Sky TV's Fellet picks up shares on market as analyst questions future dividends

Sky Network Television John Fellet lifted his small stake in the pay-TV operator yesterday after presiding over a 21% slump in annual profit and smaller dividend payment.

Mr Fellet bought 50,100 shares for $152,506.04, or $3.04 a share, in one trade on market yesterday, lifting his holding to 216,400, documents lodged with the NZX show. That was on a day when the stock closed at its lowest level since late 2000, and preceding the merger with former cornerstone shareholder Independent Newspapers Ltd. The stock has dropped even further, down 3.8% to $2.82, valuing Sky TV at just $1.09 billion.

The Auckland-based company reported a 21% slump in annual profit to $116 million on a 3.7% decline in revenue to $893.5 million as increasingly expensive content squeezes margins while at the same time cheaper on-demand streaming rivals and Sky's inability to make a more flexible service has seen subscriber numbers decline. The pay-tv firm's board, chaired by veteran Peter Macourt, trimmed the 2.5c per share from the annual dividend to a full-year return of 27.5c a share.

In a note to clients this week, First NZ Capital analyst Arie Dekker said Sky TV doesn't appear to have settled on a way to respond to a changing industry where both content rights owners and customers have more choice.

Mr Dekker said it didn't appear as though the board had chosen a preferred way of responding since the Commerce Commission's rejection of a proposed merger with Vodafone New Zealand. Still, Dekker warned further cuts to dividend payments could be on the cards if Sky TV's board follows earnings rather than free cash flow as the company nears its next rights agreement negotiations.

"The scale and pace at which this occurs will depend on many factors but it would take a major change in momentum to avoid further dividend cuts," he said.

FNZ's Dekker cut his target price to $2.98 from $3.55 and downgraded the stock to 'underperform' from 'neutral.'

Readers divided over Fellet comments
Meanwhile, a close majority of NBR subscribers disagree with Mr Fellet’s accusation yesterday that the media is biased in its coverage of Sky while at the same time pirating content.

His comments came after Sky launched legal action alleging copyright infringement against TVNZ, MediaWorks, NZME and Fairfax.

“The media companies in question have spent a lot of effort running every negative article they can find about Sky, some of which sadly are justified but many are not. I suggest this context is worth remembering the next time you read an article or opinion piece that appears to have a strong bias against Sky.”

Asked in an NBR Business Pulse poll if Mr Fellet was right about the media bias, 56% of voters said no and 44% said yes.

(BusinessDesk)