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small trader - sorry it’s taken awhile to respond.
You’re right. I stand corrected. My prior understanding of earnouts was that they have variable terms, and are therefore difficult to nail down. However, I’m now assuming that the best forecasts are included as debt even if they are variable & subject to adjustment.
In any event, your interpretation was clearly correct. Apologies for doubting.
LedZepper, As you seem to have some sort of accountancy training so please review the RNS and let us know what you find.
I'm not an accountant at all. I looked at RNS and I see that £256m payment is part of a liability to be paid for Tapla acquisition. I'm now not clear if £467m net debt is on top of Tapla payment but going by their statment that I copied in my previous post, they seem to infer that £467m is before the Tapla payment so after Tapla payment net debt left as of August would be £211m!
Either way it is good that they are paying off such big amount this month.
Also I just researched on Talpa and I see that ITV bought Talpa media for £355M in 2015 and they are paying earnout payment of £256m for that acquisition. ITV said this is the final payment for Talpa.
I just learnt what "earnout" payment is -
"An earnout is a contractual provision stating that the seller of a business is to obtain future compensation if the business achieves certain financial goals. ... The earnout eliminates uncertainty for the buyer, as they only pay a portion of the sale price upfront and the remainder based on future performance."
Now from RNS I see that there are more Tapla like payments coming as part of "earnout" payments to the previous owners from which acquisitions were made by ITV in the past! They currently estimate £331m to be paid between 2021-2026. I wonder if this is not what market didn't like after seeing the RNS. But I also see that this £331m includes Tapla payment of £256m so if this is deduced then the future payments as part of earnout payments for acquisitions is £331m - £256m = £75m, which is nothing. Someone please correct me if my understanding is not correct. If anyone is interested to see where this is mentioned in the RNS then it is listed in 2 tables above the FCF calculation.
Also FCF dropped from £345m(June 30, 2020) to £71m now but this they said is due to not much production last year due to pandemic as a result there was cash left so it is not a real drop in FCF.
Overall, net debt on June 30, 2020 was £783m and now it is £467m so ITV managed to reduce debt by awesome £316m and ITV can run the business like this for several years to come and outlook is going to improve and can exceed 2019 levels when SP was at 155p so ITV price should head back to 155p.
Like Nige said with less debt and cash in hand, ITV is dead cheap at current price for a takeover.
Peachy, one is by no means an expert, but one very much doubts there is a procedure other than trusting one’s gut instinct.
Hope that helps.
Can anyone explain what the procedure is should ITV receive a bid? Sell immediately? Hold on the assumption of a bidding war? Play it cool and see it out....wait for the sale to complete?
P
Small trader: are we sure that the earnout payment is included in the debt figure? I’m not a fully qualified accountant, but my basic training would suggest it would possibly be included in other short term liabilities rather than debt. Just asking.
Guys I can think of no other reason than the ITV BOD intentions are to make ITV look more attractive to a predator by saving cash.
As of 30th June 2021 ITV Net Debt was £467m (2020 £783m) a reduction of £316m.
Cash in the bank £704m minus tarp payment this month £256m = £448m in the bank.
To not pay a dividend in H1 2021 is plainly obvious to me that either the BOD have plans for the saved cash, ie Channel4 or they're saving cash for a takeover. Asset strippers love companies with little debt and cash in the bank. If ITV were a USA company the share price would reflect the true valuation that most of us can see. IMHO.
Thanks 5eights.
Just another thing that I noted in the results RNS and I forgot to post it here is about this statement on Financials -
" Reported net debt of £467 million (31 December 2020: £545 million) is before the final earnout payment for Talpa of €298 million (c. £256 million) which will be paid in August 2021"
so they are saying that £467m debt is "before" payment to Talpa and they are paying of £256m to Talpa in August so it means that the net debt after august and after making payment to Talpa is £467 - £256 = £211m! and that is peanuts!
With total liquidity of £1,482 million, comprising total cash of £704 million (includes restricted cash of £50 million) and committed undrawn facilities of £778 million, they can still pay dividend sooner than in 2022 even after paying £256m to Talpa. Something is brewing behind the scenes....
Definitely ITV is dead cheap now for a takeover. With Debt so low and with such high cash, am pretty sure, there will be a takeover attempt this year.
Just today another British company Meggit got a cash offer by a US company! There will be one for ITV too.
Apart from the holder or indeed holders of these missing shares, there is only one person or a group of persons that can possibly know the whereabouts of these shares..................the board at ITV !!
We all know about the orchestrated shorting of ITV by GS and the involvement of Liberty and Marshalls since 2016 until 2020 and obviously so do the board at ITV, so much so that if the board did declare an interim dividend of lets say 2.5p (£100m) then at least £50m would have gone straight into the pockets of GS and their conspirators holding 51% of ITV shares.
If anyone doubts any of the above by all means just post an up to date shareholder list and source on this forum so we can all see for ourselves.
5eights