Saturday, December 18, 1999
Category TV has Scripps sizzling
Food Network helps cash flow
BY MIKE BOYER
The Cincinnati Enquirer
BAM!
The Food Network, the cable channel best known for voluble chef Emeril Lagasse, and the other ingredients in E.W. Scripps' category TV business are causing the Cincinnati media company's revenues and cash flow to heat up, analysts say.
“Category TV represents only 15 percent of total company revenues and only 7.2 percent of EBITDA” which is earnings before interest, taxes, depreciation and amortization, said James Marsh, a media analyst with Prudential Securities, in a recent report where he rated Scripps a strong buy. “But it is 30 percent of the company's value.”
He values the category TV business — which includes Home & Garden Television and Do It Yourself network, launched in September — at more than $1.5 billion.
On Thursday, Scripps announced it was increasing its controlling stake in Food Network to 64 percent by acquiring the 5 percent held by Pacesetter Communications Inc., a company headed by Food Network founder Reese Schonfeld.
Terms of the purchase weren't disclosed. But Scripps says it has an appetite for more of the Food Network.
“It's our intention to further increase our stake in this valuable property when opportunities present themselves,” said William R. Burleigh, Scripps chairman and chief executive officer, in a statement.
The Tribune Co. of Chicago owns 29 percent of the Food Network and the bal ance is held by other small investors.
Category TV is Scripps' fastest growing business, said spokesman Mark Kroeger. Revenues increased 60 percent to $24.7 million in November. While Scripps' overall revenues from newspapers and TV stations, which includes the Cincinnati Post and WCPO-TV in Cincinnati, increased 5.3 percent to $145 million last month.
Subscribers to HGTV, which Scripps started from scratch in 1994, reached 58.9 million in November. That is up 200,000 from the previous month, according to the Nielsen Homevideo Index.
Food Network subscribers increased 700,000 to 43.5 million.
Despite the strong growth rate of Scripps' category TV business, analyst Mr. Marsh thinks a lot of investors have overlooked its potential.
“The unit's (earnings before interest, taxes, depreciation and amortization) has improved from negative $9.3 million in 1997 to an estimated $41.3 million in 2000,” he said. “As Category TV continues to grow at above-average rates, Scripps' consoli dated EBITDA growth should increase from 8 to 10 percent to 10 to 12 percent.”
Mr. Marsh estimates Scripps' category TV business will grow EBITDA to $70 million to $75 million over the next two years.
Scripps acquired a 56 percent stake in the Food Network and $75 million in cash in 1997 as part of a swap of TV stations with A.H. Belo of Dallas.
Scripps switched strategies in 1996, divesting its cable TV systems, opting instead to provide programming rather than the pipeline for cable.
Scripps shares closed Friday at $43.50, up 683/4 cents.
UDF stores to sell Mobil gas
Utilities ordered to reduce emissions
Category TV has Scripps sizzling
Multi-Color buys Buriot as step one of expansion
TRISTATE BUSINESS SUMMARY
Fed likely to hold rates
Internet cradle not Silicon 2
Wall Street wants rally for Christmas
