JPM European Media Internet 2019 Outlook_watermark

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Daniel Kerven	Europe Equity Research
(44-20) 7134-3057	10 December 2018
daniel [e-mail]

TF1: Summary of Financials

Income Statement	FY16A	FY17A	FY18E	FY19E	FY20E		Cash Flow Statement	FY16A	FY17A	FY18E	FY19E	FY20E
Revenue	2,063	2,125	2,249	2,296	2,319		Cash flow from operating activities	229	269	326	202	203
COGS	-	-	-	-	-		o/w Depreciation & amortization	178	173	220	63	64
Gross profit	-	-	-	-	-		o/w Changes in working capital	15	(82)	0	(5)	(5)
SG&A	-	-	-	-	-
Adj. EBITDA	307	359	407	265	276		Cash flow from investing activities	(316)	(150)	(428)	(64)	(65)
D&A	(178)	(173)	(220)	(63)	(64)		o/w Capital expenditure	(205)	(189)	(63)	(64)	(65)
Adj. EBIT	129	185	187	202	212		as % of sales	9.9%	8.9%	2.8%	2.8%	2.8%
Net Interest	(84)	(23)	(25)	0	0
Adj. PBT	41	168	162	202	212		Cash flow from financing activities	(195)	(43)	(79)	(124)	(81)
Tax	(6)	(45)	(55)	(57)	(67)		o/w Dividends paid	(167)	(59)	(73)	(69)	(76)
Minority Interest	(2)	(0)	(0)	(0)	(0)		o/w Shares issued/(repurchased)	(20)	0	0	(50)	0
Adj. Net Income	125	159	128	140	141		o/w Net debt issued/(repaid)	(6)	17	0	0	0
Reported EPS	0.20	0.65	0.49	0.68	0.69		Net change in cash	(282)	76	(180)	14	57
Adj. EPS	0.60	0.76	0.61	0.68	0.69			24	255	263	138	137
DPS	0.28	0.35	0.33	0.37	0.37		Adj. Free cash flow to firm
							y/y Growth	(70.6%)	986.4%	3.1%	(47.6%)	(0.3%)
Payout ratio	141.0%	54.1%	67.6%	54.1%	54.1%
Shares outstanding	210	211	210	207	204

Balance Sheet	FY16A	FY17A	FY18E	FY19E	FY20E		Ratio Analysis	FY16A	FY17A	FY18E	FY19E	FY20E
Cash and cash equivalents	420	496	316	329	386		Gross margin	-	-	-	-	-
Accounts receivable	980	1,205	1,205	1,205	1,205		EBITDA margin	14 9%	16 9%	18.1%	11 5%	11.9%
Inventories	678	616	616	621	626		EBIT margin	6 3%	8.7%	8.3%	8.8%	9.1%
Other current assets	45	13	378	378	378		Net profit margin	6.1%	7.5%	5.7%	6.1%	6.1%
Current assets	2,123	2,329	2,514	2,533	2,594		Organic Revenue growth	-	-	-	-	-
PP&E	1,093	1,061	911	919	927		Net debt/EBITDA	(60.8%)	(71.6%)	(18.8%)	(34.0%)	(53.2%)
LT investments					-
Other non current assets	0	0	0	0	0		Sales/Assets (x)	0.6	0.6	0.7	0.7	0.7
Total assets	3,216	3,390	3,425	3,452	3,522		Assets/Equity (x)	2.0	2.1	2.1	2.1	2.1
							Interest cover (x)	3.7	15.4	16.0	-	-
Short term borrowings					-		Tax rate	14 3%	26 5%	33.8%	28 3%	31.6%
Payables	1,368	1,466	1,466	1,466	1,466
Other short term liabilities	0	0	0	0	0		Revenue y/y Growth	2 9%	3.0%	5.9%	2.1%	1.0%
Current liabilities	1,368	1,466	1,466	1,466	1,466		EBITDA y/y Growth	43.1%	16.8%	13 5%	(34.9%)	4.1%
Long-term debt	234	239	239	239	239		EPS y/y Growth	8.4%	26.8%	(19.5%)	11 2%	1.7%
Other long term liabilities	122	103	108	113	118
Total liabilities	1,723	1,809	1,814	1,819	1,824
							Valuation	FY16A	FY17A	FY18E	FY19E	FY20E
Shareholders' equity	1,493	1,582	1,611	1,633	1,698		P/E (x)	12.7	10.0	12.4	11.2	11.0
Minority interests					-		FCFE Yield	1.4%	15 9%	16 2%	8.5%	8.6%
Total liabilities & equity	3,216	3,390	3,425	3,452	3,522		EV/EBITDA (x)	4.9	4.0	3.3	5.0	4.6
							Dividend Yield	3.7%	4.6%	4.4%	4.8%	4.9%
Net debt/(cash)	(187)	(257)	(76)	(90)	(147)

