Sky profits fall but subscribers rise

Sky has reported a £12m fall in pre-tax profits to £524m for the six months to the end of December.

But the media company said 205,000 new customers joined Sky in the UK and Ireland in the second quarter, its highest rise there for 10 years.

It was also announced that James Murdoch would become the chairman of Sky. He had previously been chairman of what was then BSkyB.

Operating profits were their highest for a first half at £747m, up 12%.

But operating expenses were a hefty £223m - primarily the result of paying for financial adviser and "transaction fees" incurred as part of its buyout of the remaining minority shareholdings in Sky Deutschland and Sky Italia, which left pre-tax profits lower.

BSkyB merged with its two sister broadcasters, Sky Italia and Sky Deutschland in 2014 in a £7bn deal. It was renamed Sky.

In Germany and Austria, Sky gained 120,000 new customers in the second quarter of the latest financial year, which it said made Germany one of European's fastest-growing pay TV markets. In Italy it attracted 12,000 new customers over the same three months.

'Excellent' performance

Revenue in Germany and Austria rose by 10% to £693m, driven by the new customers. However, it made an operating loss of £34m for various reasons, including an increase in Bundesliga football costs and a rise in Champions League costs under the new 2015-16 deal.

In Italy, revenue fell by 3% to £953m because of a fall in customers over the past year and the fact that in the previous year the broadcaster had benefited from advertising around the World Cup. Operating profit fell by £6m to £25m.

Charlie Huggins, Investment Analyst, Hargreaves Lansdown described the company's first half performance as "excellent". He highlighted the fact that customers in the UK and Ireland stay with the group for an average of 10 years giving it a secure revenue base.

"Sky has built a very strong brand in the UK. It is the clear market leader in pay TV but it faces the challenge of margin pressure, as competitors like BT bid against it for key content rights," he said.

"If it can raise the performance of Sky Deutschland and Sky Italia, the impact of rising sports content costs might not be felt so badly. A larger Sky could potentially be better placed to bid for new rights too".

"It now has around three years to try and improve the acquired businesses, before it has to go into battle for another set of Premiership rights".