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BSkyB said its first-quarter pre-tax loss before goodwill and exceptional items amounted to STG22.6 million from a loss of STG123.6 million in the same period a year ago, ahead of analysts' expectations. Forecasts for the company ranged from pre-tax losses of between STG27 million and STG30 million. The company said its basic and diluted loss per share was STG0.05, more than three times what it reported a year ago.
Sky also said its pre-tax losses after exceptional and goodwill was STG89.2 million which included an STG49.2 million loss from its share of earnings derived from its joint ventures. It said STG29 million in losses were incurred from Sky's 24 percent share in KirchPayTV in Germany. The company warned that if operations at the German operation do not improve, it may exercise the put option it holds over KirchPayTV.
These results have come in the midst of a difficult environment for both digital and traditional broadcasters as advertising revenues have slumped in the sector. In fact, Sky's advertising revenues dropped six percent to STG54 million in the quarter. However, Tony Ball, BSkyB's chief executive, said despite the downturn the firm continued to deliver strong revenue and profit growth. "This is the sixth successive quarter in which we have increased year-on-year profitability and we remain on track to deliver positive free cash flow for the second half of the financial year," he said.
Sky's net digital DTH (direct to home) subscribers increased by 190,000 in the quarter to 5,498,000. Furthermore, customer churn, the rate at which subscribers sign up for services, was 10.4 percent for the year to date. The company's revenue from DTH subscribers increased by STG91 million to STG438 million. These figures, according to the company, were the result of a 19 percent jump in the average number of subscribers, and a seven percent rise in the average spend by each customer.
Some of the rise in customers can be attributed to 45,000 new subscriptions following the shut-off of Sky's analogue service, ahead of schedule. Sky said ARPU (average revenue per user) was up eight percent to STG317, including interactive ARPU of STG13. Additionally BSkyB has decreased its costs in acquiring new customers, spending only STG237 per customer in the September quarter, compared to STG250 the same time a year ago.
Other positive figures for the company included cash outflow of STG47 million in the September quarter, down from STG172 million in the same period last year. Nevertheless, the company reported a hearty jump in net debt from STG133 million a year ago to STG1.68 billion.
Despite a weak advertising market and the incursion of high levels of debt by firms like Sky, the market for digital television looks good in the UK. Last month one of Sky's competitors, ITV Digital, reported stronger-than-expected subscriber growth in the third quarter, adding 82,00 customers, up from 48,000 the previous quarter. ITV Digital, a joint venture of Carlton Communications and Granada, said its new sports channel and the rebranding of its offering under the ITV brand had helped in the quarter.
Also, the BBC in the UK, in a somewhat controversial move, has recently applied for a number of new digital channels to provide programming to specific segments of its audience. During the quarter, Sky said non-terrestrial channels as a whole achieved their highest ever weekly share of viewing in all UK homes at 22.5 percent. The major terrestrial stations in the UK ITV1 and BBC1 achieved their lowest weekly shares at 24.2 percent and 24.5 percent respectively.
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