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Sky Television finally goes cash-positive

By Nick Stride

Friday 21st February 2003

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Sky Network Television has passed a major financial milestone but is sticking to its forecast of a bottom line profit in the 2004 financial year.

In the December half year Sky's operating cashflows exceeded operating expenses and capital expenditure by $26 million.

That meant the company was "free cashflow positive" for the first time since it began operations in 1990 and no longer has to call on shareholders or raise debt to pay for its expansion.

Chief executive John Fellet said the projection the company would break even at the bottom line in the first half of the next financial year ­ that is, in the six months to December this year ­ was unchanged.

In the latest period Sky lost $4.4 million, down from a $13.2 million a year ago.

Subscriber numbers this week hit 520,541, a penetration rate of 37.3%. Subscriber growth has slowed since the company switched from all-out expansion mode to managing for early bottom-line profitability.

But the net churn rate ­ the percentage of subscribers that disconnect during the year less those who reconnected ­ remained low at 13.4%.

Ebitda ­ earnings before interest, tax, depreciation and amortisation ­ jumped 42% to $73.8 million.

A fall in programming costs as a percentage of revenue, from 48.6% to 42.4%, was achieved without much help from the climbing New Zealand dollar. Mr Fellet said Sky typically hedged forward for about a year, meaning the benefits of the higher exchange rate against the US dollar would start to come through from next January.

The company's revenue was up 11.6% to $186.1 million. Advertising revenue rose 18.1% to $8.6 million.

The result pushed Sky's shares up 8c to $3.68 at the end of Wednesday's trading. It also helped boost 66% owner Independent Newspapers, whose share price rose 3.6% to $3.16.

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