Going for gold

The countdown to the London 2012 Olympics is well and truly under way. Having narrowly pipped Paris to the post, the start of the 12-week sporting extravaganza, on 27 July, is eagerly awaited by millions of people.

The total budget for the Olympics is likely to leave little change from £10 billion, including the redevelopment in the Lower Lea Valley, security and policing costs and a ‘contingency fund’.

Moreover, the £2 billion cost of staging the Games themselves is to be funded by the private sector, sponsorship, merchandising and ticketing. The National Lottery has also chipped in £2.2 billion.

A raft of large corporates have already shown their financial support, including Adidas, British Airways, British Telecom and Thomas Cook.

Though more than 40,000 people have worked directly on the site, there is likely to be a significantly larger ripple effect on UK Plc. Many companies have tendered for projects on the site, with the benefits likely to stretch beyond the end of the Games.

The building process
More than 800,000 tonnes of soil (enough to fill the Royal Albert Hall nine times over) had to be removed from the site of the Olympics before construction could begin.

Hazardous waste management specialist Augean was one of the first to enter the site. After private operator DEC Environmental recycled 80 per cent of soil on-site, AIM-listed Augean removed 150,000 tonnes of contaminated
soil to landfill.

Severfield-Rowen, the UK’s leading steel fabricator, provided 10,600 tonnes for the main Olympic Stadium – the focal point of the games. It took 34 months to build and has a capacity of 80,000, making it the third-largest stadium in the country. The site will host the opening and closing ceremonies, and the athletics and Paralympic events.  

Chief executive Tom Haughey says, ‘We have enjoyed significant success at the Olympics, and delivered on time and to budget.’

Severfield-Rowen also provided steel for other facilities including the basketball and handball arenas as well as the aquatics centre.

Fit-out specialist Interior Services was the construction firm behind the velodrome, which was handed over earlier this year. Global leader in rental power Aggreko has secured a £37 million contract to provide temporary energy supplies, and the group is a sponsor of the Games. From installing spotlights to providing maintenance support, electrical contractor T. Clarke has also been a benefactor of the Olympics.

Supporting the Games
Data verification specialist GB Group has been enjoying strong results as the shift from paper-based to digital checks continues. However, the Games are expected to deliver sales of up to £500,000 to the AIM counter.

Chief executive Richard Law says, ‘Our clients are using our products to ensure that they maximise revenue-generating opportunities.’ For example, he highlights the fact that drivers ferrying the athletes around will need to have their driving licences checked. In addition, there will be increased security control by car leasing and property rental firms, and Law predicts a rise in online gaming.

Voice recognition specialist Eckoh has been a long-term favourite of Growth Company Investor and should benefit from the Games.

It recently secured a deal with Premier Inn to provide its services when customers book rooms.

Eckoh has built a 24-hour, secure and resilient infrastructure that is hugely scalable. It can handle more than 650,000 calls per hour, and up to 8,000 calls simultaneously. With a contract to provide voice recognition to Transport for London to help passengers check on journey plans, the raft of foreign visitors should put pounds in Eckoh’s pocket.

Broadcast equipment supplier Avesco is expected to benefit as it leases out its kit to beam the Games around the world – the global audience is estimated to be two billion. Speaking to Growth Company Investor, chief executive Ian Martin said, ‘We expect the Olympics to provide plenty of demand for our services.’

Though contracts are still to be awarded, Avesco may benefit from the broadcasting of the opening and closing ceremonies, corporate pavilions and other corporate entertainment.

With August often a slow month for Avesco, the Olympics provide a good opportunity to deliver what could be ‘multimillion-pound’ contracts. Buoyed by the Olympics effect, finnCap forecasts 2012 pre-tax profits of £4.5 million and EPS of 13.6p.

Security services firm Cohort is providing training in covert operations to the security staff at the Olympics, while G4S has the contract to provide security across the site.

