An impressive 100,000 new households were added to
The new service will initially offer Sky Movies on a cheap, pay-per-view basis and places Sky in direct competition with LoveFilm and Netflix. The plan is to expand the offering to include sport and entertainment. It also provides Sky with a decent chance of grabbing some more market share in the traditional pay TV market - currently a sluggish segment. Indeed, just 40,000 new customers took up Sky's TV service in the second quarter of the financial year - the same quarter last year saw 140,000 new TV customers added.
Broadband growth, on the other hand, remains firm, with 166,000 new customers added in the six-month trading period - a 21 per cent year-on-year increase. Moreover, over three million customers, or 29 per cent of the total, are now subscribing to 'triple-play' services of broadband, television and telephone services, up from 24 per cent at this stage last year. This has helped drive average revenues per user (ARPU) up from £536 to £544.
Other new initiatives to drive growth this year include a new channel dedicated to Formula 1 motor racing and the addition of BBC iPlayer and ITV Player to Sky's Anytime+ service, which currently has 1.2m customers. In April, Sky will launch a free WiFi service to its Broadband Unlimited customers and will add a new fibre optic broadband service offering download speeds of 40Mb.
Analysts at Peel Hunt are expecting full-year adjusted pre-tax profits of £1.36bn and EPS of 47.6p (£1.16bn and 41.1p in 2011), rising to £1.49bn and 53p, respectively, in the year to June 2013.
|BRITISH SKY BROADCASTING (BSY)|
|ORD PRICE:||685p||MARKET VALUE:||£11.9bn|
|DIVIDEND YIELD:||3.5%||PE RATIO:||14|
|NET ASSET VALUE:||64p*||NET DEBT:||55%|
|Half-year to 31 Dec||Turnover (£bn)||Pre-tax profit (£m)||Earnings per share (p)||Net dividend per share (p)|
Ex-div: 28 Mar
Payment: 24 Apr
*Includes intangible assets of £1.4bn, or 82p a share
BSkyB's new content initiatives are promising, and should bode well in times of tightened purse strings, while rising ARPU and a stable churn rate of around 9.6 per cent are impressive, too. But that all seems reflected in a shares price trading on 14.5 times full-year earnings estimates. Hold.
Last IC view: Fairly priced, 718p, 29 July 2011