Mexican pay-TV and broadcasting behemoth Grupo Televisa S.A.B. TV reported mixed financial results for the fourth quarter of 2014. Net income in the reported quarter came in at approximately $178.3 million compared with $208 million in the year-ago quarter. Quarterly earnings per Global Depository Shares (GDS) stood at 31 cents, missing the Zacks Consensus Estimate of 37 cents.
Quarterly consolidated net revenue of around $1,609.4 million reflects an improvement of 12% over the prior-year. Televisa currently carries a Zacks Rank #3 (Hold).
Gross margin came in at 47.3% compared with 46.4% in the year-ago quarter. Consolidated operating income was $371.6 million, up 4.3% from the prior-year quarter. Operating margin was 23.1% compared with 24.8% in the year-ago quarter. Capital expenditure, during the reported quarter, totaled approximately $1,212 million.
At the end of 2014, Televisa had approximately $2,312.7 million in cash and marketable securities and $5,426.8 million of outstanding debt compared with $1,572 million of cash and marketable securities and $4,624.3 million of outstanding debt at the end of 2013. At the end of 2014, the debt-to-capitalization ratio was around 0.48 against 0.43 at the end of 2013.
Content Segment
Quarterly total revenue came in at $745.6 million, up 6.7% year over year. Operating profit was $344 million, up 9.1% year over year, while operating margin was 46.1% compared with 46% in the year-ago quarter. Quarterly royalty from Univision was $77.5 million, up 4.8% year over year.
Within this segment, Advertising revenues totaled $578.4 million, up 3.8% year over year. Network Subscription revenues were $52 million, indicating an increase of 21.5% year over year. Licensing and Syndication revenues were $115.2 million, up 16.5% year over year.
Sky Segment
Quarterly revenues came in at $300.8 million, up 7.4% year over year. Operating profit was $137 million, up 14.4% year over year. Quarterly operating margin stood at 45.5% compared with 45.2% in the year-ago quarter.
Telecommunications Segment
Quarterly revenues of $417.3 million reflected a rise of 35.4% year over year. Operating profits totaled $167.2 million, up a substantial 50.7% year over year. Operating margin came in at 40.1% compared with 36% in the year-ago quarter.
Other Businesses Segment
Quarterly revenues were $169.7 million, down 1.6% year over year. Operating income stood at $13.2 million, down 42.2% year over year. Operating margin was 7.8% as against 13.2% in the year-ago quarter.
Subscriber Statistics
As of Dec 31, 2014, Televisa had 3,356,732 Video subscribers; 2,288,709 Broadband Internet subscribers; and 1,228,182 Telephony subscribers, which together constitutes 6,873,623 revenue generating units (RGU) in the Telecommunications segment. The company also had 6,638,032 net active Satellite TV subscribers, up 10.3% year over year. In the reported quarter, the Sky segment added 120,297 net active subscribers.
Our View
Televisa is likely to gain significantly from its ownership stake in the U.S. broadcaster Univision Communications Inc. In 2007, Univision was acquired by a consortium led by billionaire Haim Saban. Other investors in the group were Madison Dearborn Partners, Providence Equity Partners, TPG and THL Partners.
In 2012, Televisa started investing in Univision and currently effectively holds a 38% (after converting debt into equity) stake in the company. Moreover, Televisa has the scope to buy another 2% stake of Univision within the next three years.
At present, the owners of Univision are exploring strategic options to sell the company and an initial public offering (IPO) is likely to take place in next 12-18 months. Univision’s owners held talks with CBS Corp. CBS, Time Warner Inc. TWX and Viacom Inc. VIAB regarding this, but those initiatives have failed.
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