Profits up as Sky claims to reach 40 million households

FTSE 100 subscription broadcaster Sky reported strong growth in customer numbers on Thursday, claiming it surpassed the 40 million homes mark in the UK and Ireland.

It wasn't immediately clear how it came to this figure, however, as according to the most recent official statistics the UK contained just 27 million households and Ireland 1.7 million.

The group said 177,000 new customers signed up to its services in the third quarter to 31 March, with 686,000 more products in Sky homes.

Revenue in the first three quarters was up 5% to £8.72bn, with profit rising 12% to £1.14bn - an all-time record nine month profit.

Its largest category, subscription revenue, was up 4%, while transactional revenue was the fastest-growing segment with revenue up 21% to £141m. It put this down to continued strong performance of the Sky Store, growing demand for NOW TV sports passes and three major pay-per-view boxing events.

Its commercial arm was also continuing to grow, with programme and channel sales revenue up 18% and advertising revenue up 7%.

"It's been another strong quarter for Sky. Our strategy to broaden our business, expanding into new markets and customer segments, has delivered further excellent financial results with revenue up 5% and a double digit growth in profit,” said group chief executive Jeremy Darroch.

"We want to offer customers the very best TV experience, whenever and however they want to watch. With the launch of Sky Q in February, we now have three outstanding products to meet all our customers' needs.”

Darroch said the company was pleased with the early response to Sky Q, as the company focused on establishing the premium product in its first market.

The firm’s approach to the ‘connected home’ was continuing to engage customers, Darroch said, with almost 11 million households now connected to on demand services including Sky Box Sets, which recently launched in both Germany and Italy.

"Our promise of world class content, commitment to innovation and brilliant service is persuading more customers to join and stay with Sky, in every market.

“As we pass the major milestone of 40 million products in UK and Irish households, we will continue to execute this successful approach across the group,” Darroch concluded.

Analysts at Liberum, which has a 'sell' rating on the stock, pointed to the growth in subscriber numbers, but said there was some cause for concern going forward.

"Interstingly, churn ticked up in the UK by 60bps year-on-year,driven by limiting discounts to customers, and 130bps on-year in Italy,driven by the loss of Champions League rights.

"ARPU was flat across each region, which is surprising for the UK as they cite the increase in churn due to limiting discounts, but yet haven't seen a positive impact on ARPU.

"The results are in line but [we are] starting to see some worrying trends in churn, especially in Italy where we expect more competition post the Vivendi/Mediaset deal."

Digital Look News has reached out to Sky for clarification on the number of households it serves. Sky is yet to respond.