SKT - Sky Network Television

[Mysterion]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SKT/407086/389023.pdf

Around 200 roles would be created in the Philippines

[mistaTea]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SKT/407086/389023.pdf

Around 200 roles would be created in the Philippines

So it looks like customer service unlikely to improve then 😅

Outlook clearly not as good as some have hoped for if they are announcing more sackings just two days before the results.

The results they report in a couple of days (I.e covering the past) will be just fine.

It's the likely future FCF profile that has me scratching my head.

[mistaTea]

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/SKT/407086/389023.pdf

Around 200 roles would be created in the Philippines

Sophie says the firing and outsourcing will probably make permanent savings but she just can't really be sure at the minute 🤣🤣🤣

[Perky]

Glad I'm out.

When was the last time you heard anything about growth strategies for this business?

It's just been cost out, cost out and more cost out.
Anyone been in business knows that's the easy bit...then what.

Business run by lawyers and accountants.

GLTH

[mistaTea]

Glad I'm out.

When was the last time you heard anything about growth strategies for this business?

It's just been cost out, cost out and more cost out.
Anyone been in business knows that's the easy bit...then what.

Business run by lawyers and accountants.

GLTH

Agreed. No plausible story for how the company will grow in the future. Just corporate speak about strategy to grow revenue streams but with no demonstrable way forward.

New set top box yet to launch to the general public.

Rising content costs - can only raise subscription prices so far. So relying on more cost cuts to 'sure up' EPS for the next period is needed. All good and well, and they should be on the lookout for efficiencies etc - but not a 'great plan' to make the investment community believe sky will grow.

[Shareguy]

First glance

Looks like a ok result. Fall in profit with weaker sky box revenue.  Updated guidance which is an upgrade of sorts at NPAT and dividend level. Further savings of $35m in 2023. Increased revenue. Share buyback as shares significantly undervalued according to board. $56m cash

6 cent interim divi

Sky's balance sheet remains strong with $56.6m in cash on hand at 31 December 2022, and an undrawn bank facility of $150 million. In addition, the outlook for future cash generation remains strong.

From presentation.  As I outlined in my address to the Annual Shareholder Meeting, the Board believes that the Company's shares are significantly under-valued despite the significantly improved outlook for the business and the decisive moves we have made on capital management. At the close of business on 21 February, SKT shares traded at $2.56, equivalent to a multiple of 2.0 times EBITDA and 6.5 times earnings per share.
After careful consideration, the Board intends to commence an on-market buyback programme (the Buyback) for
up to a maximum of 8,734,416 shares (approximately 6.0% of Sky's current shares on issue). The company currently intends
to initiate this Buyback next month as will be communicated to the market ahead of the Buyback commencing. Assuming the full capacity of the Buyback is deployed at the share price of $2.56 as at 21 February 2023, it is expected this will deliver a
3.3% uplift in Earnings Per Share.

Programing rights including All Blacks a real risk.

[mistaTea]

So after all that glossy presentation stuff and the platitudes...Sky essentially created zero FCF/Owner Earnings in the last 6 months.

Cashflow from operations = $56,115,000 (down from ~$74M Dec-21).

Cash needed for 'investing activities' totalled $40,156,000 across tangibles and intangibles. This entire amount really does have to be treated as 'stay in business CAPEX' given the company is still in the fight of its life.

Then do not forget the lease costs ($13,416,000) and some other borriwings they paid back ($577,000).

So after the (impressive) growth seen in SSN, maintenance of lower STB churn rate and what appears to be peaking NEON subs...Sky generated ($56,115,000 - $40,156,000 - $13,416,000 - $577,000 =) $1,996,000 for shareholders in the last 6 months.

They essentially generated no cash in the last 6 months and the remaining $56M on the Balance Sheet is just leftovers from the money that shareholders handed over when they got mugged during the infamous Covid Capital Raise.

I mean, yes Sky is still a going concern - but you wouldn't really pitch this as a magnificent result yeah?

[Teitei]

Overcapitalised balance sheet with cash so great to see Sky initiate the share buyback as well as pay the dividend.

Happy with result. Shows Sky is well and truly on track imo.

[Teitei]

Looks like institutional buying and retail selling.

