British Sky Broadcasting Group Plc (BSY)’s first-half operating profit rose 7.7 percent, beating analysts’ estimates, as the U.K.’s biggest pay-TV broadcaster raised prices and added high-speed Internet customers.
Operating profit, excluding interest, taxes and a gain from a regulatory settlement, was 647 million pounds ($1 billion) in the six months ended Dec. 31, compared with 601 million pounds a year earlier, BSkyB said today. Sales rose 5 percent to 3.53 billion pounds. Analysts had projected profit of 636 million pounds on sales of 3.51 billion pounds, data compiled by Bloomberg show.
BSkyB, with almost 11 million subscribers, won customers by airing exclusive sports broadcasts, making content available on mobile phones and showing movies immediately after their DVD release. The Isleworth, England-based company, which is about 39 percent owned by Rupert Murdoch’s News Corp. (NWSA), added 88,000 new customers in the first half by gaining subscribers for packages that combine T.V., Internet and phone services.
“Retail subscription revenue growth was greater than expectations,” Citigroup Inc. analyst Thomas Singlehurst, who has a buy rating on the stock, said in a note. “This, combined with moderating programming cost growth, suggests the pace of operating profit growth should sustain across the second half.”
The higher profit let BSkyB, which has pledged to pay out half of its full-year adjusted earnings, increase its dividend to 11 pence per share from 9.2 pence a year ago.
Shares rose 0.9 percent to 817.5 pence today in London. The stock has gained 18 percent in the last 12 months. Mike Darcey, BSkyB’s former chief operating officer, took the top job at Murdoch’s U.K. newspaper unit this month. News Corp. also owns pay-TV businesses in Germany, Austria and Italy.
Subscribers’ bills rose 24 pounds from a year earlier to an average of 568 pounds annually. Customer turnover rose to 10.3 percent from 9.6 percent as “people’s household incomes are being squeezed,” Chief Executive Officer Jeremy Darroch said in a conference call today.
U.S. streaming service Netflix Inc. (NFLX) and Amazon Inc. (AMZN)’s Lovefilm are increasingly competing with BSkyB to show movies and TV shows in the U.K. In response, BSkyB brought out its own Web-TV service, Now TV, which added 25,000 subscribers in the last quarter. The service will stream sports on later this year.
To supplement this growth, BSkyB expanded Now TV with a 24-hour pass for non-subscribers for 9.99 pounds. Users will be able to watch Sky’s sports content, such as the Monaco Grand Prix or Premier League soccer matches on a pay-as-you-go basis.