Sky Network 1H profit climbs 19% as MYSKY start-up costs abate, sales grow

Friday 19th February 2010

Sky Network Television, New Zealand’s dominant pay-TV provider, posted a 19% gain in first-half profit as growth in MYSKY HDi subscribers caught up with costs and the company paid less interest.

Net income rose to $50.8 million, or 13.03 cents a share, in the six months ended December 31, from $42.6 million, or 10.99 cents a year earlier, the company said in a statement today. Profit exceeded Forsyth Barr’s forecast of $48.9 million.

Sky launched its MYSKY HDi decoder in August 2008 and had to cover costs including a rebuild of its TV station to enable high-definition broadcasts, expanded fibre links and leasing more satellite space. Subscribers to the enhanced service more than doubled to 144,148 by December 31 from a year earlier, to account for about 19% of total customers.

The benefits for Sky include a reduced churn rate from subscribers who pay a $599 joining fee to get the MYSKY box, which provides HD TV, the ability to pause live shows, and record two while watching a third. Sky’s overall gross churn fell to 13.8% from 14.8% a year earlier.

Shares of Sky were unchanged at $4.71. The stock has underperformed the NZX 50 Index so far this year, falling 8% to the index’s 5% decline.

Chief executive John Fellet said he is pleased with growth in MYSKY HDi subscribers during “very challenging economic times.” He didn’t provide a full-year forecast.

Fellet described New Zealand’s TV advertising market as the most depressed ever seen, and said Sky had been “severely impacted.”

Its total advertising revenue fell 16% to $27.6 million, accounting for 7.5% of the company’s total sales. The overall TV advertising market fell 10.9% in the same period.

Fellet also highlighted tepid net subscriber growth in the first half of 5,976, from growth of 10,493 a year earlier.

“While the churn is down compared to the previous year we have been struggling to generate new sales over these summer months,” he said. “This has continued into January.” He predicted a pickup when winter sports start.

Average revenue per user, or ARPU, rose 6.1% to $67.35, which Sky attributed to the increase in MYSKY customers.

Expenses climbed 6.5% in the first half, about matching the increase in sales growth, while finance expenses dropped 28%, including a foreign exchange gain that reversed from a year-earlier loss, an a decline in interest costs.

The company will pay an interim dividend of 7 cents a share, unchanged from a year earlier.

Businesswire.co.nz

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