Pan-European pay-television broadcast group Sky has reported a nine per cent fall in first-half operating profit, admitting that it has been hampered by the rise in costs of UK rights to club football competition the English Premier League.
Sky, which has accepted a buyout offer from US media company 21st Century Fox, today (Thursday) unveiled its financial results for the six months ending December 31, 2016.
Sky, which now incorporates operations in the UK and Ireland, Germany and Austria, and Italy, said operating profit of £679m (€789m/$847.3m) was slightly below market expectations. Group revenue rose by 12 per cent to £6.41bn.
“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,” Sky chief executive Jeremy Darroch said.
“To put this into perspective, our first half operating profit of £679m is down £65m on the prior year despite absorbing an additional £314m of Premier League costs, highlighting the strength of our underlying financial performance. This has been supported by the efficiency of our operating model and the achievement of our £200m synergy target six months early.”
Darroch targeted a reduction in the churn rate of customers switching providers. In the UK, this rose to 11.6 per cent in the six months to December 31, up from 10.2 per cent for the same period a year earlier. Darroch said Sky has a strategy to counter this, including a new loyalty programme that will reward long-term British television customers.
In December, 21st Century Fox and Sky confirmed they had reached agreement on the terms of a recommended pre-conditional cash offer by the former for the fully diluted share capital of the pan-European pay-television broadcaster, which Fox and its affiliates do not already own.
The announcement to the stock exchange came after Sky, a major broadcaster of sports coverage, confirmed a takeover approach for the 61 per cent of the company that is currently not controlled by Rupert Murdoch’s Fox.
The agreement stuck to the original offer of £10.75 per share. Fox said it will pursue a Scheme of Arrangement, therefore requiring the support of 75 per cent of Sky's independent shareholders who vote to secure a deal that values Sky at £18.5bn in total.
Fox currently has a 39-per-cent stake in Sky, which in 2014 completed acquisitions of sister operators Sky Deutschland in Germany and Sky Italia in Italy. Fox said the deal, which will require thorough scrutiny by regulators, is expected to close before the end of 2017.