Sky Q3 results: 127,000 new UK customers added
Sky added 242,000 net new customers in the third quarter of 2014, taking its customer base to 20.8 million, according to results published on Tuesday (21 April).
In the UK the company achieved the highest customer growth in more than a decade, adding 127,000 new customers – up 41% up on 2014.
At the same time, Sky grew paid-for subscription products by 1 million taking total product sales to 3.8 million for the year to date.
Meanwhile, group revenues grew by 5% to £8,453 million during the period, with UK and Ireland revenues up 6% to £5,824 million and revenues in Germany up 9% to £1,037 million.
Revenues in Italy dropped slightly over the period from £1,610 million in 2014 to £1,592 million.
Overall, the company recorded strong rates of growth across all main revenue streams, with subscription rates up 5% to £7,280 million, transactional revenues up 19% to £120 million and group advertising revenues up 6%.
“We have delivered an excellent third quarter as customers across the enlarged Sky group respond to the quality and breadth of what we offer,” said Jeremy Darroch, group chief executive.
“In all, we attracted almost 70% more new customers than the prior year and over one million new products. By continuing the strong operating momentum of the first half, we have grown revenues by 5% and operating profit by 20% over the nine months.”
The launch of Sky Store in the UK in April 2014 has been a key driver of transactional growth, while UK ad revenues were boosted largely by the continued strong performance of Sky AdSmart.
Group operating costs grew by just 3%, well below the rate of revenue growth, to £7,428 million, as the company looks to invest in content in all markets.
Operating profit was up 20%, with the UK continuing to deliver the largest share – up 14% to £1 billion.
“The UK and Ireland delivered a stand-out performance, reporting both the highest customer growth and lowest churn for 11 years,” Darroch added.
“We took share in broadband and grew strongly in TV as our dual-brand strategy with NOW TV and Sky continues to deliver. At the same time, Germany enjoyed another record quarter of growth and Italy posted its best Q3 customer growth in three years. We’ve also delivered significantly increased customer loyalty in each of our businesses.
“We are particularly excited by our progress in original drama. Fortitude debuted as the most successful drama ever on Sky Atlantic in the UK, 1992 opened as our most successful original scripted series in Italy, while Germany took its first steps in international co-production with 100 Code.
“As these results demonstrate, our teams are working well together right across the new Sky. Five months in, our integration plans are progressing well and we are well positioned for the expanded growth opportunity ahead.”
Commenting on the results, Joshua Raymond, chief market strategist at Cityindex, said the jump in profits was towards the top end of market consensus and so this will re-affirm confidence amongst investors, particularly after the hefty sums paid by the broadcaster for rights to screen Premier League matches, which Raymond estimates it overpaid for by around £1bn.
“This is also the highest rate of Q3 growth for the firm in 11 years for the UK and Ireland, showing that despite the highly competitive market, its offering remains attractive and this helps to settle investor nerves,” Raymond said.
“Outside of the UK, Germany and Austria also saw solid growth rates which is encouraging. Taking aside the somewhat flimsy bid talk from Vivendi – which has attracted buyers to Sky’s stock – there remains a healthy degree of market confidence here and these results will help cement that.
“One concern I continue to have is on Sky’s rising cost base and this remains an area the firm must keep a firm grip on.”
Sky shares rose 4% in trading on Tuesday morning.