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21st Century Fox's Sky Deutschland Narrows Second-Quarter Loss

Brian Sullivan - P 2011
Sky Deutschland CEO Brian Sullivan

The German pay TV company, led by CEO Brian Sullivan, grew revenue and added more subscribers than analysts had expected, boosting its stock to a five-year high.

The stock of Sky Deutschland, in which Rupert Murdoch's 21st Century Fox owns a controlling stake of more than 54 percent, rose to a new multi-year high Tuesday after the German pay TV company posted better than expected second-quarter results on Tuesday.

As of 11:15 a.m. Berlin time, the stock was up 5.9 percent after earlier going as high as $8.85 (€6.66). The last time the stock traded this high was nearly five years ago, Bloomberg data shows.

Second-quarter revenue grew 15 percent to $498 million (€375 million), and the company's loss narrowed to $1.2 million (€900,000) compared with a loss of $18.3 million (€13.8 million) in the year-ago quarter.

Operating cash flow, another profitability metric, came in at $48.9 million (€36.8 million), up 60 percent from $30.5 million (€23.0 million).

The company, led by CEO Brian Sullivan, ended June with 3.45 million subscribers, compared with 3.4 million as of the end of March amid a net increase of 47,900 customers. That compared with a year-ago gain of 47,100. Analysts had on average expected a second-quarter gain of 40,000.

Sky Deutschland said one key drivers of success was the fact that two German soccer teams -- Bayern Munich and Borussia Dortmund -- reached the final of European club tournament the Champions League. "This year's UEFA Champions League season was the most successful ever on Sky," the company said.

Sky Deutschland on Tuesday also reiterated its guidance of positive operating cash flow for the full year and "strong growth" thereafter.

"We had a great second quarter, with continued strong operational and financial performance," Sullivan said.

UBS analyst Polo Tang lauded the latest figures as "solid" and reiterated his "buy" rating on the stock.

"Consensus already assumes a significant acceleration in net adds in the third and fourth quarter (280,000 net adds versus 90,000 in the first half) given exclusivity on the [German soccer league] Bundesliga and distribution deals with Deutsche Telekcom and Kabel Deutschland," he wrote. "With relatively fixed costs, Sky Deutschland is considered a geared play on premium pay TV penetration in Germany."

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai