2 FTSE Listed Stocks that seem to be in favour these days: Tekcapital PLC and ITV PLC

The United Kingdom market opened higher today (on 6^th May 2020, before the market close), though the market sentiments were dented by gloomy quarterly earnings report amid the Coronavirus pandemic impact and apprehensions over the spat between US and China. Meanwhile, Companies are mitigating the impact of Covid-19 mayhem through a double edge sword. On one side, they are reducing operating & capital expenses and managing cashflow strictly, while on the other hand, they are boosting up their capital base through the issuance of new equity shares or arranging debt facilities. Today, we are going to discuss two FTSE listed stocks from varied industry - Tekcapital PLC (LON:TEK) and ITV PLC (LON:ITV) as both the Companies have released their financial update. While Tekcapital posted its full-year results for FY2019, ITV announced the first-quarter 2020 results. Following the business updates, the stock price of both TEK and ITV surged over 5 per cent and 4 per cent, respectively (at the time of writing, GMT 9:20 AM). Let’s skim through the operational and financial position of these two Companies and understand, what is bringing positivity to the market sentiments despite prevailing economic disruption.

Tekcapital PLC (LON:TEK): Sustainable Business Model with Focus on Value Creation Through Investment in Technologies

Tekcapital PLC is a FTSE AIM-listed technology transfer service provider company. It caters universities and corporations in the United Kingdom and the United States. It generates value by investing in IP (Intellectual property), acquiring and commercializing technologies. Its search engine is connected to over 4,500 universities in 160 countries.

(Source: Presentation, Company Website)

Key Milestones of FY2019 in Portfolio

• Under its portfolio Salarius, The Group launched MicroSalt® and secured three commercial accounts.
• Under its portfolio Lucyd, The Group introduced 3.0 audio glasses, which can be connected to mobile phone.
• Belluscura raised USD 2.7 million, and its post-money valuation stood around USD 9 million.
• Guident filed a patent for controlling autonomous vehicle post-accident.

Significant Updates for 2020

• 1^st May 2020: Tekcapital raised £925,000 in the capital by issuing 9,250,000 new ordinary shares at the placing price of 10 pence per share. The capital raising was made to accelerate the development of portfolio companies.
• 24^th April 2020: The Group announced that its portfolio company, Lucyd Ltd expanded its online presence to Walmart, in addition to availability on Amazon.

Final Results for the year-ended 30 November 2019 (as on 6^th May 2020) - Multi-Year Track Record of Delivering Significant Growth of Net Assets and ROIC

• Through the commercialisation of university discoveries, the investment objective is to attain long-term growth of net assets and ROIC (returns on invested capital).
• 2019 was the finest year for value creation in the Tekcapital’s short history: net assets rose by 40 per cent to US$22.25 million (2018: US$16.13 million); net assets per share increased to $0.35 (2018: $0.30); total revenue surged to US$7.72 million (2018: US$6.83 million); operating expenses tumbled 7 per cent to $1.59 million (2018: $1.72 million); profit before tax climbed to $5.52 million (2018: $4.55 million).
• The company has no debt as of November 30, 2019 and completed a post-period placement raising gross proceeds of US$0.9 million as well as a conditional placing for US$1.15 million.
• The group has continued development of four high-value portfolio companies: Belluscura (18.9 per cent ownership), Lucyd (100 per cent ownership), Salarius (91.7 per cent ownership) & Guident (100 per cent ownership), with exciting near-term potential catalysts.

Share Price Performance

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

TEK’s shares were trading at GBX 18.80 on 6^th May 2020 (before the market close at 8:58 AM GMT+1). Stock's 52 weeks High is GBX 24.00 and Low is GBX 3.60.

Outlook – Built a High-Value Portfolio

The group has continued to expand and develop its existing business. The management is confident that continued investment in the four high-value portfolio companies stays the right approach for long-term value creation. Currently, the company is exploring early-stage venture funding for its portfolio companies. Tekcapital commercialises university intellectual property for its portfolio and as a service for client companies. It is further growing services division alongside the portfolio companies, differentiating Tekcapital from most other IP commercialisation companies. Clients consist of more than 250 leading universities and blue-chip companies. While the group is on-track, net asset values will vary from period to period due to individual portfolio performance, valuations and changes in market conditions and macro-economic financial conditions comprising the current Coronavirus pandemic.

