Sky's the limit: Spiralling costs set to outstrip revenue growth

 
Oliver Gill
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Arsenal FC v FC Bayern Munchen - UEFA Champions League
Sky netted Champions League TV rights victories in Germany and Italy (Source: Getty)

Sky is expected to report stuttering profits on Thursday as revenue growth is more than offset by a rise in costs.

The media giant is predicted to post full-year sales just under £13bn, according to analysts.

But revenue growth of around eight per cent is not anticipated translate to an increase in the bottom line.

Earnings before interest, tax, depreciation and amortisation are forecast to fall from £2.2bn to £2.1bn, Jefferies analysts estimated. Operating expenditure is seen jumping from £9.8bn to £10.9bn.

Read more: Free-to-air no more: Sky ousts ZDF in German Champions League battle

While Sky missed out on the UK auction of European football’s Champions League TV rights, it secured them in Germany, Austria and Italy. This is expected to cost up to an additional €500m (£450m), though Sky plans to licence the rights to on-demand providers such as UK-based Dazn, generating additional revenue.

Analysts will be focussing on Sky’s churn figures – the number of customers it is losing – in the face of increased competition from larger on-demand providers such as Netflix and Amazon Prime.

Fox takeover

The focus on Sky in recent weeks has been whether or not culture secretary Karen Bradley will order a deeper probe into the firm’s takeover by 21st Century Fox. Last week Bradley revealed she would further delay making a decision, this means shareholders are in line for a £171m special dividend, according to the Sunday Telegraph.

Fox is vying to buy the 61 per cent of the group it does not already own for £10.75 per share. Shares closed a touch under £9.70 on Friday. Roddy Davidson, an analyst with Shore Capital Markets, said it “seems likely” the Fox takeover will be referred for further investigation. Jerry Dellis of Jefferies predicted a 40 per cent chance that the takeover will ultimately fall through.

Last week, the Murdoch family upped the pressure on Bradley describing the handling of its Sky takeover as a test for how far the country is “open for business”.

Read more: Culture secretary keeps Murdochs and Fox waiting on Sky takeover decision

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