Sky to hand back £1bn but investors want more
Saturday 30 July 2011
BSkyB promised to hand back more than £1bn to shareholders as it posted a 23 per cent rise in annual profits yesterday, but one major investor complained the windfall could have been higher.
Sky released a set of stellar figures, with profits passing £1bn, in the first financial update since the bid by News Corporation for the pay-TV company collapsed. Yet, after James Murdoch's confirmation as chairman by the board the previous evening, all eyes were on whether the company would return cash to shareholders.
The company revealed it would hand back £750m, through a share buyback. In addition, the group hiked its ordinary dividend by 20 per cent to £253m.
Sky's chief executive Jeremy Darroch said the capital return programme "is a reflection of our strong performance and financial position, which flow directly from delivering for customers in the marketplace."
Thomas Singlehurst, an analyst at Citi, said Sky "has delivered" with the buyback and Sky's shares closed slightly ahead of the market, down 4p at 712p.
One of the broadcaster's largest shareholders said: "We are happy with the share buyback" before adding: "But the sum could have been higher."
The investor had hoped the company would outline a "multi-year buyback programme, although that certainly was not a deal breaker". The shareholder said it intends to raise the issue when it next meets with Sky's board in the coming months.
Steve Liechti, an analyst at Investec, said the buyback "may not be enough for mega bulls, but it is a good start in our view".
This came against the backdrop of strong full-year results for the company. Revenues in the 12 months to the end of June rose 16 per cent to £6.5bn over the previous year. Operating profits were up almost a quarter to £1bn, beating analysts' consensus.
Mr Murdoch said it had been "a year of outstanding operational and financial results for Sky," adding: "It is to the credit of Sky's first-class management team that the company has continued to deliver throughout the offer period."
Mr Singlehurst hailed Sky's performance. He said that with the City focused on the prospects for the News Corp deal it had taken its "eye off the fundamentals at Sky," adding that once the focus had shifted there was "genuine concern that the fundamentals had deteriorated. These results should go some way to assuaging concerns."
Others pointed to the low rate of churn – the number of customers leaving -–and added that the company continued to add customers to its high-definition service. Sky now has 10.3 million subscribers, up 426,000 during the year. The group's high definition customers was up 30 per cent year on year to 3.8 million.
Mr Darroch said: "While Sky is not immune to tougher economic conditions, we have continued to see good demand across our product portfolio."
Separately, the broadcaster announced it had landed joint rights with the BBC to show Formula One racing between 2012 and 2018. Sky will show all the races, qualifying and practise sessions, while half the races will remain live on the BBC.
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