BSkyB Reports Strong Fiscal First-Quarter Profit Growth

LONDON - BSkyB has reported a 33 percent hike in pre-tax profits to £307 million ($485.4 million) in the three months to the end of September, as an expected dip in new TV subscribers was balanced by an increase in selling products including broadband and telephony to existing customers, according to The Guardian.

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BSkyB, which was on the brink of being taken over by its largest shareholder, News Corporation, until the phone-hacking scandal at News of the World scuppered the deal, exceeded most analyst targets.

The company said that operating profit of $516.8 million, a 32 percent year-on-year increase, was boosted by a $61.6 million payout by News Corporation for breaking off the sale and $11 million in costs for advisory fees.

As the economic downturn has hit the U.K. the company has been aiming to move the focus away from the number of new subscribers it achieves each quarter – a culture engendered under former chief executive James Murdoch, who set the company a target of hitting 10 million households – to how many products it can cross-sell to its existing base, said The Guardian.

BSkyB added 26,000 new pay TV customers in the quarter, taking the total subscriber base to 10.2 million, well down on the almost 100,000 added in the same quarter last year.

However, the company managed to sell in a total of 683,000 products to customers in the three months to the end of September.

BSkyB added 103,000 customers to its HD service, which stands at 3.9 million of its total subscriber base, while broadband numbers rose 150,000 to 3.5 million, said The Guardian.

Telephony customers rose 147,000 to 3.2 million, while those taking their line rental through BSkyB rose 212,000 to 2.9 million.

The total number of customers taking TV, broadband and a "talk" product grew by 5 percent to account for 28 percent of BSkyB's total customer base – a 29 percent year-on-year increase.

The company will also be pleased that average revenue per user remained relatively stable at $846, up $39.50 on a year ago, The Guardian said.

In addition, BSkyB managed to keep "churn", the proportion of customers leaving Sky altogether, to analysts' seasonal expectations of 11.1 percent.

BSkyB chief executive Jeremy Darroch hailed double-digit growth in operating profit, earnings per share and free cash flow.

"In tough market conditions our move to more broadly based growth and multiple products is serving us well," he said. "Looking ahead, the environment is likely to remain challenging as a result of the pressures facing consumers in the U.K. and Ireland."

BSkyB revenues increased by 9 percent to $2.53 billion as its overall subscriber base rose by 77,000 households to 10.4 million.

BSkyB said that programming costs increased by $83.8 million, about 11 percent year on year, to $845.8 million in the quarter.

Half of that increase in spend was due to BSkyB's drive to build its entertainment content. Sports costs increased by $23.7 million. Expenditure on movies and news was "broadly level."

BSkyB's share price had risen 3.4 percent, to $1.10 by 8.45am on the results.