TIDMSKY
RNS Number : 8958C
Sky PLC
21 October 2015
SKY PLC
Unaudited results for the three months ended 30 September
2015
STRONG START TO THE YEAR
Excellent financial performance
-- 6% increase in group revenue to GBP2.8 billion
-- 10% increase in operating profit to GBP375 million
Strong customer demand and loyalty across the group
-- 134,000 new customer additions
-- 937,000 new paid-for subscription products, with 133,000 new broadband subscribers in the UK
-- Strong churn performance across all territories
Strengthening leadership in content and innovation
-- Taking Sky's original drama to the next level: The Last Panthers to launch across the group
-- Securing the best content: multi-year agreements with Disney and SANZAR rugby
-- Driving connected services: over 750 million views across 9.6 million connected households
Jeremy Darroch, Group Chief Executive, commented:
"We have made a strong start to the year with customers
responding well to the quality and breadth of our content, products
and services. As we continue to place customers right at the heart
of our business, we are focused on offering the very best content
at the same time as anticipating customers' evolving needs,
delivering the programmes that they love across multiple platforms
and devices.
"This approach has delivered an excellent financial performance
in the quarter, with further broad-based revenue growth of 6%,
translating into a 10% increase in operating profit. This
performance was driven by strong demand across the group. We added
over 130,000 new customers in the quarter, up 7% on the previous
year, which means that we've added almost a million new customers
over the past twelve months, up 51% year on year. Our total product
base now exceeds 54 million, and within this, broadband growth in
the UK had a stand-out performance this quarter, up 77% year on
year.
"Our investments in content are driving a great performance on
screen, with highlights this quarter including record viewing of
Sky Atlantic in the UK, of the Bundesliga in Germany and the X
Factor in Italy. We are building scale in our own world class
original content, as well as securing key rights including
multi-year deals with Disney and SANZAR southern hemisphere
rugby.
"We want to make the viewing experience even better for all our
customers. Following the success of our proven connected home
strategy in the UK and Ireland, we are beginning to roll this out
across our other territories. We now have almost 10 million
connected households across the group, driving over 750 million
views to our connected services this quarter alone.
"As these results show, we are delivering against a clear set of
plans across Europe, and are well positioned for the growth
opportunities ahead."
Results highlights
Group operational performance
Quarterly
As at As at Annual Growth
(000s) 30-Sept-15 30-Sept-14 Change to 30-Sept-15
------------------------ ------------ ------------ -------- ---------------
Products 54,720 50,465 +4,255 +937
Retail customers 21,140 20,158 +982 +134
Churn (%)
UK & Ireland 9.8% 10.9% -1.1%
Germany & Austria 9.0% 9.4% -0.4%
Italy 10.0% 10.0% -
Churn calculated on 12 month rolling basis
Group financial performance
3 months to 3 months to
30 Sept 2014 30 Sept 2014 Growth at
3 months to at constant Foreign exchange at actual exchange constant exchange
30 Sept 2015 exchange rates impact rates rates
------------------- --------------- ------------------- ------------------ ------------------- ------------------
Revenue GBP2,793m GBP2,647m GBP88m GBP2,735m +6%
UK and Ireland GBP2,003m GBP1,869m - GBP1,869m +7%
Germany and
Austria GBP336m GBP304m GBP35m GBP339m +11%
Italy GBP454m GBP474m GBP53m GBP527m -4%
Operating Profit GBP375m GBP340m GBP7m GBP347m +10%
UK and Ireland GBP358m GBP299m - GBP299m +20%
Germany and
Austria (GBP8m) GBP8m GBP2m GBP10m -
Italy GBP25m GBP33m GBP5m GBP38m -24%
Results are presented on an adjusted like for like basis
including the results of Italy and Germany and Austria for the full
period, and including the results of the continuing operations of
UK and Ireland.
Operating profit for Germany & Austria is impacted by the
previously announced change in amortisation profile which increased
programming costs by GBP17m in the current period.
SUMMARY OF GROUP OPERATIONAL AND FINANCIAL PERFORMANCE
We have made a strong start to the year. In what was expected to
be a tough trading period, our investments in world class content
and innovation delivered a good quarter of financial and
operational growth.
