Pantaflix had a difficult H120 due to the COVID-19 pandemic, leading to film projects being suspended or postponed. This resulted in a significant dip in revenue from €14.5m in H119 to €4.9m in H120. Production resumed in late H120, with releases scheduled for H220 and H121. Encouragingly, B2B activities are building steadily as the group diversifies monetisation of its platform. H120 costs were reduced by short-time working, aided by state support, reducing the EBIT loss to €4.3m (H119: €6.3m). Management still expects FY20/21 aggregate revenues in line with earlier indications.
Companies: PANTAFLIX AG
Pantaflix expects a tough FY20, followed by a strong recovery in FY21. The COVID-19 shutdown has disrupted current productions and the release of previously finished films, weighing heavily on FY20 revenue. EBIT should retrench less, given efficiencies put in place. With production hopefully resuming later in the year, the content pipeline should start unwinding. The Pantaflix VoD (video on demand) platform is building its presence in a busy market and has some interesting B2B opportunities. The group is looking for cost savings, which may include the sale or spin-off of operations. Due to COVID-19, broker forecasts are currently withdrawn.
Pantaflix’s first half results show a marked reduction in the EBITDA loss, from €3.1m in H118 to €1.1m for the period, benefiting from lower operating expenses. The new corporate strategy put in place earlier in the year broadens the potential revenue streams, both in terms of channels to market and in the breadth of content. Management guidance suggests a significant improvement in EBIT and earnings in H219, with consensus forecasts suggesting that the group should move into profit in FY21.
Pantaflix’s content production business continues to do well, although FY18 earnings were impacted by timing issues, with revenues slipping into FY19 and costs already incurred. The content pipeline is strong, including a first series for Netflix. Longer-term growth should come from expanding the Pantaflix platform from transactional video-on-demand (TVoD) to subscription and advertising-supported models (SVoD and AVoD). It should also open up white-label and commercial B2B2C opportunities.
While the growth of the video on demand (VoD) platform will likely take the plaudits, Pantaflix’s film production business has continued its strong run of ramping up both the quality and volume of content. Continued investment in both businesses saw net losses expand to €4.4m in H118. However, the film production business has a strong pipeline and the VoD platform is growing rapidly. Despite the premium rating, further improvements to the newly launched KPIs or the announcement of additional partnerships could drive upside.
Stefan Langefeld’s promotion to CEO is a strong validation of Pantaflix’s commitment to its disruptive VOD platform, where it continues to improve functionality and distribution. However, in 2017 it was the excellent performance of the production business that underpinned the 152% increase in revenues and return to operating profitability for the group.
Pantaflix has undergone significant transition over H117. The newly renamed company has delivered a number of functional improvements to its eponymous VOD platform, which has now begun to record revenues, and is expected to drive growth. Furthermore, the film production business continues to perform strongly. While we see risk to estimates, we do not believe that these should be the basis on which investors gauge the opportunity to participate in a disruptive, global VOD platform.
The launch of global video-on-demand (VOD) platform PANTAFLIX at the end of 2016 and the recent announcement of a new JV in China could prove transformative for Pantaleon, traditionally known for its hit film productions. The market opportunity is significant, it has a first-mover advantage and capital risk is limited. Although at an early stage of development, the direction of travel is positive and the shares have started to reflect the potential.
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Entain reported strong Q4/FY 20 sales with 7%/1% cc growth respectively (ahead of estimates). The performance was driven by the strong broad-based momentum in online (Q4 20: +41%, FY 20: +28%), which more than offset the decline in retail. The US stood out with 131% growth, pushing FY 20 revenue expectations higher to $175-180m. We will be upgrading our estimates to factor in the stronger than expected performance. In other developments, Jette Nygaard-Andersen was appointed CEO with immediate effect.
Companies: Entain PLC
Taking into account the adverse impact of the pandemic, the Air Europa acquisition price has been halved to €500m with payment deferred until the sixth anniversary of the acquisition’s completion, which is now scheduled for H2 21.
Companies: International Consolidated Airlines Group SA
Escape Hunt (ESC) has conditionally agreed to acquire its French master franchise partner, BGP Escape (BGP). Together with UK sites currently in build, ESC expects BGP to add enough scale for the group to reach positive EBITDA when conditions normalise and new sites have matured. The acquisition is attractively priced at only 1x EBITDA before earnout payments.
