BSkyB profits leap by 26% to £520m
Broadcaster BSkyB added to the pressure on News Corp's takeover plans today by revealing a 26% jump in profits during an "outstanding" half-year.
In a period when the satellite company broke through the 10 million customer mark, BSkyB said turnover rose 15% to £3.2 billion while operating profits hit £520 million for the six months to the end of December.
BSkyB rejected a 700p a share bid proposal from Rupert Murdoch's News Corp in the summer and today's strong results will add to pressure on the media giant to deliver a sharp hike in any future offer, should it gain regulatory approval.
This week, Culture Secretary Jeremy Hunt said he was minded to refer News Corp's bid for the shares in BSkyB it does not already own to the Competition Commission but gave the group more time to deliver undertakings.
The number of Sky customer numbers increased by 140,000 in the final quarter of 2010 as it reported the fastest broadband growth for more than two years and a 68% increase in subscriptions to high definition television.
Almost one in four Sky customers now take all three of TV, broadband and telephone contracts, the company said.
Sky also announced plans to create 1,500 jobs by opening new contact centres across the UK, with a new site in Sheffield the next to open.
A new service, Sky Anywhere, will launch later in the year to allow customers to access Sky programmes on their computers when they are away from their homes.
The service will be supported by the acquisition of public wi-fi operator The Cloud.
Next week, a new channel, Sky Atlantic, will be launched on Sky to screen new series from American channel HBO, as well as the fifth season of award-winning drama Mad Men which was recently poached from the BBC.
Chief executive Jeremy Darroch said he was cautious about 2011 as the Government's austerity plans begin to bite but added that there was significant potential for long-term growth in the entertainment and communications marketplace.
Shares in BSkyB were up nearly 2% to 771p after the update, comfortably above News Corp's offer price of 700p in June when it first tried to buy the 61% of the company it does not already own.
At the time Sky dismissed the offer as an undervaluation and called for offers in excess of 800p a share but agreed to work with the Rupert Murdoch company to clear the way for a potential merger.
Richard Hunter, head of UK equities at Hargreaves Lansdown Stockbrokers, said: "Despite the inevitable distractions of the News Corp bid, Sky continues to power ahead regardless.
"Its recent growth trajectory has been maintained, with the 10 million customer mark having been surpassed by the end of last year as forecast.
"The News Corp situation could drag on for a while yet, but in the meantime Sky is firing on all cylinders."
If News Corp's bid to take full control of Sky is referred to the Competition Commission, it could be delayed by six months, according to analysts, by which time shares in Sky could have increased further.
Analysts at Numis Securities have already raised their target price from 800p to 825p to reflect the rise in the stock market since News Corp first made its approach.
Sky said it has so far incurred costs of £7 million on administration fees for News Corp's takeover bid and said it will continue to co-operate with the ongoing regulatory process.
Asked whether David Cameron would be meeting or speaking by phone to Rupert Murdoch while the pair are both at the World Economic Forum in Davos, Switzerland, tomorrow, the Prime Minister's official spokesman told a daily Westminster press briefing: "No."
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