The Investment Column: Premier price for Man Utd

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The Independent Online
MANCHESTER United have been struggling for form off the pitch as well as on it. The shares have fallen from a peak of 183p at the end of 1996 and the group has underperformed the market by 36 per cent over the last 12 months.

An early exit from the European Cup cost the group nearly pounds 4m in lost ticket revenues. Poor league form has put their third successive championship in doubt. And the stock has suffered as the football sector continues to lose fans, hardly helped by a spectacular own goal by Newcastle United directors.

Man Utd's shares slipped another 2p to 139.5p yesterday reflecting disappointment that the club failed to announce a blockbuster new sponsorship deal, choosing instead to renew its contract with Sharp for the next two years. There are also fears that a sharp rise in players wages could dent profit progress.

Nevertheless, pre-transfer profits rose a healthy 11 per cent to pounds 17.5m, despite a pounds 1.5m rise in players costs. And to bracket Man Utd with other football clubs is to ignore its real strength of its brand name.

An imminent tie-up with a Far Eastern retailer, a stake in a new hotel next to Old Trafford and its new television channel hint at some of the possibilities available the club over the next few years. Rising television income from the new BSkyB deal should offset any hike in costs. Then there is pay per view. Man Utd could eventually make a killing, although it could take several years to get the ball rolling.

Analysts forecast full-year profits of around pounds 28m, putting the shares on a prospective p/e ratio of 18. Whether or not Man Utd wins the Premiership, the club remains in a league of its own financially. The share price weakness represents a good buying opportunity.