Source: Company reports and J.P. Morgan estimates.

Note: € in millions (except per-share data).Fiscal year ends Dec. o/w - out of which

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Daniel Kerven (44-20) 7134-3057

daniel [e-mail]

Overweight

Company Data

Price (€)	68.16
Date Of Price	07 Dec 18
Price Target (€)	120.00
Price Target End Date	31-Mar-19
52-week Range (€)	107.90-61.28
Market Cap (€ bn)	7.61
Shares O/S (mn)	112

Ubisoft: DCF

€ million, Mar-YE

Wacc (%)	9.0%
G	3.0%
Present Value of FCF (18-30)	5,384
Present Value of Terminal Value	8,865
Enterprise Value	14,249
(Net Debt)/Net Cash	-147
Equity Value	14,102
Outstanding Shares (bl)	117.7
Equity value per Share (€)	120

Source: J.P. Morgan estimates.

Europe Equity Research

10 December 2018

Ubisoft

Ubisoft Entertainment SA (UBIP.PA;UBI FP)

FYE Mar	2018A	2019E	2019E	2020E	2020E
		(Prev)	(Curr)	(Prev)	(Curr)
Adj. EPS FY (€)	1.80	3.17	3.17	4.11	3.95
Revenue FY (€ mn)	1,732	2,187	2,185	2,531	2,473
EBITDA FY (€ mn)	844	1,077	1,076	1,276	1,247
EBITDA Margin FY	48.7%	49.3%	49.2%	50.4%	50.4%
EBIT FY (€ mn)	300	500	500	634	610
EBIT Margin FY	17.3%	22.9%	22.9%	25.1%	24.7%
Net Income adjusted FY (€	220	376	376	480	461
mn)
Adjusted P/E FY	37.9	21.5	21.5	16.6	17.3

Source: Company data, Bloomberg, J.P. Morgan estimates.

Investment Thesis, Valuation and Risks Ubisoft (Overweight; Price Target: €120.00)

Investment Thesis

In our view, near-term multiples do not reflect medium-term growth and margin expansion and the improving visibility and quality of earnings. UBI trades on a Mar-20 PE of 16.7x falling to 11x in 2022. It trades on 20.5x Mar-20 EV/NOPAT. We see potential upside from one or more of Ubisoft’s games breaking into the major league of 15-20m titles, from China, cloud based services and subscription bundles. We think it’s not “too late” to buy into the Ubisoft story, and we remain OW.

Valuation

Our 2019E estimates remain unchanged as we believe company guidance is conservative. We have slightly reduced our 2020E / 21E EPS by c3% / 5.5% on more conservative assumptions for Player Recurring Investment in case of macro slowdown / contraction. Our DCF based valuation decreases from €130 to €120 with a WACC of 9.0% and terminal growth of 3%.

Risks to Rating and Price Target

Risks include 1) unexpected delays of games; 2) weaker-than-expected next generation console sales; 3) FX changes; 4) higher-than-expected cash research and development costs; 5) negative reviews of blockbuster games; and 6) worse-than- expected monetisation of key franchises via additional content and other revenues (including movies).

