Join our community of smart investors

Sky re-appoints James Murdoch as takeover rumours swirl

Alongside these robust first-half results, Sky revealed James Murdoch will be its next chairman
January 29, 2016

The fox is among the chickens at Sky (SKY). As the media giant prepares to enter the UK mobile market and face off against both Vodafone and BT -owned EE, it has announced that 21st Century Fox chief James Murdoch - who resigned as Sky's chairman during the phone-hacking scandal in 2012 - will reclaim the role at the end of April. Hope that the appointment could herald a takeover bid from shareholder Fox (which owns 39 per cent of the company), combined with these strong first-half figures, sent Sky's shares above a rising market on the day.

IC TIP: Hold at 1062p

Sky attracted 471,000 retail customers in the reported period, taking the total to 21.5m. That fuelled constant-currency sales growth across the UK, Ireland, Germany and Austria, which drove group adjusted operating profits up 12 per cent to £747m. But operating losses widened to £34m in the German and Austrian business, reflecting the steep costs of top-tier football and greater spending on box sets, marketing and products. And both sales and operating profits fell in Italy, due to fierce price competition and the division's loss of the Champions League broadcasting rights.

Sky showed clearer gains on the product and programming fronts. Management recently unveiled premium set-top box Sky Q and rolled out digital box sets and both on-demand and mobile TV services in Germany and Italy. Moreover, the group has more than 100 original dramas in the pipeline and has inked major deals with Showtime and HBO to broadcast shows such as Game of Thrones and new hedge fund drama Billions.

The downside of Sky's content push has been spiralling costs. For instance, it has agreed to pay £1.4bn for the live UK broadcasting rights to three seasons of the Premier League. Broker Numis expects that to weigh on earnings in the coming financial year, but predicts revenue and cost synergies from the group's integration of its German and Italian subsidiaries – which management peg at £200m by June 2017 – will boost profits in the year to June 2018. It expects EPS of 60.8p for the year to June 2016, compared with 55.3p in FY 2015.

SKY (SKY)
ORD PRICE:1,062pMARKET VALUE:£18.3bn
TOUCH:1,061-1,062p12-MONTH HIGH:1,180pLOW: 900p
DIVIDEND YIELD:3.1%PE RATIO:29
NET ASSET VALUE:174p*NET DEBT:190%

Half-year to 31 DecTurnover (£bn)Pre-tax profit (£bn)Earnings per share (p)Dividend per share (p)
20144.301.2163.612.3
20155.720.4121.012.6
% change+33-66-67+2

Ex-div:24 Mar

Payment:21 Apr

*Includes intangible assets of £8.33bn, or 484p a share