UK performance boosts Sky results

A strong UK performance helped deliver exceptional full-year results for Sky, with the operator adding close to a million customers over the course of the full year while increasing revenue and profit significantly.

Delivering its first full-year results as an expanded operation spanning the UK, Ireland, Germany, Austria and Italy, Sky added 973,000 customers over the last 12 months, an increase of 45% on the previous year’s additions.

Sky posted full-year adjusted revenue of £11.3 billion (US$17.7 billion), up 5%, and EBITDA of £2 billion, up 10%. Operating profit was £1.4 billion, up 18%. Pre-tax profit was £1.2 billion, up 6%.

Europe-wide, the company had 21 million customers at the end of June, up 158,000 on the previous quarter, taking 53.8 million products, up 829,000 for the quarter. Churn was down – to under 10% – across all markets.

The UK and Ireland led the way, delivering revenues of £7.8 billion, up 6%. And an operating profit of £1.3 billion. The UK and Ireland business delivered customer growth of 506,000 for the year, the highest for 11 years, taking Sky’s total above 12 million. The number includes the Now TV OTT service, for which the operator did not break out figures separately. Sky did say that it sold almost three times as many sports passes for the service as in the previous year.

Sky in the UK and Ireland added 3.3 million revenue-generating units, taking it past 38 million, including the addition of 113,000 TV customers in the final quarter and broadband additions of 96,000. Sky Go passed the six million mark.

Germany and Austria saw revenues grow from £1.3 billion to £1.4 billion, and operating losses improve from negative £57 million to negative £11 million. The company added 467,000 new customers, including 55,000 in the fourth quarter. Germany and Austria added 969,000 revenue-generating units, 56% higher than the previous year, including 127,000 new products sold in the fourth quarter.

The Italian unit remains – relatively – the weak link in the chain, delivering lower revenues of £2.1 billion due to rival Mediaset’s hold on Champions League football. The unit nevertheless contributed a 56% improvement in operating profits to £61 million and held its customer base stable at 4.7 million after three years of decline. Over the year, Sky in Italy added 387,000 RGUs, but saw a loss of 19,000 in the fourth quarter as a result of repackaging customers onto HD products.

Sky said its Sky Store movie purchase and rental services saw revenues grow by 77% over the year thanks to the launch of its ‘buy and keep’ service. Revenue from Sky Store, AdSmart and Sky Vision together was up 122%. On the production front, Sky said it had 35 projects in development, on-air or in production over the next three years, with at least 10 of these to launch as priority projects across Europe.

Sky said it was on track to realize its target of £200 million in synergies by 2017 from the combination of the three international operations, and said that it would implement a common look and feel across all of its channel by next summer.

“It’s clear that the steps we have taken to broaden out our business are paying off. By distributing our content over multiple platforms and launching new products and services, we are now able to offer something for every household,” said CEO Jeremy Darroch.

“The UK and Ireland, where our strategy is most progressed, put in a particularly strong performance. We passed the 12-million customer milestone with the highest growth in 11 years; we surpassed 38 million paid-for subscription products; and we delivered the lowest churn in 11 years.

“This is the direct result of the investments we’ve made in connected services and quality content with more than seven million customers now connected. Germany and Italy also posted strong performances. Germany delivered its highest-ever customer growth, while Italy maintained its subscriber base in a tough market. Both businesses also achieved significantly increased customer loyalty, thanks to continued investment in the customer experience.”