Companies: Escape Hunt Plc
We were bullish about the ongoing effects of strategic/operational initiatives at G4M, seeing forecast upside risk. It has not disappointed. Q3 sales and margin outperformance drive a 30% upgrade, and a shift into net cash. Extensive planning and systems/delivery changes have helped it after Brexit too, with trading stronger than expected so far in Jan. Valuation looks undemanding given upgrade momentum and the discount to lower margin peers.
Companies: Gear4music (Holdings) PLC
Air Partner has reported a record H1 performance, with PBT increasing by 250% to £10.5m. This was driven by COVID-19 related work, in particular repatriation flights and transportation of PPE, which offset more challenging trading conditions elsewhere. Air Partner’s diversity has insulated it from the significant COVID-19 impact felt elsewhere in the sector. As expected, COVID related work has slowed down in H2, though there have been some early signs of improvement in Private Jets (number of JetCards sold +50% YoY) and Safety & Security (multiple contract wins in Redline). Given continued subdued demand, gross profit has reduced YoY in Q3 to date, though this was offset by cost initiatives. We reintroduce forecasts for FY21, assuming PBT of £10.5m, which implies break even in H2. The balance sheet remains strong, with net cash of £18m and the Board has proposed an interim dividend of 0.80p.
Companies: Air Partner plc
HeiQ is a materials innovation technology company, marketing products that increase the functionality of technical, medical and consumer textiles. The company's core products are at the leading edge of innovating the c$25bn textile chemicals market, while the recently launched antimicrobial technology, HeiQ Viroblock, enables the forward integration into the c$10bn antimicrobial textile market and OTC textile medical devices. The company is grounded on three strategic success factors, materials innovation, mass manufacturing and ingredient brand marketing, which will support the company's ambition to grow its revenues from $30m to $300m in the medium term. HeiQ has listed on London's Main Market via a reverse takeover, raising £20m in new equity. We initiate coverage with a BUY.
Companies: HeiQ PLC
…..drive further forecast upgrade
M&B’s poor trading performance in Q1 FY20/21 was not a surprise. Lfl revenue in the current quarter is also likely to remain deep in the red. Management is exploring an equity issuance to remain afloat / meet the fixed cost and debt service obligations. After all, the cash coffers are fast depleting and the choice on the table is limited.
Companies: Mitchells & Butlers plc
In conjunction with the government’s new tier 4 restrictions, ANG has closed 12 stores. These stores remain operational for ‘call & collect’ though. The remaining estate, websites and DC continue to trade normally, and are geared up to fulfil demand. Positive sales momentum has continued since the update at the start of December, and angling continues to be permitted. The Board therefore reiterates full year guidance of no less than £3.8m EBITDA.
Companies: Angling Direct Plc
Dixons’ trading performance in the 10 weeks ended 9 January 2021 was a mixed bag. The strong lfl growth in the first six weeks is in contrast to the subsequent period. Management has expressed it is comfortable with the consensus of the current financial year and reaffirmed its mid-term guidance. Overall, the business remains in good shape despite the adverse impact of frequent lockdowns and the dilutive impact of the growth in e-com. We maintain a positive stance on the stock recommendation.
Companies: Dixons Carphone PLC
IAG may have reached an agreement to acquire Air Europa at a lower price (edited as per IAG’s request). The deal should be approved by the Spanish government.
Today's news & views, plus announcements from FERG, AHT, KAZ, LMP GLO, ERM, MCS, STU, SEIT, SOLG, INCE, AEXG, BEG
Companies: AEX GLO SEIT SOLG STU INCE
Kingfisher continued to register strong sales growth in Q4 FY20/21, buoyed by the higher DIY spend by consumers since the onset of the pandemic. Management continues to refrain from providing full-year revenue guidance, citing the pandemic-related uncertainties and the impact of lockdown restrictions. We maintain a positive outlook on the stock.
Companies: Kingfisher Plc
Following continued delays of a Brexit agreement, few sectors within the UK market have remained attractive to investors despite low valuations. One sector which has continued to outperform despite the political drama has been the UK video gaming sector (henceforth UK gaming), which we are fans of. We believe a combination of sector-leading growth, strong cash conversion and timely cyclical positioning support our positive view on the UK video gaming sector.
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Strike-led negative jaws effect brought IAG weakened Q3 results, which was still in line with market expectations. There was no guidance update.