Sky in 12% profit increase

Sky said a twin focus on product innovation and top-class sport and entertainment would help deliver a better-than-expected rise in revenue in the year ahead after it reported 12% higher full-year profit.

Sky has been seeking to earn more money from existing customers through new products and price rises instead of chasing new subscribers with cut-price offers.

Rival BT, Britain’s biggest telecoms group, also updated the market yesterday, saying demand for broadband boosted its first-quarter earnings, which include a first contribution from mobile operator EE.

The two companies have been playing to their strengths — premium TV content for Sky and broadband for BT — while selling extra products to existing customers.

Sky’s shares had their best rise in nearly three years, up as much as 7.3%. The shares rose almost 2% yesterday, while BT shares were almost 3% higher.

Analysts at Citi said Sky’s results “should be greeted with relief” as investors had been worried about the company failing to keep customers or add enough new ones.

Churn — the percentage of customers leaving — rose to 11.2% in the fourth quarter, at the higher end of analysts’ expectations.

Sky chief executive Jeremy Darroch said he was “actually very happy” with the churn rate, saying it had risen with its growing proportion of broadband-only customers who were more likely to switch suppliers.

Analysts at stockbroker AJ Bell, however, said Sky had a customer loyalty problem on its hands.

The Game of Thrones broadcaster added 808,000 customers and 3.3m new products across its operations in Britain and Ireland, Germany and Austria, and Italy in the year.

Sky said it expected revenue growth of 5% to 7%, topping market forecasts of 5%, in the year to end-June 2017.

It also increased expected cost savings from the integration of Sky Deutschland and Sky Italia to £400m (€477.5m) by 2020, from £200m by 2017, and said it would separately reduce costs by 2% to 3% of sales next year. The savings, analysts said, would help offset higher costs for Premier League football.

Sky’s revenue rose 7% to £11.97bn, beating forecasts of £11.75bn, with adjusted operating profit broadly in line with forecasts at £1.56bn.

BT reported earnings before interest, tax, depreciation, and amortisation of £1.82bn in the three months to the end of June, compared with a company-supplied analyst forecast of £1.78bn.


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