72

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Daniel Kerven	Europe Equity Research
(44-20) 7134-3057	10 December 2018
daniel [e-mail]

Ubisoft: Summary of Financials

Income Statement	FY17A FY18A FY19E FY20E FY21E
Revenue	1,460	1,732	2,185	2,473	2,958
COGS	(271)	(297)	(341)	(357)	(404)
Gross profit	-	-	-	-	-
SG&A	(477)	(591)	(769)	(869)	(1,060)
Adj. EBITDA	712	844	1,076	1,247	1,494
D&A	(475)	(544)	(576)	(637)	(700)
Adj. EBIT	238	300	500	610	794
Net Interest	(7)	(8)	64	(11)	(10)

Cash Flow Statement	FY17A	FY18A	FY19E	FY20E	FY21E
Cash flow from operating activities	149	170	436	508	683
o/w Depreciation & amortization	475	544	576	637	700
o/w Changes in working capital	39	(45)	(50)	(20)	(20)
	(169)	(239)	(80)	(87)	(93)
Cash flow from investing activities
o/w Capital expenditure	(63)	(59)	(80)	(87)	(93)
as % of sales	4.3%	3.4%	3.7%	3.5%	3.2%

Adj. PBT	228	294	488	599	784
Tax	(51)	(69)	(117)	(124)	(166)
Minority Interest	-	-	-	-	-
Adj. Net Income	174	220	376	461	604
Reported EPS	0.98	1.19	3.30	3 56	4.89
Adj. EPS	1.45	1.80	3.17	3.95	5.32

Cash flow from financing activities	397	48	45	(351)	(495)
o/w Dividends paid	0	0	0	0	0
o/w Shares issued/(repurchased)	(68)	(411)	0	(292)	(432)
o/w Net debt issued/(repaid)	454	407	0	0	0
Net change in cash	370	(21)	373	70	95

DPS	0.00	0.00	0.00	0.00	0.00		Adj. Free cash flow to firm	93	118	341	432	600
							y/y Growth	(149.7%)	26.5%	188.8%	26.5%	38.9%
Payout ratio	0.0%	0.0%	0.0%	0.0%	0.0%
Shares outstanding	120	122	119	117	114
Balance Sheet	FY17A	FY18A	FY19E	FY20E	FY21E		Ratio Analysis	FY17A	FY18A	FY19E	FY20E	FY21E
Cash and cash equivalents	853	747	1,148	1,218	1,313		Gross margin	-	-	-	-	-
Accounts receivable							EBITDA margin	48.8%	48.7%	49.2%	50.4%	50.5%
Inventories							EBIT margin	16.3%	17 3%	22.9%	24.7%	26.9%
Other current assets	611	711	749	758	768		Net profit margin	11.9%	12.7%	17.2%	18.7%	20.4%
Current assets	1,464	1,458	1,897	1,976	2,081		Organic Revenue growth	-	-	-	-	-
PP&E							Net debt/EBITDA	0.1	0.6	0.1	0.1	(0.0)
LT investments
Other non current assets	1,118	1,347	1,388	1,422	1,430		Sales/Assets (x)	0.6	0.6	0.7	0.7	0.9
Total assets	2,582	2,805	3,285	3,398	3,511		Assets/Equity (x)	2.1	2.7	2.8	2.5	2.4
							Interest cover (x)	98.9	109.6	-	114.8	147.7
Short term borrowings							Tax rate	23.7%	25.0%	23.0%	23.0%	23.0%
Payables	398	499	499	499	499
Other short term liabilities	0	0	0	0	0		Revenue y/y Growth	4.7%	18.6%	26.2%	13.2%	19.6%
Current liabilities	398	499	499	499	499		EBITDA y/y Growth	12.8%	18 5%	27.5%	15.9%	19.8%
Long-term debt	934	1,295	1,295	1,295	1,295		EPS y/y Growth	28.9%	23.7%	76.0%	24.6%	34.7%
Other long term liabilities	116	122	210	199	189
Total liabilities	1,448	1,916	2,004	1,993	1,983
							Valuation	FY17A FY18A FY19E FY20E FY21E
Shareholders' equity	1,134	889	1,281	1,405	1,528		P/E (x)	46.9	37.9	21 5	17.3	12.8
Minority interests	-	-	-	-	-		FCFE Yield	-	-	-	-	-
Total liabilities & equity	2,582	2,805	3,285	3,398	3,511		EV/EBITDA (x)	10.9	9.7	7 3	6.2	5.1
							Dividend Yield	0.0%	0.0%	0.0%	0.0%	0.0%
Net debt/(cash)	81	548	147	77	(18)

Source: Company reports and J P. Morgan estimates.

