ITV’s latest special payout fails to boost shares

<p>It looks like ITV is prepping shareholders for life without (Liberty) Global dreams.   With a flourish, the UK’s largest free-to-air broadcaster said on Wednesday […]</p>

It looks like ITV is prepping shareholders for life without (Liberty) Global dreams.


With a flourish, the UK’s largest free-to-air broadcaster said on Wednesday

  • 2015 earnings jumped 20%
  • it would pay £400m in its latest ‘special’ dividend and
  • that it expected to outperform the television advertising market in 2016



What more could investors wish for?


Well, if not jam today, at least jam in the first quarter.

Instead, the 12-year old firm, which is the latest incarnation of Britain’s 60-year old independent television network, warned net advertising revenue would be flat in the first quarter.

That would be a marginal underperformance of the market, according to ITV’s own estimates.

Ad revenues would then pick up for the European Football Championship in Q2.

There was no direct word on ITV’s plans to boost viewing share for its main UK channel, after a 4% fall in 2015.



Back to earth

More to the point, in my view, since ITV stock racked up its last in a string of record highs in July, the downside has been more compelling.

Speculation of an eventual take-out by Liberty Global was a major reason for the extent of those gains.

Expectation of the return of double-digit sales growth also played a part.

However the pattern of serial levered deal doer Liberty’s recent European M&A, forays has not pointed towards a ‘terrestrial path’.

See Cable & Wireless; Vodafone’s Netherlands operations.

The last free-to-air TV business John Malone’s uber-vehicle bought was Ireland’s TV3, for the relatively small sum of £61m, compared with £4.4bn for the Dutch deal.

As ITV’s earnings continue to recover, a takeout begins to look more challenging and less of the bargain it would have been a couple of years ago.

ITV EBITDA rose 18% in 2015.


If LBTYA were to stump up just 50% of that growth rate against ITV’s £865m core earnings last year, the theoretical price could be £7.8bn, before £90m net debt.


The deal would instantly be Liberty’s biggest European buy for 3 years.

With the US group having an eye to credit agencies about downgrade risk (no really) the chances of it picking up ITV have receded even further.

ITV’s second consecutive ‘one-off’ pay-out in 2 years could therefore be followed by another, in March 2017.

Not least because management is aware a long-standing prop for the shares has been removed, perhaps for good.



From a technical perspective, the stock has latterly failed (at a 61.8% projection) in a first attempt to take back a 13% tumble last month.

(The slide followed a filing by Goldman Sachs about a loan of some 800 million shares, and bearish comments by other brokerages).

Since 100% of the extension from ITV’s late Dec-Jan move failed to halt its fall, attention should move to long-standing support between 235p and 238p.


There’s a lot of empty space beneath the latter, before an unproven further extension (161.8%) equating to 225p.

Scrolling left, we find no real historical floor below current levels before 216p, though the stock

Wednesday’s highs around 249p—previous support—should now be a first resistance, when (if?) the effect of ITV’s promising 2016 outlook takes holds.

254p would be eyed afterwards.





Please click image to enlarge






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