Friday tips round-up: BSkyB, Britvic

18th Oct 2013 07:48

Pay-TV provider British Sky Broadcasting (BskyB) is facing the rising cost of content as competition for viewers heats up. This can be seen in the eight per cent fall in operating profits for the quarter ended in September to 285m pounds. BSkyB's outlays should be worth it if revenue per customer growth can keep pace with content costs. The broadcaster has had a good run, but now it looks to be stabilising - customers spend £559 each year on average, which is slightly lower than three months ago. Marketing costs are also on the rise. Although BSkyB added 37,000 new pay-TV customers over the quarter, marketing costs rose at more than twice the pace of revenues. Furthermore, should BT decided to ramp up its spending then BskyB will have no choice but to respond in kind. BSkyB's shares have gained 140% in the past five years, just behind its FTSE media peers. Its shares trade on 16 times forward earnings, in line with its five-year average. Yet given the real prospect of a rising cost base, that valuation is more trick than treat, the Financial Times' Lex column says. Britvic yesterday said profits for the year ended September would now beat expectations. That came as revenue for the full year increased by 4.4% to £1.32bn. In fact, the firm managed to increase both its average selling price and volumes of drinks sold in every single division throughout the fourth quarter. Brtivic's performance has been flattered, however, against a period last year when products were coming back into warehouses rather than going out, following the Robinsons Fruit Shoot product recall because of a faulty cap. The exceptionally warm summer is also something The Daily Telegraph's Questor wouldn't want to bet on a repeat of any time soon. Taking the slight gloss on these figures into consideration the recovery has been priced in at Britvic. The shares are trading on 17.5 times 2013 forecast earnings, falling to 15 times next year. However, lifting its earnings might prove tricky if the group has to heavily promote, or discount, products in a competitive market. The forecast dividend yield on the shares at 3.3% is also less than compelling. Overall, Britvic has proven its long-term quality but the shares are no better than a hold at these levels, Questor says. Please note: Digital Look provides a round-up of news, tips and information that is impacting share prices and the market. Digital Look cannot take any responsibility for information provided by third parties. This is for your general information only as not intended to be relied upon by users in making an investment decision or any other decision. Please obtain a copy of the relevant publication and carry out your own research before considering acting on any of this information.