$214m hit to Sky's market value

Peter Macourt

More than $200 million was wiped off Sky TV's market value after the company said annual profit would fall by up to 11 per cent as the business grapples with rising costs and online competition from streaming services such as Netflix.

Addressing the firm's annual meeting in Auckland yesterday, chairman Peter Macourt also warned some subscribers were expected to cancel their subscriptions after the Rugby World Cup.

Sky gave guidance for profit in a range of $153 million to $158 million for the year ending June 30, down from $172 million the previous financial year. Revenue would remain steady or slightly ahead at $928 million to $938 million compared to $928 million in the previous year.

The company's shares closed down 10.5 per cent at $4.68, wiping $214 million off the firm's market capitalisation.

"The delivery of new services including Neon, FanPass and SKY ON-Demand has increased costs ahead of attracting a critical mass of subscribers," Macourt said.

"Further, the 2016 year will also see an increase in programming costs for the Rugby World Cup, the new Sanzar Rugby agreement, the new Disney and Discovery channels and a general escalation of content costs with the entry of new competitors."

Salt Funds Management managing director Matt Goodson said that while yesterday's profit guidance had disappointed the market, the key question was how well the company would respond in the longer-term to competitive challenges.

The company had a future, but it was just a matter of assessing the value that could be attributed to that future, said Goodson, whose firm holds a small shareholding in Sky.

Macourt said the company's short-term dilemma was stabilising customer churn after the Rugby World Cup, while subscriber numbers through the new internet-based services, FanPass and Neon, increase.

Programming costs are likely to rise to 35 per cent of revenue this financial year, compared to 32 per cent in the last, the company said.

Sky also came under fire from the New Zealand Shareholders Association over a resolution asking for a $200,000 a year increase in the pool available to pay directors' fees, although no other shareholders raised questions on the move.