Can you score with the Red Devils?
Sports team investments on the JSE have been few and far between and none that would jog the collective market memory with too much fondness.
For a country that is sports mad, it might be surprising how few sports brands even made it to the JSE if we look past former listings such as Moresport/Holdsport (owner of Sportsmans Warehouse).
Pay television broadcaster SuperSport, before it was absorbed into Naspers/ MultiChoice, was a fairly popular and lucrative listing. Primedia, before its delisting from the JSE, also dabbled in sports brands most notably iconic football club Kaiser Chiefs.
The only dedicated sports brand listing was the imaginatively named Southern African Investments Ltd (Sail) which held an influential stake in the Blue Bulls rugby franchise as well as a significant minority stake in Western Province rugby (along with a few other smaller rugby union brands).
Sail was eventually absorbed by investment giant Remgro, which still owns the major stake in the Blue Bulls rugby team. Remgro, at one point, also owned Premier Team Holdings, the owner of the Saracens rugby club in the UK.
While local investors have not had much game time with sports investments, globally major team brands do enjoy a fair bit of support from investors. Several European football teams are listed AS Roma, Juventus, Borussia Dortmund and Ajax. In the US, the Green Bay Packers an American football team is listed.
Arguably the best-known listed sports team investment is British football club Manchester United, which is listed on the New York Stock
Exchange. While IM does not usually cover international stocks, Manchester United shares can be bought (and sold) on the EasyEquities $ platform.
It is an interesting time to look at Manchester United. The team’s “recent” heyday would be the period between 1992 and 2012, when legendary manager Sir Alex Ferguson was in charge of the team. In that rich period Manchester United won the Premiership 13 times and was runner-up five times. Over the same period, the team also lifted the FA Cup more than a handful of times and twice won the coveted UEFA Cup.
In recent years, Manchester United has been overshadowed by its wealthy neighbour Manchester City. At the time of writing United was enduring another underwhelming season in the Premiership, lying seventh on the points table. If one is accommodating of the United performance over the past few seasons, one might regard the team as in the throes of a gradual re-building phase.
The share is trading well off its 12-month high from early in 2023, and with another inglorious season about to come to a close the share price seems likely to remain subdued.
Is it perhaps then a good time to dribble some cash into Manchester United if the 2024/ 2025 season promises to be the start of a convincing comeback?
There are a number of factors at play. Essentially the group’s fortunes hinge on the Manchester United team’s performance which affects sponsorship revenue as well as retail, merchandising, apparel and product licensing revenue through product sales. The team’s performance also influences broadcasting revenue (through the number of appearances especially in additional matches in the FA Cup and the Europeans cups). Then there is matchday revenue through ticket sales.
The breakdown of revenue for the 2023 financial year showed £303m generated from commercial activities, £209m from broadcast revenue and £136m from matchday sales. The total R648m in revenue, though, was eroded by operating expenses of R681m. The employee bill was a whopping R331m though perhaps not so startling when one reads of some of the fantastical pay deals commanded by top footballers.
In short, if there’s more cash flow sloshing around, Manchester United can afford to woo top players to the club, hire the top coaching staff and extend its player development initiatives. But for the past handful of years it has operated at a loss which is not really surprising considering the revenue losses during the Covid shutdowns. The group last made a profit in financial 2019 £18.9m to be exact.
One key change is the emergence of petrochemical magnate Sir Jim Ratcliffe as a major shareholder at Manchester United, having forked out $33 a share to take an influential 27% stake in the group. Ratcliffe brings in a chunk of new capital, which shareholders and supporters alike will hope can put Manchester United back in top form.
Team form aside, investors with a longer-term view can at least be reassured by the brand power of Manchester United. The group’s CRM (customer relationship management) database has around 60million records and the club has more than 240-million social media connections.
These datapoints can be leveraged perhaps with fintech offerings, online merchandise marketing and media applications.
If hopes for stronger seasons ahead are realistic and profits can be netted, Manchester United at the current price could be a rewarding medium-term punt.