Package deals boost Sky profits

British Sky Broadcasting Group

Last Updated at 17 Apr 2014, 11:30 ET *Chart shows local time British Sky Broadcasting Group intraday chart
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BSkyB profits have increased due to sales of broadband, telephone and TV packages to its existing customers.

The firm reported a 27% rise in pre-tax profit to £597m for the last six months of 2011, compared with the same period in 2010.

The broadcaster sold 772,000 products in the period, but only 100,000 went to new subscribers.

Sky also announced it would create 1,300 new jobs in the UK and Ireland over the next two years.

The job plan includes a new service centre in Dublin, which is part of an on-going programme to bring Sky's workforce in-house rather than using other companies to provide customer support.

Although Sky said it now makes £544 a year from each of its customers, up £8 from the same period in 2010, the company said it was feeling pressure from the economic gloom.

"We expect the environment to remain tough in calendar 2012. No consumer business can be immune to these conditions and we will manage any short-term headwinds as they emerge," said chief executive Jeremy Darroch.

Analyst reaction to the results has been positive.

"We believe Sky has reported strong results today, with churn of under 10% an outstanding achievement given the macro challenges," said Paul Richards at Numis Securities.

Shares in the company rose 3.8% in London after the results were announced.

New channels

Sky also announced a new internet-based pay TV service to go live in the first half of 2012.

The internet channel will run on the back of existing services and Sky says there will be no need for significant infrastructure investment.

Sky is aiming to provide its programmes to users of computers, tablets or smartphones who do not subscribe to its satellite packages.

The service will start by offering films, but the firm plans to expand it to include other entertainment and sport.

The announcement comes in the wake of last week's launch of US video streaming service Netflix in the UK.

"Amidst all the Netflix noise comes a reminder that Sky is not about to give up its crown lightly," said shares analyst Richard Hunter from Hargreaves Lansdown Stockbrokers.

The US-based service launched in 2007 and has more than 20 million online subscribers in 47 countries.

Research in 2011 suggested that Netflix was the single biggest driver of internet traffic in the US.

Sky also pointed to its plans to introduce a new channel for Formula 1 coverage as a potential highlight for 2012.

The broadcaster agreed to split Formula 1 coverage with the BBC last year.

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