Sky Results for the nine months ended 31 March 2017
This is a discussion on Sky Results for the nine months ended 31 March 2017 within the Sky news and announcements forums, part of the SkyUser Announcements category; 11% increase in revenue to £9.6 billion Over 100,000 new customers joined Sky in Q3; added 769,000 in the last ...
- 20-04-17, 08:54 AM #1
Sky Results for the nine months ended 31 March 2017
11% increase in revenue to £9.6 billion
- Over 100,000 new customers joined Sky in Q3; added 769,000 in the last year to 22.4 million customers
- Good financial performance; adjusted Group EBITDA of £1.5 billion; adjusted Group operating profit of £1.0 billion
- Strong year on year profit growth in Italy (+£64 million) and Germany & Austria (+£43 million)
- Continued progress on cost efficiency with operating costs down 1%
- HBO and Sky announce a $250 million multi-year production partnership
- Business remains on track for the full year
Jeremy Darroch, Group Chief Executive, commented:
“It's been another strong quarter for Sky, despite this being our seasonally quietest period. We continue to perform well, attracting another 106,000 customers across the Group in the quarter, taking growth to 769,000 over the last 12 months. We have delivered strong revenue growth of 11% and are on track financially with operating profit for the nine months exceeding £1 billion.
“We’ve made good progress on the growth plans that we laid out. We launched Sky Mobile to create a substantial new source of revenue and profits. We have continued to improve the customer experience with further enhancements to our Sky Q and Sky+ platforms as well as the launch of our digital customer service via the My Sky app. We have concluded a number of long term rights renewals and are announcing today a major new multi-year co-production deal with HBO, as well as a ground breaking virtual reality experience in partnership with Sir David Attenborough and the Natural History Museum.
“Looking forward, we enter the final quarter of our fiscal year in good shape. Despite the broader consumer environment remaining uncertain, we continue to deliver on our strategy and are on track for the full year. “
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- 20-04-17, 09:09 AM #2
Re: Sky Results for the nine months ended 31 March 2017
Group and UK & Ireland
We have continued to make good progress on our plans: to grow revenues and profits and create sustainable long-term value for shareholders, investing to expand into new markets, opening up new customer segments and develop more products and services. This approach is working well as reflected in our strong operating and financial performance for the year to date.
Group revenues increased 11% to £9,641 million in the first nine months of the year (“the period”). We benefited from the stronger Euro whilst, even on a constant currency basis, our revenues were up 5% in line with our guidance and showing good growth across all territories.
In a year in which we are absorbing significantly higher programming costs, we continue to make further progress on our efficiency plans, with operating costs down a further 1%. As a result, we were able to deliver operating profit of £1,013 million in the period, only £129 million lower than the prior year despite additional Premier League costs of £494 million, investment in Sky Q and Sky Mobile, and a weaker UK advertising market. This shows the strong underlying progress we are making and as part of this Germany and Austria and Italy each grew strongly, together delivering a year-on-year growth in operating profit of over £100 million.
Across the last year, we have continued to attract new customers to our service in all our markets, adding 769,000 new customers, including growth of 106,000 this quarter, and taking our total customer base to 22.4 million households.
It has also been a good quarter on screen, reflecting our continued investment in the customer viewing experience. Our reach increased by 4% and we are now regularly reaching over 100 million viewers across Europe. Within this, Sky Atlantic audiences grew 5% across all territories, MasterChef became the most watched Sky Original programme ever both in Italy and Germany, and viewing increased for Bundesliga, Serie A and the English Football League, while Premier League audiences have continued to improve since the beginning of the season and are up year-on-year in Q3.UK & Ireland
In the UK and Ireland we had a solid quarter, growing customers, products and revenues, despite the more challenging environment facing most consumer businesses during the first quarter of the new calendar year.
UK revenues increased by 4% to £6,410 million driven by customer growth of 338,000 over the last year, the benefit of our June 2016 TV price change and growth in transactional and programme and channel sales revenues. We estimate that the UK advertising market was down around 8% in the first quarter of the 2017 calendar year and down around 4% fiscal year to date. Against this backdrop our own business continued to outperform the market, with our advertising revenues only down 3% year to date, driven
by the quality of our audiences and the track record of innovation in advertising formats. Our UK EBITDA for the period was £1,245 million and UK operating profit was £918 million.
As at 31 March, we had 12.7 million customers and we added 40,000 new customers this quarter. Churn was stable on the prior quarter despite communicating a 2017 Broadband and Telephony price change to customers and, as outlined at our Half Year results, we have a strong set of plans in place to reduce churn over the balance of the year.
