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  # 2335377 11-Oct-2019 09:22
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eracode:

 

@tdgerk Quote: “How is equity plummeting like as rock?”

 

This looks somewhat plummety:

 



 

 

 

 

tdgerk?? I will overlook that... :-)

 

 

 

Scroll up, they wrote off massive goodwill. Goodwill is a paper number, and anyone who may be analysing the accounts will know that, and ignore it, focusing on real assets and liabilities.


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  # 2335384 11-Oct-2019 09:31
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Sky has announced 4 year extensions to international cricket, including all CWC categories

 

This tells me that Sky is here for the long term, that they are consolidating the business. Remember their share capital size is low. Its becoming a smaller business, as its revenue has been decreasing with competition. Its downsizing to better match its smaller place in the market


 
 
 
 


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  # 2335388 11-Oct-2019 09:41
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Unless sky sales drop and it goes out of business.

I doubt there are many potential purchasers of overseas license rights other than sky and spark

I wonder if you pay all the license fee at once or is it paid in installments.


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  # 2335392 11-Oct-2019 09:49
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afe66: Unless sky sales drop and it goes out of business.

I doubt there are many potential purchasers of overseas license rights other than sky and spark

I wonder if you pay all the license fee at once or is it paid in installments.

 

Take Foxtel/Kayo. They could buy the shares cheap, as there are not many and they are already cheap. For Foxtel they can buy 700,000 customers cheap. Run Sky from AUS so get rid of almost all NZ costs. Im unsure how rights are managed, I assume they pay them regularly. They would certainly amortise them over the period of use. There would be a cashflow issue there to manage also I expect.


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  # 2335395 11-Oct-2019 09:58
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tdgeek:

 

sen8or:

 

Sky will have some strong banking covenants in place to do with equity, working capital, debt payment calculations and likely a few other things. With equity plummeting like a rock, this will place pressure on cashflow and their ability to raise working capital. Shares going down will make it nigh on impossible for them to raise funds in the equity markets (stock exchange), whilst there are some investors that may bank on buying a sinking ship to turn it around, there would have to be other positive indicators for them to gain comfort in the investment.

 

How is subscriber growth? How is return per subscriber? What are the long term trends in the business? What are the trends in the wider industry?

 

None of these are particularly pretty so even trying to appeal to the investor with a bit of a risk appetite is tricky.

 

If they can't raise cash in the equity markets, then they have to try and raise debt. If creditors / financiers already have a larger stake in the company than the owners / shareholders do, this makes lending a particularly risky prospect and the same questions about subscribers and long term trends become even more pertinent.

 

Businesses do not go broke solely due to lack of profit, they go broke due to lack of cashflow, whilst the two are often linked, its not always the case. I'd dare say if they miss even one debt repayment then the banks would be in there pretty much immediately.

 

 

 

 

How is equity plummeting like as rock? They make a profit every year, so equity, i.e. the net assets will be increasing

 

Why do they need to raise working capital? They are adding to it daily, while this cashflow business is in the black. They are not expanding, so the level of debtors and creditors is unchanged. Not being a manufacturer they dont buy stock so need extra WC for that. Not being an expanding brick and mortar retailer they have no need for extar WC to cater for that expansion, stocks, etc

 

Why do they need to raise cash in the equity markets? If anything, as they reduce the size of the busines they will do share buybacks

 

Why do they need to raise debt? I dont see any need to borrow

 

Cashflow is more important than profit we all know that and why. That can happen as a business expands, requires more WC, more staff, more costs, and the resultant sales do not line up. Sky is not in that position. They are reducing sales, and they are pro active in reducing costs, they run a low number of shares which is where they need to be

 

Every year I read Sky is falling like a stone

 

 

The net assets arent increasing, they declined in the 2017/2018 financial year from $1.3bio to $1.0bio. Now the directors spin was that this was due to a one off impairment charge of $360mio on a particular asset, but that doesn't negate the fact that this asset was clearly overstated in value. If this one was, what else has been? 

 

The 2019 annual report continues this trend, net assets have declined further, down to $351mio a $650mio drop in equity (net assets). As per 2018 the decline was mostly attributable to an impairment charge, this time good will, written down $670mio. When creditors and/or financiers start wearing more of the risk of the business than shareholders, thats when things start to tighten up.

 

 

 

Why do they need to raise working capital?

 

Bit of an assumption here, but broadcast rights presumably have upfront costs (much like a retailer has to pay upfront for their stock) with the view that future revenues will help pay for those rights over the term. Unless they have significant sums of money floating around then odds are they will have to borrow funds to pay for those costs. Based on their 2019 report, this is not the case, they have a negative working capital position and 2:1 creditors/debtors position - ie for every $1 of debtors, they owe $2 to creditors. Now again, horses for courses, this may not be unusual in the industry, but it is another factor in the overall financial picture.

 

The 2019 report also showed that cash generated from operating activities was around $178mio, from that they had $70mio paid out to fund investments (presumably broadcast rights or similar) and $375 mio in debt repayments and dividends, a cashflow deficit of $ 267mio which they borrowed as advances in a bank loan.

 

 

 

That all starts the downward spiral of death (which arguably sky are at risk of already being in). Sales decline so you reduce costs and delay investments until sales improve. Sales don't improve because youve got nothing different or new to offer the market, so sales decline again, again you cut costs, rinse and repeat. If they aren't investing in new IP / broadcasting rights, then their appeal to the market will dwindle and they risk losing market share. Theres an old adage in business, if you aren't growing, your shrinking. A period of consolidation can be a sound business strategy in the short term, but consolidate too long and you open the door to competitors who are hungrier.

