Advanced Television

“Underwhelming” Sky vs “Winning” Sky

October 14, 2016

One set of results – albeit limited in detail – generated some extremely different conclusions and comments from equity analysts who closely watch Sky’s trio of European operations.  Sky issued its Q1 results on October 13th..

Berenberg Bank’s comments were headlined “Underwhelming” saying that the absence of most key performance indicators, and of EBIT, took some people by surprise. “Indeed, we understand that Sky decided less than a week ago that it would not disclose Q1 EBIT. Working on the principal that management teams generally provide more disclosure when the news is good, and vice versa, this may cause concern. We retain our Sell rating.”

Berenberg’s note to clients highlighted that Sky’s UK customer growth was disappointing. “Sky added 35k UK customers, which is the lowest quarterly growth in the last five years. Management cited an Olympic effect, and the summer’s football, but even so the number is disappointing.”  The bank added that discounting remains aggressive in the market as a whole, “for both TV and telecoms, as we have highlighted previously”.

However, the same set of numbers impressed analysts at Deutsche Bank. Their report said: “The transition in Sky’s growth – from adding satellite subs to selling more-to-the-same – is being overlooked.”  Deutsche Bank confirmed the market’s view that the UK’s progress in Q1 net additions were an implied “negative”.  But the bank were happy that September trading had been “strong” in all regions and the June price rise in the UK had “landed well”.

Deutsche Bank said bluntly that they did not expect Sky’s UK DTH base to grow.  It also expects advertising on Sky to fall, and not aided by a ban now in place on pre-Watershed (9pm) gambling adverts.

The bank is impressed by progress being made in Sky Italia, where better than expected subs and revenues helped the overall position.

Deutsche Bank’s continuing recommendation to clients is to “Buy” Sky shares.

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