Jeremy Darroch, chief executive officer (CEO) of Sky, spelled out the challenges confronting the broadcaster in its home market, pointing to economic headwinds in the form of weakened retail sales, consumer confidence and house price inflation and noting that “the environment we’re dealing with therefore at the margin puts a little more pressure on the business.”
However, he emphasized that he did not expect such factors to prevent Sky from reaching any of its goals and highlighted the positive customer satisfaction levels recorded of late. It must be said that these reviews have been achieved alongside the implementation of initiatives that could potentially negatively impact Sky from an operational perspective, such as allowing customer to roll unused data over each month, and a growing subscriber base of broadband-only customers who tend to demonstrate less loyalty to service providers.
Outside of the U.K., revenue and profits in the company’s newer markets of Germany and Italy delivered a strong performance for the period, with Sky signaling a positive outlook for the final quarter of its fiscal year and further ahead.
The results come against the backdrop of the ongoing agreed takeover attempt by the Murdoch family’s 21st Century Fox vehicle to secure the 61 percent of Sky that it doesn’t already own for a bid price of £10.75 ($13.79). On Thursday morning, Sky’s share price was trading at £9.83 – indeed, since the bid was announced, the shares have never traded higher than £10.00, reflecting significant investor concern about the regulatory and political headwinds facing the deal.
“You’d expect the share price to be somewhere close to that (bid price) as opposed to being one pound away. So there are clearly some big question marks in the minds of investors as to whether the concerns over media plurality and indeed influence will win out and the deal will be scuppered,” Richard Wilson, head of research at Wilson King Investment Management told CNBC’s Street Signs on Thursday.
The current broker consensus of ‘hold’ for the stock makes sense, according to Wilson.
“Should the deal go through the share price is going to go up a pound pretty much overnight. If the deal doesn’t go through, any premium that it might have had…obviously will be wiped out but that doesn’t change the fact that the Sky underlying business is still a strong one.”
