Sky TV first-half profit falls 32%

Sky Network Television, which is awaiting a decision from the Commerce Commission on a proposed merger with Vodafone New Zealand, posted a 32% drop in first-half profit as content costs increased, and revenue and subscriber numbers fell.

Profit slid to $59.3 million, or 15.24 cents per share, in the six months ended December 31, from $87.1 million, or 22.38 cents, in the year-earlier period, the Auckland-based company said in a statement. Revenue dropped 3.7% to $458.2 million while operating expenses gained 4.6% to $308.3 million.

Sky TV reiterated its forecast for earnings before interest, tax, depreciation and amortisation for the year ending June 30, 2017, to be 5-7% below the $296 million forecast it gave last June, compared with ebitda of $325 million last year. The company said today that ebitda in the first half of its financial year fell 17% to $149.9 million.

The pay-TV operator is looking to team up with telecommunications company Vodafone as it faces increased rivalry from online streaming video services such as Netflix and Spark New Zealand's Lightbox offering. Still, it retains rugby rights, which are seen as a linchpin in securing domestic viewers. Its costs to secure programming rights jumped 12% to $181.6 million in the first half, mostly due to higher costs to secure rugby rights and the 2016 Summer Olympics, while subscriber numbers fell 5.2% to 816,135.

"This digital disruption has ... brought a massive increase in the supply of additional viewing options for consumers and spending options for advertisers. Yet without much increase in overall demand," Sky TV chief executive John Fellet said. "Since Sky has the lion's share of the New Zealand subscription television customers, it faces the biggest challenges."

The Commerce Commission is scheduled to release its decision on the merger tomorrow, and Mr Fellet said the regulator's decision will have a greater long-term impact on the value of a shareholder's investment in the company than today 's first-half earnings release.

Sky TV will pay a dividend of 15cps on February 22, unchanged from the year-earlier period.

Its shares last traded at $4.47, and have gained 8.3% the past year.

(BusinessDesk)