Note: € in millions (except per-share data).Fiscal year ends Mar. o/w - out of which

73

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Daniel Kerven	Europe Equity Research
(44-20) 7134-3057	10 December 2018
daniel [e-mail]

Overweight

Company Data

Price (€)	21.25
Date Of Price	07 Dec 18
Price Target (€)	40.00
Price Target End Date	31-Dec-19
52-week Range (€)	24.87-20.26
Market Cap (€ bn)	26.70
Shares O/S (mn)	1,257

Vivendi

Vivendi (VIV.PA;VIV FP)

FYE Dec	2017A	2018E	2019E	2019E
			(Prev)	(Curr)
Adj. EPS FY (€)	1.05	0.86	1.12	1.10
Bloomberg EPS FY (€)	0.75	0.88	-	1.05
Adj P/E FY	20.3	24.7	19.0	19.2
Group org. growth FY	4.1%	2.8%	5.1%	5.0%
Revenue FY (€ mn)	12,501	13,689	14,546	14,540
Adj. EBITA FY (€ mn)	987	1,289	1,610	1,587
DPS (Net) FY (€)	0.45	0.43	0.56	0.55
Net Debt/EBITDA FY	2.0	0.1	(0.1)	(0.1)

Source: Company data, Bloomberg, J.P. Morgan estimates.

Investment Thesis, Valuation and Risks Vivendi (Overweight; Price Target: €40.00)

Investment Thesis

Vivendi is one of the best ways to get exposure to Music, which in our view offers the best content story in media. We believe Universal Music more than underpins Vivendi’s entire EV and has the potential to drive multiples of upside as subscriptions become the global norm, driving revenue growth, margin expansion, improved earnings visibility and a re-rating. Vivendi’s other activities have been a drag on earnings and sentiment – however, expectations and valuations for these activities are now low and they could become a source of upside should momentum improve.

Valuation

Our Dec-19 SOTP-based valuation decrease from €42 to €40. We value UMG at €43.3bn, we have a C+ group valuation of €3.6bn (down from €3.9bn) and we mark to market its listed investments. Please see our deep dive note on Vivendi (link).

Vivendi SOTP

	Stake	EV/EBITDA			EV/NOPAT	Value
€ million, year-end 31 December	%	2018E	2019E	2018E	2019E	€m
UMG	100%	46.9	38.0	66.4	53.2	43,332
C+ Group		5.7	5.4	14.0	13.4	3,631
Havas		8.9	8.0	16.1	14.2	2,509
Gameloft		28.2	19.3	304.2	78.1	237
Village		5.9	3.8	-16.0	-17.4	88
New Initiatives		-0.8	-2.2	-0.9	-1.5	50
Corporate		9.8	9.8	14.8	14.8	-1,077
EV		28.8	24.0	28.0	22.8	48,771
Value of stakes						4,023
Tax assets						626
Pension and other provisions						-1,807
Less net Debt						-636
Mediaset settlement						-500
Equity Value						50,477
No Shares						1,257
Value per share (€)						40

Source: J.P. Morgan estimates.

Risks to Rating and Price Target

The following risks could prevent the stock from achieving our target price and rating: 1) worse-than-expected operating performance at Canal+ Group and UMG; 2) valueilutive acquisitions; and 3) lower-than-expected cash return to shareholders.

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Daniel Kerven	Europe Equity Research
(44-20) 7134-3057	10 December 2018
daniel [e-mail]

