Morning Mumble: British Sky Broadcasting the summer doesn't look rosy..without one drop of mining!

So Sky's results the city seemed to think were a positive for Sky (BSY), well in part they were. They added new subscribers, albeit one does not know the cost of 'adding' these nor the reporting element, was it a profitable package or not? How were they new aka existing customers giving retention benefits? Were they utilising the ever increasing "trends" of Half Price Sky to benefit? 

In monitor consumer actions its interesting that Sky's model is showing a lesser reliance on the "Sports" package and more about the connectivity/plus features in Entertainment. Analysts seem to know but have not realised the significance of this years World Cup. It's not on Sky, its been known about for ages, but this impacts on a variety of add-ons. 

What the results don't allow for is the competitiveness in the market, "the additional costs" that Sky are likely to need but more importantly, the retention costs. The market is growing in terms of retailers being encouraged to cancel contracts, most "advice" type websites are informing their readers better. This will also have an impact on Orange/T-Mobile aka EE, with their inflationary rises. One thing they tried to catch me on. As a heavy user, with various phones on my plan, they decided that a "cursory £3 a month on a £120 per month bill pay was rewarding loyalty." Alas, they lost they lot, I got savvy and am now pay half that....+ VOIP etc...

Anyway, back to Sky, the football, a key advertising driver is not available on their platform, the plays off, F1 and Golf (yawn to both) are but the World Cup the furore and everything that drives the Football non-fans mad (ME) is starting soon. In essence, Sky Sports and Sky will have a User 'sick note'...Dear Sky, we're busy watching something you failed to get the rights on (yet again) and we'll be back after the World Cup. The difference is, those not in contract will see no benefit in retaining Sky for 4 months as 'advice' sites are now suggesting they put in their cancellation notices and rejoin post World Cup. Sky's model ultimately means that most are not in contract post 18-24 months of being with Sky so the affordability measure comes into play 'being out of contract.' Lets watch for signs in Q4/Full Year Results and Q1 next year of what is likely as a result of Sky not retaining certain rights. Sky could change these trends significantly,, if they utilised some very basic and common-sense practices.

The results in Q3 were just another reason for me to short the stock, so thank you bulls, it was just assisting with making money for literally old rope. With a total ignorance of the fact Sky has to do something to fall in with the "Quad play" that consumers are demanding...a tie up, merger, acquisition? Hell who knows Sky may actually hunt for Vodafone akin the to the RBS/ABN Amro debacle? Either way, I'm surprised holders are not pushing for this deal...

As a thought for those whom are looking for trends and having personally had a daughter at the grand old age of 38, it got me thinking one day. If i'm slow to the game and everyone's having babies, the 'boom...' Then surely entertainers earnings are likely to grow, Walt Disney's results came in ahead of expectations showing this trend, more importantly, its showing signs that their parental pound and spending ...especially around entertainments. The worrying sign is, this has not been seen in the child care sector of Mothercare, Kiddiecare and ToysRUs which suggests there needs to be some structural alterations to the companies and their cost basis to improve. 

Kiddicare is up for sale, will it be developed properly or haphazardly conforming to its older model...The brand/company I've always liked, it has some significant potential, above and beyond the likes of Mothercare and ToysRuS. Albeit Mothercare would have been a good bet for Tesco/Sainsburys, stores, locations and a bolt on that could be managed. Morrisons simply was not up to the task of Kiddicare, it had all the right bells and whistles and simply wasn't pushed. Kiddicare has not lost ground its stagnated in an undervalued and archaically structured sector which has so much potential but sadly needs a draconian knife to it. 

There is some gossip about ABM holders making a profit on their stock with a potential sale. Really? I suspect the room to maneourve comes from their pledge book which was conservatively valued and debt at £53M, Vs. the pledge book at £37M. So was ABM worth circa £15M? The company stripping out the debt and the like was a good entity, albeit a leveraged play on Second hand gold.  Once you take any reconcillation of pledge book, debt I'd be surprised if the debt is repaid nevermind something for the stock holders. 

With the FCA reforms and lending expectations based around affordability, we have One Savings Bank's intention to Float come to market. "one"ders will never cease...sub prime?

Atb Fraser