‘Flawless’ BSkyB -
We reported on BSkyB’s end-of-year results last week, and now the analysts have their say on BSkyB’s prospects. One forecast says Sky will add another 900,000 HD subscribers this current trading year, and an additional 1m in 2010-2011.
Morgan Stanley, in its note to investors, summed up the situation nicely, saying of BSkyB: “Most company reports in both the media sector and the market over the last two weeks have highlighted poor revenue trends but substantial cost cutting to make earnings numbers.
“BSkyB, by contrast, has reported accelerating customer volumes (the best for five years), threefold y-o-y growth in HD adds in Q4, and Q4 group revenue growth of over 9%. Operationally this was a flawless quarter. Financially it was in line, with annual EBITA of £780m up 4%. Operationally Sky is safely on target to achieve more than 10m subscribers by the end of 2010, and we have growth of another 0.9m HD subscribers to take the total to 2.2 million.”
“The key dynamic,” says the bank, “for broker forecasts is the anticipated rate of new HD additions in 2009/10. The lower the HD and subscriber growth number, the higher the forecasts. We are already at the upper end of HD subscriber growth forecasts at 900k (versus 815k added in 2008/9) and we keep this unchanged. The payback on an existing subscriber of upgrade to HD is around 24 months. A new subscriber taking HD as part of a new package take up produces a positive return within 12 months.”
“[BSkyB’s] management has consistently told the market that it believes that it has been going through a ‘double dip’ of investment related to the roll out of consumer broadband and the aggressive promotion of HD. As these work through, with consumer broadband losses now set to fall and the year on year investment in HD due to level out, the company should be able to produce sustained earnings growth.”