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Sky profits up 10%

Sky’s British and European Q1 results were in the main better than expected. Equity analysts praised the pay-TV broadcaster’s broadband efforts which resulted in the best growth (+133,000) for two years.  The market’s view is that Sky’s “aggressively priced” dual-play offering is resonating with consumers, and not just established DTH clients.  Sky’s European numbers were, however, mildly disappointing.

Overall, Sky’s UK subscriber numbers held up well, helped by its NOW TV offering. Retail customer net additions grew 77,000, with TV net additions up 43,000. Jerry Dellis, an equity analyst at investment bank Jefferies, says: “If DTH were in decline, there could be a large volume of new Sky subs coming on board adopting NOW TV in conjunction with discounted dual-play. Sky’s view, however, is that campaigns aimed at selling phone/BB into DTH homes (and not merely focused on those taking Sky Sports who might have been tempted away by the BT Sport Europe launch) were successful.”

Sky Deutschland’s customer growth was excellent (up 18 per cent) and maintaining its now praiseworthy low churn (9 per cent, compared with 8.6 per cent same period last year). However, German EBIT came in at a loss of -€11 million. Higher Bundesliga rights payments and a change in accounting policy that increased football programming cost allocated to Q1 were both known about, so it is possible that underlying SAC/programming was slightly above our expectations, said Jefferies.

Italian churn grew to 10 per cent (9.6 per cent last year), with revenues falling -4.4 per cent, Retail net additions also fell back (minus -57,000).

In Italy, Sky has weathered the loss of UEFA Champions League rights to Mediaset Premium quite well, with only 37,000 customers lost.

There remains no specific outlook targets from Sky management. However, the tone of this morning’s statement is confident, stated Jefferies.

Result highlights include:

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