I like your thinking. To add to your analysis...I like to look...

I like your thinking. To add to your analysis...

I like to look at NOPAT (Net Operating Profit after Tax) and 'Owner Earnings' as a way of assessing the value of a business.

NOPAT = Accounting Profit + Depreciation and Amortisation = Approx $73M. Now, due to IFRS16, we need to adjust that Depreciation figure (because a portion of it does actually relate to cash that went out the door for the transmission costs...). I was on the call today listening to Martin and Blair...and the figure directly attributable to the increase in depreciation for the 'new' transmission cost was about $14M. So that leaves $59M.

But...we are trying to get a feel for ongoing operating earnings. $12M of the OPEX was one-off relating to redundancies and other strategic manoeuvres. So we add those one-off costs back in. That then leaves a NOPAT of $71M.

Right, on to Buffet's non GAAP 'Owner Earnings' = NOPAT - 'replenishment CAPEX'. We are not interested in how much money the company is spending on growth here - we just want to subtract the costs the company is likely to have to pay year in and year out just to keep the existing systems and infrastructure etc working.
Everyone will have different estimates here, but I have tended to use a very large figure of $50M per annum. That would equate to half a billion dollars over a decade - which is actually much more than they would need to spend 'just to keep the lights on'. But let's be conservative here to build in a margin of safety given the company is trying to evolve in an ever-changing competitive and technological landscape...

Replenishment Capex for the HY = $25M.

Owner Earnings for the HY = $71M - $25M = $46M. If the company just repeats HY1 in HY2 then Owner Earnings for the year = $92M. This is in line with revenue and EBITDA projections and I expect HY2 to be better. So Owner Earnings will probably end up being somewhere between $90M - $100M.

I think it is absolutely astounding that a company that is trying to change its entire business proposition and model (and has been doing so at pace) is still able to generate such high underlying earnings.

Time will tell how much the current investments pay off, and what other acquisitions and moves they might make with the Owner Earnings available to them, but personally I am very excited to see the two new streaming platforms they will release in the next few months.

It looks like they are rationalising their streaming platforms too - all platforms will end up on Endeavour Streaming I think (they are the platform for Sky Sport NOW). That will make it easier as they evolve the platforms in the future as they only deal with one trusted vendor who knows the business very well.

I am very happy with the HY results.