Sport Media Share Discussion Threads

[risk1] 11/2/2011 20:03

pedro

What is the difference between classified and display advertising?

and what are the call girls and lip service all about and how significant are they to the business?

tia

[risk1] 11/2/2011 19:08

EBITDA and PBT are likely to be below current market expectations??? What was the market looking for??? .

[pedro57] 11/2/2011 12:06

Cartagena, I agree that management really messed up the acquisition of the Daily Sport bombing out sales with the relaunch. The key question is if the current share price is not undervaluing the assets the company has. I do not think Daily Sport is worth the £50m that was paid for it, but if one were to assume a £20m value the share price would be at a multiple where it is today. Interestingly enough overhang in shares is clearing getting quote 1.25 at the ask currently, the highest it has been in weeks.

[cartagena2] 11/2/2011 10:04

Then they ruined the business within weeks by turning the Sport into the world's first daily newzine.
Sales collapsed and have never recovered.

[pedro57] 11/2/2011 07:12

The £11m of debt came from the £50m purchase of the Daily Sport newspaper in 2007, ~£40m of this purchase price was paid through an equity raising and ~£10m by raising debt.

[risk1] 10/2/2011 21:17

Pedro

Where did the 11million pounds of debt come from?

Was it caused the purchase by ITW creating SPMG?

[risk1] 10/2/2011 19:07

the result of the 2 disposals should drop straight onto the bottom line?

16k per month better off?

This is priced as bust but it is apparent this is not the case

The stock market behaves in odd ways ;-)

[risk1] 10/2/2011 17:55

thanks again pedro and have seen the buying

how do you know how many shares the mm's are sitting on unsold???

[pedro57] 10/2/2011 16:22

Nice steady buying in 100K blocks today. I wonder at what point the overhang in SPMG will be cleared? It does not seem that all the recent buying we have had has had any impact on the share price.

[pedro57] 10/2/2011 07:55

Given SPMG's business model the company does not need significant capital investment, if you look at the cash flow statements of the last years you will find that yearly capex did not exceed £100K, which is around £8K per month. This is what makes SPMG's business attractive as capex needs are limited and in an environment of high profitability any excess of cash can be returned to shareholders. Regarding the repayment of debt the key question is SPMG's cash generation, if cash generation of 1H10 is matched the cash balance will increase by £70K per month this means net financial debt (financial debt – cash) will continue to decline. The question is how will funds that are not used for debt repayment (~£300K over 2H10) be used alternatively, i.e. increase of cash balance, increase of working capital, etc. In my view we should see a step-up in cost savings and a small increase in newspaper sales in 2H10, I am more sceptical whether advertising and digital will have increased, but I do not see a decline either so net-net 2H10 should see a further improvement. On wastage SPMG has been improving performance, although there probably is still some work to do on this front.

[risk1] 09/2/2011 22:10

ref wastage i would have thought it was possible to analyse where the wastage/sales occurs and either reduce or increase circulation in those areas???

[risk1] 09/2/2011 22:00

Any ideas???

will the cost savings, digital growth and sale of loss making activities balance the loss of advertising revenue?

will only £20k per month now be paid off debt during the 6 month holiday?

[risk1] 09/2/2011 22:00

how long before they will need significant capital investment?

[pedro57] 09/2/2011 08:03

I bought a copy of the Daily Sport yesterday. In my view the look is a bit slicker, page count has been reduced to a lower number than where it was a couple of months ago. Otherwise I noticed very little changes. Using a lower page count should generate some cost savings, which would be a positive. Going around a couple of vendors in my area it seems that there are less copies of the newspaper left at the end of the day, although this is a highly subjective exercise, but interested in whether some other posters have been noticing the same. It seems that sales of newspaper have slightly improved and at the same time SPMG getting better at wastage supplying less papers to vendors. Both would help the bottom line. From anecdotal evidence it seems SPMG is continuing to address costs, which is good. As stated before ultimately what we need for shares to rerate is the evidence in the numbers of an improvement in the underlying business with higher operating profitability and a continued improvement in the cash balance, which we should get at the FY10 results end of April.

[risk1] 08/2/2011 20:30

thanks guys


did you buy a copy?

[pedro57] 08/2/2011 08:49

Cartagena you make a valid point about the weather I am sure that there will have been a negative impact on sales similar to what many other UK businesses have experienced. It is however important to remember that the Christmas holiday represents the low for SPMG's newspaper sales (page 4 of investor presentation) and we had a negative impact from cold weather in winter 2009 as well, which means that the historical operating profitability already reflects the negative impact from cold winter weather to a certain extent. I agree however that the sales of newspaper that did not happen because of this year's winter will be badly missed. Interesting to hear about new look paper it will be interesting to buy a copy today to analyse changes, less pages will help on costs, but most important is what advertising consists of as in my view any evidence of more mainstream advertising would indicate improvement in advertising revenues.