Vivendi: Summary of Financials

Income Statement	FY16A	FY17A	FY18E	FY19E	FY20E		Cash Flow Statement	FY16A	FY17A	FY18E	FY19E	FY20E
Revenue	10,819	12,501	13,689	14,540	15,396		Cash flow from operating activities	696	960	1,159	1,493	1,814
COGS					-		o/w Depreciation & amortization	309	337	405	448	463
Gross profit					-		o/w Changes in working capital	(7)	247	(20)	(20)	(20)
SG&A					-
Adj. EBITDA	1,033	1,324	1,694	2,034	2,361		Cash flow from investing activities	(2,401)	(3,283)	1,785	(506)	(528)
D&A	(309)	(337)	(405)	(448)	(463)		o/w Capital expenditure	(233)	(259)	(285)	(294)	(303)
Adj. EBIT	724	987	1,289	1,587	1,898		as % of sales	2.2%	2.1%	2.1%	2.0%	2.0%
Net Interest	(40)	(53)	(56)	(26)	(19)
Adj. PBT	945	1,168	1,512	1,926	2,260		Cash flow from financing activities	(3,843)	(2,459)	(762)	(664)	(794)
Tax	(162)	189	(395)	(499)	(564)		o/w Dividends paid	(2,555)	(470)	(545)	(447)	(577)
Minority Interest	(28)	(45)	(36)	(38)	(39)		o/w Shares issued/(repurchased)	(1,542)	(51)	0	0	0
Adj. Net Income	755	1,312	1,081	1,388	1,657		o/w Net debt issued/(repaid)	-	-	-	-	-
Reported EPS	0.59	1.05	0.86	1.10	1.32		Net change in cash	(5,548)	(4,782)	2,182	323	492
Adj. EPS	0.59	1.05	0.86	1.10	1.32			381	1,399	785	1,088	1,367
DPS	0.40	0.45	0.43	0.55	0.66		Adj. Free cash flow to firm
							y/y Growth	(1076.9%)	267.2%	(43.9%)	38.6%	25.7%
Payout ratio	67.6%	43.0%	50.0%	50.0%	50.0%
Shares outstanding	1,276	1,253	1,257	1,257	1,257

Balance Sheet	FY16A	FY17A	FY18E	FY19E	FY20E		Ratio Analysis	FY16A	FY17A	FY18E	FY19E	FY20E
Cash and cash equivalents	4,072	1,951	4,079	3,900	4,554		Gross margin	-	-	-	-	-
Accounts receivable	4,011	6,754	6,804	6,839	6,859		EBITDA margin	9.5%	10.6%	12.4%	14.0%	15.3%
Inventories					-		EBIT margin	6.7%	7.9%	9.4%	10.9%	12.3%
Other current assets	1,077	345	345	345	345		Net profit margin	7.0%	10.5%	7.9%	9.5%	10.8%
Current assets	9,160	9,050	11,228	11,084	11,758		Organic Revenue growth	(0.2%)	4.1%	2.8%	5.0%	5.9%
PP&E	23,205	25,283	22,963	22,892	22,826		Net debt/EBITDA	0.0	2.0	0.1	(0.1)	(0.4)
LT investments	-	-	-	-	-
Other non current assets	0	0	0	0	0		Sales/Assets (x)	0.3	0.4	0.4	0.4	0.4
Total assets	32,365	34,333	34,191	33,976	34,584		Assets/Equity (x)	1.7	1.8	1.9	1 9	1.8
							Interest cover (x)	25.8	25.0	30.0	79.4	127 5
Short term borrowings					-		Tax rate	17.1%	16.2%	26.1%	25.9%	25.0%
Payables	5,614	9,001	9,001	9,001	9,001
Other short term liabilities	0	0	0	0	0		Revenue y/y Growth	0.5%	15.5%	9.5%	6.2%	5.9%
Current liabilities	5,614	9,001	9,001	9,001	9,001		EBITDA y/y Growth	(17.2%)	28.2%	28.0%	20.1%	16.1%
Long-term debt	4,081	4,636	4,331	3,631	3,631		EPS y/y Growth	16.1%	77.0%	(17.9%)	28.4%	19.4%
Other long term liabilities	3,058	2,818	2,818	2,818	2,818
Total liabilities	12,753	16,455	16,150	15,450	15,450
							Valuation	FY16A	FY17A	FY18E	FY19E	FY20E
Shareholders' equity	19,383	17,656	17,819	18,304	18,912		P/E (x)	35.9	20 3	24.7	19 2	16.1
Minority interests	229	222	222	222	222		FCFE Yield	1.3%	5.1%	2.7%	4.0%	5.0%
Total liabilities & equity	32,365	34,333	34,191	33,976	34,584		EV/EBITDA (x)	26.8	22 9	16.5	13.4	11 3
							Dividend Yield	1.9%	2.1%	2.0%	2.6%	3.1%
Net debt/(cash)	9	2,685	252	(269)	(923)

Source: Company reports and J.P. Morgan estimates.