 

 

 

The 2019 report did mention a deliberate 5 year strategy and essentially blamed everything on the departing executive(s). This may be the case, no doubt there are people in charge far more experienced at business at that level than I'll ever be, but from a "cold eyes" look at the financial history it leaves massive room for a financier to become extremely nervous.

 

 

 

 


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  # 2335400 11-Oct-2019 10:04
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tdgeek:

 

eracode:

 

@tdgerk Quote: “How is equity plummeting like as rock?”

 

This looks somewhat plummety:

 



 

 

 

 

tdgerk?? I will overlook that... :-)

 

 

 

Scroll up, they wrote off massive goodwill. Goodwill is a paper number, and anyone who may be analysing the accounts will know that, and ignore it, focusing on real assets and liabilities.

 

 

 

 

If goodwill is "only a paper number" then sky are in serious trouble and have been for years, thats the only thing of any value in their financial accounts.


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  # 2335403 11-Oct-2019 10:10
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tdgeek:

 

eracode:

 

@tdgerk Quote: “How is equity plummeting like as rock?”

 

This looks somewhat plummety:

 



 

 

 

 

tdgerk?? I will overlook that... :-)

 

 

 

Scroll up, they wrote off massive goodwill. Goodwill is a paper number, and anyone who may be analysing the accounts will know that, and ignore it, focusing on real assets and liabilities.

 

 

[Sorry - fixed the typo].

 

OK, so let’s look at the meaningful tangible assets:

 

     

  • debtors $62m
  • programme rights $89m
  • PPE $163 m

When things get tough, banks look at what they’re going to realise in cash if the company is wound up. I’d say there’s bugger-all realisable value in those assets in the event of things really going pear-shaped. A large chunk of PPE is likely to be old STBs spread out all over the country. Obviously second-hand equipment in a tech company is worth very little. What real value would the programme rights have - they’re probably almost an intangible too.

 

Sky’s bank are probably crapping themselves by now.





Sometimes I just sit and think. Other times I just sit.


 
 
 
 


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  # 2335405 11-Oct-2019 10:16
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Opened this thread to read about Spark Sport and the cricket, and all I can see is Sky chat, and not even sky chat related to cricket! Don’t get me wrong it’s interesting to read people’s differing views on sky, but maybe in another thread??

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  # 2335406 11-Oct-2019 10:16
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You are assuming that everyone else was not aware of real net assets and paper net assets. When Sky was making bigger money, Goodwill, although a paper figure was a true value. It represented the ability to make money. Also matched by share price. The competition has caused Sky to contract so the Goodwill is written off as have other such assets, so it continues to match the current business. Its now smaller business so its "ok" to make a smaller profit as the business is smaller, better matching the ROI as it downsizes


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  # 2335410 11-Oct-2019 10:21
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eracode:

 

tdgeek:

 

eracode:

 

@tdgerk Quote: “How is equity plummeting like as rock?”

 

This looks somewhat plummety:

 



 

 

 

 

tdgerk?? I will overlook that... :-)

 

 

 

Scroll up, they wrote off massive goodwill. Goodwill is a paper number, and anyone who may be analysing the accounts will know that, and ignore it, focusing on real assets and liabilities.

 

 

[Sorry - fixed the typo].

 

OK, so let’s look at the meaningful tangible assets:

 

     

  • debtors $62m
  • programme rights $89m
  • PPE $163 m

When things get tough, banks look at what they’re going to realise in cash if the company is wound up. I’d say there’s bugger-all realisable value in those assets in the event of things really going pear-shaped. A large chunk of PPE is likely to be old STBs spread out all over the country. Obviously second-hand equipment in a tech company is worth very little. What real value would the programme rights have - they’re probably almost an intangible too.

 

Sky’s bank are probably crapping themselves by now.

 

 

Ok, given that banks are not stupid, and are frequently in the news negatively, when will they shut Sky down?  Ive heard hat every year for years. This week or next? By Xmas? It cant be long by these posts. And buying the Cricket rights for 4 years would appear to be tantamount to legal action? negligence?

 

I dont know all the answers, but I would envisage that its not the doomsday in two months that I'm reading here  :-)


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  # 2335417 11-Oct-2019 10:38
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Sky out for a duck. Caught and bowled.






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  # 2335468 11-Oct-2019 10:58
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JarrodM: Opened this thread to read about Spark Sport and the cricket, and all I can see is Sky chat, and not even sky chat related to cricket! Don’t get me wrong it’s interesting to read people’s differing views on sky, but maybe in another thread??

 

 

 

You’re right - it’s gone OT and I’m as guilty as anyone. Will step out here.





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  # 2335470 11-Oct-2019 11:02
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Me too, sorry


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  # 2335508 11-Oct-2019 12:50
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Back to cricket..

I am very much looking forward to cricket in 4k. (or Tour de France) which is a potential option with streaming but not eith aging sky satellite. I find the sky program quality is the same in 2019 as it was in 2009. Only difference is dont pay extra for HD and their are many more adds with recent version..

More than prepared for a 30 minute delayed broadcast to gain quality.

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  # 2335532 11-Oct-2019 13:36
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afe66: Back to cricket..

I am very much looking forward to cricket in 4k. (or Tour de France) which is a potential option with streaming but not eith aging sky satellite. I find the sky program quality is the same in 2019 as it was in 2009. Only difference is dont pay extra for HD and their are many more adds with recent version..

More than prepared for a 30 minute delayed broadcast to gain quality.

 

 

 

This would mean building 4k trucks to cover it with in NZ, but yeah it would definitely be awesome!


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