Triple treat lights up the Sky

Sky Television beat analysts' forecasts by almost tripling after-tax profit to $103.4 million for the year to June.

The maturing business easily surpassed last year's $35.3 million profit as new subscribers swelled the bottom line. But flat programming costs and the unexpected recognition of a tax asset bought profit in ahead of the $100 million analysts had predicted.

Subscriber numbers grew 7.4 per cent, to 619,168 - with the service reaching 39.7 per cent of homes. No new channels were added during the period, as Sky banked on the Lions tour to provide subscriber growth.

"It certainly didn't disappoint," chief executive John Fellet said yesterday. Costs enjoyed a "golden period" as the strong dollar kept largely US dollar-denominated programming costs at an all-time low of 36 per cent of revenue, even though Sky did not feel the full benefits hedged at an average exchange rate of 58USc in 2005. It is 91 per cent hedged at 61USc in the current year.

Churn - a measurement of how many subscribers disconnect their service - fell to 15.8 per cent from 17.1 per cent in 2004. Analysts said the only real disappointment was a blow to hopes for a high dividend. Fellet said Sky would pay a dividend in February 2006 - but would not commit to a high payout ratio. He said there were growth opportunities in traditional media and areas such as TV over high-speed internet connections, and through next-generation mobile phones.

Sky has previously bought businesses that could benefit by tapping into its infrastructure and Fellet said it would look for such opportunities rather than head to Australia.

Profits will fall this year as the company feels the full impact of taxes, having run through a $33.5 million cushion provided by INL in return for its use of Sky's tax losses.

But while Fellet steered analysts towards the low end of the $58 million to $82 million range of profit forecasts for the current year, he met with scepticism. "Unless something has gone wrong the guidance given is too low," said one analyst.

Sky is negotiating for up to four new channels this year and Fellet said it was "close" to a deal with TV3-owner Canwest on free-to-air rights for delayed rugby broadcasts.