Advanced Television

Liberty Global downgrades won’t help Sky

May 8, 2017

By Chris Forrester

John Malone-backed media conglomerate Liberty Global announced its Q1 revenues of $3.52 billion (€3.21bn), down 17.8 per cent (y-o-y). Its European-based Operating Income was also down 18 per cent (to $431 million). The results were blamed on a “soft start” to the year by CEO Mike Fries. “While most markets reported results consistent with our forecasts, Virgin Media’s cable ARPU was softer than planned, partly due to discounting and mix effect, as well as a decline in mobile revenue.”

The numbers resulted in Liberty Media downgrading its full-year growth expectations from 6-7 per cent, to 5 per cent. This, says, equity analysts from investment bankers Exane-BNP/Paribas, “is in large part due to weak performance in the UK. This reads poorly for Sky as we would note that the primary reason for lower Operational Cash-Flow was increased marketing spend, which positively impacted KPI performance.”

Exane-BNP/Paris continued: “We don’t necessarily believe Liberty’s the new guidance will result in [market] downgrades – indeed we were already at the 5 per cent OCF growth target. Also, the 1Q17 results actually beat lowered consensus/Exane estimates at revenues/EBITDA. However, for those investors seeking solace in the ‘2017/1Q beat/no-downgrade’ argument, we would highlight that capex came in higher than expectations, meaning a cash flow miss. Furthermore, over the past 2 years Liberty has frequently struggled to hit guidance, and thus the sentimental impact is likely to outweigh to the downside. The downgrade of Project Lightning 2017 homes passed target adds further fuel to this fire!”

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