Wednesday preview: Hopes high for ITV, less so for Vodafone
Trading updates and results come thick and fast on Wednesday, including from Antofagasta, GlaxoSmithKline, ITV and Vodafone.
ITV, is due to publish first-half results, with the market expecting to hear good news about the impact of the Fifa World Cup on TV advertising sales. Management have merely guided to TV net advertising revenue (NAR) being “broadly flat”.
Broker Shore Capital hoped to see confirmation that momentum has been maintained or possibly accelerated since the first quarter. More importantly, analysts look forward to hearing the conclusions of new boss Carolyn McCall’s “strategic refresh” – and particularly how she plans to accelerate growth in digital and content revenues both organically and through acquisitions.
Liberum expects McCall to wait until ITV's strategy day on 19 September to outline the full detail but analysts were looking out for two subjects in the presentation: retransmission revenues, as brought to light in the dispute between Virgin Media and UKTV, and whether ITV looks to change the Contract Rights Renewal (CRR) mechanism, which has regulated ITV1’s prices from the start of ITV.
But Liberum was in agreement that ITV is likely to beat ad revenue expectations driven both by England’s better than expected performance in the World Cup and the success of Love Island on ITV2. Analysts predict June NAR to be up at least 20% and July in double-digits so first-half NAR will be up around 1%. Total advertising revenues are likely to be more like +3% or more vs the +2% guidance with ITV VOD revenues likely to be in excess of 40% for 1H (41% for Q1).
Analysts at Hargreaves Lansdown suggested that online streaming and the growing ITV Studios content-creation arm will form major parts of the strategic changes. "The nation still tunes into old favourites like Coronation Street, but the big-budget dramas on Netflix and Amazon are increasingly muscling in on ITV’s act. At the same time advertising spending, traditionally ITV’s main source of revenue, is in a cyclical lull.
"ITV spends only a fraction of what Netflix and Amazon commit to new shows, so an increase in the budget shouldn’t be ruled out. However, ITV’s pockets just aren’t as deep as its big American rivals. Therefore the group might need to think outside the box. Increasing spending on its own streaming offering, the ITV Hub, is one possibility."
Amid a number of headwinds, Vodafone has seen its shares lose almost a quarter of their value since the start of the year, with May's final result and the announcement that CEO Vittorio Colao will step down in October after ten years in charge only hastening the decline.
Wednesday will see a first-quarter update where organic service revenue growth is expected to slow from the 1.4% seen in the fourth quarter.
Quarterly growth will slow to 0.2%, forecast Deutsche Bank, predominantly due to slower growth in Europe substantially due to the move from lunar billing and the launch of Iliad in Italy, slower growth in UK given handset financing and slower growth in Spain due to competition. Deutsche expects service revenues of €9.9bn and total revenues of €11.1bn, with service revenues under IFRS 15 accounting rules likely to be considerably lower than before.
"Spectrum auctions, like buses, seem to come along all at once (Italy in Sep) and are a hindrance to near-term sentiment. However, 5G is a positive for the sector, and FCF accretion from the LBTY deal will likely be more highly discounted by year-end," Deutsche said, advocating taking advantage of recent share price weakness with its 'buy' rating.
Analysts at Kepler Cheuvreux recently downgraded Vodafone's shares as they reckon the combination of higher capex, a lack of data monetisation, M&A leverage and upcoming spectrum auctions, put the dividend at risk.
Looking elsewhere, Capital & Counties will report half-year results following May's announcement that it was considering a demerger of its two businesses: Covent Garden and Earls Court.
Alongside an update on this process, which could be formalised by the year end, analysts at Peel Hunt were expecting to get an update on both estates. "For Covent Garden, progress towards the £125m ERV target and lettings news will be closely watched, while at Earls Court we would expect an update on both the site’s valuation as well as any headway made with local stakeholders."
After a fairly dramatic few weeks for Indivior, including US regulatory approval for rival Dr Reddy’s generic version of the FTSE 250 company's Suboxone Film, half-year results could allow the company to regain some momentum, said broker Numis.
However, this second quarter compares to a very strong performance last year and so declines in revenue and EBITA should be expected. "The update provides an opportunity for the company to update the market on current trends for Suboxone, and more importantly the initial launch of Sublocade... We hope to see around $3m of revenue from Sublocade to support our $33m full year estimate, and an expectation that sales could ramp materially in Q4 as teething problems are ironed out, and physicians get more comfortable with the new treatment format, with an initial focus on the 6,000 highest volume prescribers."
Brewin Dolphin will update on its third quarter, with investors hoping for assets to recover from the market weakness in the second quarter.
Peel Hunt expects AuM of just over £41bn, assuming net inflows of £0.4bn are broadly consistent with the run rate in the first half of the year, with quarterly revenues just less than £80m. "Brewins continue to evolve and develop its propositions – the new West End office will continue the enhancement of advisory capabilities, while more generally there is a focus on further improving intermediary distribution."
There will also be macroeconomic data, in the form of the monthly mortgage approvals report on the major high street banks from UK Finance at 0930 BST and the CBI's report on the retail sector.
With gradual increases in mortgage rates weighing on house purchase demand, keeping the RICS new buyer enquiries balance below zero for the 15th consecutive month, the market expect mortgage approvals to fall to 39.0K in June from May's four-month high of 39.2K.
The CBI's distributive trades survey is expected to show a drop in the reported sales balance to +15 for July from +32 in June.
"If so, it still would exceed its 12-month average, +10," said economists at Pantheon Macroeconomics. "Food sales likely were stimulated by the football World Cup.
Wednesday July 25
INTERNATIONAL ECONOMIC ANNOUNCEMENTS
IFO Business Climate (GER) (09:00)
IFO Current Assessment (GER) (09:00)
IFO Expectations (GER) (09:00)
M3 Money Supply (EU) (09:00)
MBA Mortgage Applications (US) (12:00)
New Homes Sales (US) (15:00)
Crude Oil Inventories (US) (15:30)
UK ECONOMIC ANNOUNCEMENTS
BBA Mortgage Lending Figures (09:30)
CBI Distributive Trades Surveys (11:00)
FINALS
Angle, Joules Group
INTERIMS
Burford Capital , Capital & Counties Properties , Croda International, GlaxoSmithKline, IDOX, Indivior, Informa, International Personal Finance, IP Group, ITV, Metro Bank, Primary Health Properties, Quartix Holdings , Rathbone Brothers, Staffline Group, Tullow Oil, Tyman
TRADING ANNOUNCEMENTS
3i Group, Antofagasta, Brewin Dolphin Holdings, Empresaria Group, GlaxoSmithKline, Marston's, QinetiQ Group, Victrex plc, Vodafone Group, Wizz Air Holdings
DRILLING REPORT
Antofagasta, Fresnillo
AGMS
Advanced Oncotherapy, Circle Property , Clear Leisure, Connemara Mining Co, Cropper (James), Mediclinic International , Norcros, Palace Capital , Petrel Resources, Polar Capital Holdings, QinetiQ Group, QinetiQ Group, Richland Resources Ltd, System1 Group, Trifast, ULS Technology , Vertu Motors
FINAL DIVIDEND PAYMENT DATE
Electrocomponents, Gama Aviation , Trans-Siberian Gold
QUARTERLY PAYMENT DATE
General Electric Co