Note: € in millions (except per-share data) Fiscal year ends Dec. o/w - out of which

75

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Daniel Kerven (44-20) 7134-3057

daniel [e-mail]

Overweight

Company Data

Price (p)	816
Date Of Price	07 Dec 18
Price Target (p)	1,090
Price Target End Date	31-Dec-19
52-week Range (p)	1,474-811
Market Cap (£ mn)	10,337.52
Shares O/S (mn)	1,267

WPP summary DCF valuation (£m)

£ million,

PV of FCF (18-30, £m)	6,993
PV of Terminal Value (£m)	8,352
Total Enterprise Value (£m)	15,345
(Net Debt) FY18 (£m)	-4,708
Associates	880
Minorities	-882
Tech, data, content inv.	250
Kantar	2,766
Equity Value (£m)	13,651
Fully diluted Shares (m)	1,252
WPP Equity Value per Share (p)	1,090

Source: J.P. Morgan estimates

Europe Equity Research

10 December 2018

WPP PLC

WPP PLC (WPP.L;WPP LN)

FYE Dec	2017A	2018E	2018E	2019E	2019E
		(Prev)	(Curr)	(Prev)	(Curr)
Dil.Adj.EPS FY (p)	120.43	105.33	105.48	96.29	97.63
Adj.P/E FY	6.8	7.7	7.7	8.5	8.4
Net Sales FY (£ mn)	13,140	12,753	12,769	12,624	12,775
Adj. Ops. Profit FY (£ mn)	2,154	1,932	1,934	1,782	1,805
Adjusted PBT FY (£ mn)	2,092	1,841	1,844	1,689	1,711
Adjusted Diluted NP FY (£	1,536	1,336	1,338	1,215	1,232
mn)
DPS FY (p)	60.00	60.00	60.00	60.00	60.00
Dividend Yield FY	7.4%	7.4%	7.4%	7.4%	7.4%

Source: Company data, Bloomberg, J.P. Morgan estimates.

Investment Thesis, Valuation and Risks WPP PLC (Overweight; Price Target: 1,090p)

Forecast changes

We have slightly increased our estimates due to FX changes. Our 2019 / 20 EPS increase by +1.4% / +1.4%.

Investment Thesis

We continue to believe that the slowdown in the Advertising Agency space can be explained by a number of short-term factors, that structural concerns are overstated and that the role of the agency, to help clients optimise their marketing spend across the marketing funnel, remains just as relevant as in the past. In fact, digital advertising spends grows the overall market, allowing agencies to move beyond traditional marketing to drive consideration, intent and purchases. WPP is well placed, in our view, given its scale, geographic reach and expertise across disciplines. With c30% implied upside to our PT, we remain OW.

WPP trades on 8.5x earnings in 2020E for 2020E-23E EPS growth of c7% pa. It offers a 2018E yield of 7.4%. WPP’s peers trade on 11.3x earnings in 2020E and offer a yield of 4%.

Valuation

Our Dec-19 DCF based price target increases from 1,070p to 1,090p as a result of our changes in estimates. Our DCF assumes a WACC of 8.5%, terminal growth of 1.5% and operating margin of 15.2%.

Risks to Rating and Price Target

The following risks could prevent the stock from achieving our target price and rating: 1) worse-than-expected economic and advertising environment (particularly following Brexit); 2) value-destroying acquisitions; 3) costs may increase faster than expected, implying lower-than-expected operating margins; 4) substantial number of client contracts lost due to peer competition on pricing; and 5) increased competition from Consultancy/IT firms could lead to market share loss.

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vk.com/id446425943

Daniel Kerven	Europe Equity Research
(44-20) 7134-3057	10 December 2018
daniel [e-mail]