[pedro57] 08/2/2011 08:42

Administrative costs are essentially the cost of paying employees and renting SPMG's offices, the company has already reduced costs here quite aggressively highlighted by a 20% cost reduction in 1H10 over 1H09, but there still should be a small further improvement in 2010. The finance costs are essentially the cost of debt, which will gradually come down as debt is repaid (net debt was reduced by ~4% in 1H10). The share based payment charges is the cost of awarding options to management, it is non-cash, but seems high to me particularly because management does not have that many options. The amortisation of intangibles relates to the £1.1m of intangibles on the balance sheet. This amortisation is non-cash effective, but reduces the tax paid so I would expect this to continue, although the company could stop amortising this item and show a 0.3p improvement in EPS if it wanted to. In my view the most effective cost savings for SPMG are not within cost of sales that were £7.65m over 1H10 almost 80% of revenue. If SPMG were able to reduce wastage (mainly copies of newspaper that are not read) this would impact bottom line more significantly than the items you listed. It does seem that SPMG has been targeting COGS with some success as evidenced in their investor presentation with newspaper waste rates 2% lower in Jul-Aug 2010 than the 1H10 average. If SPMG could build on the momentum of lowering waste rates through either selling more newspapers or better inventory management it would make a considerable difference on the bottom line.

[cartagena2] 08/2/2011 08:21

Everyone's forgetting that the bad weather will have hammered sales. That money can never be recovered. So the question is have sales recovered to previous levels?
I noticed that a new look paper was launched on Monday. Still down to 40 pages though.

[luchan] 07/2/2011 21:29

Risk,

the repayment holiday does not do anything else apart from divert cash from paying down long trem debt to the SPMG current account so to pay for working capital headroom, launch of own studio and other promotional moves. Cash prior to this was £250k +, see my post of last week below.

luchan.

2 Feb'11 - 11:40 - 14 of 33 edit


Chaps,

Cash at end of interims was £284 add the £50k a month bankers loan holiday add in the cash generated usually with the loans being paid £16k ... also add in the cash savings of £15k pcm for the two now disposed of Digital loss making lines Strictly Broadband and Watch Me (£98k loss on the H1 period)

We will assume there is no uplift in trading for easy maths (or down either)

Cash should look like this .. roughly..

Cash £284k (H1 ending figure)
Loan Holiday £300k
Loss Making Closures £98k
Usual Cash Generation £16k

£698k in cash .. (although net debt will have only reduced slightly)

Going bust... nope.

IMHO.

luchan.

[risk1] 07/2/2011 20:35

thanks it helps and i do see an opportunity here i don't understand how debt can reduce through this repayment holiday

i like quiet bb's and want to get in early

if you are correct the herd will be here before long and it will be too late

[pedro57] 07/2/2011 20:27

Net debt will continue to decrease, the key thing to remember is that the company is generating cash after paying cash expenses. If you check the last results over 1H10 £70K of cash were generated every month after paying all cash expenses, which resulted in net debt declining by £350K over 1H10. Even if there is no change in the operational performance until now net debt will have continued to decline. What is needed for an uplift in net profit in the P&L will be an improvement either in revenues (more newspapers sold & higher digital division turnover) or lower costs as this benefit will go straight to the bottom line and improve the pay-down in net debt even further. In my view reason for current debt holiday is to improve cash balance to a higher level £300K resulting in the market gaining more confidence in SPMG's survival. The loan holiday will probably not be extended by company. The performance of the digital division has bottomed out and particularly Telecom2 could lead to higher operating profitability in the division. The way I see SPMG is that 1) current share price is result of Lloys selling 15% stake and market not seeing survival of company, 2) as long as cash generation remains at current level net debt gets reduced and company survives so share price too low, 3) any operational improvement would lead to big uplift in financial performance making investment case even better. I hope this helps!

[risk1] 07/2/2011 20:04

thanks pedro

is there likely to be further holidays?

Is debt likely to increase in this period and equally importantly when is this company going to start making net profit?

Is the digital division going to continue to grow and play a bigger part in the turnover?

What are the prospects of corporate activity changing the fortunes of the company and it's sp

tia

[pedro57] 07/2/2011 19:55

The £300k you are referring to is a loan holiday, which relates to SPMG not paying back principal on one of its loans for 6 month (£50k per month principal repayment). Some of these funds will be used to build up a larger cash balance and some to invest in its own studio.

[risk1] 07/2/2011 19:49

if only 50k why spend the 300k tax saving on a studio?