Sky TV first half profit rises 22% as programming costs fall, more subscribers switch to My Sky service

Sky TV CEO John Fellet
Sky TV 12-month price history (NZX.com)

Sky Network Television [NZX: SKT], New Zealand's dominant pay-TV company, posted a 22 percent gain in first half profit as it benefited from lower programming costs and as more subscribers switched to its premium MY SKY service.

Net profit increased to $82.1 million in the six months ended Dec. 31, from $67.4 million in the year earlier period, Auckland-based Sky TV said in a statement. That beat First NZ Capital estimate of $74.1 million. Revenue rose 2.9 percent to $456.4 million and programming costs dropped 8.9 percent to $13.5 million.

Sky TV said its costs were lower in the latest period reflecting abnormally higher expenses from the Summer Olympics in the prior period. Subscribers to its premium MY SKY service, which allows users to record programmes, now account for 56.7 percent of its total subscriber base, up from 50.1 percent in the year earlier period.

Customers subscribed to MY SKY were less likely to drop the service, helping gross churn fall to 13.3 percent in the latest period, from 14.6 percent a year earlier. Just 10.3 percent of MY SKY customers dropped the service, compared with 17.4 percent of subscribers with a standard digital decoder, the company said.

Revenue growth per customer slowed to a 2.3 percent pace in the latest period, from a 5.5 percent pace the year earlier as the company added 10,127 subscribers, mostly from the new low-cost pay television service provided by IGLOO, its joint venture with state-owned Television New Zealand. Total subscribers rose 1.2% to 857,000.

Sky estimates its service is in 48.7 percent of households, down from 48.8 percent the year earlier.

Chairman Peter Macourt told shareholders at the company's last meeting in October that Sky TV is gearing up for the new assault on its grip on premium content from internet-service providers, which has seen web-based Coliseum Sports Media win the live rights to air the English Premier League, and they have new offerings in the works which will likely come out this year. Telecom Corp, the nation's largest phone company, said on Friday that it plans to launch its own internet-based television service this year after ending its decade-long partnership to resell Sky TV's service.

In the latest period, Sky TV's capital spending rose 10.7 percent to $47.4 million, reflecting an increase in new project work such as the expansion of TV station capacity and new products such as SKY GO, its live streaming App for iPhone and iPods, which went live in December. In October, Sky said it expected full-year capital expenditure of between $100 million and $120 million.

Sky TV plans to launch an android version of the new App in the first part of 2014 and on-demand content will be available later in 2014, which it expects will improve its retention figures.

The company will pay a dividend of 14 cents a share on March 17, up from 12 cents the year earlier.

Shares in Sky TV last traded at $5.75 and have slipped 1.5 percent so far this year. The stock is rated an average 'hold' according to analysts polled by Reuters.

(BusinessDesk)

READ ALSO: Sky TV running the numbers on a Netflix-style service - 'We're serious,' says CEO

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