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Lindsell stays tuned to football as TV bid war calms

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Lindsell stays tuned to football as TV bid war calms

Star manager Michael Lindsell is unfazed by signs the market for TV football rights is slowing, after Sky (SKYB) retained its grip on Premier League broadcasting at a lower cost.

Lindsell owns shares in Italian champions Juventus (JUVE.MI) in his £4 billion Lindsell Train Global Equity fund, whose shares are down over 15% since the start of February, following the latest round of bidding for Italian football TV rights.

The Citywire AA-rated manager acknowledged that the latest auction of Premier League rights was unlikely to 'reach the heady levels achieved for the current three-year period' and said Juventus was likely to lose out from bidding for Italian rights.

'The deal for the domestic Italian rights will probably result in a minor 10% hike overall but a distribution that will be disadvantageous to bigger clubs such as Juventus,' he said.

He said the fall in the shares was understandable given 'broadcasting revenues make up by far the biggest proportion of Juventus’s revenues so any price marking the value of football intellectual property in Italy or elsewhere is eagerly analysed'.

As in the UK, the fastest growing source of TV revenue in Italian football lies in the rights to broadcast matches overseas, but the revenue is split equally between clubs, rather than favouring those, like Juventus, which draw the largest ausiences.

'Despite these disappointments we continue to believe that live sports rights will over time command ever higher values, providing
owners with unanticipated windfalls of cash flow,' he said.

Lindsell and Nick Train, founders of fund group Lindsell Train, are among a small cohort of fund managers drawn to investing in football clubs. Train has long held Scottish champions Celtic (CCP) in his Lindsell Train UK Equity fund and Finsbury Growth (FGT) investment trust, and recently invested in Manchester United (MANU.K).

That marks the second time Train has invested in the club, with the manager having described his first stint as a shareholder, from Mancester United's listing in the 1990s before its takeover by the Glazer family in 2005, as his best-ever investment.

Lindsell and Train's belief in the ongoing power of sports to generate TV revenues also informs their investment in World Wrestling Entertainment (WWE.N).

Certainly shareholders of WWE have experienced strong share
price performance on the basis of these expectations,' he said.

‘It was up 7% last month and 86% over the last 12 months,’ said Lindsell. ‘WWE is another "sports like" content owner but unlike football clubs sells some of its intellectual property directly to consumers through its own internet channel and has been particularly successful in expanding its reach, especially through social media.’

The fund has outperformed its MSCI World Index benchmark over the past year, returning 22.6% against the index’s 6%. Over three years it has returned 73.1% against 42.1% for the index and over five years the fund’s return is 135.8% versus 83.1%.

In February, gains were made thanks to Japanese cosmetics company Shiseido (4911.T), whose shares jumped 15%. The company is the sixth largest holding in the fund at 5.5%.

‘It spent 20 years seeing its market share decline in Japan with low profit margins and with periodic inventory write-offs,’ said Lindsell (pictured).

‘Under its new chief executive Masahiko Uotani it has rationalised its brands, acquired complementary businesses in Europe and the USA, cut cost while increasing spend on targeted marketing, moved online and reinvigorated its business in China.’

Lindsell added that ‘there is more to go’ and operating margins could move past their new recent high of 8%.

‘Let’s hope that domestic operating margins, now at c.20%, are a leading indicator,’ he said. ‘This has all fuelled continued performance from the shares that encouragingly still trade at a discount to the company’s global competitors.’

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