Sky has been the focus of much interest in recent weeks with Walt Disney’s Bob Iger, Comcast’s Brian Roberts and Twenty First Century Fox (led by Rupert Murdoch of course) all vying for control of the business. Sky is due to release its Q3 figures this week (on Thursday). But is it worth all the excitement?
Sky results mark latest chapter in takeover bid
The Sky results will this week mark the latest chapter in a saga which has seen Twenty First Century Fox bidding for the rest of Sky that Murdoch does not already own. Last week the UK takeover panel ruled that Disney must bid for Sky if its completes is own £66 billion takeover bid of Twenty First Century Fox.
There are a number of key indicators which analysts will be looking at this week from the Sky results, including subscriber numbers. Sky ended its first half with 16.3 million subscribers in the UK, with another 5.3 million in Germany and Austria and 4.8 million in Italy. Subscriber growth has slowed in Germany and we’ve seen numbers of subscribers fall off slightly in the UK and Italy. Sky will be looking to reassure analysts that this is not the beginning of a more severe trend.
Churn is going to be another significant factor in the Sky results. This is a measure of how many customers drop Sky. In the UK it has been fairly constant at about 11%, but again there are analyst worries about the increase in churn in Germany and Italy in the first half of last year.
Average revenue per user (ARPU) has been pretty steady in all three of Sky’s major European markets. This comes to £46 per user in the UK, while in Germany it is €44.
“These three figures will go a long way to driving sales and profits,” explains Tom Selby, senior analyst at AJ Bell.
At the nine month stage, a year ago, Sky recorded £9.6 billion in sales and an operating profit of £1 billion, with the UK contributing £918 million. For the full year analysts are looking for mid-single digit growth in sales and profits, so in Selby’s view, “that seems a fair benchmark for the nine month numbers.”
Sky shares see mixed trading, slide in value
Sky shares were all over the place last week, starting the week at 1323.50, but saw a dramatic drop at the opening of trading in Wednesday, although they quickly recovered. Sky shares ended the week at 1305.18. They are, however, trading at significantly higher levels since the interests of Disney and Twenty First Century Fox.