[LoungeLizard]

Happy with the result too. I don't see the marginal drop in FCF as being the takeaway from the result, unless you're a glass half empty type. Even that is not necessarily an issue given they would have burnt a bit of cash with the new stb plus restructuring and redundancy costs. Those are likely to tail off in the second half and the buy back will help a bit as well..

Main points are the business is starting to grow again (even broadband!), back to paying consistent, and hopefully increasing, dividends, strong balance sheet (no debt, $50m cash), key content has been secured (for now) and the share buyback will help with EPS. NP full year guidance of $55-$60m a year is nothing to be sneezed at.

On the whole, I'm glad I held on, through the cap raise. Can't say there isn't few clouds on the horizon but
for me it's a hold. And there's always the possibility of a takeover    

[Mysterion]

Forsyth Barr

-We retain our NEUTRAL rating with a slightly increased NZ$2.85 target price (was NZ$2.75).

-Significant content cost escalation continues to weigh on the results.

-We estimate that programming rights (content) costs will increase by almost +NZ$100m from FY21 to FY24. Primarily driven by like for like cost inflation.

-The good news story of the 1H23 result was the continued very strong growth in streaming, both for Neon and Sky Sport Now.

-FY24 will see the exit of Spark Sport from July 1 2023, and the RWC in September, setting SKT up for a potentially strong period of customer acquisitions, reducing the urgency to stem the continued decline in satellite subscribers. 

[Shareguy]

Craig's today

Further cost cuts and share buy-back announced
SKT are proposing organisational changes which could see up to 170 local
roles impacted, with 'multi-million-dollar' permanent savings anticipated
within two years. The intention of a $15m buyback was also announced, which
at the limit could reduce shares on issue by up to 6%. These add to a slew of
recent shareholder-friendly moves by the company, including; permanent
cost savings in discretionary areas, material return of capital, and a 10%
increase in dividend pay-out policy in November.

Overweight rating remains. Price Target $2.95 (prev. $3.03).

We retain our overweight rating, with our price target changed to $2.95. With
reduced local sport competition, and higher interest rates reducing global
content producers funding towards direct-to-consumer, we are incrementally
more confidence on long-term forecasts and SKT's position as an aggregator.
Our revised price target is now based on a forward DCF valuation (WACC
11.1%, Tg 2.0%), while we remain cautious and think a higher WACC is
appropriate with several risks still to be managed; including satellite churn,
ARPU decline, execution of new technology path and retaining key content.

[mistaTea]

https://www.nzherald.co.nz/business/markets-with-madison-the-landlord-charging-17pc-more-rent/3WTVAWGD3ZBODN6R2JATCLC4AM/

Wow, really insightful interview. Key takeaways:

• Sophie plans to sack 170 staff but has no idea how much money Sky will save until they go "through the process". It will be 'millions' but outside of that she has absolutely no idea! Nice one.
• Sophie does not think NETFLIX is a competitor. Even though it was the launch of NETFLIX that coincided with the most rapid drop in their satellite base that the company has ever seen. Nope, not a competitor at all.
• NEON growth likely peaked so considering a cheaper ad-supported tier

[Ferg]

Sophie does not think NETFLIX is a competitor. Even though it was the launch of NETFLIX that coincided with the most rapid drop in their satellite base that the company has ever seen. Nope, not a competitor at all.

Wow.  That is head in the sand stuff.  It's a no brainer......watch TV on demand with zero ads for a small subscription fee, or watch linear programming stuffed full of promo's for a larger fee....what to do, what to do??  I know this is just an anecdote, but our viewing habits changed the instant we got Netflix.  The first step in resolving an issue is recognising it is an issue....sounds like Sophie has some way to go yet IMO.

[LoungeLizard]

Wow.  That is head in the sand stuff.  It's a no brainer......watch TV on demand with zero ads for a small subscription fee, or watch linear programming stuffed full of promo's for a larger fee....what to do, what to do??  I know this is just an anecdote, but our viewing habits changed the instant we got Netflix.  The first step in resolving an issue is recognising it is an issue....sounds like Sophie has some way to go yet IMO.

If you like to watch sport or news would you tune in to Netflix? So not a direct competitor in that sense. In fact they are complimentary - most people who have Sky (for sport etc) will probably also have another streaming platform, perhaps Netflix. They are not substitutes for each other as they offer different things.