Olympic gains

27 January 2012 | By Rob Langston

It’s been difficult to quantify the cost of the games which will run in to billions, tied up, as it is, with the regeneration of London’s East End. The value to taxpayers of the Olympics is also difficult to gauge. Although any boost to the UK economy will be welcome particularly given recent GDP figures, there’s unlikely to be any visible windfall.

So with this in mind, FundTalk wondered if investors could have made money from the Olympics some other way.


Faster, higher, stronger

Investors in UK equities are perhaps best placed to make money, with companies offering a whole range of services set to benefit from increased tourism and spending during the two-week event.

To benefit, companies will have to embrace the International Olympic Committee’s motto “Citius, Altius, Fortius” or “faster, higher, stronger”. That is a fast turnover of stock and services during the games, higher profits and stronger margins.

Trevor Green, who manages the £115.6m Aviva Investors UK Focus fund, says a number of companies and sectors could benefit from the Olympic games.

He says the Beijing Olympics in 2008 drew 4.7 billion TV viewers, with a similar number expected for the London Olympics in Summer.

The fund manager says the hotel sector should receive a boost as London and the south-east prepare to receive hoardes of international athletics fans, highlighting Premier Inn-owner Whitbread and Millenium & Copthorne, adding that some hotels have put up prices by up to five times. (FundTalk continues below)

Green says visitors will visit the West End of London and perhaps come into contact with luxury brands such as Burberry.

Tony Nutt, manager of the Jupiter Income trust, says investors may already own companies set to benefit from the Games.

He says: “While one would not buy a company simply on the basis that it might benefit from the Olympics, there are stocks we already hold that will benefit. The transport sector is a good example and here I would select public transport companies Go Ahead and First Group.

“Go Ahead’s operations are located primarily in the south-east of England and the company has around 21% of the London bus market. The company has strong management, is cash generative and operates a progressive dividend policy.”

Nutt says First Group operates buses and trains across the UK, including the First Capital Connect franchise, which links a number of major transport hubs. He adds: “First Group’s management has steadily improved revenues, has a focus on increasing its net cash position and aims to increase dividends by at least 7% a year.”

There have been other beneficiaries highlighted by Fitch Ratings, which has cited the games as a positive influence on credit ratings for property manager Westfield (which operates the Westfield East shopping centre at Stratford), brewer Marstons and Transport for London.

However, Green says there could be negative implications for at least one sector: travel. He believes UK residents could put delay travel plans while the Olympics are on, which could be a real blow for the already embattled Thomas Cook.

How else?

As part of its strategy to help spread the costs, the London 2012 Organising Committee (Locog) has announced a number of partnerships with the private companies.

The list represents a who’s who of blue chip companies from across the globe, who will undoubtedly gain exposure from the biggest sporting event of the year, boosting their worldwide profile.

Worldwide partners include Coca-Cola, Acer, Omega, Dow Chemical Company, GE, Mcdonalds, Panasonic, Proctor & Gamble, Atos, Visa and Samsung. Official partners include another tier of blue chup companies, including: Adidas, BMW, BP, BT, EDF, Lloyds Banking Group and British Airways. Official supporters include Adecco, Arcelor Mittal, Cadbury, Cisco, Thomas Cook and UPS.*

Aviva Investors manager Green says these companies could benefit from an uplift in interest and media exposure.

“For Coca-Cola [for example] it would be a great opportunity not just for the brand but for a product launch,” says Green. He says partners such as Sainsbury’s could use the Games for in-store promotions.

However, he says other partners would face different challenges, such as BP, which faces a “credibility battle” in US courts next month.

What you would have made from backing the Olympic partners

Portfolio 1 consists of Worldwide partners: 

• Coca-Cola
• Acer
• Omega (Swatch Group)
• Dow Chemical Company
• GE
• Mcdonalds
• Panasonic
• Proctor & Gamble
• Atos
• Visa
• Samsung

Portfolio 2 consists of Official partners:

• Adidas
• BMW
• BP
• BT
• EDF
• Lloyds Banking Group
• British Airways (International Consolidated Airlines Group)

Portfolio 3 consist of Official supporters:

• Adecco
• Arcelor Mittal
• Cadbury (Kraft)
• Cisco
• Thomas Cook
• UPS

A total expense ratio (TER) of 1.61% has been factored in based on a Morningstar study of average TERs for equity funds in the UK.

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^{*NB Only those companies that are listed on an international stock exchange are mentioned here a full list of partners, supporters, providers and suppliers can be found here.}

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