Mediaset has announced the creation of a new holding company, MFE (Media For Europe), which will totally control its Spanish and Italian assets. This operation is clearly aimed at creating a pan European media and entertainment group to compete with Netflix, HBO or Disney.
The merger of Mediaset and Mediaset Espana should generate €100-110m of synergies by 2023. Be aware, however, that all the synergies of the world can’t prevent the decline in the European TV advertising market.
Companies: Mediaset S.p.A.
2018 revenues were down by 4% yoy at €3.4bn, quite in line with our estimates at €3.43bn. The Q4 was, as expected, weak in Italy with the expected process of digital transformation of the Pay TV business (as a reminder the group signed a content deal with Sky in April 2018 to stop losing money in that activity but with less revenues as a counterpart).
EBIT was, however, very poor at €75m. This is due to the realignment of the accounting of Pay TV rights (for c.€200m) and, adjusted for this item and the €70m restructuring, EBIT should have been €348m for the whole year (corresponding to a poor 10.2% margin), 15% lower than our estimates.
The outlook is not at all exciting. A further slowdown in the Italian economy limits visibility regarding the advertising market. Over the short term, a flat trend is indeed expected in Q1 in a weak market.
So a poor release (except for the Spanish business which was slightly better than expected but which has already released its 2018 numbers at end February).
Mediaset has released a poor Q3 with revenues down by 6.6% yoy, while the EBITDA was down by 25.4% yoy. The Q3 net result was also negative at €-15.8m. Note Ei Towers is for the first time consolidated by the equity method. The reason for this separation is the exit of the transmission towers company from the group’s area of consolidation at the beginning of Q4 18 following the successful public offering made by Ei Towers. Note the sale by Mediaset of its controlling interest – the company now owns 40% of the share capital of 2ìTowers, which holds 100% of Ei towers – resulted in a net capital gain of around €500m.
Mediaset reported Q2 17 revenues slightly above consensus at €956.4m (-0.2%). This implies the H1 17 revenues dropped by 1.3% to €1,845.7m (H1 16: €1,870.6m), impacted by declining Italian pay-TV, Italian other revenues and Mediaset Espana revenues (-2.5% to €508.5m for the latter).
Consolidated H1 17 EBIT positively improved by €116.7m to €212.8m (i.e. an operating margin moving from 5.2% to 11.5%), namely highlighting a recovery from the last year’s loss-making situation in Italy (H1 17 EBIT at €53.5m versus €-54m in H1 16; opex down 6.2% to 59.4% of revenues versus 62.6% in H1 16), while Spain’s EBIT improved from €150.1m to €159.2m (i.e. a 250bp operating margin improvement for the Spanish business).
Consolidated H1 17 net profit amounted to €74.8m, versus a €27.8m loss a year earlier and management reiterated its FY17e target for a “positive” OP/net result, seeing advertising revenue flat to slightly up in Italy (September is going well after a poor July and August), with Spain “consolidating the positive trend”.
Vivendi announced yesterday evening that it owns 3.01% of Mediaset and is intending to continue to acquire shares “depending on market conditions, until possibly becoming Mediaset’s second largest industrial shareholder, which, to begin with, could represent between 10% and 20% of the Mediaset share capital”.
The Italian group, which was apparently not aware of this “attack”, said it will continue the ongoing legal battle with Vivendi and block any Vivendi takeover by all possible means.
Mediaset’s share price trading has just halted after a c.25% rise since this morning…
Once upon a time (say about 6 months ago), Mediaset and Vivendi concluded a splendid strategic alliance: the French group was to acquire 100% of Mediaset Premium, while each entity would be taking a 3.5% stake in the other on the occasion. The ambition was to build a pan-European OTT platform and to create a southern European content and VOD powerhouse…
The announced wedding has since moved to the divorce legal battlefield, maybe paving the way for a ménage à trois.
Following a strategic deal (please refer to our 11 April 2016 Latest), Mediaset’s Italian pay-TV operations (88.9% stake in Mediaset Premium) were due to be sold to Vivendi in exchange for a 3.5% stake in the French group (deal initially expected to be completed by end-September 2016).
On 25 July 2016, Vivendi officially made an alternative proposal, confirming the exchange of 3.5% of Vivendi’s share capital with 3.5% of the share capital of Mediaset but proposing to buy only 20% of Mediaset Premium and, in three years, c.15% of Mediaset’s share capital through a mandatory convertible bond.
