The Week Ahead: Demand is buoyant for BSkyB as users increase
Monday 24 January 2011
Investors in BSkyB may have found that their attention has been domina-ted by the proposed takeover from News Corp to gain total control of the broadcaster, but on Thursday the company's interim results will give them a chance to see how the business itself is getting on.
Numis Securities' Paul Richards believes that, after the group reported a "robust operational performance" for the first-quarter, its strong performance will continue, noting that with the company's "investment in HD and broadband having peaked, returns are accelerating markedly".
Meanwhile, Sam Hart – an analyst at Charles Stanley – is also expecting a positive update that will show the "continued buoyant demand for its key products and services". He is forecasting that subscribers to its service will have seen a net increase of 150,000, bringing the total to around 10.1m, while average revenue per user will have increased to £541.
Both analysts expect the BSkyB and News Corp deal to go through – with Mr Richards predicting it will be completed in the third-quarter of 2011 –but only following an investigation by the Competition Commission.
In terms of the price that News Corp could end up paying, Mr Hart says: "BSkyB's board may feel obliged to demand a price well in excess of 800p for an offer to be recommended."
International Ferro Metals was knocked last week after it released an operational update in which it revealed its output had been hit by having to perform repairs on two of its furnaces. As a result, Numis Securities' Andy Davidson wants "a more detailed insight" into the problems and how they are being dealt with when the group's production report is released tomorrow.
Although – given the proximity of the two announcements – the analyst is not expecting a lot of extra detail, he does say he will be "looking closely for an update on IFM's cash balance and debt levels to gauge how stretched the balance sheet has become".
The fact that the Nigerian economy is "still not firing on all cylinders" will have an effect on PZ Cussons' interim announcement tomorrow, according to Panmure Gordon, which says that uncertainty in the country is likely to remain until after the elections in April.
More generally, the broker predicts that the update should reveal "relatively muted growth". In terms of the company's outlook, Panmure's analysts expect it will "continue to sound the familiar cautionary note for consumer goods companies at the moment, pointing out challenging consumer markets, high promotional activity and rising commodity costs". Tomorrow also sees an update from Misys, with Canaccord Genuity predicting "solid results and a positive outlook" from the software company. Canaccord's analyst Bob Liao believes that "IT spending is returning to the financial services sector", pointing to updates from Logica, Cap Gemini and Accenture to support his view.
Meanwhile, he also predicts "continued success in the rollout of Bank Fusion", the group's new banking system, which he says will play a part in ensuring the first-half is "the final half of declining revenues".
Results/Updates: Ashley House, Babcock, Intermediate Capital Group, International Ferro Metals, Misys, PZ Cussons and Severn Trent.
Results/Updates: Brewin Dolphin, Cookson, Renishaw, Sage, United Utilities and WH Smith.
AstraZeneca releases its full-year figures on Thursday, with Charles Stanley's Jeremy Batstone-Carr saying investors' "attention is likely to focus, initially at least, on confirmation of an enhanced share buy-back programme". The analyst strongly suspects that the drug company's net cash, plus its "good track record of returning excess funds to shareholders", means the current programme will be accelerated.
However, he does warn that the cash return "masks the fact that the company faces a series of significant patent expiries and challenges to key products over the next few years", and he says that concerns will really start to mount after 2011. Therefore, he is predicting "a relatively cautious outlook" but feels the operating uncertainties facing the group is already reflected in its price.
Results/Updates: 3i, Aquarius Platinum, AstraZeneca, Britvic, BSkyB, Cairn Energy, Eaga, Great Portland Estates, Hansard, Kazakhmys, London Stock Exchange, Mitchells & Butlers, Petropavlovsk, Tullow Oil and Vedanta Resources.
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