Grupo Televisa S.A.B. (TV), the largest integrated cable and media company in Mexico, reported second quarter of 2011 financial results, which fell below the Zacks Consensus Estimates. Significant surge in depreciation and amortization charges affected the company’s net income as Televisa spent more on new customers for expanding its client base.
Quarterly consolidated net income was approximately $153.7 million, almost unchanged year over year. Second-quarter EPGDS (Earnings per Global Depository Shares) was 27 cents, significantly below the Zacks Consensus Estimate of 32 cents. However, quarterly consolidated net revenue of $1,288.7 million was an improvement of 4.7% over the prior-year quarter.
Quarterly gross margin was 55.8% and remains same year over year. Quarterly depreciation and amortization cost was $154.5 million, up 19.1% year over year. Second-quarter consolidated operating income was $358.6 million, down 0.6% over the prior-year quarter. Quarterly operating margin was 27.8% compared with 29.3% in the year-ago quarter.
At the end of the first half of 2011, Televisa had approximately $2,051.3 million cash and marketable securities compared with $2,548.8 million at the end of fiscal 2010. Capital expenditure during the reported quarter was $203.5 million. At the end of the second quarter of 2011, Televisa had $4,516.9 million of outstanding debt on its balance sheet compared with $3,894.8 million at the end of fiscal 2010. At the end of the reported quarter, debt-to-capitalization ratio was 0.49 compared with 0.47 at the end of fiscal 2010.
Television Broadcasting Segment
Quarterly revenue was $466.8 million, down 5.9% year over year. Operating profit was $223.1 million, down 8.7% year over year. Quarterly operating margin was 47.8% compared with 49.2% in the year-ago quarter.
Pay Television Networks Segment
Quarterly revenue was $70.5 million, up 6.4% year over year. Operating profit was $35.3 million, up 13.2% year over year. Quarterly operating margin came in at 50% compared with 47% in the year-ago quarter.
Programming Exports Segment
Quarterly revenue was $75.8 million, up 40.5% year over year. Operating profit was $39.7 million, up 58.7% year over year. Quarterly operating margin was 52.4% compared with 46.4% in the year-ago quarter.
Publishing Segment
Quarterly revenue was $67.8 million, down 2% year over year. Operating profit was $12.9 million, down 14.3% year over year. Quarterly operating margin was 19.1% compared with 16.4% in the year-ago quarter.
Sky Segment
Quarterly revenue came in at $266 million, up 10.2% year over year. Operating profit was $127.5 million, up 16.4% year over year. Quarterly operating margin was 47.9% compared with 45.4% in the year-ago quarter.
Cable and Telecom Segment
Quarterly revenue was $284 million, up 14.9% year over year. Operating profit was $94.1 million, up 15.1% year over year. Quarterly operating margin of 33.1%, remains same year over year.
Other Businesses Segment
Quarterly revenue was $85.7 million, up 2.2% year over year. Operating income was $1 million, down 76.9% year over year. Quarterly operating margin was 1.1% compared with 4.9% in the year-ago quarter.
Subscriber Statistics
As on June 30, 2011, Televisa had 2,088,312 video subscribers; 898,462 broadband subscribers; and 577,541 telephony subscribers. Together these constitute 3,564,315 revenue generating units (RGU) in the Cable and Telecom segment. As on June 30, 2011, Televisa had 3,586,073 gross active satellite TV subscribers including 153,983 commercial subscribers.
Our Recommendation
Televisa is at present facing a competitive threat from the telecom giantTelefonos de Mexico S.A.B. (TMX), who is trying to enter into the Mexican broadcast TV market passively through a deal with Dish Mexico.
We maintain our long-term Neutral recommendation on Televisa. Currently, it holds a short-term Zacks #3 Rank (Hold) on the stock.
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