Mediaset H1 16 revenues rose by €150m to €1,870.6m, driven by improving Italian advertising trends (+8.5% or +8.5% to €1,349.7m) and a continuing satisfactory Spanish performance (+9% to €521.6m). Conversely, the group’s EBIT dropped by 29% to €97.3m (the operating margin moving from 8% to 5.2%), namely highlighting a loss-making situation in Italy (-€52.8m versus €26.5m a year earlier, while Spain improved from €111m to €150.1m) as pay-TV entity Mediaset Premium, is no longer reported as a discontinued operation. The consolidated net result came to a €27.8m loss (H1 15: +€24.2m) after a €33m one-off cash payment related to the initial contract signed with Vivendi (alternative proposal finally made by the latter end-July).
Last Friday evening, Mediaset and Vivendi signed a strategic alliance, each group taking a 3.5% stake in the other (Mediaset transferring existing treasury shares to Vivendi and receiving in exchange existing or newly-issued Vivendi shares). Simultaneously, Vivendi will receive the 89% stake still owned by Mediaset in its pay-TV operation, Mediaset Premium, while buying back the remaining 11% owned by Telefonica.
There will be a three-year lock-up period with Vivendi not authorised to buy shares in Mediaset in the first year after the closing date and not permitted to cross the 5% ownership over the following two years (the Mediaset family holding, Fininvest, a 33.5% owner, being free to purchase shares in Mediaset in line with the applicable regulation on mandatory takeover bids).
Although Mediaset outperformed the Italian TV advertising market over H1 15 (-0.7% versus -3%), its total revenues for the period were down 0.2% to €1,721.1m as the Italian businesses remained in the red (-1.1%), offsetting the positive Spanish trend (+2.2%). The group EBIT margin slightly improved from 6.3% to 8% thanks to the Spanish part (23.2% versus 17.1%) and Ei Towers (29% compared with 28.4%), while the integrated Italian activities remained loss making (-€7.7m over the period versus -€3.7m a year earlier).
Management is continuing to give few indications regarding the full-year guidance, considering the high level of economic volatility in Italy. Uncertainty remains about the domestic advertising market (although positive trends at a low single-digit for the group in July and August) as well as regarding the subscriptions trends for Mediaset Premium in pay-TV (enhanced Premium offer, launched on 1 July). A €580-600m full-year pay-TV revenues was confirmed, which appear feasible despite a rising competitive environment (as a reminder, Netflix announced earlier in the year the launch of its video streaming service in Italy in October), namely thanks to the Champions League exclusive three-year coverage (2015-18).
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Reach’s prelims were ahead of N1S estimates for H2 sales and EBITDA (1% and 3% resp.) and showed excellent progress with both the customer value strategy (‘CVS’) and business transformation agenda. Whilst FY’20 Group sales were 15% y/y lower as CV19 impacted Print, Digital revenue grew +11% y/y to £118m (H2: +20% to £70m), supported by a strong uptick in user engagement with content (page views/user: +39% y/y) and further progress in signing up new registered users (Feb’21: 5.8m; Dec’20: 5.0m; Dec’19: 0.7m). Meanwhile quick action to mitigate CV19 impact on Print volumes and execution on the business transformation plan saw AOP margins increase 50bps y/y, with Group H2 AOP down just 4% y/y (FY’20: -13%). Looking ahead, there were highly encouraging results from initial campaigns on the Group’s ReachID platform (+10%-40% uplift in click-through rates on early campaigns), whilst further cost savings of £11m are announced through rationalisation of the Group’s Print sites. Strong cash performance was reflected in £42m of cash inflow (post pension and historic legal and contractual payments), which gives management confidence to declare a final cash dividend of 4.26p/share. The path to sustainable top-line and FCF growth remain very much open, with FY’21E adj FCF of £120m generating an 11% yield at current valuation.
Companies: Reach plc
CentralNic released unaudited preliminary 2020 results showing pro forma 9% revenue growth, ahead of expectations (ZC: 4%). The company continues to take market share in a growing market. EBITDA was in line with consensus expectations but below our top of consensus forecasts. CNIC is increasing investment in new products and integration, which we expect to continue in 2021 and provide net returns in 2022. The company’s results demonstrate its ability to integrate, scale and extract synergies from acquisitions. We see potential earnings upside from the Codewise acquisition and expect CNIC to deliver further significant earnings accretive acquisitions in 2021.
Companies: CentralNic Group Plc
CentralNic delivered FY20 revenues of US$241.2m, a 121% y-o-y increase (FY19: US$109.2m). Adjusted EBITDA rose 71% to US$30.6m (FY19: US$17.9m), supported by the acquisitions completed in FY19 and FY20 and led by growth in Monetisation. On a pro forma basis, adjusting for the Codewise acquisition, the group delivered 9% organic revenue growth in FY20. In FY21, the group has already completed two acquisitions (SafeBrands and Wando) and secured €60m of additional bond headroom from shareholders, of which €15m has been placed to fund Wando and future M&A deals. On the basis of the strong FY20 results, with the group trading in line with management’s expectations ytd, we have updated our forecasts. The valuation continues to look attractive versus peers.
