Sky profits up 20% after best UK quarterly growth in 11 years

Third-quarter results from Sky generated the most growth in 11 years, it said, as near 70% growth in new customers fed through to a 20% increase in operating profits over the financial year to date.

The group, which is five months into the merger of its UK and Irish, German and Italian businesses, grew paid-for subscription products by more than 1m to lift total product sales to 3.8m in the nine months of to 31 March.

This helped drive 5% growth in revenue during the period to £8.5bn while operating profits rose 20% year on year to £1.03bn.

Chief executive Jeremy Darroch said the integration of the three businesses was progressing well, leaving the group well positioned for growth.

He hailed the "stand-out" performance from UK and Ireland's as the division enjoyed both the highest customer growth and best customer loyalty for eleven years.

The region added 127,000 new customers, 41% up on the prior year, with Germany, Austria and Italy also adding strong numbers and reversing a net loss of customers in the previous year.

Customer churn was down 10.1% in the UK and Ireland, attributed to customer satisfaction from the growth of connected TV services, with an 8.5% fall in Germany and 9.7% in Italy.

Darroch was particularly excited by the group's performance in developing television drama, with new series Fortitude its most successful drama ever, as well as encouraging success from its Italian and German arms.

Sky, which has recently been subject of speculation that France’s media giant Vivendi could table a bid, has helped win customers and broker upgrades with its expensive but 'worth it' bid for Premier League football rights and converged product offering.

Analyst Augustin Eden at Accendo Markets said: "Sky’s linkup with Spain’s Telefonica, facilitating its expansion into quad-play, has also proven extremely successful with consumers increasingly bored of keeping track of multiple bills for their home technology services. Sky has increased its customer base by 41% - 242,000 new customers in the first quarter of 2015 – as the market moves towards consolidated services.

"It’s a ‘convenience’ tactic used widely these days with many companies extoling the virtues of doing less stuff... Sky have cottoned on to perhaps the most annoying of these, and for that they should be applauded."

Investec analyst Steve Liechti said consensus forecasts were unlikely to change materially bearing in mind the fourth quarter provides a tougher comparative.

He said the quarterly result was "fine" and in line with forecasts.

"3Q is a decent quarter, but not as big as 2Q partly due to seasonality as Sky is less aggressive on customer acquisition post-Christmas normally with marketing more skewed to retention/existing."

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