Ann: Sky and WarnerMedia expand long term relationship, page-9

Yes agreed, this is very good. The Doom Prophets have been saying for years that before long every major network and studio will dump Sky to go it alone and direct...but, as we have been saying all along, that is unlikely to make financial sense for most. As each new service lands in NZ, it is harder and harder to get people willing to pay - as they are already experiencing subscription fatigue.

In fact, I would argue that if everyone did decide to ditch Sky to go it alone...all it would achieve is increase piracy as consumers give up on trying to figure out what to subscribe to to get their content legally...

Finally had some time to flick through the FY21 financials properly. I realise they are somewhat pumped up by one-off savings etc due to Covid, but...some key metrics...(all NZD)

• NOPAT $122.5M!! Wow.
• Underlying Owner Earnings $87M ($72M last year)
• EV $250M
• OE/EV yield 35%!!
• FCF $63M (Hirst states $69 in the presso, but I am just going off the cashflow statement and prefer to use the lower number).

These are simply stunning results to deliver considering we have just been hit by a global pandemic that meant Skys entire sport offering came to a halt and they had to give a bunch of 'freebies' to customers for about three months to keep them happy.

Now, FY22 won't be as good as we absorb some higher content costs and double down on the investments needed (broadband, new STB).

I think if we use the lower guidance of GAAP Earnings ($17.5M), we will get something like:

• NOPAT $75M
• Underlying Owner Earnings $25M
• EV ~$150M (this assumes market cap stays at $285M but cash balance increases to $135M from final OSB settlement, property sale and additional FCF)
• OE/EV yield 17%
• FCF ~$20M

Earnings to take a hit next year, and Sky have made no bones about that. But if they continue their path on cost discipline (reducing OPEX, only paying up for the rights that really matter...) and the investments they are making enable them to return to growth, they the current market capitilisation still looks incredibly cheap.

And we should find out at the AGM what they plan to do with all the cash - something I am sure every shareholders is keen to understand.