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Sky shrugs off BT football fears but City warns over spiralling TV rights costs Sky shrugs off BT football fears but City warns over spiralling TV rights costs
(about 3 hours later)
Sky has boosted its profits and reduced the rate of customers leaving to rival services, shrugging off fears that BT’s poaching of the Champions League rights would hurt its performance.Sky has boosted its profits and reduced the rate of customers leaving to rival services, shrugging off fears that BT’s poaching of the Champions League rights would hurt its performance.
The pay-TV group increased total revenues by 6% to £2.8bn and profits by 10% to £375m year on year in the three months to the end of September.The pay-TV group increased total revenues by 6% to £2.8bn and profits by 10% to £375m year on year in the three months to the end of September.
Crucially, Sky reduced its churn, the rate at which customers leave the business, to 9.8% – its lowest UK rate for the quarter in 11 years.Crucially, Sky reduced its churn, the rate at which customers leave the business, to 9.8% – its lowest UK rate for the quarter in 11 years.
Its UK and Ireland operation, which could have been hit by BT Sport airing the Champions League, added 77,000 new customers. This was 50% growth over the same period last year, the highest rate in four years.Its UK and Ireland operation, which could have been hit by BT Sport airing the Champions League, added 77,000 new customers. This was 50% growth over the same period last year, the highest rate in four years.
The company acknowledged that it had expected a “tough trading period” but said the overall performance of the business, including its German and Italian operations, was “excellent”.The company acknowledged that it had expected a “tough trading period” but said the overall performance of the business, including its German and Italian operations, was “excellent”.
The UK business remains the powerhouse, reporting a 20% increase in operating profits to £358m in the quarter, helped by what the company said was a “strong focus on costs”.The UK business remains the powerhouse, reporting a 20% increase in operating profits to £358m in the quarter, helped by what the company said was a “strong focus on costs”.
Sky’s German business reported revenue growth of 11% but a small operating loss of £8m, as a result of increased Bundesliga and Champions League costs. The business added 94,000 new customers.Sky’s German business reported revenue growth of 11% but a small operating loss of £8m, as a result of increased Bundesliga and Champions League costs. The business added 94,000 new customers.
The Italian business saw revenues fall 4% and operating profit slide by 24% to £25m as 37,000 customers left the business.The Italian business saw revenues fall 4% and operating profit slide by 24% to £25m as 37,000 customers left the business.
“Italy delivered a resilient performance against a challenging economic backdrop and the loss of the Champions League rights on a platform that is more sports-focused,” the company said.“Italy delivered a resilient performance against a challenging economic backdrop and the loss of the Champions League rights on a platform that is more sports-focused,” the company said.
Ian Whittaker, an analyst at Liberum, said there are issues over Sky’s long-erm profitability due to spiralling programming costs, especially sports such as Premier League. Ian Whittaker, an analyst at Liberum, said there are issues over Sky’s long-term profitability due to spiralling programming costs, especially sports such as Premier League.
Average revenue per user, a metric that measures how profitable each customer is which is closely watched by analysts, remained flat at £47.Average revenue per user, a metric that measures how profitable each customer is which is closely watched by analysts, remained flat at £47.
“We still have concerns that Sky’s long-term profitability will never get to the heights to justify its valuation because of the pressures from increasing programming costs,” said Whittaker.“We still have concerns that Sky’s long-term profitability will never get to the heights to justify its valuation because of the pressures from increasing programming costs,” said Whittaker.
“We see evidence of this as ARPU continues to flatline, with ARPU flat in UK and Germany and falling in Italy over the quarter. Cost rights inflation and the uncertainty of further spikes in the major costs such as the Premier League rights will continue to drag on the valuation as they continue to display an inability to pass this cost through to customers.”“We see evidence of this as ARPU continues to flatline, with ARPU flat in UK and Germany and falling in Italy over the quarter. Cost rights inflation and the uncertainty of further spikes in the major costs such as the Premier League rights will continue to drag on the valuation as they continue to display an inability to pass this cost through to customers.”
Sky group chief executive Jeremy Darroch said that overall it was a strong start to its new financial year.Sky group chief executive Jeremy Darroch said that overall it was a strong start to its new financial year.
“As these results show, we are delivering against a clear set of plans across Europe, and are well positioned for the growth opportunities ahead,” he said.“As these results show, we are delivering against a clear set of plans across Europe, and are well positioned for the growth opportunities ahead,” he said.
Sky also announced that it has renewed a new five year deal with Sanzar, the body representing New Zealand, Australia and South African rugby, that will include the Rugby Championship as well as tours by England, Ireland, Wales and Scotland down under.Sky also announced that it has renewed a new five year deal with Sanzar, the body representing New Zealand, Australia and South African rugby, that will include the Rugby Championship as well as tours by England, Ireland, Wales and Scotland down under.