Customer demand helps Sky to best start to the year for decade

Sky reported a 20% rise in operating profits after its UK business achieved its best start to a calendar year for more than a decade.

The entertainment company reported a 20 per cent rise in operating profits and said it added 242,000 new customers in the three months to March 31.

The performance included the company’s best UK and Ireland showing for the period in 11 years with growth of 127,000, 41 per cent up on last year.

Sky sold a million more paid-for subscription products to take total product sales to 3.8 million for the first nine months of its financial year.

Sky is a significant employer in Yorkshire with more than 1,600 staff across two customer contact centres in Leeds and Sheffield. It also owns a 20 per cent stake in Sky Betting and Gaming, which is based in Leeds.

Sky’s UK operation achieved the largest share of group operating profit after growing by 14 per cent to more than £1bn.

Operating costs grew by three per cent to £7.4bn, reflecting the cost of programming such as the Cricket World Cup. Its biggest shows include the HBO hit Game of Thrones and Sky Atlantic’s big budget Arctic thriller Fortitude.

Chief executive Jeremy Darroch said: “The UK and Ireland delivered a stand-out performance, reporting both the highest customer growth and lowest churn for 11 years.

“We took share in broadband and grew strongly in TV as our dual-brand strategy with NOW TV and Sky continues to deliver.

“We are particularly excited by our progress in original drama. Fortitude debuted as the most successful drama ever on Sky Atlantic in the UK.”

Revenues rose five per cent to £8.45bn, with the figure in the UK and Ireland up six per cent to £5.8bn due to the increase in its customer base, the sale of more products and the impact of its September price rise.

Losses in Germany reduced by £43m following strong subscriber revenue growth and profits in Italy rose £5m to £45m despite difficult economic conditions in the country.

Richard Hunter, head of equities at Hargreaves Lansdown Stockbrokers, said: “Another set of encouraging numbers underlines Sky’s determination to position itself as a major European force within the media sector.

“On screen, Sky continues to benefit from both original and acquired content, whilst its presence as a sporting powerhouse was consolidated after the recent Premier League rights auction, albeit at a high price.

“Revenue growth in the UK and Ireland, from where Sky derives the lion’s share of its earnings, were strongly ahead, whilst Germany also posted a nine per cent gain, with Italy easing slightly, given the challenging local economic environment.”

Analyst Steve Liechti at Investec added: “Third quarter figures are fine, with consensus unlikely to change materially. “The third quarter is a decent quarter, but not as big as the second partly due to seasonality as Sky is less aggressive on customer acquisition post-Christmas.”

Sky’s online betting business Leeds-based Sky Bet was sold to private equity firm CVC Capital Partners for £800m in December.

Sky Bet, which also runs gaming websites such as Sky Vegas, Sky Poker, Sky Vegas and Sky Bingo, has remained in the city with all 500 plus staff transferred over to the new group, including managing director Richard Flint.

At the time Mr Flint said the deal would back Sky Bet’s growth in the UK and abroad.

“We’ve reached the scale now where it makes sense for us to operate as an independent business,” he said.

“We are really excited. It gives us the breadth and relationship with Sky, but we won’t be competing for resources with Sky.”

Sky Bet primarily offers an online sports betting service although customers can also use their mobile or tablet.