A Look At Village Roadshow Limited And Sky Network Television Limited

  • August 29, 2019 11:53 PM AEST
  • Team Kalkine
A Look At Village Roadshow Limited And Sky Network Television Limited

We are discussing two stocks, VRL and SKT, which operate in the media and entertainment segment. In the recent past, both the stocks have delivered negative performance. Let’s have a look at these stocks.

Village Roadshow Limited

Village Roadshow Limited (ASX: VRL) deals in theme park and water park operations, information technology development, corporate overheads and financing activities. The business segments of the company are theme park and water park operations, cinema exhibition operations, film distribution operations and sales promotion and loyalty program operations.

Sale of Edge at an enterprise value of $32.3 million

The company has informed the sale of wholly-owned promotional solution agency Edge Loyalty Systems Pty to Blackhawk Network (Australia) Pty Ltd for an enterprise value of A$32.3 million. The funds will be used to reduce VRL group debt.

VRL notes that iPic Entertainment Inc (NASDAQ: IPIC), in which the former has a stake of 24.4% has missed a scheduled interest payment for its credit facility. This may further create a default-like scenario for iPic Entertainment.

Announcement of FY19 results: VRL announced its results for the year ended 30 June 2019 (FY2019) wherein it posted revenue of $980.543 million against $952.762 million during FY18. The company reported a loss of $9.580 million in FY19 against a loss of $3.411 million during the previous year. The company reported total expenses of $980.861 million and finance cost of $32.496 million in FY19. Total current assets of the company are valued at $272.769 million wherein it includes $61.653 million of cash, $129.337 million of trade and other receivables, $37.439 million of film distribution royalties. The company’s goodwill and other intangible assets were valued at $239.957 million, property, plant & equipment at $656.217 million. Noncurrent portion of film distribution royalties and trade and other receivables stood at $53.897 million and $17.588 million, respectively. The company had interest -bearing loans and borrowings of $275.229 million followed by a lease liability of $ 106.125 million as on 30 June 2019. Net Assets of the company during FY19 stood at $ 434.509 million. Net cash from operating activities stood at $ 82.435 million, while Net cash used in investing activities amounted to $9.10 million. The company reported net cash used in financing activities at $75.59 million.

FY19 Financial Highlights (Source: Company Reports)

Operating performance: Theme Parks’ segment reported EBITDA of $76.5m, up 100% from FY18 well supported by higher ticket volumes and favourable weather conditions. Ticket yields grew by 25% aided by consumer’s migration to higher-priced annual and multi-day passes, and growth in ticket volumes. July 2019 attendances were up 12.5% y-o-y, driving strong in-park spend. VRL has successfully attracted the crowd to the fashion theme parks. VRL successfully delivered the opening of Lionsgate Entertainment World during July 2019 at Novotown on Hengqin Island. In cinema exhibition membership base has grown approximately 30% on y-o-y basis. VRL has agreed to sell its Edge Loyalty Systems Pty Ltd to Blackhawk Network (Australia).

Dividends: The Board has today declared a fully franked final FY2019 dividend of 5 cents per share.

Outlook: The company has implemented Cost reduction program during FY19, and the management is confident of delivering annualised savings in excess of $10 million across the VRL group. The management cited high-yield ticket strategy demonstrates the customer’s willingness to pay for quality experiences. VRL will launch in a new campaign that will sell the entire suite of attractions and the Village Roadshow Theme Park umbrella brand in September. FY20 will see increased capital expenditure for cinema exhibition segment, led by several upgrades across Village and Event circuits, and the development of the new M-City site at Clayton, Victoria.

Stock update: On 29 August, the stock of VRL closed at $2.820, up 16.529% from its previous day close. The market capitalisation of the company stood at $472.22 million, with 195.13 million shares outstanding. The stock has given a negative return of 29.45% and 24.38% in last three-months and six-months, respectively.

Sky Network Television Limited

Sky Network Television Limited (ASX: SKT) operate as a sport and entertainment media service provider in New Zealand. Based on revenue recognition, the business consists of two segments namely residential subscription and other subscription. Residential subscription constitutes retail customers and other subscription revenue includes commercial revenue earned from Sky subscriptions at hotels, motels, restaurants and bars across New Zealand. The company is based at New Zealand and headquartered at Auckland. SKT was listed in ASX during 2005.

With a market update on 29 August 2019, SKT informed about the change in shareholding of company’s director Geraldine Celia McBride. Number of shares acquired by Mr. Geraldine Celia McBride is 23,016 worth $24,972.36. Number of shares held by the above director is 23,016.

Recently, with a market update SKT has informed regarding the change in management of the company. Due to the retirement of Chairman Peter Macourt, the company has decided to appoint Philip Bowman as the new Chairman commencing September 1, 2019.

FY19 Financial Highlights: The company posted revenue at NZ$795.126 million, a decline of 6.7% on y-o-y and posted higher net loss at NZ$ 607.837 million compared to a net loss of NZ$240.674 million during FY18. The net loss includes goodwill impairment charges of NZ$670 million, asset impairments of NZ$44 million and NZ$5 million of other non-recurring costs. EBITDA during FY19 stood at NZ$230.168 million as compared to NZ$285.810 million in previous year. SKT reported FY19 current assets at NZ$160.756 million including cash and cash equivalents at NZ$4.283 million, trade and other receivables at NZ$61.996 million and programme rights inventory of NZ$89,458 million. Property, plant and equipment of the company stood at $ NZ163.217 million followed by intangible assets at NZ$ 50.485 million and goodwill at NZ$395.331 million, respectively. Total equity of SKT stood at NZ$351.568 million as on 30June 2019. The business generated net cash from operating activities at NZ$178.026 million and cash used in investing activities stood at NZ$69.78 millions.

FY19 Financial Highlights (Source: Company Reports)

Operational performance: Residential subscription revenue decreased by 9.3% to NZ$629.8 million due to decline in satellite customers. SKT reported lower uptake in premium segment followed by lower pay-per-view purchases and a decline in Sky’s basic entry level package. Other subscription revenue increased by ~16.4% y-o-y to NZ$98.6 million during FY19 well supported by higher subscriber numbers for Sky’s streaming services NEON and FAN PASS. However, the business reported 50% y-o-y growth in streaming customer segment.

Revenue from advertising sales declined 9.2% at NZ$51.8 million in FY19 primarily due to weakening of market conditions in advertising expenditure. Installation and other revenues also declined by 10.8% y-o-y and came at NZ$14.9 million.

Outlook: The management cited that the current ARPU pressure is likely to continue in FY20 and estimates higher content costs in entertainment and sporting rights for FY20. The company is looking to increase market share across the streaming service segment while the management will also focus on costs controlling strategies to improve operational performances.

Stock Update: On AEST 2.01pm 29 August 2019, SKT’s stock was quoting at $1.030, down 1.905% from its previous day close. SKT’s market capitalisation stood at $434.94 million, with approximately 414.23 million outstanding shares. Annualised dividend yield of SKT stood at 13.38%. The 52-week trading range of the SKT stood between $1.030 to $2.380. and currently the stock is quoting at the lower band of its 52-week trading range. SKT has generated a negative return of 9.48% and 25% in the last three and six months, respectively.

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