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‘Skinny’ Q1 results from Sky

Normally at this time of the year, Sky reveals its Q1 numbers. This year it is different, and the statement is converted into a much reduced market statement, and missing many important elements, not least many of its key performance indicators.  Some of this extra information will be unveiled at a dedicated Investor day on October 20th.

The headline numbers indicate encouraging growth, especially in Germany.  Its UK division delivered +5 per cent organic revenue growth (despite ad-revenue falling -3 per cent), Germany up 9 per cent (helped by ad-revenue rising 25 per cent) and Italy +4 per cent (ad-revenue up 17 per cent).

The improvements contributed to growth in group revenue up 7 per cent to £3.1 billion.  Sky says that more than 106,000 new customers joined Sky, “including Italy’s highest Q1 customer growth (+22,000 customers) in four years”. Germany & Austria added customers at the highest rate with 49,000 new additions followed by the UK & Ireland at 35,000.

Group CEO Jeremy Darroch, in his statement, says: “We finished the quarter strongly after a slower start against the backdrop of the Rio Olympics and UEFA Euro 2016. It was also a strong quarter of innovation with the launch of our new streaming service, Sky Ticket, in Germany; Ultra HD in the UK, Ireland, Germany and Austria; and our enhanced mobile TV proposition, Sky Go Extra, in Italy, as we transform all our markets to multi- platform distribution services.”

Early comments from the market were generally favourable despite the lack of information, not least the lack of Churn data.

One analyst (David Cheetham at www.xtb.com) says: “A 5% increase in like for like currency terms for the quarter to 30th Sept reflects continued revenue growth for Sky, which is even more impressive when the cuts to operating costs and adverse external factors are considered. One of the main strategic goals of the year has been to improve cost efficiency as the rise in competition has made the trading landscape more challenging to navigate and it appears that this is not hindering turnover. As for the external factors, both the European football championships and Olympics – two major sporting events that Sky own no rights to – occurred near the start of the quarter and provided alternatives to one of Sky’s core markets which focuses on sport.”

XTB adds: “The rise in particular of BT Sport has eaten into Sky’s share in its largest market of the UK & Ireland and contributed towards the decline of almost 20% in the stock over the past year. There’s many positives in the latest release that may suggest the firm’s recent decline has been halted and with several market relative multiples trading near their lowest levels in a decade, investors could view these results as a signal for a potentially good buying opportunity.”

For Paolo Pescatore, Director, Multiplay and Media, CCS Insight, the results were somewhat of a concern because of the lack of subscriber metrics beyond top line figures, in stark contrast to the same period last year. “Despite this, the company made a decent start to its new fiscal year, which typically is its most challenging quarter,” he noted. “And the move to ditch Sky+HD for new subscribers suggests that SkyQ has underperformed. It was inevitable and happened sooner than we had expected. But it was a positive move as it now simplifies Sky’s pay TV offering in the UK and will drive uptake of SkyQ. All eyes are now on the launch of Sky Mobile which we believe is imminent. The move into mobile has the potential to disrupt the market given its success in the home fixed line market with a slew of free adsl and fibre broadband deals.”

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