We launched our new My Sky digital service, a key early step in our journey to digital-only customer interaction and management. Central to this is our new app, which has been downloaded by 1.2 million customers in just two months and next quarter will be extended to include digital messaging.
Whilst it is early days we are pleased with the initial response to our entry into the UK mobile market, with our operations running smoothly. Following our SIM-only launch in January we launched our innovative handset proposition at the end of the quarter, which allows customers to upgrade their device annually and included the UK’s lowest price for the new Samsung Galaxy S8.
Other UK highlights from the quarter include:
- Sky Q is now in over 1 million customer homes
- Major long term rights renewals secured with UKTV, Discovery, A+E Networks and NBCUniversal
- 50% increase in Fibre penetration to 24%
- Led Ofcom service league table for fourth consecutive quarter across pay-TV, fixed line telephony and broadband
Group revenue grew by 5%, or £492 million, to £9,641 million (2016: £9,149 million).
Subscription revenue grew by 4% to £8,125 million. Over the past twelve months we’ve added 769,000 retail customers and grown paid-for products strongly whilst subscription revenues also benefitted from the prior year’s UK TV price increase in June 2016.
Weak consumer markets in the UK and Italy have resulted in tougher advertising markets in calendar 2017. In spite of this, our advertising revenue was up 4% to £613 million, boosted by the strong performance of our TV8 free-to-air channel in Italy, greater reach of our wholly-owned channels through customer growth in Germany, and Sky Adsmart in the UK.
Transactional revenue increased by 10% to £162 million, whilst we saw excellent revenue growth from our programme and channel sales, up 20% to £578 million. This reflects higher sales of our premium channels (sports and movies) on our wholesale partners’ platforms and rate increases, as well as growth in international programme sales of our original commissions through Sky Vision.
Total costs grew by 8% to £8,628 million, slightly ahead of revenue growth as we absorbed significantly higher programming costs resulting from the £494 million year to date step-up in the new three-year Premier League contract. Excluding this, total costs increased by only 2%, well below the rate of revenue growth. Despite the substantial investment in rolling out Sky Q in the UK and Sky+ Pro in Germany, as well as the first time costs associated with the launch of Sky Mobile, SG&A costs reduced in absolute terms by 1% reflecting the strong progress we have made driving efficiencies through the business as well as the benefit from capitalising Sky Q boxes.
Further good progress in revenue growth and efficiency savings this year have substantially offset the majority of the increase in Premier League costs (£494 million). As a result EBITDA only decreased by 6% to £1,525 million (2016: £1,625 million) and operating profit by 11% to £1,013 million (2016: £1,142 million).
HBO and Sky join forces to launch a new global drama powerhouse
HBO and Sky today announced a partnership in the production of high-end drama series.
- HBO and Sky partner to develop high-end drama slate
- $250m multi-year co-production
- First projects in development
HBO and Sky, two of the world’s pay TV leaders, have developed reputations as homes for the most highly acclaimed television series. They have now joined forces to oversee a development slate of world class drama series. The focus of the arrangement will be on high end productions that feature engaging stories with international points of view and casting.
A panel of executives from both organisations will be responsible for greenlighting the projects. The HBO and Sky partnership will be open to pitches from across the creative community, in both the US and Europe, and is looking for ideas consistent with the content strategies of HBO in North America and the Sky Atlantic brand in Europe. This is an unrivalled opportunity for production companies to have their content broadcast by two of the leading brands in worldwide television.
Within two years, the partnership anticipates reaching a consistent output, green-lighting at least two drama projects per year with the first project coming to screen in 2018. The new venture represents an exciting opportunity for HBO and Sky to work together to offer our consumers ‘exclusive’ access to some of the world’s very best drama and reflects both parties commitment to continued investment in content our customers love.
The first projects of the partnership have been initiated in development, with announcements expected in the coming weeks.
Commenting on the deal today, the Chairman and CEO of HBO, Richard Plepler said "Sky has been a great partner for us and this deal allows even deeper collaboration between our two great companies, which have a long tradition in creating superior content for our customers. Together we represent the best in television and combined we will raise the bar even higher in pay TV programming."
Jeremy Darroch, Group CEO of Sky added "HBO and Sky have for many years shared a common creative culture and a common vision for the development of high quality drama. This new venture deepens that relationship, maintains our leadership position in world-class content, provides great opportunities for indies and gives our customers even more opportunity to enjoy brilliant story telling."