New Zealand Professional Investment Services Firm

Forsyth Barr

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New Zealand Professional Investment Services Firm, Forsyth Barr

Equity Bottom-Up

Sky Network Television / Equity Bottom-Up

<h2>Sky TV (SKT) FY22 Guidance Upgrade</h2>
Sky TV (SKT) has this morning substantially upgraded FY22 earnings guidance, primarily reflecting opex cost savings. Revised guidance is for EBITDA of NZ$155m at the midpoint (previously NZ$122.5m and compares to FB of NZ$130m) and NPAT of NZ$44m at the midpoint (previously NZ$22.5m and compares to FB of NZ$23m).
Key points
<ul>
<li>Substantial upgrade to FY22 earnings guidance; cost savings the main driver: Revised guidance is for EBITDA of NZ$155m at the midpoint (previously NZ$122.5m and compares to FB of NZ$130m) and NPAT of NZ$44m at the midpoint (previously NZ$22.5m and compares to FB of NZ$23m). This is primarily a costs story with revenue revised up +1% at the midpoint. SKT expect to deliver additional opex cost savings of NZ$35m in FY22 which includes a one-off COVID-19 saving of NZ$9m. On a recurring basis SKT expect savings of N$26m comprising of NZ$13m relating to programming, NZ$17m relating to non-programming and NZ$4m increase in variable costs.</li>
<li>What does this mean for FY23? SKT has not explicitly commented on FY23, but state that the announced cost savings equal NZ$40-NZ$45m on a recurring, annualised basis excluding the one off savings which we estimate to be split approximately 45% programming costs and 55% non-programming costs. This compares to previous guidance of “at least” NZ$10m-NZ$15m of non-programming cost savings by FY24 and a programming cost guidance that implied some but not dramatic savings. All in all this looks like a meaningful consensus upgrade to next year’s numbers, maybe around 10%-15% on FY23 at the EBITDA level, and significantly more on NPAT.</li>
<li>Property sale progressing well: Negotiations are “progressing well” with most commercial terms broadly agreed. Latest commentary suggested book value in the mid-30s millions, and we would expect a transaction value substantially above book. Given negotiations are still ongoing, today’s guidance doesn’t include any impacts from the sale process</li>
</ul>
Investor briefing – 10am NZT
Register here;&nbsp;<a href="https://s1.c-conf.com/diamondpass/10018373-wh3i4k.html" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://s1.c-conf.com/diamondpass/10018373-wh3i4k.html&amp;source=gmail&amp;ust=1638924472037000&amp;usg=AOvVaw3ASNhjIVVdzcshdm6giWIW" rel="noopener">https://s1.c-conf.com/diamondpass/10018373-wh3i4k.html</a>
FY22 guidance summary
<table class="table table-striped">
<tbody>
<tr>
<td style="width: 48pt; height: 12pt;">
&nbsp;
</td>
<td style="width: 80pt; height: 12pt;">
Previous guidance
</td>
<td style="width: 78pt; height: 12pt;">
Revised guidance
</td>
<td style="width: 134.2pt; height: 12pt;">
Midpoint upgrade/(downgrade)
</td>
<td style="width: 2cm; height: 12pt;">
Forsyth Barr
</td>
</tr>
<tr>
<td style="width: 48pt; height: 12pt;">
Revenue
</td>
<td style="width: 80pt; height: 12pt;">
715-745
</td>
<td style="width: 78pt; height: 12pt;">
725-745
</td>
<td style="width: 134.2pt; height: 12pt;">
1%
</td>
<td style="width: 2cm; height: 12pt;">
724.5
</td>
</tr>
<tr>
<td style="width: 48pt; height: 12pt;">
EBITDA
</td>
<td style="width: 80pt; height: 12pt;">
115-130
</td>
<td style="width: 78pt; height: 12pt;">
150-160
</td>
<td style="width: 134.2pt; height: 12pt;">
27%
</td>
<td style="width: 2cm; height: 12pt;">
129.7
</td>
</tr>
<tr>
<td style="width: 48pt; height: 12pt;">
NPAT
</td>
<td style="width: 80pt; height: 12pt;">
17.5-27.5
</td>
<td style="width: 78pt; height: 12pt;">
40-48
</td>
<td style="width: 134.2pt; height: 12pt;">
96%
</td>
<td style="width: 2cm; height: 12pt;">
23
</td>
</tr>
<tr>
<td style="width: 48pt; height: 12pt;">
Capex
</td>
<td style="width: 80pt; height: 12pt;">
50-60
</td>
<td style="width: 78pt; height: 12pt;">
45-50
</td>
<td style="width: 134.2pt; height: 12pt;">
-14%
</td>
<td style="width: 2cm; height: 12pt;">
54.3
</td>
</tr>
</tbody>
</table>
Source: Forsyth Barr analysis, Company reports

Sky TV (SKT) FY22 Guidance Upgrade
Sky TV (SKT) has this morning substantially upgraded FY22 earnings guidance, primarily reflecting opex cost savings. Revised guidance is for EBITDA of NZ$155m at the midpoint (previously NZ$122.5m and compares to FB of NZ$130m) and NPAT of NZ$44m at the midpoint (previously NZ$22.5m and compares to FB of NZ$23m).
Key points

Substantial upgrade to FY22 earnings guidance; cost savings the main driver: Revised guidance is for EBITDA of NZ$155m at the midpoint (previously NZ$122.5m and compares to FB of NZ$130m) and NPAT of NZ$44m at the midpoint (previously NZ$22.5m and compares to FB of NZ$23m). This is primarily a costs story with revenue revised up +1% at the midpoint. SKT expect to deliver additional opex cost savings of NZ$35m in FY22 which includes a one-off COVID-19 saving of NZ$9m. On a recurring basis SKT expect savings of N$26m comprising of NZ$13m relating to programming, NZ$17m relating to non-programming and NZ$4m increase in variable costs.
What does this mean for FY23? SKT has not explicitly commented on FY23, but state that the announced cost savings equal NZ$40-NZ$45m on a recurring, annualised basis excluding the one off savings which we estimate to be split approximately 45% programming costs and 55% non-programming costs. This compares to previous guidance of “at least” NZ$10m-NZ$15m of non-programming cost savings by FY24 and a programming cost guidance that implied some but not dramatic savings. All in all this looks like a meaningful consensus upgrade to next year’s numbers, maybe around 10%-15% on FY23 at the EBITDA level, and significantly more on NPAT.
Property sale progressing well: Negotiations are “progressing well” with most commercial terms broadly agreed. Latest commentary suggested book value in the mid-30s millions, and we would expect a transaction value substantially above book. Given negotiations are still ongoing, today’s guidance doesn’t include any impacts from the sale process

Investor briefing – 10am NZT
Register here;&nbsp;https://s1.c-conf.com/diamondpass/10018373-wh3i4k.html
FY22 guidance summary




&nbsp;


Previous guidance


Revised guidance


Midpoint upgrade/(downgrade)


Forsyth Barr




Revenue


715-745


725-745


1%


724.5




EBITDA


115-130


150-160


27%


129.7




NPAT


17.5-27.5


40-48


96%


23




Capex


50-60


45-50


-14%


54.3




Source: Forsyth Barr analysis, Company reports

Sky TV (SKT) - Significant FY22 Guidance Upgrade