Strong Results From BSkyB As Revenues Grow
BSkyB has this morning turned in a very strong set of year-end financial results, beating market expectations by some margin. The satellite broadcaster said that its operating profit has increased by 88% to £160 million and that it is adding record numbers of subscribers and increasing the average revenue per user (ARPU).
After goodwill, interest, share of joint ventures’ losses and exceptional items, the loss before tax was £514.5 million. This is a considerable mark-up on last year’s £262.7 million and reflects the heavy costs incurred at the KirchPayTV joint venture in Germany and the migration from analogue to digital. Nevertheless, Sky says that it hopes to generate a positive figure by the end of this year.
Analogue and digital churn remained flat quarter on quarter at 10.0%. Churn is the number of customers leaving the service. This figure is some way below the 23% churn currently being experienced at ITV Digital (see ITV Digital Places Breakeven At 2004) and is one indicator of the relative strength of Sky Digital over the ITV business. The figure is doubly encouraging for Sky as not only does it represent a 0.5% points fall on last year’s churn, but also comes when around 60% of customers have passed their initial 12 month contract period.
Advertising revenues grew by 12% across the year on viewing to Sky channels up by 5.8% in UK TV homes. The growth also reflects greater sponsorship revenues and the introduction of dedicated advertising sales for the Republic of Ireland.
Interactive revenues are starting to look healthy as well. Included in the ARPU of £313 is £11 from interactive services. The company says that its experience as a ‘pioneer’ of interactive television services has shown that “contextual and user-friendly interactive services such as Sky Sports Active are already widely used.”
Analysts at ABN Amro described the results as ‘excellent’ and said that encouraging progress is being made on all fronts. The market also reacted positively this morning pushing shares up 8p to 684p by 10:15am.
Whilst satellite subscriber growth of 150,000 was well ahead of ABN’s forecast of 75,000, the broker says that cable subscriber levels have dropped again to a worryingly low level of 2.9 million (see BSkyB To Cease Analogue Broadcast This Summer). This demonstrates the increasing strength of the cable operators’ own pay-TV packages and channels. Sky arguably now faces more competition from the cable companies than it does from ITV Digital.
ABN says that these results show that BSkyB is able to deliver improving profitability without sacrificing its targets for growth.
