Sky upbeat about financial performance despite hike in Premier League costs
PAY-TV giant Sky has seen its half-year earnings fall 9 per cent after being hit by a big hike in the costs of broadcast rights to Premier League football matches.
The group reported underlying operating profits of £679 million for the six months to December 31, following a £314 million rise in Premier League costs.
Jeremy Darroch, group chief executive of Sky, said: "In a year in which we are absorbing significantly higher programming costs, as a result of the step up in Premier League costs, our financial performance has been good."
Sky has accepted an £11.7 billion takeover offer from Rupert Murdoch's 21st Century Fox, which already owns 39 per cent of the company and bid to buy the remaining 61 per cent of the business late last year.
Fox needs shareholder approval and the green light from regulators in both the UK and Europe for the offer, which comes five years after the media tycoon's last tilt at taking full control of the business through News Corporation.
Sky said it signed up 205,000 new customers in the UK and Ireland in its first half, driven by strong demand ahead of Christmas, when an extra 1.2 million products were sold.
But its so-called rate of churn - customers quitting the group - surged to 11.6 per cent from 10.2 per cent a year earlier.
Sky blamed this on a rising number of broadband customers, who it said tend to switch around more, as well as tough promotional competition from rivals.
It added it would launch a loyalty programme in the UK this year to help retain customers, following the success of a similar scheme in Italy.
Figures showed revenues in the UK and Ireland lifted 4.8 per cent in the half-year, with overall revenues 6.2 per cent higher.
On a bottom-line basis, pre-tax profits fell to £377 million from £414 million a year earlier.
Sky's half-year results come a day after the group announced it would be hiking the cost of its line rental in March, up from £17.40 to £18.99 a month - a 9 per cent rise.
Roddy Davidson, analyst at Shore Capital, said Sky's half-year results are "satisfactory rather than particularly inspiring".
He added Fox's offer was "credible if undoubtedly opportunistic".
He said: "We were disappointed by the failure of the directors charged with looking after shareholder interests not to secure an improved price for what is after all a unique asset in a consolidating market place."