Sky Network profit falls 17% on HD costs

Friday 20th February 2009

Sky Network Television, New Zealand's biggest pay-TV company, posted a 17% drop in first-half profit on costs of its new high definition platform and weakening advertising revenue at Prime.

Net income fell to $42.6 million, or 10.99 cents a share, in the six months ended Dec. 31, from $51.2 million, or 13.16 cents a year earlier, the company said in a statement. Sales rose 5.4% to $346 million.

Sky has been investing in high definition broadcasting to capitalise on the popularity of HD televisions, which have fallen in price as traditional CRT sets fall from favour. The company had 51,485 new MYSKYHDi subscribers as at December 31, while total customers rose to a record 759,069. Sky added a further 11,703 in the period up to Feb. 12, up from a 6,798 gain a year earlier, when sports fans were mourning New Zealand's Rugby World Cup stumble.

"Our figures show that Sky can deal better with a recession than the All Blacks not doing particularly well in the last Rugby World Cup, chief executive John Fellet said.

Still the recession, which may have entered its fifth quarter in January, dented advertising revenue at Prime Television, the free-to-air channel that allows Sky to broadcast delayed sports coverage and sell advertising around the packages.

Operating costs rose 15% to $261.9 million in the first half, on marketing costs for the HD platform, promotional discounts and programming expenses. Sky, which is 44% owned by Rupert Murdoch's News Corp., will pay a first-half dividend of 7 cents a share.

The company reiterated its forecast for full-year profit of between $90 million and $100 million, from $97.7 million in the previous year.

Sky's shares fell 1.2% to $4.14 and are up about 12% so far this year.

By Jonathan Underhill

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