BSkyB Financial Results – Reaction
Stock in BSkyB dropped heavily yesterday following the group’s interim financial results (see BSkyB To Cease Analogue Broadcast This Summer), to end down 52p (6.1%) at 804p. Shares continued to fall as trading opened this morning; they were down a further 11p to 793p by midday.
Alongside the financial results, Sky also confirmed that it has taken management control of British Interactive Broadcasting (BIB), the parent group of interactive TV service Open. It plans to bring Open into the new Sky Interactive division, along with all other online and interactive ventures. The reorganisation will cost around £40 million, but should yield annual cost savings of around £20 million once completed.
These restructuring costs, along with what are thought to be disappointing ecommerce revenues at Open (there is no official breakdown of figures), may also have contributed to investors’ reactions to sell BSkyB stock yesterday and today. Open’s overall revenues were £20 million, significantly lower than forecasts from ABN Amro.
The national papers had little to say about Sky and broker reactions were mixed. ABN Amro has a positive view on Sky’s fundamentals, but says this is offset slightly by negative technical factors. These include the necessary sale of BSkyB shares in the near future by certain groups. Vivendi, for example, has to sell its 22% stake by the end of next year and HSBC and Matsushita – the two Open investors that have received BSkyB stock – may also sell now that BIB has been taken into Sky’s control.
This flood of shares to the stock market could push the price down. As a result, ABN Amro has a Hold stance on the group. Schroder Salomon Smith Barney has reduced its price target from £12 to £10. ABN has a target of £12, as does Deutsche Bank.
ABN Amro: Hold Schroder Salomon Smith Barney: Neutral Deutsche Bank: Buy
