(Adds detail, market reaction, further analyst's comment.)
By Lilly Vitorovich
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)
Chief Executive Jeremy Darroch said the group has made a good start to the new financial year, with strong demand for its Sky+HD set top boxes, which offer high definition television.
"As the year continues, we'll maintain a clear focus on our customers and on delivering on our priorities, all with the aim of building a larger, more profitable, and better business," he said in a statement ahead of the group's annual shareholder meeting in London.
Operating profit before exceptional items, the key figure tracked by U.K. analysts, rose 9% to GBP198 million for the three months ended Sept. 30, above market expectations of GBP193 million. That compares with GBP182 million over the same period a year earlier.
Before exceptional items, basic earnings per share rose 15% to 7 pence in the quarter from 6.1 pence a year earlier.
Revenue jumped 10% to GBP1.38 billion, beating expectations of GBP1.36 billion, underpinned by 94,000 net customer signings, takings its total customer base to 9.5 million. That compares with revenue of GBP1.25 billion a year earlier.
Given the tough economic environment, more Britons are staying home for their entertainment, fueling demand for BSkyB's services.
BSkyB competes against telecom giant BT Group PLC (BT) and media and cable group Virgin Media Inc. (VMED) in the U.K. While BSkyB is busy signing up new customers, BT is accelerating its fiber rollout plans and Virgin Media is getting traction from improved service and faster speeds.
BSkyB has delivered a "very strong set" of results in line with expectations, Bernstein analyst Claudio Aspesi said. "It provides further reinforcement that this company will come up with numbers that are consistently better than most people expect," with high-definition "the real engine of growth."
Aspesi said that the rise in churn, which measures the number of customers leaving the company, to 11.3% in the first quarter from 10.9% a year ago, was unsurprising given the first fiscal quarter is when "new pricing typically hurts them...and the economic environment is relatively difficult." Aspesi has a market-perform rating on BSkyB and 500 pence target price.
BSkyB added 287,000 new Sky+HD customers in the first quarter, a three-fold increase on the prior year. Some 1.6 million U.K. households now have high definition TV.
Its push into its more expensive high definition TV package resulted in a 9.1% increase in average revenue per user to GBP469 from GBP430.
BSkyB's results were well received by the market, with Nomura analyst Matthew Walker describing them as "very impressive across the board."
At 0823 GMT, BSkyB shares were up 14 pence, or 2.5%, at 574 pence, valuing the company at GBP9.97 billion, in a higher London market. The stock has risen around 20% since January on signs the group will emerge strongly from the economic downturn.
BSkyB also said it will launch Sky channels on Microsoft Corp.'s (MSFT) Xbox consoles later this year, and on U.K. digital service Fetch TV early in 2010, giving customers wider access to its channels.
First-quarter net profit, meanwhile, jumped 75% to GBP128 million from GBP73 million a year earlier, boosted by higher revenue and lower finance costs. It also paid slightly less tax. Last year's first-quarter result included a GBP24 million impairment charge relating to its investment in U.K. commercial broadcaster ITV PLC (ITV.LN).
News Corp. (NWS), which owns Dow Jones & Co., publisher of this newswire, holds about a 39% stake in BSkyB.
-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@dowjones.com