Sky TV's half-year profit drops by 78% but company points to 'green shoots'

Wednesday, 12 February 2020

Sky TV CEO Martin Stewart presents the company's last full year results in August..

Sky Television has reported a 78 per cent drop in its profit to just under $12 million for the six months to the end of December.

Its revenues fell by 5 per cent for the half-year to $385m, but chief executive Martin Stewart took heart from 'positive signs' as it slowed churn amongst its satellite subscribers from 15 per cent to 'closer to 13 per cent' as a result of initiatives to attract and retain customers.

Stewart said Sky would unveil an 'exciting new streaming platform' later this year that would provide a single place to access its online sports and entertainment programming, which can currently be accessed through several sites including SkySportNow, Neon and SkyGo.

He forecast Sky would surpass 1 million total subscribers next year, with streaming and satellite customers currently totalling 925,000 after a boost from its acquisition of streaming entertainment service Lightbox from Spark last month.

Sky's accounts revealed that it paid $6m to buy Lightbox from Spark, not including a pending payment for Lightbox's pre-paid programming rights, the value of which have yet to be determined.

Sky TV has bought Spark's video streaming service Lightbox, a deal first announced in December 2019. (Video first published February 2021).

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Sky's shares closed at an all-time low of 63 cents on Tuesday, as investors braced for a bleak result, but bounced 5 per cent to 66c shortly after trading opened on Wednesday.

The company has lost two-thirds of its sharemarket value since Stewart replaced long-time boss John Fellet a year ago with instructions from Sky's board to 'transform' the company.

Prior to that decline Sky had already lost two-thirds of its value since reaching an all-time high above $6 in 2014, when optimism about the company's business model was at its peak.

Major moves last year included Sky suspending dividends to shareholders and expanding its sports business internationally by buying Dublin-based rugby streaming company RugbyPass for US$40m (NZ$62m).

Sky was forced to later splash out a reported $500 million to renew its rights to domestic and All Blacks rugby for five years to forestall a possible bidding war with Spark Sport.

A speculated move by Sky into the broadband market has not so far eventuated, and the company has instead explored freeing-up capital by selling its once-strategically important outside-broadcast division, OSB, to US-owned rival NEP.

Sky stuck to its full-year guidance of an operating profit of between $170m and $190m for the year to the end of June, but chairman Philip Bowman warned that it was likely there would be 'further restructuring costs to come'.

Revenues from satellite subscribers during the half-year fell 8 per cent to $299m, from the same period in 2018.

But Stewart said slowing the decline in satellite customer numbers was an 'important achievement'.

'It shows that we can manage the transition to a streaming future while continuing to serve satellite customers well,' he said.