ITV Plc - Strengthening the Business Financially, Creatively and Commercially

ITV Plc (LON: ITV) is an IPB (integrated producer broadcaster) company. The company's operations are differentiated in two segments: Broadcast & Online and ITV Studios.

Declined Revenue for Q1 FY2020 with tight Cost Control Measures
On 6^th May 2020, ITV released an update on the trading for the first quarter of the financial year 2020 ending 31^st March 2020. During the period, the total external revenue declined by 7 per cent to GBP 694 million versus GBP 743 million in Q1 FY2019. The revenue from ITV Studios revenue declined by 11 per cent to GBP 342 million, and revenue from Broadcast surged by 2 per cent to GBP 500 million for the period with an increase in viewing for 2 per cent. The group witnessed strong demand in Studios Global Distribution business for library content internationally with good growth for BritBox. The company is working closely with agencies and advertisers to create innovative opportunities and an increase in demand for competitions resulted in Interactive revenues to increase. The group has taken multiple steps to reduce cost and preserve cash to tackle the uncertain period. ITV has decent liquidity position with unrestricted cash of more than GBP 100 million, RCF of GBP 630 million and bilateral facility of GBP 199 million. The majority of employees are working from home and enabled the company to broadcast six channels. The group, along with the entire industry, is in talks with the Government for protocols for return-to-production. The company has resumed production for various popular programs in different markets internationally. ITV continues to apply Hub acceleration plan, which resulted in strong viewing growth in the first quarter of the financial year 2020 and launched a deal with EE related to distribution.

Share Price Performance

Daily Chart as of May 6^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

ITV Plc shares were trading at GBX 77.16 at the time of writing before the market close (at 1:27 PM GMT+1) on 6^th May 2020 and up by 6.90% versus the previous day closing price. Stock's 52 weeks High is GBX 165.90 and Low is GBX 50.06.
 
Valuation Methodology

*Peers: STV Group Plc, Publicis Groupe SA, Proslebensat 1 Medai SE and Impresa Sociedade Gestora SA.

Key Risks
In the media market, the company operates in a very dynamic environment. It is evolving, changing rapidly and becoming progressively competitive.  An economic downturn could affect the demand for Radio and TV Broadcasters, and the media is exposed to global political and economic events and trends, leading to a risk to business operations from external factors.

Conclusion
The company has a decent balance sheet which remains robust in the current challenging times. The revenue for the Q1 declined with a decline in advertising. The advertising across categories in April declined by 42 per cent. Since mid-March ITV Studios has had to pause the majority of its productions globally as a result of the restrictions on working practices. In the financial year 2020, the company expected another challenging operating environment due to the recent outbreak of Coronavirus. At present, the group is unable to quantify the impact of the outbreak and has not provided any outlook for Q2 2020.
Based on the risks factors as highlighted above, we recommend investors to keep a “Watch” on the stock at the current price of GBX 77.28 (as on 6^th May 2020, before the market close at 1:10 PM GMT+1), with support from few catalysts needs to be evaluated at a later stage.

Metro Bank Plc – Offering Multiple Service to Support Customers

Metro Bank Plc (LON: MTRO) is a banking institution providing banking and related services to retail customers and SMEs.

Q1 Trading Update - Increased Deposits with Proactive Management
On 6^th May 2020, Metro Bank released an update on trading for the first quarter of the financial year 2020. During the period, the group is focused on supporting its colleagues, customers and communities, and all stores are open. In the Q1 of the FY2020, the deposits increased by GBP 77 million to GBP 14,554 million since 31^st December 2019. Despite a decline in fixed term deposit rates, the company witnessed growth in retail saving accounts. Driven by proactive management of growth in lending, the net loans declined by GBP 169 million to GBP 14,512 million in Q1 FY2020 versus net loans as on 31^st December 2019. The loan to deposit ratio declined to 100 per cent as at 31^st March 2020. The company has a strong liquidity coverage ratio and stood ahead of 197 per cent reported on 31^st December 2019. The bank is looking to access the Bounce Back Loan Scheme and Coronavirus Business Interruption Loan Scheme to support requests for repayment holidays by customers. The company will provide impacts of the outbreak and economic consequences in H1 FY2020 results.

Share Price Performance

Daily Chart as of May 6^th, 2020, before the market close (Source: Refinitiv,Thomson Reuters)

Metro Bank Plc shares were trading at GBX 84.52 at the time of writing before the market close (at 1:29 PM GMT+1) on 6^th May 2020 and down by 2.58% versus the previous day closing price. Stock's 52 weeks High is GBX 893.50 and Low is GBX 69.00.

Growth Catalysts
The bank is reducing costs, increasing fee income, and further strengthening its capital and liquidity position, which would help it to improve its performance.

Conclusion
In the first quarter of the financial year 2020, the group witnessed an increase in the total deposits despite a decline in the deposit rates and net loans have also declined. The bank is awarded as the best bank for overall quality of service for personal current account customers. Net fee and other income in FY2019 were up by 43%, due to decent customer growth and the initiation of fee-earning services. It was awarded second for business current account customers in the latest Service Quality Survey. The company is focusing on its future growth plans to improve its growth, costs and capital efficiency, which would help the Group for the sustainable growth of its business. It can be an excellent opportunity for investors to invest in generating good returns in the long term.

Based on the above rationale, we have given a “SPECULATIVE BUY” recommendation at the current price of GBX 81.28 (as on 6^th May 2020, before the market close at 8:58 AM GMT+1).
 
*All forecasted figures and Peer information have been taken from Refinitiv, Thomson Reuters.

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