Group revenues for the period increased 6% to GBP2,793 million,
leading to a 10% increase in operating profit to GBP375
million.
This excellent financial performance was driven by continued
customer demand and loyalty. Across the group we added 134,000 new
customers, up 7% on the prior year. At the same time, we grew
paid-for subscription products by 937,000, taking our total
products to over 54 million. Customer loyalty remained strong with
12 month rolling churn either flat or down across all
territories.
In the UK and Ireland our investments in content and connected
services helped to deliver customer growth of 77,000, up over 50%
year on year and the highest rate of Q1 customer growth for four
years. We also added 759,000 paid-for products, including 43,000
new TV additions and 133,000 new broadband additions, growth of 77%
year on year. Churn of 9.8% was down 110 basis points year on year,
our lowest Q1 level for 11 years. Revenue was up 7% to GBP2,003
million (2015: GBP1,869 million) which drove a 20% increase in
profit to GBP358 million (2015: GBP299 million) helped by our
strong focus on costs.
In Germany and Austria, we added 94,000 new customers. Total
product growth was 236,000, including another strong quarter of Sky
Premium HD, and churn was down 40 basis points year on year to
9.0%, aided by the impact of 24-month contracts. Revenue was up 11%
to GBP336 million (2015: GBP304 million) whilst we recorded a loss
of GBP8 million (2015: profit of GBP8 million) as the result of
increased Bundesliga and Champions League costs and the change in
amortisation profile.
Italy delivered a resilient performance against a challenging
economic backdrop, and the loss of the Champions League rights on a
platform that is more sports-focused. In the quarter, we had a loss
of 37,000 customers with products down 58,000, largely driven by a
one-time increase in HD subscribers in the prior year as we
unbundled the HD product. We saw another good performance on churn
which remained at 10.0%. Revenue was down 4% to GBP454 million
(2015: GBP474 million) largely due to lower customer numbers,
although down only 3% on an underlying basis excluding the impact
of the discontinuation of programme sales to Mediaset Premium and
advertising revenues from the 2014 FIFA World Cup. Profit was down
GBP8 million year on year to GBP25 million (2015: GBP33
million).
Content
Building on the significant momentum established in content last
year, we have had a strong quarter on screen with record audiences
across our portfolio.
In entertainment, Sky Atlantic had a stand-out quarter across
the group with total viewing up over 70% year on year in the UK and
Ireland, up 28% in Germany and Austria, and up 16% in Italy. This
was driven by the second series of True Detective across the group,
as well as the channel's strong box set offering - including titles
such as Sons of Anarchy, Entourage and True Blood - in the UK and
Ireland. The quality of our Sky Atlantic documentary work was also
recognised, with the Sky original commission Going Clear:
Scientology and the Prison of Belief winning three Emmy Awards. On
Sky Uno in Italy, the latest series of X Factor achieved record
audiences in the quarter, whilst the first episode of You, Me and
The Apocalypse in the UK was our biggest original drama series on
Sky 1 since 2012.
Sky Sports in each market continued to be the first choice for
sports fans. Our Bundesliga audiences set new records, with Q1
viewing up 4% year on year. In Italy, the nation's basketball match
against Lithuania attracted an audience of over 650,000, an
all-time high for the sport. The Europa League has also got off to
a great start, with average audiences of 885,000, up 13% from the
2013/14 season. And in the UK and Ireland, total consumption in the
quarter was up 3% year on year, with the boxing match between
Anthony Joshua and Gary Cornish attracting the largest linear
boxing audience for 12 years.
(MORE TO FOLLOW) Dow Jones Newswires
October 21, 2015 02:00 ET (06:00 GMT)
We are executing our plans to deliver world class original
content across all our European platforms, with over 150 hours of
Sky original drama now in production. Next month the major six-part
new crime drama, The Last Panthers, launches simultaneously across
all territories, starring BAFTA Award winner Samantha Morton,
double Cesar award winner Tahar Rahim, and three-time BAFTA Award
winner and Golden Globe(R) winner John Hurt, with the title track
written and performed by music legend David Bowie. Sky Vision, in
partnership with StudioCanal, is managing worldwide distribution of
the drama, with sales already made to HBO Nordic, and SundanceTV in
the US.