WPP PLC: Summary of Financials

Income Statement	FY16A	FY17A	FY18E	FY19E	FY20E		Cash Flow Statement	FY16A FY17A FY18E FY19E FY20E
Revenue	12,398	13,140	12,769	12,775	11,011		Cash flow from operating activities	1,869	1,514	1,665	1,648	1,500
COGS					-		o/w Depreciation & amortization	259	267	301	325	327
Gross profit					-		o/w Changes in working capital	(151)	(532)	(60)	(30)	(26)
SG&A	-	-	-	-	-
Adj. EBITDA	2,420	2,534	2,298	2,169	1,997		Cash flow from investing activities	(975)	(547)	(600)	(490)	(593)
D&A	(260)	(267)	(274)	(285)	(245)		o/w Capital expenditure	(277)	(318)	(350)	(340)	(293)
Adj. EBIT	2,095	2,154	1,934	1,805	1,580		as % of sales	2.2%	2.4%	2.7%	2.7%	2.7%
Net Interest	(174)	(175)	(180)	(173)	(149)
Adj. PBT	1,986	2,092	1,844	1,711	1,602		Cash flow from financing activities	(1,468)	(931)	(999)	(1,398)	(228)
Tax	(417)	(460)	(415)	(392)	(358)		o/w Dividends paid	(633)	(776)	(768)	(740)	(721)
Minority Interest	(102)	(96)	(91)	(88)	(88)		o/w Shares issued/(repurchased)	(427)	(504)	(200)	(150)	(500)
Adj. Net Income	1,467	1,536	1,338	1,232	1,156		o/w Net debt issued/(repaid)	(23)	600	(300)	(530)	(400)
Reported EPS	113.19	120.43	105.48	97.63	94.75		Net change in cash	(573)	37	66	(240)	679
Adj. EPS	113.19	120.43	105.48	97.63	94.75			1,575	1,172	1,299	1,316	1,209
DPS	56.60	60.00	60.00	60.00	60.00		Adj. Free cash flow to firm
							y/y Growth	28.8%	(25.6%)	10.9%	1.3%	(8.2%)
Payout ratio	50.0%	49.8%	56.9%	61.5%	63 3%
Shares outstanding	1,296	1,276	1,268	1,261	1,220

Balance Sheet	FY16A	FY17A	FY18E	FY19E	FY20E		Ratio Analysis	FY16A	FY17A	FY18E	FY19E	FY20E
Cash and cash equivalents	2,437	2,391	2,527	2,263	3,093		Gross margin	-	-	-	-	-
Accounts receivable					-		EBITDA margin	19 5%	19.3%	18.0%	17.0%	18.1%
Inventories					-		EBIT margin	17.4%	17.3%	15.9%	14.8%	15.9%
Other current assets	0	0	0	0	0		Net profit margin	11.8%	11.7%	10.5%	9.6%	10.5%
Current assets	2,437	2,391	2,527	2,263	3,093		Organic Revenue growth	-	-	-	-	-
PP&E	32,131	31,277	31,676	31,878	32,277		Net debt/EBITDA	6.5	5.7	6 5	7.1	8.2
LT investments					-
Other non current assets	0	0	0	0	0		Sales/Assets (x)	0.4	0.4	0.4	0.4	0.3
Total assets	34,568	33,669	34,202	34,142	35,370		Assets/Equity (x)	3.7	3.6	3 5	3.5	3.5
							Interest cover (x)	13.9	14.5	12.7	12.5	13.4
Short term borrowings					-		Tax rate	21.0%	22.0%	22.5%	22 9%	22.3%
Payables					-
Other short term liabilities	6,567	6,875	6,575	6,045	5,645		Revenue y/y Growth	17.8%	6.0%	(2.8%)	0.0%	(13.8%)
Current liabilities	6,567	6,875	6,575	6,045	5,645		EBITDA y/y Growth	20 9%	4.7%	(9.3%)	(5.6%)	(7.9%)
Long-term debt	18,233	16,832	17,437	17,676	19,490		EPS y/y Growth	20 9%	6.4%	(12.4%)	(7.4%)	(3.0%)
Other long term liabilities	0	0	0	0	0
Total liabilities	24,801	23,707	24,012	23,721	25,134
							Valuation	FY16A	FY17A	FY18E	FY19E	FY20E
Shareholders' equity	9,325	9,493	9,698	9,903	9,692		P/E (x)	7.2	6.8	7.7	8.4	8.6
Minority interests	443	469	493	517	544		FCFE Yield	13 3%	9.6%	10.8%	11.1%	10.6%
Total liabilities & equity	34,568	33,669	34,202	34,142	35,370		EV/EBITDA (x)	6.8	6.5	7 2	7.1	6.5
							Dividend Yield	6 9%	7.4%	7.4%	7.4%	7.4%
Net debt/(cash)	15,796	14,441	14,911	15,413	16,397

Source: Company reports and J.P. Morgan estimates.

Note: £ in millions (except per-share data).Fiscal year ends Dec. o/w - out of which

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