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Price:
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126p
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Rating:
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Neutral
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30/06/09
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FACTS: Following UTV's first-half results last week, we are upgrading our 2010 revenue and EBIT forecasts by 2% and 4% respectively. We are now forecasting revenue of £120.5m and EBIT of £24.8m. For 2011, we are forecasting revenue of £123.9m and EBIT of £25.7m.
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ANALYSIS: By division, our 8% top-line growth to £120.5m in 2010 comprises the following: GB radio up 14% to £49.2m, increasing to £50.5m by 2011; Irish radio is expected to decline by 2% in the current year to £24.4m and return to growth in 2011 to £25.2m; we expect television to continue its strong growth in the first half and are forecasting 9% growth to £35.6m in the current year and £37m in 2011.
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In terms of earnings, we are forecasting EBIT growth of 4.6% to £24.8m. We expect the biggest contribution to this to come from GB radio, where we expect EBIT to grow by 29% to £12.3m. We expect the decline in Irish radio revenues to be offset by effective cost management, leading to flat earnings growth in 2010. We are forecasting a television EBIT of £3.6m, down from £5.3m last year.
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Overall, we expect UTV to achieve diluted adjusted EPS of 15.6p in 2010 and 16.6p in 2011. With limited capital requirements, minimal tax costs and a reduced interest bill, we are expecting free cash flow of £20.8m in 2010 and £19.7m in 2011. This results in net debt/EBITDA of 2.7x by end-2010 and 2.2x by end-2011, well within the required covenants.
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DAVY VIEW: At the EPS level, this represents a 4% upgrade to our 2010 forecasts. As management only provides guidance for the third quarter, we have taken a more cautious approach to our estimates in Q4. Should the momentum in the recovery — particularly in Ireland — continue to the end of the year, these upgraded numbers may look conservative. UTV will issue a trading update on November 18th.
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