The Week Ahead: Struggling ITV set to announce rights issue
Monday 02 March 2009
City analysts anticipate a dividend cut when ITV posts full-year results this week. The broadcaster, which is due to publish figures for 2008 on Wednesday, is expected to strike a cautious note in the face of falling advertising revenues, and, according to recent market speculation, may also launch a rights issue and announce the disposal of the Friends Reunited social networking website, which has failed to keep up with competition from the likes of Facebook and Bebo.
UBS, one of the company's brokers, said that, in light of the uncertain outlook for the business, ITV should consider a rights issue "at the earliest opportunity" to remove a financing overhang, potentially damaging cuts to programming investment and the sale of strategic assets such as SDN, the digital terrestrial channel operator.
"Reports suggest that, as part of its 'blue sky thinking' for the Digital Britain review, ITV has suggested a three-way merger with Channel 4/Five. While it could be argued [that] such a radical approach is required to ensure the future of free-to-air broadcasting, it would be at the expense of advertisers and viewers, and we think would face insurmountable competition and plurality issues," UBS said.
"Rather that relying on a regulatory bailout, we believe a better solution could be for ITV to undertake a rights issue and adopt a subscription model which could create significant value for shareholders."
On the dividend, UBS expects a suspension on Wednesday, as the com-pany scrambles to preserve cash. Cazenove – which alongside Deutsche Bank also expects a cut – does not anticipate any payouts until 2011.
TODAY: HSBC may unveil a £12bn-plus rights issue with its full-year results. The market has been abuzz with speculation about the need for additional funds at the lender, which – although considered stronger than most its of peers in the British banking sector – is heavily exposed to the slowdown in Asia and other emerging markets. If confirmed, the move will rival Royal Bank of Scotland's £12bn share sale in April, which set a new record for cash calls.
Also today, Numis Securities expects final results from Ultra Electronics, the defence and aerospace specialist, to meet or possibly exceed consensus estimates, anticipating "strong double-digit underlying growth, positive contributions from acquisitions and a small translational currency benefit".
Results/updates: Amlin, Keller, Pearson, Ultra Electronics, Xchanging, Whitbread and HSBC.
TOMORROW: Trading at Persimmon, the housebuilder which is due to post full-year results tomorrow, is likely to remain significantly depressed, Panmure Gordon says. "Following recent comments from other housebuilders, we have downgraded our forecasts for 2008, 2009 and 2010," the broker said in a note to clients last week.
Results/updates: Admiral, Drax, Meggitt, JLT, Provident Financial, Rotork, Standard Chartered, Wood Group, Ashtead and Persimmon.
WEDNESDAY: The debt position is likely to be in focus when Informa, the publishing and conferences group, posts full-year results for 2008, with Deut-sche Bank warning that the dividend may be suspended as it tries to avert a possible end-of-year covenant breach. "On our estimates, Informa will be at [a net debt-to-earnings ratio of 3.5 times] at end 2009 – which is where the covenants are," the broker said.
"Even if our forecasts are too cautious, we think that the board must acknowledge that the macro situation is sufficiently uncertain [and] that paying a dividend would be imprudent."
Although a suspension of the payout may precipitate some short-term pain for equity holders, if combined with a resetting of the covenants, it would "pretty much solve the financing problem", Deutsche said.
The broker also highlighted the possibility of a capital raising.
Also on Wednesday, Evolution Securities expects no surprises when International Personal Finance posts full-year results, but warns on the pros-pects for the year ahead. "Our focus will be on the 2009 outlook, in particular the impact that a deteriorating economic environment and rising unemployment in Eastern Europe could have on im-pairments," the broker said. "Poland's performance is key, and unemployment here has increased sharply to 10.5 per cent in January 2009 [against 9.5 per cent in December 2008]."
Results/updates: Carillion, IMI, Old Mutual, Restaurant Group, International Personal Finance, Informa and ITV.
THURSDAY: Results/updates: Aggreko, Arriva, Rathbone Brothers, Aviva, Balfour Beatty, Cobham, easyJet and Michael Page.
FRIDAY: Results/updates: WPP, Robert Walters, Sthree and Marshalls.
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