Sky PLC (LON:SKY) reported to have passed the £8bn mark in revenues for the first time in the UK and Ireland, but customer loyalty raised some concerns.
The broadcaster saw a seven per cent increase in sales to £12bn, and a 12% hike in operating profit to £1.56bn across the board, which chief executive Jeremy Darroch said was down to Sky’s “unrivalled” choice of content platforms.
In the UK, Sky added 300,000 customers, as it continues to push into broadband, with 800,000 customers added in Europe. The group added 445,000 new customers across the year, including 93,000 in the fourth quarter.It revealed UK customers spend on average £400 a year.
However, limited retention discounts and a five per cent TV price rise pushed Sky’s churn rate higher in the UK and Ireland.
Churn rates - the number of subscribers who leave the service - stood at 11.2% in the UK, a marked increase from last year’s 9.8%.
“Sky has a customer loyalty problem on its hands," said analysts at AJ Bell.
"The broadcaster has historically tried to keep the level below 10% but clearly its recent decision to put up TV prices and limit retention discounts hasn’t gone down well. Netflix, Amazon and BT are now serious competitors to Sky for film and sport and have cheaper pricing points, so Sky’s monopoly on premium content is arguably coming to an end," said the broker.
To see-off its broadcasting rivals, namely BT Sport, Sky is focusing on the dominance of the Premier League football; airing more games than ever before, with 126 live matches.
BT Sport reported concern in March that viewing figures for the Champions League were worryingly low, just 200,000 watched it live.
In a bold move, Sky recently announced that it was teaming up with Twitter to show highlights of Premier League games across social media.
“Our focus on operating efficiently and effectively in all our markets has enabled us to further reduce our costs as a percentage of sales, providing more fuel to grow profits and to invest where it counts - on screen and in our products and services,” said Darroch.
The board proposed a final dividend of 20.95p per share, bringing the total dividend for the financial year to 33.5p, up two per cent and the twelfth successive year of growth.
Over the past five years the dividend has grown by 44%, meaning the group has paid out a total of £2.6bn to ordinary shareholders.
“Our ambition is to be the best customer-led entertainment and communications company in the world, delivering long term benefits for all our shareholders," said Darroch.
Shares rose just under 7% to 949.5p.
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