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26-07-2012 13:20:00

UPDATE: BSkyB To Return GBP500 Million to Shareholders as Profit Rises

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16 sep - 
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--BSkyB to return another GBP500 million to shareholders

--BSkyB has returned GBP2.3 billion to shareholders since 2005

--Annual net profit rises on consumer demand for products

(Adds further details.)

By Lilly Vitorovich

LONDON--British Sky Broadcasting Group PLC (BSY.LN) said Thursday that it will return another 500 million pounds ($774.9 million) to shareholders via a share buyback as the U.K.'s biggest pay-television provider brushed off the recession to report a rise in annual earnings, underpinned by strong demand for its broadband, telephone and high definition television products.

The capital return follows a GBP750 share buyback a year ago, making a total of GBP2.3 billion returned to shareholders since 2005.

The company's biggest shareholder, News Corp. (NWS), has agreed to participate in the buyback in order to maintain its stake at 39.1% stake. News Corp. also owns Dow Jones & Co., owner of this newswire and of The Wall Street Journal.

BSkyB, which competes with Virgin Media Inc. (VMED) and BT Group PLC (BT.LN) in providing TV, broadband and phone lines, booked a 12% rise in net profit to GBP906 million for the year ended June 30.

The company added 312,000 customers over the year, a significant slowdown over last year's 426,000, taking its customer base to 10.6 million.

Annual revenue rose 3% to GBP6.79 billion, while revenue per customer rose to GBP548 from GBP538 as existing customers took more products or upgraded.

"Our consistent approach of investing where it matters most to customers and improving efficiency behind the scenes is working extremely well, "Chief Executive Jeremy Darroch said. He noted that more customers are staying loyal, with its churn rate--a measure of customer losses--down to 9.9% in the three months to June 30 from 10.4% a year earlier.

BSkyB has built its financial success on owning the exclusive U.K. broadcasting rights to live English Premier League soccer matches. Last month, BSkyB spent GBP2.28 billion to secure the bulk of those rights for another three years, starting from 2013. That was well over a third higher than the GBP1.62 billion it paid at the previous rights auction in 2009, eating into profits.

With new pay TV customer signings slowing as an ongoing recession in the U.K. pinches household budgets, the company is focused on getting existing customers to take-up more of its services, such as high definition TV and broadband.

That ploy appears to be paying off with 138,000 new broadband subscribers signing up in the fourth-quarter, compared with 80,000 at rival BT. BSkyB also added 141,000 new telephone and 121,000 new HD TV subscribers in the quarter, compared with just 20,000 new pay-TV customers.

The company launched an Internet streaming service, Now TV, earlier this month, despite some investor concern the product could cannibalise its Sky Movies subscriptions. The move responds to the arrival of U.S.-based Internet movie service company Netflix Inc. in the U.K. (NFLX) earlier this year. Netflix has added its video-on-demand offers to those of Amazon.com Inc.'s (AMZN) Lovefilm increasing competition and driving down prices, posing a challenge to BSkyB's premium movie channels.

Virgin Media, BSkyB's main rival in TV and broadband, has also raised the bar in home entertainment with the launch of its combined Internet television and broadband on-demand platform powered by U.S. firm TiVo Inc.'s (TIVO) set-top box.

Virgin Media on Tuesday reported strong customer demand for TiVo, with around a fifth of its 4.8 million cable customers moving onto TiVo since its launch more than a year ago.

Subscriptions to BSkyB's triple-play offer, which bundles a television package with broadband Internet and a fixed telephone line and makes up about a third of its customer base, held up well, however, rising 21% in the year to 3.4 million.

BSkyB declared a final dividend of 16.2 pence a share, up 11% from a year earlier, taking the total dividend for the year to 25.4 pence.

At 1059 GMT, BSkyB shares were up 15 pence, or 2.1%, at 700 pence, valuing the company at GBP11.71 billion, in a higher lower London market.

-By Lilly Vitorovich, Dow Jones Newswires; 44-0-207 842 9290; lilly.vitorovich@dowjones.com

Subscribe to WSJ: http://online.wsj.com?mod=djnwires

(END) Dow Jones Newswires

July 26, 2012 07:20 ET (11:20 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.

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