Sky TV reported a first-half net profit of $28.3 million this morning.
That was down on the $39.6m that Sky reported for the year-ago period, as rights fees increased to Hollywood content creators, and its full payments to NZ Rugby were restored after the prior period's discount for the Covid-interrupted schedule.
But the pay-TV broadcaster stood by its bullish full-year guidance (detailed below), made customer gains, and revealed the return of its long-dormant dividend.
The company saw revenue grow 4.1 per cent to $372m for the six months to December 31, as its total customer base grew 6 per cent to 983,561.
Sky box subs fell from the year-ago 566,497 to 545,000 but Sky's streaming services Neon and Sky Sport Now grew a collective 23 per cent to drive overall customer growth.
Sky shares, which rose just under 10 per cent yesterday, were down 5.2 per cent to $2.55 in early trading. Jarden head of research Arie Dekker said the increased programming costs and attendant profit dip were in line with expectations. Dekker said Sky was still on track to meet its full-year numbers.
"Compositionally, the key highlight for us included streaming customers up to 431,000 from 352,000 a year ago," Dekker said.
The streaming gains are relative. Satellite customer revenue increased 3 per cent to $262m for the half as average revenue increased by $1 to $79 per month after several years of decline. But although the streaming customer base surged, revenue per user was flat at $18 per month. Despite compound annual growth of 39 per cent since 2020, the cheap nature of streaming means it still only accounted for a relatively modest $48m of Sky's first-half revenue.
Several content deals were closed in the period, which saw programming costs increase to $178.4m from the year-ago $141.7m. Sky renewed its HBO and NRL deals and, beyond its first-half close, pulled English Premier League rights back from Spark (and the telco did nothing to challenge analyst speculation that it would exit streaming as it played down sport in its interim result yesterday).
"There was an uplift in rights fees across multiple contracts, including NZ Rugby, ESPN and Universal," Sky corporate affairs chief Chris Major told the Herald.
Chairman Philip Bowman announced that a capital review was complete and Sky's long-suspended dividend will return with its full-year result in September with a payout that would equate to between 50 per cent and 80 per cent of free cash flow (free cash flow for the first half was $29.7m).
"As today's results show, rather than being a business in defensive mode, we now have a
greater understanding of our existing and prospective customer base, an enhanced portfolio of rights, and a balance sheet which is able to embrace opportunity and growth, as well as to recommence distributing dividends to our investors," chief executive Sophie Moloney said.
Sky shares rose 24c or 9.8 per cent to close at $2.69 yesterday.
The stock, which had a 10:1 consolidation in September, is up 56.4 per cent for the year, though has yet to return to its pre-pandemic level when it was trading above $3.00.
Shares headed north in early December after Sky upped its ebitda forecast from $115m-$130m to $150m-$160m, and its full-year net profit guidance from $17.5m-$27.5m to $40m and $48m on long-term cost-savings, plus streaming gains out-stripping its satellite decline for the first time.
The rosier forecast saw Jarden upgrade Sky from neutral to overweight, and its 12-month target price from $1.80 to $2.42 (Sky was trading at $1.75 ahead of its December 7 update) and Forsyth Barr upgrade from neutral to outperform and lift its target price from $1.80 to $3.00.
Sky followed that up with the December 16 announcement that it had sold its Mt Wellington campus for $56m - at the upper end of analyst expectations.
The proceeds of the Mt Wellington sale are not included in today's numbers.
Sky will lease back two studios on the campus, one for $1.7m per year, the other for $1m per year (with right of renewal for up to five years), meaning some staff will stay in Mt Wellington. Others will move into the CBD, where, from April, Sky is leasing a floor in Auckland Transport's building on the Viaduct (an office previously occupied by Vodafone NZ) and some will work from home.
Sky launched Sky Broadband early last year, provisioned by Orcon Group (formerly Vocus Group), but has yet to give any numbers for the new service, which is available to all but discounted for Sky TV subs as a loyalty bonus. Orcon has a merger with 2degrees in front of the Commerce Commission. Today there was still no word on uptake.
December also saw Vodafone NZ announce it will switch off Vodafone TV in September this year. Vodafone TV, which offers streaming plus Sky TV channels under a wholesale deal - if the Vodafone customer wants to pay for a Sky bundle, has around 100,000 users, who will all be offered a Skybox. Vodafone NZ said the service was a money-loser.
Sky said recently that its new box was still on track to be rolled out from mid-year. The new box will run on Google's Android software and offer third-party streaming apps as well as Sky's own channels delivered over UFB fibre rather than via dish. Customers will be able to keep their existing Sky decoder if they wish.
The mid-year delivery date was confirmed today.