BSkyB posts strong first-quarter profit growth

BSkyB, which was set to be bought by its largest shareholder News Corp until a phone hacking scandal erupted in July, has been focussing on cross-selling products in recent quarters as the increasingly tough economic conditions make it harder to attract new subscribers.

“Financially these look very good,” Numis analyst Paul Richards said. “Operationally we’d been expecting a slowdown in net additions and this has come through. It’s perhaps even a shade lower than we were looking for.

“This isn’t an environment where you can really add lots of new customers in TV upgrades but that doesn’t mean the company can’t grow and really drive its profitability and cash.”

BSkyB signed up 26,000 new customers to its pay-TV service in the three months to September, slightly below forecasts and well below the 96,000 signed up in the same period in the previous year. With the sale of standalone products such as broadband, it added 77,000 net new households.

“We continue to deliver strong financial results and good growth in customers and products,” chief executive Jeremy Darroch said in a statement. “In tough market conditions, our move to more broadly based growth and multiple products is serving us well.

“Looking ahead, the environment is likely to remain challenging as a result of the pressures facing consumers in the UK and Ireland.”

Analysts had expected to see a slowdown in the number of new customers joining the service as increasing unemployment and inflation in Britain hits discretionary spending, prompting the company to increasingly focus on selling more products to existing customers.

It sold 150,000 broadband products, in line with forecasts, and 147,000 telephony products and has taken the percentage of its customer base who take the three main products to 28 percent. Churn, or the percentage of customers who left the service, was at 11.1 per cent.

The approach, to stimulate growth outside of new customers, has helped to reassure investors and analysts in recent weeks as the bid premium present in the shares evaporated.

Revenue from the first quarter was up nine per cent to £1.66bn while adjusted operating profit was ahead of forecasts, up 16 percent to £295m.

BSkyB posted a 20 per cent increase in adjusted basic earnings per share to 11.6 pence.

Rupert Murdoch’s News Corp was forced to pull its $12bn bid for BSkyB in July after it admitted that people working for one of its British tabloids had hacked into thousands of phones to generate stories.

The admission heaped pressure on the government to distance itself from News Corp, just as it was about to approve the deal, leaving Murdoch with no alternative but to withdraw the prized offer.