Sky Earnings Beat Forecasts -- Update

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By Simon Zekaria

LONDON--Sky PLC (SKY.LN) on Wednesday sounded an upbeat note as it reported a forecast-beating rise in first-quarter earnings on higher revenue boosted by its operations in the U.K. and Germany, and cost-cutting.

The pay-television giant, Europe's biggest pay-TV operator by customer numbers, said operating profit before exceptional items on a constant currency basis--a closely watched measurement of Sky's main business performance--rose 10% year-over-year in the three months ended Sept. 30 to 375 million pounds ($579 million), higher than a consensus market forecast of GBP366 million. It didn't disclose net profit.

Revenue rose 6% to GBP2.7first-9 billion, in line with a forecast of GBP2.78 billion.

By region, U.K. and Ireland revenue rose 7%, while revenue in Germany and Austria increased 11%. Revenue in Italy fell 4%. On an operating profit growth level, U.K. and Ireland posted a jump of 20%, but for Germany and Austria there was no change as soccer rights costs for the Bundesliga and Champions League competitions ate into earnings.

Sky battles media rivals like BT Group PLC (BT.A.LN) in the U.K. for a share of soccer TV viewers, which is seen as key to attract consumers to its channels. BT has spent billions of dollars to secure the rights to live European soccer in a bid to take on Sky's longstanding dominance of soccer broadcasting in the U.K. In Italy, Sky faces off with Mediaset SpA (MS.MI), which has secured television rights to the Champions League.

The number of products Sky's customers use, including broadband services and high-definition TV, jumped 937,000, taking its products total to over 54 million. It also added 134,000 customers in the quarter.

In the U.K. and Ireland, it added 77,000 customers, up over 50% year-over-year and the highest rate of first-quarter customer growth for four years, it said. It added 759,000 paid-for products, including 43,000 TV additions and 133,000 broadband additions.

In Germany and Austria, Sky added 94,000 new customers.

"We have made a strong start to the year," said Chief Executive Jeremy Darroch.

Last year, Sky bought its sister companies in Germany and Italy from 21st Century Fox Inc. (FOXA) in a deal worth about $9 billion, creating a pan-European pay-TV giant with over 20 million customers across Germany, Italy, Austria, the U.K. and Ireland.

Sky is 39%-owned by 21st Century Fox, which until June 2013 was part of the same company as The Wall Street Journal parent, News Corp. (NWS.AU).

At 0741 GMT, shares rose 2.3% to 1,094 pence, valuing the company at GBP18.4 billion. "Sky's numbers make impressive viewing," says Richard Hunter, analyst at broker Hargreaves Lansdown.

-Write to Simon Zekaria at [e-mail]

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(END) Dow Jones Newswires

October 21, 2015 04:35 ET (08:35 GMT)

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