Future has announced a pre-close trading update for H1’20 highlighting continued strong online audience growth which is further driving eCommerce and digital advertising revenue streams. Recent weeks have been unprecedented, however the Group continues to see limited impact to online consumer behavioural trends (Feb audience traffic: +2% month on month per ComScore), whilst in Magazine y/y growth in Grocers is partly offsetting declines in travel outlets. Key metrics are holding up well, and the Group expects to continue to trade in-line with expectations. Half year net cash of £47m-£53m is expected by management, implying FCF is ahead of our £18m H1 forecast (N1Se H1 net cash: £44.9m). The Group is a highly cash-generative business, and post TI acquisition (consideration: £140m) will enjoy £30m-£40m of headroom in debt facilities and plenty of comfort on covenants (1.0x net debt/pro forma EBITDA; covenant: <3.0x). The Group trades on a 6.6x EV/pro forma FY’20E EBITDA multiple (peers: 12x-17x), and offers an FY’21E FCF yield of 13.5% (peers: 3%-5%).
Companies: Future plc
Future’s H1 results highlight the benefits of the Group’s diverse revenue model. Group sales grew 33% y/y to £144.3m (organic: +11%; N1Se: £145.0m), with AOP up 77% to £39.9m (organic: +40%; N1Se: £38.7m). Organic Media sales growth of +21% y/y reflects strong online user growth, with H1 average monthly online users up +26% to 253m, driving eCommerce sales up +68% organic. Online audience growth rapidly accelerated post lockdown (+66% y/y in March) supported by gaming and Live Sciences verticals. Magazine revenues, particularly at TI Media, have been impacted by lockdown, yet the opportunity to leverage Future’s Vanilla platform and SEO expertise to drive growth in TI’s asset base remains significant. We make no changes to forecasts, yet with strong H1 performance, H2 forecasts look undemanding with risk to the upside. Future offers a 7.4% FY’21E FCF yield on our conservative forecasts.
Future today released an update highlighting FY’20E adj EBITDA which is trading towards the top-end of consensus (£86.3m-£91.0m; N1Se: £88.5m). Strong performance has been supported by acceleration of the consumer shift to digital, positive cost control and cost synergy extraction from the TI Media acquisition (c.£9m annualised savings delivered so far). Migration of TI Media sites to the Group’s Vanilla platform are underway, whilst Hawk (price comparison platform) has been successfully deployed on three key existing TI Media websites. TI Media represents a significant opportunity to drive strong EBITDA growth in the medium-term as the portfolio transitions to digital, whilst the Group also has a number of additional levers to drive outperformance against conservative consensus forecasts. We leave forecasts unchanged for now, although upside risk is building. Future offers a 7% FY’21E FCF yield on N1Se forecasts, peers offer closer to 4%.
Reach plc, the market-leading commercial regional and national news publisher, is approaching a positive revenue inflection point which is transformational to perceptions of the Group. With the 5th largest digital unique visitor base (>40m) in the UK (behind the likes of Facebook and Google), the Group has a material, yet currently under-exploited opportunity which could see Digital revenues double on a 4-year view. Among initiatives to unlock value, new management is focused on granular data capture, audience stratification, and targeted, highly-relevant content dissemination, with successful execution already manifesting itself in rising user engagement. Cost efficiencies and a mix shift towards Digital support margin expansion, and are forecast to improve already attractive FCF margins (FY’20E: 19%). A progressive dividend (N1S FY’21 DPS: 6.8p) augments the investment case whilst an intrinsic value of 300p/share offers significant upside potential.
In Q3 20, the decrease in total advertising revenue slowed significantly (-7% vs -43% in Q2 20, of which -42% in June). For Q4 20, ITV is expecting a slight increase yoy, assuming no prolongation of the containment into December. ITV Studios’ revenue dropped by 19% at constant currency in 9m19 (vs -17% in H1 20). The return to full capacity is challenging due to the second lockdown so that both revenue and the EBITA margin should be impacted in Q4 20.