Promotional merchandise
I recently took a train to visit the Hornby head office in Margate, Kent, to see the efforts that the model railway to Scalextric and Corgi toy producer was making for the Olympics.

Thanks to a licence secured from LOCOG (the London Organising Committee for the Olympic Games),
the firm has developed a range of 150 products that will be largely impulse buys and tourist purchases. These include a range of 40 London taxis to cover different sports, a London bus, a tube train, a Concorde aeroplane and even a Scalextric version of the velodrome.

The products are high-margin and are already selling well – with more than 150 items leaving Hamleys every week. Items sell from £2 for a keyring up to £80 for a train set, and Hornby hopes to secure £6 million of sales this year and at least the same figure in 2012.

Hornby has also signed a deal with the Royal Mint whereby it is selling a range of limited-edition 50p coins for £2.99 a time. There are 29 to collect and each is individually numbered.

Chief executive Frank Martin says, ‘We are a patriotic nation, so the Olympics should provide a good opportunity for Hornby.’ Broker Numis predicts 2012 pre-tax profits of £7.4 million and EPS of 13.8p.

AIM-listed Pivot Entertainment owns Dewynters, which is the UK’s leading arts and entertainments agency. Given its market-leading position in promoting West End shows, the influx of overseas visitors is likely to lead to a jump in attendance figures.

Sports and leisure equipment distributor Tandem has designed a range of bicycles for the Games. These range from children’s bikes to BMX products and a racing bike in the ‘Team GB’ colours. A range of branded accessories including water bottles and knee and elbow pads will also be launched. Against a tricky retail environment, finance director Jim Shears says he hopes that the Games will ‘bring a feel-good factor’. Asda and Argos are among the major retailers with whom Tandem is in discussion in relation to stocking its Olympics range.

Though chocolate giant Cadbury will be producing a wide range of Olympics chocolates, confectionery specialist Zetar also hopes to benefit. Through its Kinnerton subsidiary, the AIM-listed company has secured a ‘food-gifting’ licence, which will see it sell a range of biscuits and tinned nuts. Finance director Mark Stott says, ‘The sales contribution may be as much as £2 million, but what it will do is open up our product range to a wider audience.’

Life sciences firm Provexis recently acquired Science in Sport (SiS) for £8 million. SiS produces sports nutrition products for consumers and professional and elite athletes, including Olympic athletes, professional cyclists and triathletes – so next year should provide a huge opportunity for the company to boost business.

A lasting legacy
At the end of the 19th century, more than 6,000 people worked in the railway yards in Stratford but, sadly, much of the land being used for the Olympic site had been left derelict for almost 50 years.

But now the Olympic Village has been handed its own new postcode – E20. When the Games finish, the site will be transformed to house more than 16,000 residential properties. In addition, there are plans for a £147 million refit to provide more than 2,800 rental homes. With its heart in the East End, this is all welcome news for AIM-quoted housebuilder Telford Homes.

The Olympic Stadium has been designed so that it can be scaled down after the Games to just 25,000 seats, when it will be a home for athletics and other sporting, community and educational uses.

Specialist engineering consultancy Hyder was retained for the structural planning and design of a new station at Stratford. This should provide an efficient means of transport in the years ahead.

Last month, the £1.5 billion Westfield Stratford City shopping centre opened its doors to the public. It is the largest urban shopping centre in Europe and covers 1.9 million sq ft – the size of 25 football pitches. Severfield-Rowen supplied 40,000 tonnes of steel during the building process.

With 300 shops and more than 70 restaurants, it took 25,000 workers to build the centre, with enough pipework to stretch from London to Paris.

Despite the gloomy retail outlook, it is already 96 per cent let, with shops such as Marks & Spencer, JD Sports and Game now open.

With one million visitors flocking to Westfield Stratford City in its first week of opening, this site and theredevelopment of the Olympics area should provide a lasting legacy for what has historically been a very deprived area, to the benefit of many UK businesses.