Yesterday, a US federal judge cleared AT&T’s $85bn takeover of Time Warner. It has been taken as a green light for Comcast to submit a new $65bn cash bid for 21st Century Fox’s entertainment businesses, 19% higher than the value of Disney’s offer.
As a reminder, in parallel, the UK regulator has recently approved Fox’s proposed takeover of Sky if it sells Sky News. The regulator had already cleared Comcast’s $30.7bn offer for the 61% of Sky that Murdoch does not own (the Murdoch Family Trust being the largest shareholder of Fox). A decision which would have allowed Fox to increase its bid for the 61% of Sky it doesn’t already own to fend off the rival offer from… Comcast (a £12.50 per Sky share cash proposal 16% above the ongoing Fox bid at £10.75/share). But if Comcast bought Fox…
The US cable operator Comcast announced yesterday that it was making a £12.50 per Sky share cash proposal (plus dividends), i.e. 16% above the ongoing 21st Century Fox bid (£10.75/share) and 13% above the previous share price close.
Comcast specified that a 50% + 1 share minimum acceptance would be required to get approval from its shareholders. Such an acquisition would enable the US giant to diversify outside the US while securing its content supply.
Note that a cash proposal “does not constitute an offer or impose any obligation on Comcast to make an offer”. Sky made a statement yesterday specifying that no firm offer had been made at this point, advising shareholders to take no action.
A strong start to the year with solid operating momentum and improved profitability. The strategy is deployed smartly and successfully with a focus on content, innovation and service. We expect some minor upgrades to our forecasts. But beyond these sound results, the main share price driver is, and remains, around the ongoing merger with the parent company.
Disney is near to closing a deal to acquire 21st Century Fox’s assets (said to have been previously approached by Comcast and Verizon) for $60bn on an enterprise value basis, including the latter’s 39% stake in Sky. It appears that the Murdoch family will get a 5% stake in the US media group in the end.
Sky reported a satisfactory Q1 to end-September trading statement with new customers up 160,000 (+90,000 in Germany, +70,000 in the UK, flat in Italy) or +51% (Q1 last year was >100,000). Consolidated revenues reached £3,296m, i.e. up 4.5% (+5% on a comparable basis). Note that there were positive trends across the whole business, with UK & Ireland revenues (67% total group) up 4% despite pressures on consumer spending and on the domestic TV advertising market (estimated by management to have declined by around 2% over the period), Germany & Austria (15% total group) up 8% and Italy (18% total group) up 2%.
A positive point to be noted is the 11.1% increase in EBITDA to £582m thanks to good cost control, implying a 110bp improvement for the EBITDA margin to 17.7%. This was despite the investments made in new businesses (£24m, of which c.80% for Sky Mobile and c.20% for Sky Espana). The EBITDA growth in what the group calls “Established Business” was even higher at +15%.
Having gained 77,000 new customers in Q4, putting the full-year to June 2017 at +686,000 (of which +280,000 in the UK, +365,000 in Germany and +41,000 in Italy), Sky reported a satisfactory Q4 operating profit up 8% to £455m.
For the FY to June 2017, consolidated revenues improved by 10% on a comparable basis to £12,916m (+£599m of which +£382m coming from subscriptions’ rise) and +5% at CER.
As expected, and reflecting the Premier League costs (additional £629m), the OP declined by £97m to £1,468m, finally a well-controlled negative impact, helped by reduced opex.
Also note that the group’s net debt remained flat at £6.2bn despite the £379m of adverse forex movements over the period.
The UK Government yesterday made public its comments about the 21st Century Fox bid for Sky, saying that the OFCOM regulator found that it raises public interest concerns linked to the Murdoch family interest in the UK media. Positively, it noted that there are no broadcasting concerns.
A more in-depth review is likely to be required and the merger to go through a full investigation. The final decision is awaited on July 14 as the companies were asked to propose some solutions to avoid the review. In case of submission to the Competition and Market Authority (CMA), the regulator would have 6 months to review before reporting back to the UK government.
