Editorial Contributor
British Sky Broadcasting Record telecoms sales; 9 month profits up 24% Pay-tv broadcaster Sky is being overshadowed by issues affecting its major stockholder News Corp. However, results for the first nine months show profits up just under a quarter as the group overtook Virgin to become the UK’s largest triple play provider. A stock buy-back programme adds to the attractions and with content leadership assured we rate the shares a buy. In a downturn consumers are keen to hold onto relatively low cost entertainment and treats. This is provides a cheer amidst the gloom and helps explain why Cinema chains are able to ride out recession relatively well. Pay-tv company Sky fits this mould well which explains how it has continued to grow as UK unemployment has continued to increase and inflation remains strong. The monthly cost of a subscription to Sky is around the same as a night out which illustrates the relative entertainment value it provides. The key to Sky is that it is a leader in content which allows it to out-bid others for additional content and thus attract more subscribers – a virtuous cycle. In March Formula 1 was broadcast on Sky for the first time while a deal to renew UK football premier League rights should be signed in the autumn. This serves to counter the threat from new entrants which can use the internet for content distribution i.e. companies like Lovefilm and Netflix. We discussed this threat in our last look at the shares (FAT 422, 2nd Feb 12) and argued that with Sky taking the fight to the competition – through a new on-demand service – the stock was worth buying at £6.86.
48 | www.financial-spread-betting.com | June 2012