In parallel to growing our original productions, we continue to
work with our content partners and have had a successful quarter in
securing important rights across our markets.
In entertainment we extended our collaboration with Viacom by
adding two new pay channels to Sky's offer in Italy - MTV Next and
Teen Nick - as well as agreeing improved streaming and catch-up
rights for Comedy Central, Nick Jr and Nickelodeon. We also agreed
a new multi-year deal with Disney in the UK and Ireland, meaning
our customers can continue to enjoy the very best Disney movies and
TV entertainment.
Sky Sports in the UK has continued to strengthen its breadth of
live sport by agreeing rights to La Liga, the Scottish Premiership
Football League, and England Cricket tours to Bangladesh and
Pakistan, meaning Sky Sports viewers can now enjoy over 50 England
Tests and more than 360 days of scheduled live England cricket over
the next five years. In addition, Sky Sports secured The Open golf
a year earlier than originally announced, starting in 2016, and
today we've announced a new contract with SANZAR which will provide
viewers with at least 150 fixtures a year from the top domestic and
international competitions in South Africa, New Zealand, Australia
and Argentina. In Germany and Austria, we extended our rights to
broadcast Formula 1 across all platforms.
Innovation
We are focused on enabling our customers to access and consume
our world leading content whenever and wherever they want. At the
heart of this strategy is bringing customers the benefits of the
connected platform. As proven by our performance in the UK, this
not only improves customer satisfaction and loyalty, but also
allows us to generate additional revenue streams as customers take
more products from us. We therefore see a significant opportunity
to roll out our connected strategy across the whole group.
Our connected services are transforming the customer viewing
experience and growing in popularity. Our connected platform has
grown by 2.3 million homes year on year to reach 9.6 million homes
across the group. This has driven a 33% increase in total views to
our connected services, reaching over 750 million in the quarter.
In the UK, almost two thirds of on demand viewing was to pay
content, driven by hit movie titles such as Teenage Mutant Ninja
Turtles, Interstellar and Maze Runner. In Germany, views were up
almost 50%, with total movie downloads in Italy up 37% year on
year. These trends were both driven by the crime thriller The
Equalizer, as well as the hugely popular comedy films Fack ju
Göhte, in Germany, and Andiamo a quel paese, in Italy.
Our connected boxes are a proven platform for driving new
revenues. Sky Store revenues were up 50% year on year, with over
one million unique customers using our Buy & Keep service since
launch. In the quarter we firmly established ourselves as the
number one digital retailer in the UK for key new release titles
such as Fast and Furious 7 and Home.
Our innovative targeted advertising platform, Sky AdSmart,
continues to build momentum with 500 advertisers now having run
3,200 campaigns and more than 2.5 billion impressions delivered to
customers on the platform. We have grown the proposition by
launching across more services through our on demand offering,
whilst our targeting capability continues to expand. This month, we
have launched our newest product, Sky AdVance, which allows
companies to execute sequential advertising campaigns across each
of TV, web and mobile.
Our streaming services continue to broaden our reach among new
customer segments. In a further quarter of strong growth for NOW
TV, the introduction of the Sky Sports Month Pass has successfully
complemented the weekly and daily passes, with the number of passes
purchased close to double the same period last year. The Monthly
Sky Football Pass launched on Sky Online in Italy in September,
whilst in Germany we expanded the availability of Sky Online to
over 200 devices including LG and Samsung smart TVs and
Chromecast.
Synergies and integration
We continue to make good progress on integration, focusing on
our priority workstreams, and we are on track to hit our run-rate
synergies target as we exit FY2017. During the quarter we have
deployed experienced UK talent across the group into senior
positions, and have begun to roll out a converged set of brands in
all territories with Sky Atlantic, Sky Uno and Sky Krimi channels
updated with common branding in September, whilst our advertising
sales business in each market has rebranded to Sky Media. Finally,
we are sharing best practice across the group, for example, in
Germany we have recently launched Sky Go Extra, as well as Sky Arts
On Demand, to be followed by the linear channel in spring 2016.
