Sporting moments and the markets

The UK is the world’s fifth largest economy globally when you look at gross domestic product (GDP) in nominal terms, so the impact of the Rugby World Cup (RWC) will be less pronounced than in many other smaller economies. Still, the economic benefits to the UK are real and according to Ernst and Young’s estimates, some 466,000 international visitors will make their way to the UK to watch the games.

In fact, the total number of spectators should easily eclipse any prior rugby tournament and should be just shy of the 2002 FIFA World Cup in Japan. In total the Rugby World Cup is expected to deliver up to £2.2 billion in output to the UK economy.

Given the level of attendance and spectators and impact on future growth the natural beneficiaries will be UK and some European listed shares. With discretionary spend likely to add to a pick-up in retail sales, I continue to like sterling exposure relative to currencies dependent on commodities. 

The benefits of hosting the RWC for the UK economy are not focussed on a single area, but instead spread around – and that makes judging market impact difficult.

The demographics for those nations taking part in the event and the natural volume of visitors from those countries make it difficult to accurately judge the number of increased visitors. How many of the anticipated 466,000 coming for the RWC –  including Aussies, Kiwis & South Africans – would have been coming anyway?

The largest demographic of supporters from another currency will probably be coming from Europe as Ireland, Italy & France all use the euro. It is hard to believe that this increase in tourism will outweigh the fundamentals of what is going on in the Eurozone, though.

ITV could benefit from increased market share of TV viewers and therefore future advertising revenue if it were to end up being a closely fought competition and England were to win. The viewing and advertising from this competition has already been factored in but the upside for the future is there.

Yes, ITV is the obvious place to look: although the market is already factoring in strong 15% EPS and 12% revenue growth in 2015.

With an estimated 466,000 international visitors expected to descend on the UK, one would expect airlines and hotels to get an extra revenue boost and of course when there’s rugby involved you always expect increased demand for beer. Heineken are expected to record 12% EPS growth in 2015 and 11% in 2014 and are a major sponsor, so any commentary from management about the impact of the RWC on the top line will be of interest.

In this vein, the impact of the RWC on SABMiller and InBev will be keenly watched. There may well also be a boost to the listed betting houses such as Betfair and William Hill.

Of the major sponsors for the Rugby World Cup, Heineken will be the most likely to see an upturn in revenue off of the back of it. No doubt they will ensure a ready supply of their products in and around the venues while removing the availability of their competitors.