Sky is about to enter negotiations for a new TV rugby rights deal Photo / Photosport
Sky is about to enter negotiations for a new TV rugby rights deal Photo / Photosport
Sky TV has delivered a “solid” net after-tax profit of $49.2 million, a drop of 3.7% on its previous financial year in what it describes as challenging market conditions that have seen its customer base fall to its lowest in five years.
The result comes as the company prepares toenter critical negotiations to renew its rugby TV rights.
Both revenue ($766.7m, up 1.6%) and earnings ($153m, up 2.9%) increased, but the after-tax profit was down due to increased depreciation associated with Sky’s new products, the pay-TV operator said today.
The company has 938,760 “customer relationships”, compared with 1,015,125 in 2023, 990,761 in 2022, 957,098 in 2021 and 989,569 in 2020.
“Like the revenue story for FY24, our overall customer numbers at 938,760 are lower than where we would like them to be, impacted by choices we made during FY24 and some events beyond our control,” chief executive Sophie Moloney said in the company’s annual report.
SKY TV chief executive Sophie Moloney. Photo / Alex Burton
This included cost of living challenges for customers and the company slowing down marketing in the first half of the year while it sorted out technical issues with its Sky Box.
“It was the right thing to do, and we are pleased to see the increase in customer satisfaction and uptake in H2 resulting in 21% of our Sky Box base now on the new Box or Pod,” Moloney said.
The US writers’ and actors’ strikes also “had an unplanned and tough impact on the content pipeline, which particularly affected our entertainment streaming service Neon”.
“Neon is also not immune from the now ingrained consumer habit to switch off, or between, entertainment apps, especially when individuals’ wallets are under pressure” she said.
Sky TV has delivered a 'solid' annual result. (Image: Supplied)
Sky chairman Philip Bowman said there were two significant issues in the coming 12 months.
The first was the migration from the Optus D-series satellite, which is due to reach the end of its commercial operation next May, to “an alternative solution to which Sky has contracted access”.
“As we have communicated, we continue to receive assurance of security of satellite service from Optus to 2031.”
The second is the all-important rugby rights - essentially Sky’s Golden Goose.
“The negotiation of a new rights contract with New Zealand Rugby and Sanzaar to replace the existing contract that will expire in December 2025,” Bowman said.
“We now have a much clearer view about the sport that our customers love to watch, how much they are willing to pay to do this, and the role that free-to-air plays in supporting rugby in New Zealand.
“Our significantly enhanced data analytics capabilities which enable us to model the economics of sports rights is now a key driver of negotiations. NZR is a longstanding and valued partner, and we look forward to constructive negotiations.”
Sky is unlikely to pay anything like the $500m it forked out for a five-year deal in 2019.
Presenting its annual results today, Sky said revenue was up $12.4m to $766.7m and within the guidance range.
The company announced a dividend of 19 cents a share (fully imputed), up 26.7%.
Sky TV chairman Philip Bowman.
Bowman said the results demonstrated a “solid performance and the resilience of Sky’s strategy despite the significant challenges faced within the New Zealand economy”.
“Notwithstanding the tough economic conditions affecting many consumer-facing businesses, Sophie and her leadership team have delivered a third consecutive year of revenue growth, and results within our market guidance across all metrics.”
Moloney said: “Today’s results are particularly gratifying given the tough environment we are operating in. They are the result of a lot of hard work from the talented Sky team, and they reinforce the strength of the Sky strategy to maximise the value of our unrivalled content across multiple products.”
“Our Sky Box business continues to provide enduring strength, as we also pursue higher growth options from newer products and revenue streams.”
The company said that while Sky Box revenue dropped 2% year on year, all other revenue lines were in growth, including streaming (up 7%), broadband (up 40%), commercial (up 2%), advertising (up 13%), and other revenue (up 9%).
Sky said its continued focus on costs held the increase in operating expenses to 0.8%, or $5m, year on year.
“Pleasingly, even in a challenging year, the continued focus on growing revenue ahead of costs delivered another period of margin growth to 20%, moving closer to Sky’s FY26 target of between 21% to 23%.
“Net profit after tax of $49.2m was just below the mid-point of guidance, and slightly down year on year (as expected) due to higher depreciation costs associated with Sky’s new products.
“Capital expenditure increased to $82.9m to accelerate the rollout of new products to more customers. This is an important investment that brings customers into a new and richer experience through a digital interface that also brings future opportunity for Sky.”
Moloney said at year-end, 88,000 customers were using the new Sky Boxes, and 11,000 the Sky Pods, with a total of more than 112,000 new Sky Boxes and Sky Pods in active use in customer homes, including multi-room devices.
Outlook and guidance
Sky is forecasting further revenue growth for this financial year “and delivery of additional cost reduction opportunities including transformation initiatives”.
“A year ago we shared three-year targets to highlight our areas of focus to deliver on strategy,” Moloney said.
“We remain on track to deliver these targets, with the exception of the revenue target, largely due to the headwinds encountered in FY24. The slower-than-expected start means we need to reset this CAGR-based target to give clarity on our revised expectations.
“This now sees us targeting revenue growth of 1-2% p.a. to FY26, with all other targets remaining unchanged, including our programming cost and capex targets set as a percentage of revenue.”
Sky’s guidance includes revenue of $760m to $785m; EBITDA of $150m to $170m; NPAT of $40m to $55m; capex of $55m to $70m; and a dividend of at least 21 cents per share.
Editor-at-Large Shayne Currie is one of New Zealand’s most experienced senior journalists and media leaders. He has held executive and senior editorial roles at NZME including Managing Editor, NZ Herald Editor and Herald on Sunday Editor and has a small shareholding in NZME.
