The impact of a big hike in Premier League football costs weighed on first-half profits from pay-TV giant Sky PLC (LON:SKY), although revenues and subscribers rose.
The FTSE 100-listed firm, which last month accepted a buy-out offer from top shareholder Rupert Murdoch’s media empire, reported a 9% fall in operating profits to £679mln for the six months to December 31, down from the £744mln posted in the previous year.
Sky pointed out that the second payment under the terms of its new Premier League broadcast contract which was brought forward into December 2016, as opposed to in January in the prior year, and saw a £314mln step-up in costs.
READ: Sky agrees Fox takeover …
The profit fall came despite first-half revenues rising by 6% on a constant currency basis to £6.4bn, up from £5.72bn a year earlier.
Sky said it added 205,000 new UK customers in the first half, driven by a strong Christmas trading period.
In its statement the firm said: "In a year in which we are absorbing significantly higher programming costs, as a result of the step up in Premier League costs, our financial performance has been good."
“Clear set of plans” …
Looking ahead, the company said it has a "clear set of plans in place" for 2017, including launching a Sky TV service without the need for a satellite dish for the first time in the UK.
Chief executive Jeremy Darroch said: "Whilst we expect the backdrop in our territories to remain uncertain, we are on track as we enter the second half of the financial year and we remain focused on delivering our clear strategy for growth.”
Sky will not pay an interim dividend due to its proposed takeover. Murdoch's 21st Century Fox Inc. (NASDAQ:FOX) agreed a US$14.6bn deal to buy the 61% of Sky it does not already own in December.
Fox needs to secure regulatory approval in Europe and Britain and win over Sky shareholders before it fulfils its long-held ambition to control a business with 22 million customers in Britain, Ireland, Italy, Germany and Austria.
In a note to clients, Shore Capital analyst, Roddy Davidson said: “We regard this morning’s results and trading comments as satisfactory rather than particularly inspiring, although a cynical view would suggest that a strong performance and bullish outlook assessment would not have been helpful in the context of converting Fox’s bid for the company.”
And analysts at Liberum said: “Given the Fox bid is likely to go through, this is somewhat academic but the general message would be Germany and Italy better but the UK numbers show worrying signs on churn (11.6% on a 12m rolling basis vs 10.2% in 1H16) and UK operating profits down 18% yoy due to the increased costs of the new Premier League contract.”
In early morning trading, Sky shares edged up 3p to 1,006p.
-- Adds broker comment, share price --