Companies: ITV PLC
Reach plc today provides a strong Q4 trading update highlighting upgraded FY’20E AOP expectations of £130m-£135m ahead of consensus (cons: £124.3m) and record growth in Digital. Digital sales growth has recovered strongly since Q2, accelerating to 25% y/y (Q3: +13%; H1: -1%) benefitting from both higher traffic through implementation of Group engagement initiatives and yield recovery as advertisers in CV19 impacted verticals return. Print circulation revenue decline moderated to 11.7% y/y in Q4 (Q3: -12.6%), a significant deceleration from the -18.2% y/y in H2 and modestly better than our H2 forecasts. Continued focus on audience engagement, the quality of audience data and insights, and further extension of locally focused digital content we see driving further gains online, with Digital sales still on track to double on a four year view. We are upgrading forecasts, increasing FY’20E sales, AOP and adj FCF by 2%, 6% and 5% respectively, with upgrades filtering into future periods. A 17% FY’21E FCF yield sits well in advance of global peers (3%-7%), with a 10% FCF yield generating an intrinsic valuation of 315p/share.
Upon Admission to AIM, Nightcap will acquire The London Cocktail Club Limited (the "London Cocktail Club"), which is an award winning independent operator of ten individually themed cocktail bars in nine London locations and one location in Bristol. Offer TBC. HSS Hire Group, HSS.L transfer from Main to Aim. Mkt Cap c. £70m. Recently raised £52.6m. Leading supplier of tool and equipment for hire in the United Kingdom and Ireland and has provided equipment hire services in the United Kingdom for more than 60 years, primarily focusing on the B2B market. VH Global Sustainable Energy Opportunities plc, a closed-ended investment Company focused on making sustainable energy infrastructure investments, today announces intends to launch an initial public offering of shares on the Official List (Premium) of the Main Market of the London Stock Exchange.
Companies: PMI RMM SUN BOIL ITM TRMR MLVN 88E IME ANP
Kape has issued a trading update for what was a very productive year for the Group and in which it exhibited a strong trading performance. Revenue for FY 2020E is expected to be at the top end of the expected range while Adjusted EBITDA is ahead of guidance. We increase our estimates by 1% and 8% respectively to be in line with the anticipated outturn for the year. It now has around 2.5m paying subscribers across its core markets of North America and Europe. Kape also completed the integration of Private Internet Access (PIA) ahead of schedule and launched new products, including its privacy suite. Kape expects to increase R&D spending further in FY 2021E to build on the successful additions to its product range and customer experience. With good momentum going into FY 2021E, the Group continues to demonstrate its ability to drive customer numbers and retention through the execution of a clear strategy for meeting the growing demand from consumers for digital privacy and security solutions.
Companies: Kape Technologies Plc
The MISSION’s trading update indicates the group had a comfortably better Q4 than expected, with the full-year PBT over £1m, against our forecast £0.5m. Cash performance was significantly ahead, with a year-end net debt position of £1.3m allowing the payment of the delayed final 1.53p dividend from FY19. We will update our FY20 numbers with the full results in April. We have trimmed our FY21 forecast revenue by 7.5% to reflect the ongoing impact of the pandemic in H121, reducing PBT from £9.0m to £7.1m. We also publish our first thoughts on FY22, on an improving trend. The shares remain priced at a significant discount to peers on earnings multiples.
Companies: Mission Group Plc
4imprint’s trading update indicates that order intake in Q4 was a little better than we had anticipated. Unaudited FY20 revenue was reported at c $560m, or 5% above our prior forecast. We remain circumspect around trading prospects for FY21, given the impact of the pandemic on corporate America and leave our forecast unchanged for now. The indicated year-end net cash balance at $39.8m (excluding lease debt) was well ahead of our projected figure ($22.5m in our modelling), and close to the $40.1m reported in October, implying that cash collections have held up strongly. We continue to view 4imprint as a high-quality investment proposition.
Companies: 4imprint Group plc
Interims (six months to September) demonstrate resilient revenue of £4.4m, adjusted EBITDA profitability at £0.3m (especially impressive vs £0.5m for 15m to FY20), and cash of £1.2m. Current cash of £1.3m is reassuring, with end January expected to be the cash low point for the year. Despite COVID pressure on the customer base, AIM membership remained steady at 2,085 at 1 January (September 2020: 2,103, March 2020: 2,276) and preferred supplier numbers were unshaken at 175. Purchase orders processed through the system are regaining strength, returning to 70% of original management volume expectations, while AIM Capital Solutions, and the associated premium member benefits, gains momentum. While we are not yet free of COVID, the group demonstrated action and resilience in this key period from March to September where the pandemic’s impact was most novel and most brutal – and with the current cash balance, the trading update delivers optimism for the long term. Forecasts remains suspended, and we look forward to further updates.
Companies: Altitude Group plc