British Sky Broadcasting strengthened its position as the UK’s largest pay-television operator as greater than expected demand for high-definition television services saw the group add a net 94,000 new customers in the first quarter of its financial year.
That took the customer base to 9.54m, although it also saw investment costs rising as consumers switched to higher-margin HDTV in large numbers. Jeremy Darroch, chief executive, said he expected subscriber numbers to reach 10m next year.
“Our sense is that the overall consumer environment hasn’t changed much over the summer,” he said, adding that BSkyB was “not complacent”, even after group revenue rose 10 per cent to £1.4bn.
The group gained 287,000 new customers in the quarter for its high-definition TV service, a threefold increase from a year ago, to take its customer base for the service to 1.6m.
“BSkyB has reported strong operational and financial performance in the first quarter, ahead of our forecasts on almost all metrics,” said Paul Richards, an analyst at Numis Securities.
Shares in BSkyB opened higher but ended down 6½p on Friday at 553p.
Nick Bell, analyst at Jefferies, said the results were, as expected, “good”, noting that its shares now trade at a 32 per cent premium to the FTSE 100’s average forward price-earnings ratio.
The number of people taking combined television, telephony and broadband packages rose to 17 per cent of all customers, compared with 12 per cent last year.
Average revenue per user rose £39 year-on-year to £469.
As a result, operating profit rose 11 per cent to £198m Pre-tax profit rose from £129m to £180m after lower financing costs and an impairment charge taken a year ago. Earnings per share improved from 4.2p to 7.3p.
Cash from operations fell 26 per cent to £113m as the group took £50m of costs for signing up higher-margin HD subscribers.
However, “churn” – the rate at which customers leave after the initial subscription period – rose to 11.3 per cent after BSkyB increased prices for some subscription services and clamped down on late-payers.
The group said that was partly due to a tightening of its credit checking.
Analysts, however, said it could be a sign that economic pressures were finally catching up with BSkyB, as the first wave of customers to sign up for its lower-cost HD box a year ago started to come out of contract.
Ofcom, the media regulator, has been consulting on a plan to force BSkyB to offer its premium channels to rivals to increase competition in the pay-TV market.
But Mr Darroch said the group had brought competition to TV market and benefited consumers.
“We’ve succeeded by investing and taking risk,” he said.
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