Sky produced satisfactory H1 to end-December 2016 results, with revenues up 12% to £6.04bn and +6% at constant currencies. The adjusted operating profit reached £679m, down £65m from last year (or -9%) but this was exclusively due to an additional £314m of Premier League costs and therefore was very solid (total costs up 8% and +2% before Premier League; opex down 1%). The group also benefited from £200m synergy savings achieved six months early.
The adjusted EPS is down 5% to 28.3p. This is on the whole in line with our full-year to end-June 17e EPS which is expected to be down by 6%.
As a reminder, as part of the terms of the proposed takeover by 21st Century Fox, Sky will not pay any dividends in 2017.
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Sky officially launched yesterday its new mobile service in the UK, in a market currently valued at £15.2bn. Considering that current “mobile contracts are inflexible and confusing” and that most people “are buying more data than they need to avoid extra charges”, the group is offering “flexibility and value”. Note that customers’ unused data “will be theirs to keep” (to use whenever they need for up to three years), with the possibility, month to month, of creating their own appropriate plan. Sky TV customers (who are the main target of this new service) will also get free UK calls and texts as well as synching with their Sky+ box.
Sky has just officially confirmed it has received a £10.75 per share cash offer from its major shareholder 21st Century Fox.
The group formed an independent committee of the board to consider this proposal, which is in agreement to recommend it…
Sky produced a satisfactory Q1 16 to end-September, adding 106,000 new customers (UK: +35,000, Germany: +49,000, Italy: +22,000), despite the impact of the Olympics in Rio and the UEFA Euro 2016 which were available on FTA channels.
Consolidated revenues were slightly above expectations at £3,148m, up 13% on a reported basis (+£355m), partly helped by sterling’s weakness (adding £147m over the period), +7% at CER and +5% on a comparable basis. Coming as a positive point is the further 2% decline in operating costs, as the group is pursuing its cost efficiency efforts in order to counterbalance rising sports expenses within an highly competitive context.
Sky produced a satisfactory full-year to end-June 2016 results, with consolidated revenues up 6.6% to £11,965m (+7% in UK, +12% in Germany, +2% in Italy). The adjusted operating profit reached £1,558m up 12%, i.e. a 60bp margin improvement at CER to 13% (UK: +80bp to 18%, Germany: -50bp to 2.4%, Italy: +110bp to 0.3%) and the adjusted EPS rose by 13% to 63.1p.
These results were supported by strong 808,000 new customer additions over the year (+445,000 in the UK, +346,000 in Germany and 17,000 in Italy) to 21.8 million (+160,000 in Q4) and 3.3m new paid-for subscription products.
Retail subscription revenues rose by 5% (+6.2% in the UK, +9.8% in Germany) but the churn rate deterioration in the UK (to 11.20% compared with 10.70% a year earlier) came as a slight disappointment as we were expecting a stable level of 10.70%.
Looking at FY to end-June 17e, management is guiding for revenues rising at a similar annual run rate (+5% to +7%; supported in the UK by a c.5% price increase and up-sell mix and by new services and progressively eliminating customers with discounts) while intending to offset the c.£600m one-off rise in cost of the new three-year UK Premier League contract by cost control. It also specified it is intending to raise the dividend at a similar rate next year (was +2% to 33.5p in FY June 2016 after the final of 20.95p) despite the UK business being impacted by this one-time step in cost.
Note that, regarding the Brexit impact, CEO Jeremy Darroch highlighted that “people stay at home and watch TV when finances are tight”...So far so good as long as one can indeed continue to provide strong content at reasonable costs and selling prices, something we consider Sky masters.
