Why British Sky Broadcasting Group plc, ITV plc and Homeserve plc Should Lag The FTSE 100 Today

British Sky Broadcasting Group plc (LON: BSY), ITV plc (LON: ITV) and Homeserve plc (LON: HSV) are falling.

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A couple of days ago the FTSE 100 (FTSEINDICES: ^FTSE) was looking like it might post its fifth week of gains in a row. But a down day yesterday coupled with a further small fall today, of 13 points to 6,575 by just after midday, is making that look very unlikely now. Still, at that level, the index is only 301 short of the 13-year record of 6,876 points set in May, and the trend is in the right direction.

It won’t take much to underperform today’s small fall, so which shares are falling behind? Here are three from the various indices that are slipping :

British Sky Broadcasting

British Sky Broadcasting shares fell 30p (3.5%) to 820p this morning, despite the TV group announcing record results for the year to 30 June. With revenue up 7% to £7.24bn, adjusted operating profit rose by 9% to £1.33bn and adjusted earnings per share (EPS) by 18% to 60p. The full-year dividend was lifted for the ninth year in a row, by 18% to 30p per share, giving a yield of 3.7%.

The company now has a subscriber base of 31.6 million, with another 3.3 million having been added during the 12-month period. Free cash flow these days is in excess of £1bn, and BSkyB has returned £500m in cash to shareholders through share buybacks.


It’s been a disappointing day for TV firms, with ITV (LSE: ITV) shares also dropping today, albeit by only 1.4p (1%) to 156p in this case — and the price has still more than doubled over the past 12 months.

Today’s news told of the acquisition of Big Talk Productions and associated companies, the producer of a number of award-winning programmes and films. The deal will be in cash, with an initial sum of around £12.5m depending on this year’s financial performance, and there will be further performance-related payments to come.

With 11% growth in EPS forecast for the year to December, ITV is on a forward P/E of 15.5.


Homeserve (LSE: HSV), the domestic emergency business, saw its shares slide by 15.6p (5.7%) today, despite releasing an AGM-day statement telling us that trading is in line with expectations. The firm’s customer acquisition efforts have been boosted, with retention rates improving, and its international customer base is also growing. Net debt at 30 June stood at £26m, down from £43m at the end of March.

Homeserve’s shares have been volatile but have been recovering, though with a fall in EPS of more than 20% forecast for the year to March 2014, we’re looking at a P/E of a bit over 15. EPS is expected to recover modestly in the following year.

Finally, reliable dividends can more than compensate for the day-to-day ups and downs of share prices. So how about a company that’s offering a 5% yield and which could be set for some nice share price appreciation too?

It’s the subject of our BRAND-NEW report, “The Motley Fool’s Top Income Share For 2013“, which you can get completely free of charge — but it will only be available for a limited period, so click here to get your copy today.

> Alan does not own any shares mentioned in this article.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

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