GROUP FINANCIAL PERFORMANCE
Unless otherwise stated, all growth rates and comparative
amounts are presented on a constant currency basis using current
period exchange rates. The financial results of Italy and Germany
are translated into sterling at a constant currency rate of
EUR1.40:GBP1. For a reconciliation to amounts at actual exchange
rates see page 2.
Revenue
Adjusted group revenues grew by 6% to GBP2,793 million (2015:
GBP2,647 million). This consisted of 7% growth in the UK and
Ireland to GBP2,003 million (2015: GBP1,869 million) whilst Germany
grew 11% to GBP336 million (2015: GBP304 million). Italy's revenues
were down 4% to GBP454 million (2015: GBP474 million) due to lower
average customers as well as the discontinuation of programme sales
to Mediaset Premium and the absence of advertising revenues from
the 2014 FIFA World Cup. Revenues were down 3% on an underlying
basis, excluding these impacts.
Subscription revenue, our largest category, delivered strong
revenue growth of 5% across the group. Over the past twelve months
we've added nearly 1 million retail customers and over 4 million
products whilst bringing forward our annual TV price rise in the UK
to June. The growth in subscription revenue was achieved against
the economic headwinds in Italy and against a backdrop of the loss
of the Champions League rights.
Transactional revenues were up 8% with the continued strong
performance of Sky Store in the UK including Buy & Keep, and
growth in demand for NOW TV Sports passes where both transactions
and revenues have doubled.
Our commercial businesses continue to grow with advertising
revenue up 5% and wholesale and syndication revenue was our fastest
growing area, up 14%. We benefitted from the continued
international programme sales of our original commissions in Sky
Vision and the first time consolidation of Blast! Films and Jupiter
Entertainment.
Costs
Total costs were up 5%, below the rate of revenue growth.
Within this, programming costs were up 4%, with the benefit of
the absence of the Ryder Cup and the FIFA World Cup this year
partially offset by higher Bundesliga costs. These related to the
expected annual contractual step-up and negative impact from the
previously announced change in the amortisation profile, which
better reflects how customers consume these rights. During the
quarter we continued to invest in our content portfolio, gaining
exclusive rights to the Fox Sports channel in Italy and launching a
Star Wars channel in the UK.
Direct networks costs increased 4%, well below the rate of
revenue growth in our home communications business.
Sales, general and administration costs increased by 6%. We
maintained our share of voice in the UK and Italy to mitigate the
loss of the Champions League rights and invested in marketing in
Germany to continue the strong customer growth. These increases
were partially offset by savings from our ongoing operating
efficiency programmes in Italy and the UK.
Profit
Group operating profit grew strongly, up 10% to GBP375 million
(2015: GBP340 million). Operating profit growth was driven by an
excellent performance on revenue and good control over our cost
base, resulting in a 60 basis point expansion in our operating
margin.
Adjusting for depreciation and amortisation of GBP154 million,
group EBITDA was up 7% to GBP529 million (2015: GBP494
million).
Net debt
Net debt at the end of the quarter was GBP6,042 million, up as
expected from 30 June 2015 due to the payment of EUR238 million on
the completion of the Sky Deutschland squeeze-out, usual seasonal
cash out flows (with the first instalment of the Premier League for
example being paid in August) and the retranslation of our euro
denominated debt of EUR7.4 billion at a higher exchange rate (Euro
debt translated at GBP1:EUR1.36 versus GBP1:EUR1.41 at 30 June
2015). The ratio of net debt to annualised EBITDA at 30 September
was approximately 2.8 times. On 15 October 2015 we repaid from
available cash on their maturity $750 million of bonds issued in
October 2005 and bearing an interest rate of 5.625%. Our overall
pre-tax cost of debt is well below 4% per annum with an average
maturity across the bond portfolio of 7.5 years.
CORPORATE
Sky Deutschland delisting
On 15 September 2015, Sky completed the acquisition of the
remaining approximately 4% minority shareholdings in Sky
Deutschland AG. As a result, Sky Deutschland AG was delisted from
the Frankfurt Stock Exchange on 24 September 2015.
Ofcom's Strategic Review of Digital Communications
(MORE TO FOLLOW) Dow Jones Newswires
October 21, 2015 02:00 ET (06:00 GMT)
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