SKY TV Announces 2018 Interim Results

For the half year ended: 31 December 2017 CONSOLIDATED INCOME STATEMENT Current Half year NZ$'000; Up/Down %; Previous Corresponding Half year NZ$'000 Total Operating Revenue: 433,085; Down 5.5%; 458,183 OPERATING SURPLUS BEFORE TAXATION: 92,728; Up 5.0%; 88,346 Less taxation on operating profit: 26,028; Down 9.9%; 28,887 NET PROFIT AFTER TAX: 66,700; Up 12.2%; 59,459 NET PROFIT ATTRIBUTABLE TO EQUITY HOLDERS: 66,562; Up 12.2%; 59,300 Earnings per share: 17.10 cps; Up 12.2%; 15.24 cps SKY is pleased to report an improvement in its half year results to 31 December 2017 with net profit after tax increasing by 12% to $66.7 million. While revenue declined 5.5% to $433.1 million, operating costs declined by 8% to $330.8 million. Costs were lower in all core categories, with significant savings in programming (down $14.6 million, 8%) and subscriber related costs (down $7.0 million, 14%). The cost savings reflect a lower subscriber base and also the costs of the 2016 Summer Olympics being in the comparative period. Capital expenditure declined from $52.6 million in the comparative period to $28.2 million, reflecting a decline in customer acquisitions and also lower project capex in the period. Total subscriber numbers declined by 37,359 in the period from 31 December 2016 to 31 December 2017. This decline included the loss of 10,608 subscribers following the closure of the on-line DVD rental business, Fatso. The decline in subscribers also reflects continued competition from OTT providers, changes that were made to the pricing of FanPass where we removed the option of purchasing daily and weekly passes, and also the continued growth in piracy. On 27 February 2018 the Board of Directors approved a change to the pricing and packaging of SKY's services. Currently all customers buy the Basic package for $49.91 per month and then add options of Sport, Movies and other premium channels. We are replacing SKY Basic with two new packages called SKY Starter (which is now our minimum package and carries a smaller number of channels at a cost of $24.91 per month) and SKY Entertainment (featuring UKTV, Discovery, Crime + Investigation and many other popular channels at a cost of $25.00 per month). Together SKY Starter and SKY Entertainment are the same cost and channel line-up as the current Basic package, so current SKY subscribers will have no change to the cost of their current package. The new line-up is available to new customers from 1 March 2018, and existing customers can change their packages from the same date if they wish. However, customers who continue to buy SKY Starter and SKY Entertainment as well as either SKY Sport or Movies will receive our premium drama channel SoHo for free. The SoHo channel currently costs $9.99 per month. The Board and management believe this new pricing structure will assist in attracting new customers by offering a cheaper entry point for customers who do not want the full SKY package. During the period the Board also completed an assessment of the carrying value of SKY's $1.4 billion goodwill asset. This assessment included the likely impact of the new pricing and packaging on future subscriber numbers, churn and ARPU. The Board believe the impact of these changes will be positive on the value of SKY but recognise there is uncertainty and any adverse changes in key assumptions around churn, subscriber numbers and ARPU could give rise to an impairment of goodwill. The Board will reassess the carrying value of goodwill at year end when there will be more evidence of the impact of the pricing and packaging changes on the key assumptions. On 28 February 2018 the Board announced it will pay a fully imputed interim dividend of 7.5 cents per share. This is a reduction from the 12.5 cents per share paid as a final dividend in September 2017. As communicated to shareholders at the October AGM, the SKY Board believes that while we continue to operate in a rapidly changing and uncertain media environment the company needs to have the flexibility to meet competitive challenges and the balance sheet strength to successfully negotiate renewal of key content deals in the future. The Board believes in order to achieve these objectives and place SKY in a much stronger strategic position it is necessary to reduce debt more rapidly than was possible under the prior period pay- out ratio. Ends End CA:00314857 For:SKT Type:HALFYR Time:2018-02-28 08:33:27