New ball game for investors

Michael Drewett asks whether it pays to team up with a football club

ALL fans of the teams in today's FA Cup semi-finals (Manchester United, Chelsea, Liverpool and Aston Villa) will be supporting their teams with their emotions. But some will also be backing them with their savings.

Football is no longer just trying to entertain fans on the pitch but also wants to act as a magnet for their savings. Manchester United is a quoted stock-market company and the shares have shot up in price.

Now Chelsea is doing it too. Tomorrow it is to be floated on the Alternative Investment Market (AIM) with shares offered at 55p, capitalising the club at pounds 58m. Investors in Chelsea Village plc will be buying into an increasingly strong brand name and land and property development opportunities described by one analyst as "worth a bomb". Victory today against Manchester United would be an important boost to the flotation, although United's shares rose 11p on Friday in anticipation of its victory.

Glasgow Celtic has launched its own Personal Equity Plan, believed to be the first by a football club. It is being sold through advertisements in programmes, in Celtic View, the club's weekly newspaper, and from a stand at the club's ground, by a Glasgow firm of investment advisers, Caledonian Investments.

Each PEP sold earns the club 0.75 per cent of the amount invested, and 0.25 per cent a year thereafter. On a full pounds 6,000 investment that amounts to pounds 45 at first and a further pounds 15 a year. This is unlikely to give the club enough money to buy a star but is another example of an increasing crossover between the financial world and football.

Supporters can also buy shares in Celtic, which is quoted on AIM, and which also offers holders discounts in, for example, the club's shops, according to The Share Centre. This stockbroker has a special offer allowing shareholders to buy, or sell, up to pounds 1,000 in shares in football clubs for a flat fee of pounds 5 (01442 890800). Manchester United, Tottenham Hotspur and Millwall are the three clubs quoted on the main UK stock market, with Celtic and Preston North End and now Chelsea quoted on AIM. Another 20 or so clubs are unquoted but have shares that can occasionally be bought.

So should you be financially supportive? Robin Bloor of Chase de Vere, the investment adviser, says: "If people buy in straight, that is real money for the club to use. But whatever the hype, the majority of such investment is led by the heart.

"You have to ask the question, would the ordinary investor put cash into any single share, even if it were ICI? The answer is no, and were it not for privatisation most people would not hold anything but pooled investments such as unit trusts anyway. Buying into football is inherently risky, but OK as long as it remains a bit of fun."

Celtic's PEP was part of a discounted deal from the Prudential, which manages the underlying investments.

Caledonian Investments says part of the thinking was to give supporters a "better deal", but even with the discount it is possible to buy PEPs cheaper elsewhere.

Holding shares in a club is much more risky, not least because of the inherently volatile nature of the business. That said, football is now big business with some serious profit margins from replica strips and some stockbrokers are starting to take the idea more seriously.

Paul Kavanagh, of Killik and Co, a London stockbroking firm, said: "Buying into football clubs might have been thought a bit daft in the past but there is a school of thought that some could become really good investments. The royalties from television deals are significant and growing and as the big clubs look more and more like proper businesses, profitability and volatility of a share price can be more independent, although never totally, on what happens on the field."

Figures from Manchester United, the biggest of the quoted clubs, this week show a doubling in interim profit to pounds 15.2m. With a stand completed in a remarkably short time, home matches will now generate pounds 1m from crowds of 54,000. Manchester United also has one of the strongest brand names in the world and opportunities come its way that pass others by. A 10- year publishing deal and an arrangement with Umbro, the kit manufacturer, will bring in tens of millions on top of television fees and gate receipts. The club is so good at selling kits that it was criticised for exploiting its fans several years ago. The strip was changing so often that accusations of ripping off supporters were rife.

However Robin Launders, the finance director of Manchester United, said: "We always introduce a kit every August for the new season, which I think is fair enough, and there has only been one kit in the past 12 months. The problem was when we moved from Adidas to Umbro and ended up with five kits in a short space of time. It was a bit unfortunate but there was no intention to sting fans."

Spurs and Millwall are also listed on the stock market but the difference in their fortunes shows the risks. Millwall's shares are on sale for 3p. Graham Robson, the chief executive of Millwall, said: "We admit the shareholders have had a rough time but the next 12 months should be much better. Although we have an average football side we also have a magnificent stadium that is largely paid for and we are going to be acquiring profitable businesses as selective opportunities come up. It is fair to say that the stadium and conferencing facilities were not used as well as they might have been initially but there is a lot of money to be made, especially off the field."

Mr Kavanagh summed it up by saying: "Take it too seriously, and we would say leave well alone. However, Manchester United is a great example of what can be achieved. The share price has risen almost 50 per cent since January."

Perks for investors

TOTTENHAM HOTSPUR is a new entry in the latest edition of a free guide to shareholder perks, discounts and other deals for shareholders. The club offers a 10 per cent discount on purchases from its Spurs Superstores and mail order purchases (details on 0181-478 8241).

Investor discounts and perks should not be the sole reason to buy a particular company's shares. In most cases any discount could be more than offset by a poor share price performance. But some perks can be very attractive and valuable.

P&O's discounts on its ferry crossings are one of the most well-known. Shareholders can get up to 50 per cent discounts. Not any shares will do, however. To qualify you would need at least pounds 600 of P&O's Concessionary shares.

Elsewhere, for example, holders of 500 shares in Austin Reed can get a discount card that entitles them to 15 per cent discounts on all purchases.

The guide, Attractive Perks for UK Shareholders, is available free to readers from Hargreaves Lansdown, the investment adviser, on 0117 988 9880.