Friday, British Sky Broadcasting Group Plc (BSY, BSYD.L, BSY.L) reported a 13% decline in first-quarter net profit, hurt by one-time charges and higher tax. However, on an adjusted basis, earnings climbed 22%, while pre-tax profit grew 6.6% from last year, driven by strong customer growth. The company also registered a 5% growth in revenue.
The company's first-quarter net profit declined to 73 million pounds from 84 million pounds in the year-ago quarter. On a per share basis, earnings fell 13% to 4.2 pence from last year's 4.8 pence.
The latest-quarter results included exceptional operating charges of 3 million pounds, an impairment of 24 million pounds relating to the company's investment in ITV, 1 million pounds loss relating to mark-to-market in derivative financial instruments, and an adjustment of 6 million pounds relating to a deferred tax write-off.
On an adjusted basis, profit grew 22% to 106 million pounds from 87 million pounds last year, and adjusted earnings per share increased to 6.1 pence from prior year's 5.0 pence.
In the quarter, taxation expense was 56 million pounds, higher than 37 million pounds last year. Quarterly pre-tax profit grew to 129 million pounds from 121 million pounds in the prior-year quarter.
Revenue for the quarter was 1.25 billion pounds, up 5% from 1.18 billion pounds in the last-year quarter. British Sky attributed the revenue growth to strong customer and product growth despite flat wholesale revenues and declining advertising revenues.
Retail subscription revenue grew 8% to 972 million pounds from 898 million pounds in the previous year, mainly reflecting 5% growth in customers and strong additional product sales, together with one month of the change in retail prices.
Gross profit rose 8% year-over-year to 843 million pounds, and gross margin increased to 67.5% from prior year's 66.0%. Operating profit was 179 million pounds, up 25% from last year, and adjusted operating profit increased 21% to 182 million pounds. Adjusted operating margin was 14.6%, higher than last year's 12.7%.
In the quarter, British Sky's net customers grew 87 thousand or 5% to 9.067 million from last year . New customer additions were 334 thousand, up 2% from the previous year, despite the challenging consumer environment.
Churn for the quarter was 10.9%, 0.4 percentage point improvement from the prior year. As expected, churn was impacted by the annual price rise in September, the company said. Average revenue per unit or ARPU increased 19 pounds from last year to 430 pounds.
"Looking ahead," Jeremy Darroch, Chief Executive, said, "the consumer environment will remain challenging and we are well positioned to manage the business accordingly."
In a research note on October 28, brokerage Citigroup upgraded its rating on British Sky shares to 'Buy' from 'Hold'.
BSY closed Thursday's regular trading session at $24.90, up $1.57, on a volume of 108 thousand shares.
BSY.L is currently trading on the LSE at 369 pence, down 9 pence or 2.38%, on a volume of 2.7 million shares.
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