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(ITV) ITV Share Chat

Discussion in 'General Share Chat' started by mart101, Jul 31, 2015.

  1. mart101

    mart101 Demi God of BlueShare

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    Comment out today on HL

    HL COMMENT (28 JULY 2015)
    ITV have delivered another strong performance in the first half of the year, with good revenue growth across all parts of the business. Group external revenue increased 11% to £1,356 million, reflecting 6% growth in Broadcast & Online revenue and 23% growth in ITV Studios. Together with good cost control, this led to a 26% rise in adjusted earnings per share (EPS) and strong cash flow, underpinning a 36% rise in the interim dividend. The shares rose by 3% in early morning trading.

    Our view:
    ITV shares are up about 25% so far this year, driven by a near-constant stream of profit upgrades. The profit upgrades have been driven by an improving advertising outlook and a string of earnings enhancing acquisitions of production studios. The acquisition of Talpa brought John de Mol onto the ITV team. He founded Endemol which went on to develop the Big Brother reality franchise. He is now committed to staying with Talpa, within ITV, for years to come.

    ITV looks to be in a good position; its balance sheet is sufficiently strong to keep funding the acquisition of new production houses. That gives more content to use at home and to sell abroad. Earnings are enhanced by the deals, and ITV becomes less dependent on terrestrial advertising revenues, which are still the most important source of income for the group. Already, ITV is the largest independent production house in the USA. The company intends to push borrowing to around 1.5x earnings before interest, tax and depreciation, if it can find the right deals. That suggests it could spend a further billion pounds or more.

    If ITV can find the right deals, at sensible prices, then it could grow even faster than the market consensus currently predicts. Expectations are for sales to rise from £2.6bn last year to £3.3bn in 2017, with earnings per share forecast to increase by around a third over the same period.

    The shares trade on a price to earnings ratio (P/E) of 16.3x, which is broadly in line with the company's historical average and the wider sector (16.1x). The dividend is also an attraction. The shares yield 2.4% for 2015, rising to 3.5% in FY17 on current analyst estimates, although please remember dividends can vary and are not guaranteed. We highlighted ITV as one of our stocks to watch in 2015 and so far it has delivered. The group is trading well and we remain confident in its long term prospects, although there are of course no guarantees.

    Register to receive ITV share research updates direct to your inbox for free

    Key highlights:
    • Total external revenue up 11% to £1,356m
    • 5% growth in Net Advertising Revenue to £838m
    • Non-Net Advertising Revenue up 18% to £693m
    • Free cash flow up 34% to £246 million
    • Net debt of £540 million (31 December 2014: net cash of £41 million)

    Business review:
    Broadcast & Online - Total revenue was up 6% to £1,035 million and total adjusted EBITA rose by 26% to £315 million. This reflects 5% growth in Net Advertising Revenue as well as growth in high margin Online, Pay & Interactive revenue, which was up 27%. ITV Family share of viewing (SOV) was down 4% in the first half, with the decline in the main channel partly offset by a 2% improvement across digital channels. SOV is expected to improve in the second half as the group benefits from exclusive rights to the Rugby World Cup as well as a strong slate of high quality drama.

    ITV Studios - Revenue grew by 23% to £496 million and adjusted EBITA increased by 18% to £85 million. Total organic revenue, which excludes current and prior year acquisitions, was up 8%, driven primarily by Studios US and Global Entertainment (more than half of ITV Studios revenue now comes from outside the UK). Recent acquisitions continue to perform as expected, with first half revenue benefitting from a full six months of Leftfield Entertainment as well as Talpa Media from 30 April 2015.

    Outlook:
    ITV has left its full year guidance unchanged and expects to deliver another strong performance in 2015.

    ITV Family net advertising revenue is expected to be up 6% in the nine months to the end of September, around 8% in the third quarter, and ITV expects to outperform the market again over the full year. Improving ITV Family share of viewing remains a key focus. Online, Pay & Interactive will deliver continued strong growth, helped by the first full year of pay channel ITV Encore, which launched in June 2014. ITV Studios is on track to deliver strong revenue growth over the full year, with good organic growth and acquisitions coming through as planned.
     
    Inspiration likes this.
  2. mart101

    mart101 Demi God of BlueShare

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  3. Mongoose82

    Mongoose82 A Legendary Member

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    "In the near term, interim results due July 27th could be a “no win” situation for ITV, as the market waits for some clarity on the outlook for UK advertising postBrexit. We expect sound H1 numbers, powered by studios, but ITV’s update on Q3 NAR is likely to be key. Our sensitivity analysis suggests that ITV looks good value at these levels, even if we were to factor in a repeat of the 2008-9 advertising downturn. We do expect our NAR estimate to move down with these results, based on the post-Brexit outlook"

    Update from Panmure: Https://www.research-tree.com/compa...ure-likely-to-stay-fuzzy-near-term-26-07-2016
     
  4. Mongoose82

    Mongoose82 A Legendary Member

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    "H1 results look ahead of expectations, driven by Studios, but post-Brexit the company is now guiding to a NAR decline of 3% for Q3. While we expect EPS downgrades, these look within the range, and already priced in given the stock price weakness seen before and since the Brexit vote. While the shares are likely to be blighted by poor visibility on NAR in the short term, we see good long term value and remain positive."

    Another update from Panmure: Https://www.research-tree.com/compa...ch/panmure-morning-note-27-07-2016-27-07-2016
     
    WatteNe likes this.
  5. Mongoose82

    Mongoose82 A Legendary Member

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    "We confirm our new estimates following interim results which overall provided some reassurance. We now forecast EPS of 16.7p this year and 15.8p in FY17E, based on NAR declines of 2% and 4.6% respectively. The overall step down postBrexit is less than feared, and leaves the stock valued at 12.4x ‘low-cycle’ FY17E EPS, supported by a 4.4% yield, even after its recent recovery. For investors who wish to retain some UK cyclical exposure in portfolios, we see good long term value in ITV and remain positive."

    Panmure update: Https://www.research-tree.com/compa...emains-a-cheap-quality-uk-cyclical-28-07-2016
     
    WatteNe likes this.

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