FIRST CUT: Sky TV FY profit falls 21% as programme costs rise, subscription revenue drops

Tuesday 22nd August 2017

Sky Network Television, which dropped a merger plan with Vodafone New Zealand after it was rejected by the Commerce Commission, posted a 21 percent decline in annual profit as content costs increased, and revenue and subscriber numbers fell.

Profit slid to $116 million, or 29.82 cents per share, in the 12 months ended June 30, from $147.1 million, or 37.7 cents, a year earlier, the Auckland-based company said in a statement. Revenue dropped 3.7 percent to $893.5 million while operating expenses slipped 0.3 percent to $601.2 million. Some $2.1 million of expenses related to the proposed Vodafone deal, compared with $13.4 million of costs a year earlier.

Sky TV chief executive John Fellet said today that appealing the Commerce Commission decision would have been "torturous and expensive".

"As time went by it became apparent that we could action many of the opportunities and synergies through commercial agreements without the escalating costs of a merger," Fellet said. "Some of those are in the market now and you will see further proof points of the closer working relationship in the foreseeable future."

The pay-TV operator faces increased rivalry from online streaming video services such as Netflix which has seen its subscriber base come under pressure while its programming costs continue to rise. Its costs to secure programming rights increased 5.6 percent to $349.4 million in the latest year, equating to 39.1 percent of revenue from 35.7 percent of revenue a year earlier.

Meanwhile, its subscriber numbers fell 3.3 percent to 824,782, with residential subscription revenue down 3.7 percent to $725.1 million due to fewer satellite customers and a lower uptake of premium services such as sports and movies and lower pay-per-view buys. Increased subscribers for its subscription video on demand service Neon and sports service Fan Pass helped 'other subscription revenue' increase 3.7 percent to $82.2 million.

Its capital expenditure costs dropped 38 percent to $79.7 million after the year earlier was impacted by $41 million of costs for the roll-out of new internet enabled decoders replacing legacy digital decoders.

Sky TV will pay a final dividend of 12.5 cents per share on Sept. 14, taking its total annual dividend to 27.5 cents, down from 30 cents the year earlier.

Its shares last traded at $3.18, and have dropped 29 percent the past year.

(BusinessDesk)

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