Sky has just released good Q3 to end-March results, adding 177,000 new customers (70,000 in the UK, 73,000 in Germany, 34,000 in Italy) which takes its total customer base to 21.7m. Over the 9 months period, consolidated revenues increased by 4.8% to £8,715m (subscription revenues up 4%) and OP by 12% to £1,143m, i.e. a 13.1% margin versus 12.3% for the same period last year. Deteriorating churn rates, namely in the UK, came as a slight disappointment but the group managed to maintain its ARPU there (£47), a positive amid always rising competition…
BSkyB produced very satisfactory H1 to end-December results, with revenues up 5% to £5.7bn, adjusted operating profit up 12% to £747m (i.e. a 13.1% margin approximately in line with our c.13.2% expectation and compared with 12.3% a year earlier) and adjusted EPS up 10% to 29.9p. The Board has announced a 2% increase in the interim dividend to 12.6p and the appointment of James Murdoch as the new Chairman of the group who will replace the departing Nicholas Ferguson from April.
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Kape’s recent Capital Markets Day (CMD) was an extremely useful update on the many benefits of integrating complementary acquired businesses (including the collaboration between engineering teams) and the opportunities for upselling that new product development brings. Over the last six months, Kape has proceeded with the integration of PIA, expanding the growth of new users through the application of the Group’s user acquisition knowhow and technology. It has also made further enhancements to its product offering which, inter alia, will improve user engagement and retention. This note looks to bring out the main points from the CMD and highlights the significant progress that has been made this year.
Companies: Kape Technologies
U.S. futures and European stocks dropped on Friday as investors mulled a reported conflict among policy makers over a stimulus package for the single-currency region, as well as political upheaval in France.
The Stoxx 600 Index fell after Bloomberg News reported the European Central Bank is facing a potential rift over how much their emergency bond-purchase program should stay weighted toward weaker countries such as Italy. The euro fluctuated following French President Emmanuel Macron's decision to name a new prime minister after asking his government to resign. Rolls-Royce Holdings Plc slumped after the British jet-engine maker said its exploring options to raise funds to strengthen its balance sheet.
The dollar was slightly down, posting its first weekly drop in a month, while American cash equity and bond markets were shut for Independence Day. President Donald Trump will attend an early July 4 celebration at Mount Rushmore with thousands of guests who won't be required to wear masks, while his U.K. counterpart Boris Johnson urged Britons to act responsibly as pubs prepare to re-open and the government lifts quarantine rules on travel for 60 countries.
The friction at the ECB highlights the risk to markets should promised stimulus measures fall short. Investors continue to weigh policy support and upbeat economic data against relentless new outbreaks of the virus. U.S payrolls figures Thursday fuelled optimism of a V-shaped recovery in the world's biggest economy, even as Florida reported that infections and hospitalizations jumped the most yet, and Houston had a surge in intensive-care patients. Emerging-market stocks posted the biggest weekly gain in a month.
Elsewhere, crude oil dipped but remained on track for a weekly gain.
Companies: TGL JSE IAE ADME BP/ DGOC ENOG NTQ NTOG PMO RBD ROSE RDSA UKOG TRIN
Gfinity plc* (GFIN.L, 3.6p/£26.7m) | Starcom plc* (STAR.L, 0.95p/£3.3m) | Mirada plc* (MIRA.L, 90.0p/£8.0m)
Companies: GFIN STAR MIRA
Gfinity plc* (GFIN.L, 1.625p/£14.0m) | Blackbird plc* (BIRD.L, 16.5p/£55.4m) | Tern plc* (TERN.L, 11.5p/£31.1m) | The Panoply Holdings (TPX.L, 72.5p/£39.9m)
Companies: GFIN BIRD TERN TPX
What’s new: Since 27 April 2020, when OnTheMarket started offering new “welcome contracts” almost 500 estate agent branches have signed up, with each business owner receiving welcome shares and over 60% either listing exclusively with OnTheMarket or on a “one other portal basis“.
