BSkyB said this morning that it’s been forced to take a £343m charge to reflect the fall in value of its ITV stake, which will leave it with a loss of £112m for the first half of its financial year. It’s the first time since 2002 that it’s lurched into the red.
Britain’s biggest pay-TV operator is being forced by the Government to reduce this stake (which it bought in November 2006, apparently to block Virgin and NTL’s proposed takeover) to less than 7.5% - and unfortunately, it’s now worth a whole lot less than it was 15 months ago. About 45% less, to be exact, which is why Sky has basically written off its value (just the kind of vote of confidence ITV boss Michael Grade needs at the moment).
To compound matters, Sky’s investment in broadband also resulted in a 25% drop in operating profit, which fell to £295m.
But although it looks like a rocky start for new boss Jeremy Darroch, it would be a bit harsh to point the finger. After all, it was his illustrious predecessor James Murdoch who bought the ITV stake in the first place. And you could argue that since Sky broke no rules in doing so, it’s being punished unfairly by being forced to sell up. That’s certainly the opinion of some lawyers, although Darroch was coy today about whether Sky plans to appeal.
And elsewhere in the business, all the numbers seem to be heading in the right direction. Revenue was up 11% to £2.5bn. It increased its pay-TV customer base by another 2%, leaving it well on course to hit 10m viewers by 2010. It’s losing few customers, and those that stay are spending more money – the number of Sky+ customers soared past the 3m mark after a period of record growth, and 1.2m people have signed up to the broadband service in 18 months. Hence why its share price has actually gone up this morning.
So Darroch shouldn’t lose too much sleep. And although the Murdochs hate nothing more than losing money – particularly when it’s the fault of regulators - Sky insiders suggest that £350m was a small price to pay to stop Richard Branson getting his mitts on ITV...