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As Covid-19 has eroded the businesses across industries, most of the companies are forced to slash their planned expenditures and seeking credit facilities to manage its cash flow during this uncertain period. Meanwhile, ITV PLC’s share surged 8.65%, and Next PLC soared by 9.65%, as on 9th April 2020, against the previous day close. While both the companies are adopting plausible measures to combat this challenging market conditions, the expectation of infection rate reaching a plateau benefitted both the stocks. Let’s discuss their specific business domain in the light of financial performance and prospects.
ITV PLC (LON:ITV)
(Source: Company Website)
ITV PLC (ITV) is an FTSE 100 listed, United Kingdom-based media company. It is operating as an integrated producer broadcaster (IPB) that provides content over multiple platforms globally. The company's operations are divided into two segments: Broadcast & Online and ITV Studios. Let’s briefly discuss their segments below:
- ITV Studios: This segment produces and creates content in the UK and 13 other countries as international operations. The formats include entertainment, drama and factual.
(Source: Annual Report)
- Broadcast: This segment operates the family of free-to-air commercial channels in the United Kingdom and delivers their content through linear television broadcasting and via ITB Hub.
(Source: Annual Report)
Significant measures are taken recently for the Long Run prospects
- 3rd April 2020: In order to weather the challenging disruption of Covid-19 pandemic, the group has taken several measures including – suspension of bonus in 2020, voluntary reduction in pay by 20%, for the Executive Directors, Management Board and Non-executive directors.
- 20th November 2019: The board of ITV has announced the PricewaterhouseCoopers LLP, as the new external auditor as KPMG didn’t participate in the tender.
- 8th November 2019: ITV had announced the disposal of the London Television Centre for the transaction value of GBP 145.6 million.
(Source: Annual Report)
Quick View on Financial Highlights and Key Updates
- On 3rd April 2020, the company released several measures to decrease its costs and manage its cash flow in response to the coronavirus (COVID-19) pandemic. The Group has cancelled annual Bonus for its executive Directors. In respect to the company’s performance in 2020, there will be no cash bonus payable. In base salary, there will be a 20 per cent of reduction for its Executive and Non-Executive Directors during the current Government-imposed lockdown.
- For the financial year 2020, the company is expecting a 1% decline in total advertising revenue and profit by c.£17 million, before any mitigation. The Group has reduced its programme budget by at least £100m. It has also reduced its discretionary spending by £20m in 2020. It has withdrawn its market guidance for 2020. The Group had ceased its dividend for FY2020 and holding £150m of unrestricted cash.
- Let’s walk through the Annual Report 2019 wherein, the full-year results were ahead of expectations. The group has made good progress in executing the strategy to build a digitally-led media and entertainment company. In FY19, the company’s total revenue increased by 3 per cent to £3,885 million, due to an increase in the total Studios revenue of 9 per cent. The group delivered 25 million pounds of cost savings, 5 million pounds ahead of the target.
Share Price Performance
One Year Chart as of April 9th, 2020, after the market closed (Source: Thomson Reuters)
On 9th April 2020, ITV’S shares closed at GBX 76.38. Stock's 52 weeks High is GBX 165.90, and 52 weeks Low is GBX 50.06.
Business Outlook Scenario: Impact Due to Coronavirus Chaos
Good start to 2020, with continued strong growth in online viewing, ITV Family SOV flat with the strong schedule coming up, TAR is expected to be up 2% in Q1, and early indications suggest TAR is down 10% in April. In March and April, the company has seen an impact from travel advertising deferments relating to the COVID-19. Despite the ongoing economic uncertainty around the outlook for the UK following its departure from the EU, over the full year, the group is currently confident about the financial performance.
Next PLC (LON:NXT)
(Source: Company Website)
Next PLC is an FTSE 100 listed British multinational retailer of clothing and homeware.
Highlights of business model
- The Next Online has over 5 million active customers globally and serving in 70 countries through its website.
- Next Retail has a chain of about 510 stores in UK and Eire.
- Next Finance provides consumer credit of GBP 1.2 billion.
- Next International Retail operates in 35 countries.
- Lipsy markets its products through Next stores and via the online channel of NEXT online.
Strategic Objectives to Deliver Long-Term Returns
- Enhancement of NEXT product range.
- Profitability across retail spaces.
- Efficient product sourcing and inventory management to control the cost.
- Increase the number of profitable customers, both in the UK and internationally.
- Focus on customer services and satisfaction level across retail stores and directory.
- Maintaining an effective balance sheet and secure capital structure.
- Generating value for shareholders and returning cash surplus through dividends, share buyback.
Recent Regulatory Stories
- 3rd April 2020: The group has announced the confirmation regarding the eligibility to access credit through ‘Covid Corporate Financing Facility’.
- 13th February 2020: The group has announced the purchase of 15,301 of its ordinary shares at 10p each for cancellation.
Update and Financial Performance for FY2020
- The company announced that they would be suspending all their online sales operations, as there was a lot of pressure from the employees of the group, specifically the one who could not be at home and were compelled to work in the distribution and warehousing centres to fulfil orders, during these terrible times.
- For the period to January 2020, the total sales increased by 3.3% to £4,361.8 million as compared with the corresponding period of the last year (2019: £4,220.9 million), while statutory sales stood at £4,266.2 million in FY20. The retail sales decreased by 5.3% to £1,851.9 million in January 2020 against £1,955.1 million in January 2019.
- Group’s profit before tax of £728.5 million was just ahead of the previous guidance, due to better than anticipated full-price sales in January. The earnings per share stood at 459.8 pence in FY20 versus 435.3 pence in FY19. The statutory earnings per share surged by 7% to 472.4 pence as compared with the previous year.
Share Price Performance
One Year Chart as of April 9th, 2020, after the market closed (Source: Thomson Reuters)
On 9th April 2020, NXT’S shares closed at GBX 4,624. Stock's 52 weeks High is GBX 7,358, and 52 weeks Low is GBX 3,311.
COVID-19 crisis may impact the upcoming results
The company is facing challenging conditions after Covid-19 outbreak. A continuous weakening in general retailers and the online platform has affected the financial performance of the Group. The sales would be assisted by positive earnings with continued strengthening expected in 2019. The growing online segment can help the company to improve its margins, but it will have a negative impact on the retail segment business due to a decrease in demand and higher operational costs burden.
Disclaimer
The website has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. The above article is NOT a solicitation or recommendation to buy, sell or hold the stock of the company (or companies) under discussion. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site.
