Sky posts 5% rise in half-year sales as pay-as-you-go boosts revenues

The boom in pay-as-you-go viewing helped Sky plc (Frankfurt: 893517 - news) , the owner of Sky News, raise like-for-like sales by 5%, to £6.7bn, during the six months to the end of December.

During the period, Sky sold 20 million pay-as-you-go products to customers, including passes to Now TV, pay-per-view sporting events such as Anthony Joshua's heavyweight boxing clash with Carlos Takam in October and one-off films on Sky Cinema.

It meant that Sky sold more than 60 million individual products and now has almost 23 million customers.

Jeremy Darroch, Sky's chief executive, said this was a strong performance in view of the fact that all customer-facing businesses are currently challenged by pressures on household budgets.

He said it showed Sky was enjoying broad revenue growth and not just relying on the core pay-television service in which the company first made its name.

It had been a particularly resilient performance, Mr Darroch said, because, during the period, the business could have been distracted by the fact that it was the subject of a takeover bid and a regulatory inquiry.

21st Century Fox, the world's fourth-largest media company which owns a 39.1% stake in Sky, tabled an offer in December 2016 to buy full control of the business.

The deal, valuing the whole of Sky at £18.5bn, has been given the green light by the European Commission and by all of the countries in which Sky broadcasts apart from the UK, where the Government referred the deal first to the media regulator Ofcom and then to the Competition and Markets Authority, which earlier this week said the deal could act against the public interest on grounds of media plurality.

Fox and Sky are presently considering their response to the CMA's findings.

Other services that contributed to the rise in sales included Sky Mobile which has attracted more than 335,000 customers in its first year.

Meanwhile, the Sky Q multiscreen service is now used in more than 2 million homes.

In all, earnings before interest, taxation, depreciation and amortisation - or 'core' earnings - rose by 15%, to £1.2bn, which was slightly ahead of City expectations.

Mr Darroch said: "We have delivered excellent results…[that reflect] the investment choices we have made in recent years, allowing us to more than offset the pressure on consumer spending across Europe as more customers continue to choose Sky for more of their services."

He said Sky's push into offering more original content was paying off, with key hits during the period including Riviera, starring Julia Stiles, and Tin Star, the cop drama starring Tim Roth, while Babylon Berlin - set in the roaring 1920s and reckoned to be the most expensive German TV drama of all time - had also won viewers in both Germany and elsewhere.

Mr Darroch went on: "As Europe's leading direct-to-consumer TV entertainment company, we are making good progress on our future growth plans.

"In content, our focus on high quality differentiated local programming to complement what we acquire through our partners is working well.

"Following both critical success and record audiences for Sky original productions, we will be increasing our investment significantly in original content in each and every year."

He said there would be more than 50 Sky (Amsterdam: BK8.AS - news) 'originals' during the next year, with highlights in coming months including the drama Patrick Melrose, starring Benedict Cumberbatch, Holliday Grainger and Jessica Raine; Save Me, starring Suranne Jones and Lennie James; and Catherine the Great, starring Dame Helen Mirren.

Popular (NasdaqGS: BPOP - news) hits including Westworld and Big Little Lies are also due to return.

Mr Darroch said the aim would be to offer something for every person in every home.

He said Sky would also be launching a new 'Sky Stick', selling for £14.99, that customers would be able to plug into any television set and have content streamed to it wherever they are.

It will be the cheapest such product on the market.

The launch of the streaming stick, which will be across Europe, comes as Sky seeks to make all of its services available to customers without the need for a satellite dish.

It has already launched so-called 'over-the-top' (OTT) services in Switzerland and Spain, two countries in which it did not previously broadcast, while Mr Darroch said the ultimate aim was to migrate all territories on to a common OTT platform.

He said this would provide a "step change" in capability - of which the streaming stick was an example.

Mr Darroch added: "We will launch Sky without a satellite dish, with all its channels and on demand content streamed over Internet Protocol.

"This is a major development for Sky that will open up headroom in existing markets, improve our cost to serve for some customer segments and offer a future way to take Sky into new markets.

"We'll launch first in Italy before taking it to Austria and ultimately deploying across all our key markets."

Other technological innovations planned include adding augmented reality and artificial intelligence to some parts of Sky's customer service app to enable customers to have simple questions answered more quickly.

Due to the delay in regulatory approval for the takeover by 21st Century Fox, Sky is resuming dividend payments to shareholders.

A special dividend of 10p a share, payable because the deal failed to complete by the end of 2017, has already been announced.

But Sky will also pay an interim dividend of 13.06p a share for the latest period, representing a 4% increase on 2015-16, the last financial year in which a payout to investors was made at the half-year stage.