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HDTV drives Sky-high sign-ups

Created:

30 July 2010

Written by:

Steven Frazer

Pay-TV and internet service supplier British Sky Broadcasting (BSkyB) saw a surge of Sky+HD high definition TV service sign-ups ahead of the World Cup, but the company is souding increasingly cautious about the future.

In the last three months of the year to June, 429,000 new subscribers joined its Sky+HD service, taking the total number of sign-ups to 1.6m for the year, 30 per cent of all its pay-TV customers.

"High definition goes from strength to strength, with more than twice as many customers as a year ago," said chief executive Jeremy Darroch. "Strong customer demand is increasingly reflected in our financial results, with double-digit growth in revenue, operating profit and cash flow.

Underlying operating profits rose 10 per cent to £855m, after stripping out £241m worth of one-off charges related to restructuring, disposals and the settlement of a £318m lawsuit with Hewlett Packard-owned EDS.

Overall, the group added 90,000 subscribers in the period, taking the total to 9.86m, with 20 per cent of customers now take a "triple play" package of TV, broadband and telephony services, 36 per cent up year-on-year. Average revenue per customer also increased by 9 per cent to £508.

Underlying cash flow of £626m helped the group slash net debt by £660m to £1.08bn.

However, BSkyB remains wary over its immediate prospects as economic worries refuse to go away. Operating expenses also rose 11 per cent to £5.1bn, with about £150m of that stemming from higher prices required to secure the rights to top sporting events and competitions, such as Champions League football, US PGA Tour golf and rugby's Super League. Sport was responsible for two-thirds of the company’s rise in direct costs during the year.

The full year dividend was raised 10 per cent to 19.4p per share, and has now doubled over the last five years. But the longer term catalyst for the share price remains the likely takeover by major shareholder News Corporation. With multiple regulatory hurdles to jump, it is likely to rumble on for months, with analysts predicting a possible takeout price between 750p and £10 per share.

Execution Noble is forecasting £891m of adjusted pre-tax profit in 2011 and 36.4p EPS (£837m and 31.1p in 2010).

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