Gfinity (LON:GFIN) is a world leader in the fast-growing market for esports. The company designs, develops and delivers full end-to-end esports solutions. This includes bespoke content, tournament and event solutions for commercial partners via the company’s proprietary online platform, live broadc
Warren Buffett once said that as an investor, it is wise to be ‘fearful when others are greedy and greedy when others are fearful’. Fear is not in short supply right now.
Companies: OPM ALU ANCR BLV CONN CRC STU GATC HAT LEK MMH MCB MWE NXR NTBR NOG PAF PEG RFX SRC TEF TEG TPT VTU WYN XLM
CAP-XX Ltd* (CPX.L, 3.1p/£10.1m) | Gfinity plc* (GFIN.L, 1.675p/£12.0m) | MTI Wireless Edge Ltd* (MWE.L, 38.5p/£33.8m) | Newmark Security plc* (NWT.L, 1.05p/£4.9m) | Mirada plc* (MIRA.L, 95.0p/£8.5m)
Companies: CPX GFIN MWE NWT MIRA
A potential disposal, reasonable trading through Q2E and a pick-up in activity from a Google led re-ranking of XLMedia's websites could create the scenario for a material re-rating of the stock. While our forecasts and recommendation remain Under Review, we can see strong potential catalysts for share price advancement.
ABDP Interim Results, ALSP Interim Dividend*, CGNR Financing Update*, COG FDA Clearance*, CNIC World's First, ELA Placing, ITM Grant, LID Launch, LRM Trading Update, , MSG Contract and Agreement*, PLI New Data*, TPG Final Results, TRAK Trading Update, VLG Agreements, VENN Final Results*, VER Fundraise, VIP Results
Companies: ABDP ALSP COG CNIC ELA ITM LID LRM PLI TPG TRAK ORPH VLG VER VIP CGNR CTEA
7DIG Trading Update, ALSP* Loan Draw Down, AAU Placing, COG* Contract Win, CHAL New York Wheel, CBUY Contract Win, CGNR* New Gold Zones, DGS Trading Update, MSG* JV, NET Trading Update, OPTI* New Patent, SEE Trading Update, TPG Contract Win
Companies: 7DIG ALSP AAU COG CBUY DGS NET OPTI SEE TPG CGNR CTEA
Informa reported solid H1 18 results – including UBM from 15 June, with +4.3% revenue growth and +1.9% growth in adjusted operating profit. The operating margin was therefore a tick lower than last year’s restated accounts at 30.8% (versus 31.1%). The company is confident of the UBM integration and confirmed its target of 3.5% underlying revenue growth in 2018 and said it is on track to deliver savings targets of £50m in 2019.
Companies: Informa Plc Ord
We are introducing our Best Ideas for 2019 and also review the performance of last year’s picks. We suggest ten solidly financed stocks with good business dynamics that ought to be considered for core portfolio holdings and six UK domestically focused stocks that our analysts believe should perform strongly in the event that uncertainties unwind. We also introduce a new style of research from N+1 Singer which presents a Company’s dynamics and metrics in a clear and concise manner and concentrates on the pivotal issues affecting that Company and an investment decision.
Companies: BCA CLIN CLG CBP DNLM EAH STU FCRM FUTR GTLY INS GLE NICL SDL SPR TRI
The Court of Appeal yesterday issued judgment “comprehensively” in favour of property portal owner OnTheMarket’ssubsidiary, Agents' Mutual, regarding all the competition issues in its legal proceedings against Gascoigne Halman, part of the Connells estate agent chain. While the non-competition issues relating to OTM’s claim remain to be resolved, we see this as a positive in terms of investor sentiment and allows senior management to focus more on the delivery of its growth strategy.
This morning OnTheMarket (“OTM”) management confirmed that “as of 31 January 2019, it has listing agreements with UK estate and letting agents with more than 12,500 branches. This is an increase of more than 7,000 branches in just under a year since Admission to AIM in February 2018.”