ITV PLC (LON:ITV) is a FTSE 100 listed media company. It operates as an integrated producer broadcaster, which offers content over multiple platforms at a global level. The Company differentiates its business into two segments - ITV Studios and Broadcast & Online.

Let’s take a glance over its business segments:

• ITV Studios: Creates and produces content in the United Kingdom and 13 other countries. The genre of content includes entertainment, drama and factual.

(Source: Annual Report)

• Broadcast: Delivers content via linear television broadcasting and through ITB Hub (Operates a bundle of free-to-air commercial channels).

(Source: Annual Report)

Key Statistics of Competitive Advantage

The Group is continuously focusing on expanding its direct to consumer business.

• Channel reaches 90 per cent of the UK population every week.
• Over 31 million of registered users in the UK.
• The Group invests around £ 1.1 million every year in channels for content in the UK.
• Its global entertainment catalogue possesses 46,000 hours of film and television content.

Significant measures are taken recently for the Long Run prospects

• 1^st May 2020: The Board of ITV appointed Graham Cooke as an Independent Non-executive Director with immediate effect.
• 3^rd April 2020: Considering the unprecedented disruption of Covid-19 outbreak, the ITV PLC had adopted several measures including – 20 per cent reduction in pay for directors (executive and non- executive) and suspension of bonus in 2020.

Q1 Trading Update – Reflecting Challenging Environment, with Reduce Costs and Tightly Manage the Cashflow and Liquidity

• On 6^th May 2020, the company provides the performance for the three months to 31 March 2020. For Q1 FY20, the total external revenue reduced by 7 per cent at £694 million (2019: £743 million).
• Total ITV Studios revenue for the three months to 31^st March 2020 tumbled 11 per cent at £342 million (2019: £385 million) and was impacted by the restrictions on working practices due to COVID-19 and phasing of deliveries.
• Broadcast revenue surged by 2 per cent at £500 million in Q1 FY20 (2019: £489 million), reflecting an increase in ITV total advertising (+2 per cent) and online revenues (+26 per cent).
• With very strong growth in simulcast viewing up 112 per cent, online viewing up 75 per cent, and reach up 40 per cent on the ITV Hub, the company’s total viewing rose by 2 per cent in the first quarter of 2020.
• In ITV main channel’s share of viewing (SOV), the group reflects the best quarter since 2009, representing marginally up at 17.9 per cent in Q1 FY20. Led by the volume of the BBC’s news output, the ITV Family SOV was down at 23.6 per cent.
• The group’s financial and operational performance significantly impacted by COVID-19.
• It has acted to tightly manage cashflow in 2020, with the withdrawal of the 2019 final dividend and delay the agreements with ITV pension trustees and tax authorities.
• ITV has good access to liquidity, with unrestricted cash of more than GBP 100 million, undrawn Revolving Credit Facility (RCF) of GBP 630 million, and GBP 300 million bilateral facility.

Share Price Performance

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

ITV’s shares were trading at GBX 76.02 on 6^th May 2020 (before the market close at 9:00 AM GMT+1). Stock's 52 weeks High is GBX 165.90 and Low is GBX 50.06.

Outlook - Remains Uncertain

In 2020, the company will reduce overhead costs by £60 million. At least GBP 100 million decrease in the programme budget to approximately GBP 1 billion. The outlook is changing rapidly and stays uncertain. Therefore, the company is not giving any guidance for the remainder of the year or for the second quarter of 2020. The group will deliver growth in direct to consumer and double-digit growth in online revenues. The company expects another challenging operating environment due to the recent outbreak of Coronavirus. ITV Group will take further action when necessary to manage the costs and cash tightly. From the perspective of the media market, Artificial intelligence is entering a new growth phase, due to the convergence of several trends.