Sky Profit Slips, Plans Unveiled for Increased Spending on Originals

Operating profit was down 6 percent at Sky to £1.47 billion ($1.9 billion) for the year ended June 30, impacted by Premier League costs.

Sky saw a 10 percent increase in revenue on a comparable year-to-year basis to £12.9 billion ($16.9 billion). EBITDA was £2.14 billion ($2.8 billion), while operating profit of £1.47 billion ($1.92 billion) was down £97 million ($126.9 million) after absorbing £629 million ($822.8 million) of Premier League costs. U.K. and Ireland revenue was up 4 percent to £8.6 billion ($11.3 billion)—despite weakness in the U.K. advertising market. Revenue in Germany and Austria grew 9 percent to £1.9 billion ($2.5 billion). In Italy, revenue increased by 4 percent to £2.5 billion ($3.3 billion).

Total costs for the year grew by 5 percent, with a significant impact from a one-time step up in the new three-year Premier League contract as well as costs incurred to launch Sky Mobile and the costs of rolling out Sky Q and Sky+ Pro to customers in the U.K. and Germany. This was partially offset by “continued excellent progress” in operating efficiency.

For 2017-18, Sky revealed plans to up its investment in original productions by 25 percent. It also announced the upcoming launch of a “simple and affordable” OTT service in Spain.

Jeremy Darroch, Sky’s group chief executive, commented: “Sky’s growth and development has continued to be strong in 2017. We have driven a 10 percent increase in revenue on a comparable 52-week basis to £12.9 billion despite market headwinds. Operating profit is excellent, down £97 million despite additional Premier League costs and investment in new businesses, with particularly strong results in Germany and Austria and Italy, where operating profit increased by £115 million. As we exit a year of investment, we returned to profit growth in the fourth quarter with operating profit up 8 percent and EPS up 19 percent.

“Looking ahead we have a strong set of growth plans for the year. We will be increasing investment in Sky originals by 25 percent as we build on our track record for producing world-class entertainment. We will make the customer experience ever better as we roll out Sky Q to Italy, Germany and Austria while also launching Sky Q without the need for a satellite dish. We are creating 300 new technology roles to further enhance our capability to deploy in- and out-of-home streaming platforms. Sky Mobile will continue to scale up as we take advantage of the headroom in our customer base and offer our customers more Sky products. Loyalty will be recognized and rewarded through a new tenure-based loyalty program in the U.K., building on the outstanding success of a similar program in Italy. We will continue to identify opportunities to reach new customers through the recently launched new portfolio of channels and pricing to drive growth in Sky Sports UK and we intend to launch a simple and affordable OTT service in Spain. We will do all this while continuing to execute against our operating efficiency plans.

“We enter 17-18 in a strong position with significant growth potential. Despite the broader consumer environment remaining uncertain, we are confident of delivering on the plans we’ve laid out as we continue to give our customers the best content, great products and industry-leading service.”