HBO's House of the Dragon - the Game of Thrones prequel showing on Sky's SoHo channel and Neon streaming service. Photo / Supplied
HBO's House of the Dragon - the Game of Thrones prequel showing on Sky's SoHo channel and Neon streaming service. Photo / Supplied
Sky TV has reinstated its profit payout to shareholders after reporting what looks at first blush like a strong full-year result - although it also forecast slightly weaker net profit in FY2023.
Shares were up 6.2 per cent to $2.75 in early trading.
The broadcaster will pay a full-year dividendof 7.3 cents per share (cps) that will be paid to investors on September 23.
Sky said the 7.3cps full-year FY2022 dividend would cost $13 million - and it estimated $17m to $23m would be returned to shareholders as the dividend was increased in FY2023.
It said it would return a further $70m (or 40cps equivalent) via a capital return involving the cancellation of shares, with investors receiving a payment for every share cancelled. The plan will go to vote at a shareholder meeting on November 2.
Jarden head of research Arie Dekker said 60 per cent of the improved cash generation to $104m came through asset sales. The capital return was effectively a redistribution of the proceeds from the sale of its Mt Wellington campus and its outside broadcast unit.
Net profit for the 12 months to June 30 jumped 41 per cent to $62.2m as revenue increased 4 per cent to $736.1m.
Total subscriber numbers also increased 4 per cent, to 990,761 - representing Sky's second straight gain after years of customer losses.
Growth in its Sky Sport Now and Neon streaming apps again outpaced a decline in Sky box revenue.
Sky box customers fell from the year-ago 554,690 to 529,521 while streaming customers jumped 11 per cent from 393,000 to 461,240 (an all-time high, even allowing for the 154,000 "wholesale" customers Sky inherited when it bought Spark's Lightbox service, which offered the entertainment streaming service free on certain mobile and broadband plans).
Sky's changing customer mix. Sky box customer numbers are declining, but decoder users pay an average $79 per month while streaming app (Neon and Sky Sport Now) subs pay an average $19 per month. Customers of the new Sky Broadband service pay an average $82.95 per month - with backend-provider 2degrees receiving an undisclosed cut. Convincing Sky box, Neon and Spark Sport Now customers to bundle Sky Broadband will be a way to increase average revenue per user across the board. Source / Market filing
After a Sky Sport price rise (and a Neon price rise announced after the full-year close), Sky said its satellite and streaming customers both paid more per month, on average, helping to offset programming costs that rose from $329m in FY2021 to $365m.
After years of steady decline, the amount per month paid by the average Sky box customer climbed by $1 to $79.
Sky TV 24-month NZX performance. Source / NZX
And the average amount paid by a subscriber to one of Sky's streaming apps increased by $1 to $19 - with Neon enjoying a 12-month impact from a 14.6 per cent price increase from May 2021 (a further 12.5 per cent price rise will kick in this month).
The lower amount paid by Neon and Spark Sport Now customers next to decoder users means that although the number of streaming customers is rising fast, they collectively contributed $93.6m or 13 per cent of Sky's revenue, despite now accounting for 44 per cent of its total customer base.
Sky box customers still accounted for the lion's share of revenue ($514m, down from $532m in FY2021) while advertising chipped in $48m (a 6 per cent increase over last year).
Dekker said results were broadly in line with expectations overall but "Sky box and streaming customers were slightly on the disappointing side... This underpins our view that caution is still required".
Forecast profit dip
The guidance issued today could give some investors pause.
Sky forecast net profit of $50-$60m, or lower than the net profit after tax (NPAT) reported this morning, with revenue between $750m and $770m for FY2023.
Operating earnings will potentially be weaker than FY2022's $169m, with FYI 2023 ebitda estimated to be between $150m and $170m.
Capex is forecast to lift to $60m to $75m (from $45m in FY2022), which chief executive Sophie Moloney told the Herald was tied to the release of Sky's new box, which will be its first hardware upgrade in a decade. An upgrade is expected in the next few weeks.
Dekker said the FY2023 guidance was broadly in line with expectations and represented a period of "stabilisation" for Sky following its multi-year turnaround effort. If the broadcaster executed well, there was room for some upside.
Delayed: Sky's new box, which will offer regular channels over UFB fibre, negating the need for a dish, offer 4K ultra high definition and support third-party apps like Netflix. Photo / File
Where art thou new Sky box?
There was no update on the delayed new Sky box, other than that its initial rollout would happen "soon".
Sky originally promised its new box, which will feature 4K ultra-high definition, allow regular Sky channels to be delivered over UFB fibre rather than via a dish, and support third-party apps like Netflix and Disney+, mid-year.
Covid supply chain issues and the war in Ukraine have been blamed for delays.
Moloney emphasised that a lot of customer testing was taking place, and said "no one will be forced to upgrade". Those who are happy with their current Sky decoder can stick with it.
Asked if customers would have to pay for some or all of the new box, Moloney said more information would be provided over the coming weeks but that "Sky will own the box".
The All Blacks remain the jewel in Sky Sport's crown. Photo / Photosport
Rugby World Cup return?
There was no update on Sky's effort to seize back the Rugby World Cup from Spark other than that talks with World Rugby are "progressing well". The talks also involve Sky's global RugbyPass app.
Broadband numbers revealed
Sky did provide the first customer number for its new Sky Broadband service, launched last year (and provisioned behind the scenes by Orcon, which recently merged with 2degrees).
In an NZX filing, the firm said Sky Broadband customers are "close to 18,000 after the first full year in market, "achieving the targeted attachment rate to Sky box of 3.3 per cent" (the actual number, which includes those who subscribe to Sky Broadband but not any Sky broadcast or streaming services, was 17,975, up from 1930 in FY2021).
While the initial Sky Broadband numbers are modest, Jarden's Dekker said earlier this year that non-traditional players, including Sky, Contact and Mercury, could account for as many as 400,000 broadband customers over coming years as they use bundled internet plans for upsells, or to make their core services "stickier".
Sky also revealed the average revenue per user per month for Sky Broadband for the first time: $82.95.
Moloney would not give a breakdown of how much revenue went to 2degrees as the backend provider.
Sky Broadband price rise possible
Sky did say that it is reviewing its pricing in the wake of UFB network operator Chorus's recent price rises of up to 6.9 per cent on its wholesale rates.
What is now shaping up to be a year of capital return and stabilisation for Sky was at one point looking like one of disruption.
In June, Sky said it was in talks over a deal to buy MediaWorks, only to walk away from the potential deal just days later following push-back from institutional investors.
