Write-down behind Sky’s $241m loss

Sky Network Television has posted a $241 million loss for the year ended on June 30 after revaluing its historic goodwill.

The pay-television company lost another 57,000 subscribers in the year to June 30, reducing the number to 768,000 across its satellite, Neon and Fan Pass services.

Underlying profit after tax was $119m for the year, an increase of 2.6 per cent on the previous year.

But the underlying profit was overshadowed by Sky’s decision to reduce the carrying value of its goodwill from $1.43 billion to $1.07b, resulting in a loss for the year.

Sky chief executive John Fellet said he was pleased with the result overall. It would be ‘‘some time’’ before the internet trumped satellite when it came to delivering sports broadcasting, he said.

Satellite was the only system that could deliver Sky’s service from one end of the country to the other, and it was the preferred viewing method for customers, he said.

‘‘Experience around the world suggests it will be some time before internet delivery of live sport meets the expectations of all sport fans, and the satellite will keep doing the heavy lifting in the meantime.’’

Last weekend 45,000 people watched the first Bledisloe Cup test match for the year using Sky’s Fan Pass and Sky Go online services, compared with more than 500,000 watching via satellite, Fellet said.

Sky has two online streaming services – Fan Pass for sports and Neon for movies and TV.

Fan Pass subscribers were up for the year while Neon was down, largely due to the popular TV series Game of Thrones taking a break, meaning some customers stopped their monthly Neon payments.

About 240,000 households did not have access to streaming-capable internet, Fellet said.

Sky chief financial officer Jason Hollingworth said the company paid more than $30m a year for its satellite contract.

The lease, which had been operating for 17 years, was due to expire in 2021. After that Sky would seek to sign a new, hopefully cheaper, lease.

Sky has broadcasting rights for the major domestic rugby union, rugby league, netball and cricket competitions until between 2020 and 2021, and its investment in outdoor broadcasting equipment has helped it renew those contracts.

But it is constantly under threat from competing technology companies looking for a slice of the lucrative broadcast entertainment sector.

The goodwill asset write-down arose from the merger of Independent Newspapers (INL) and Sky in 2005, and reflected the difference between the value of Sky’s assets at the time and the price that INL shareholders agreed to exchange their shares in INL for Sky shares.

Sky indicated in March that it would reassess the value of the goodwill once there was more information about the impact of its new pricing, products and subscriber numbers. It decided to reduce the book value of the asset by $360m.

The impairment is a non-cash charge and has no impact on Sky’s cashflow or bank covenants.

Shareholders will be paid a a dividend of 7.5 cents a share.