Sky interims sparkle with highest customer growth in nine years
In its first set of results since acquiring its German and Italian sister companies and simplifying its name to Sky, the satellite broadcaster delivered a strong set of interim results and boasted good momentum in all its markets.
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Net new retail customer numbers swelled 82% to 20.6m, with a "significant outperformance" from the UK and Ireland delivering the highest growth in new customers in nine years as 204,000 more people signed up.
Adjusted group revenues rose 5% to £5.6bn for the six months to the end of December, lifting operating profit 16% to £675m and adjusted basic earnings per share 3% to 27.1p. The board hiked the dividend 3% to 12.3p a share.
Helping to draw in new customers, the group invested further in TV content, with new drama 'Fortitude' becoming the first Sky original programme to premiere simultaneously across all of five of its markets in January and a fifth series of 'Game of Thrones' due to premiere exclusively in the spring, and in sports the company snaffled the rights to the golf Open Championship from 2017 after the BBC had broadcast the event for the last 60 years.
With bids due this week for the auction for Premier League rights for the 2016/17 to 2018/19 seasons, analysts are optimistic of Sky retaining the lions share but with likely 40% price inflation.
"Across the board, customers are responding to our investment in more high-quality TV and innovative new services," said chief executive Jeremy Darroch.
He also pointed to strong quarters for both newly acquired business, with Germany posting its highest ever customer growth and Italy showing resilience with good customer growth in a challenging market.
Darroch also cited the highest total product growth in four years and the lowest churn in a decade.
The group added 1.5m paid-for subscription products in the second quarter, a 25% increase year on year, with the highest paid-for product growth in 16 quarters in the UK and Ireland and a doubling year on year from Germany.
Mobile will be the next major product addition, with first mobile telephony services offered to customers in 2016 after the signing of an agreement with Telefónica UK last week.
"Six months into the year, we've seen a good performance right across the new Sky," Darroch added. "We have world-class capability within the expanded business and a strong set of plans that mean we are well placed to deliver growth and returns for shareholders."
Richard Hunter, head of equities at Hargreaves Lansdown, said the "new" Sky had delivered an encouraging set of numbers and dispelled some of the negative sentiment about the integration of Sky Deutschland and Sky Italia.
Numis analysts estimated at least 40% price inflation on the bidding for Premier League football and expect Sky to retain the majority of games, with the broader European base providing "cushioning".
"The integration [of German and Italian operations] is on track and we continue to see upside to the guided £200m synergies by the year ending June 2017, providing a cushion to forecasts for the forthcoming Premier League auction.”