FIRST CUT: Sky TV 1H profit falls 32% as programme costs rise, subscribers fall

Wednesday 22nd February 2017

Sky Network Television, which is awaiting a decision from the Commerce Commission on a proposed merger with Vodafone New Zealand, posted a 32 percent drop in first-half profit as content costs increased, and revenue and subscriber numbers fell.

Profit slid to $59.3 million, or 15.24 cents per share, in the six months ended Dec. 31, from $87.1 million, or 22.38 cents, in the year earlier period, the Auckland-based company said in a statement. Revenue dropped 3.7 percent to $458.2 million while operating expenses gained 4.6 percent to $308.3 million.

Sky TV reiterated its forecast for earnings before interest, tax, depreciation and amortisation for the year ending June 30, 2017, to be 5 percent to 7 percent below the $296 million forecast it gave last June, compared with ebitda of $325 million last year. The company said today that ebitda in the first half of its financial year fell 17 percent to $149.9 million.

The pay-TV operator is looking to team up with telecommunications company Vodafone as it faces increased rivalry from online streaming video services such as Netflix and Spark New Zealand's Lightbox offering. Still, it retains rugby rights, which are seen as a linchpin in securing domestic viewers. Its costs to secure programming rights jumped 12 percent to $181.6 million in the first half, mostly due to higher costs to secure rugby rights and the 2016 Summer Olympics, while subscriber numbers fell 5.2 percent to 816,135.

"This digital disruption has ... brought a massive increase in the supply of additional viewing options for consumers and spending options for advertisers. Yet without much increase in overall demand," said Sky TV chief executive John Fellet. "Since Sky has the lion's share of the New Zealand subscription television customers, it faces the biggest challenges."

The Commerce Commission is scheduled to release its decision on the merger tomorrow, and Fellet said that the regulator's decision will have a greater long-term impact on the value of a shareholder's investment in the company than today 's first-half earnings release.

Sky TV will pay a dividend of 15 cents per share on Feb. 22, unchanged from the year earlier period.

Its shares last traded at $4.47, and have gained 8.3 percent the past year.

BusinessDesk.co.nz

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