(Source: Refinitiv, Thomson Reuters)

ITV PLC – Financial position remained robust.

ITV PLC (LON: ITV) is FTSE 100 index listed Media Company, which operates as an integrated producer broadcaster that offers content with multiple platforms at a global level.

On 5 May 2021, ITV expects to release its Q1 FY21 trading update. Meanwhile, no dividend was recommended for FY20.

Investment Highlights – Hold at GBX 122.64

• As of FY20, the Company’s financial position was substantial enough to manage its covenants as the reported net debt has been significantly declined against FY19, and total liquidity was £1,447 million on 31 December 2020.
• The Company is encouraged by the positive advertising trends in March and April of FY21.
• ITV is well-positioned to take advantage of the solid demand arising for the quality content internationally.
• The major trading multiples of ITV (Price/Book, Price/Earnings, Price/Cash Flow and EV/Sales) are either equal to or lesser than the average multiples of the Media & Publishing sector.
• In terms of a technical indicator, 20-day SMA (120.26) seems favourable and reflecting a upside momentum in the stock.

Financial Highlights for the year ended 31 Dec 2020 (as on 9 March 2021)

(Source: Company Website)

• During FY20, total external revenue was down 16% year-on-year. In terms of divisions, ITV Studios declined 25% year-on-year and Broadcast fell 8% against FY19.
• The Group adjusted EBITDA was down 21% year-on-year though it was still better than the external expectations.
• The adjusted earnings per share were down 22% to 10.9 pence in FY20, while the statutory earnings per share declined 40% to 7.1 pence.
• In ITV Studios, 90% programmes of the Company are now back in production.

One Year Share Price Chart

 (Source: Refinitiv, Thomson Reuters)

Key Risks

• The growth trajectory is massively impacted by battered advertising and production revenue.
• The financial performance is also exposed to foreign exchange rates fluctuations due to global operations.
• Moreover, the paused filming amid the Covid-19 scenario can affect the production of new content as well.

Valuation Methodology: Price/Earnings Approach (NTM) (Illustrative)

Conclusion

The macroeconomic outlook remained uncertain; however, most programmes are back in production. Given the uncertainties in both the segments, the Company failed to provide clear guidance for FY21. Meanwhile, the Company is continuously monitoring the performance and taking adequate measures to manage costs and cash appropriately. Overall, ITV is well-positioned to capitalise on robust demand internationally. Stock 52 week High and Low were GBX 127.10 and GBX 54.16, respectively.

Considering the robust liquidity, reduced leverage, cost-savings, and investments for future, we are currently maintaining the “Hold” stance for ITV PLC at the current price of GBX 122.64 (as on 24 March 2021 at 8.05 AM GMT), while we look forward to reinvesting once the Company has an explicit guidance for FY21.

Next Fifteen Communications Group PLC – Seems optimistic about future growth.

Next Fifteen Communications Group PLC (LON: NFC) is a digital communications provider, which caters to different sectors and geographies. It works with some renowned brands, including Apple, Google, YouTube, among others.

On 13 April 2021, NFC expects to announce its preliminary results for the year ended 31 January 2021.

Rationale for Valuation – Hold at GBX 670.00

• From a technical standpoint, 20-day SMA (662.00) reflecting an upside momentum in the stock price.
• NFC expects to report a solid net cash and financial performance for FY21 and will make the payment of the UK Government’s furlough money in FY22.
• Over the past three years (H1 FY18 to H1 FY21), revenue has surged at a CAGR of 17.87%.
• FY21 results are expected to be better than market expectations. Therefore, the Group expects to resume dividend payments in June 2021.

Key Risks

• The general economic environment is highly uncertain, which can lead to delay or cancellation of projects.
• The Group is also exposed to foreign exchange fluctuations and liquidity issues.

Recent News

2 March 2021: NFC continued a strong trading performance and maintained a solid state of balance sheet. It is also making the repayment of £1.4m of Furlough Money received from the UK Government.

Trading Update for the financial year ending 31 January 2021 (as on 29 January 2021)

• The Group continued the strong trading momentum, and thus, it expects to report better FY21 results.
• For Q4 FY21, revenues are expected to deliver 9% growth year-on-year. Similarly, operating margins are projected to be better than the previous year.
• Overall financial results for FY21 should be ahead of the market expectations.
• At the end of FY21, net cash was nearly £10 million post making VAT repayments.

One Year Share Price Chart

 (Source: Refinitiv, Thomson Reuters)

Conclusion

During FY21, the Group carried a strong trading momentum and expects to report better financial results than the market expectations. The Company has scheduled the furlough payment to the UK Government in FY22. The strong performance was majorly supported by the B2B business lines, while B2C agencies also demonstrated a recovery during the fourth quarter. Moreover, the Group is highly cash generative, and has a strong balance sheet, which underpins its ability to pursue upcoming growth opportunities. Stock 52 week High and Low were GBX 749.86 and GBX 234.50, respectively.

Based on resilience, financial performance, strength and simplicity of the business model, decent industry prospects, and support from the valuation as done using the above method, we have given a “Hold” stance on Next Fifteen Communications Group PLC at the current market price of GBX 670.00 (as on 24 March 2021 at 12:02 PM GMT), while we look forward to reviewing the FY21 results comprehensively.

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