Sky TV seeks $157m of new capital
AUCKLAND: Sky Network Television plans to raise $157 million through an underwritten and deeply discounted share offer to shore up its balance sheet while national and international sporting events are restricted, and to prepare a new broadband product.
The offer is priced at 12c a share — a 63% discount to yesterday’s closing price at 33c — and will increase the stock on issue fourfold. It is structured as a $9 million placement to institutions and a $148 million pro rata entitlement offer at 2.83 new shares for each share already held. The shares began this year at 74c.
Chief executive Martin Stewart said the company had been proactive in reducing costs during the Covid19 shutdown and expected cost reductions of between $80 million and $95 million in the coming financial year.
‘‘There is potentially an additional pool of up to $135 million to $155 million of costs which Sky expects it can selectively target to reduce costs, depending on the level of live sport during fullyear 2021,’’ the company said in a presentation to investors.
Conditional on the equity raising, the firm’s bankers have extended their $200 million facility by one year through to July 2023 with greater flexibility in its covenants.
Sky noted the new funding arrangements mean it will be ‘‘sufficiently capitalised’’ to repay $100 million of bonds in March 2021. It would also expect to consider resuming dividends in the 2022 financial year.
‘‘Today’s moves involve decisive action to strengthen the balance sheet, and to provide funding to help navigate nearterm headwinds and deliver on the next phase of Sky’s refreshed growth strategy,’’ Mr Stewart said.
Sky shares are halted for the capital raising. The underwriters of both tranches are Goldman Sachs and Forsyth Barr.
Sky has been overhauling its operation under Mr Stewart, who has put premium sports — rugby in particular — and streaming platforms at the heart of his strategy. In February, the firm bought Spark’s Lightbox entertainment service in the pursuit of a broader and larger customer base.
But the onset of Covid19 worldwide brought international sports to a halt, with long delays expected before domestic and international fixtures get back to normal.
In March, the company cancelled its earlier guidance for Juneyear revenue of $750 million to $770 million and earnings before interest, tax, depreciation and amortisation between $170 million and $190 million.
It now expects revenue of $730 million to $750 million and Ebitda of $155 million to $175 million in the year ended June 30. For the following year, revenue could fall to $610 million to $640 million and earnings to $100 million to $130 million.
Sky said its 2021 forecast assumes that some live sport returns later this year, but with restrictions on movement and gatherings remaining in place, with a return to full coverage in the second half of the financial year.
Advertising and commercial revenue would remain suppressed in the first half of the period and return to more normal levels in the second half.
The forecast also assumes lower costs, based on Sky’s ‘‘reasonable expectation’’ of a negotiated reduction in sports programming costs proportionate to the content delivered.
Sky noted that its customer numbers, including Lightbox, exceeded 1 million at April 30, and that viewership during the lockdown month of April was about 10% higher than the year before.
Streaming customers had increased by about 8.6% since midMarch, but satellite subscriptions fell by 1% due to the inability to connect new customers.
Advertising in April fell by $1.4 million, or 36% from a year earlier, and ongoing reductions in advertising could be expected as Covid impacts continue to be felt across the country, Sky said.
Commercial revenue fell by $3.1 million, or 68%, in April as pubs, clubs and hotels were shut. Sky noted that it proactively stopped charging some customers.
Sky said it is likely to launch a bundled broadband offer in the coming financial year to take advantage of the country’s investment in ultrafast broadband and to deepen its share of the streaming market.
Use of a thirdparty network platform will minimise the firm’s investment, it noted in yesterday’s investor presentation.
It was also considering entering the market with a mobile offer to target customers beyond its traditional users. That would probably be timed to align with the rollout of 5G to capture the higher performance that offers.