Sky TV hikes profit guidance after sports-rights clawbacks, other savings

Sky TV says a cost-cutting exercise – which included clawing back money on its deal with NZ Rugby – has allowed it to boost its FY2022 full-year profit guidance.

Corporate affairs head Chris Major told the Herald, “Rugby is one of the one-off cost savings associated with negotiated equitable reductions in rights costs due to Covid-related cancellations and postponements during the calendar year. It’s not a ‘renegotiation’ of the deal, but just part of the contractual arrangement. We’re not disclosing the split. Other sports impacted too, including

In a statement to the NZX, Sky said it had, “negotiated reductions in rights costs and production savings across a number of sports”.

Other sports involved in the cost-cutting process included Supercars, World Surf Champs, World Rugby Sevens, ISPS Handa Auckland football, but Major said “the sport clawback is only s small part of the picture, with most of the reduction in costs coming from permanent savings across the business.

The pay TV broadcaster previously forecast a net profit of $17.5 million- $27.5m. Now it says NPAT will be between $40m and $48m.

Its ebitda guidance has been upped from a band of $115m-$130m to $150m-$160m.

Full revenue is now put at $725m to $745m, a nudge up from the previous $715m to $725m.

In an investor update, Sky said the increased profit guidance was driven by a “robust review” of its costs that it estimates will “deliver $40m-$45m of additional savings in FY2022. It says $26m of those savings are recurring, with the balance one-offs.

The exercise included “negotiated reductions in rights costs and production costs across a number of sports codes”.

The Herald understands Sky paid $400m for its latest five-year deal for top rugby rights – a 20 per cent increase on its previous contract as it fought off a challenge from Spark Sport.

Sky TV said earlier this year that it was in negotiations with NZ Rugby after the pandemic crimped both the domestic and international calendars.

“You’ll appreciate conversations with a partner are always confidential,” chief executive Sophie Moloney said.

“But yes we are in a conversation about what are those impacts on value for this year in terms of the nature of the competitions.”

Moloney’s predecessor, Martin Stewart, said the English Premier League’s return of £170m to pay-TV broadcasters in the UK set a precedent.

It is a double whammy for the union, which in 2019 took a 5 per cent stake in Sky as part-payment for its rights deal. In May this year, NZ Rugby took a $15.9m impairment on its Sky stake.

NZ Rugby has been asked for comment. The union has previously said it will not comment on clawback talks.

In February, the Commerce Commission approved the sale of Sky’s outside broadcast unit to the multinational sports specialist NEP. Sky did not put a price on the deal but said it would yield savings of $50m over five years. Some 38 Sky staff moved to NEP, and Sky contracted NEP to cover rugby and other sports as part of the deal.

There was also a hit today that Sky’s long-suspended dividend might return. The NZX filing included the statement:

“The board is reviewing Sky’s capital structure and has mandated external financial, legal and tax advisers to assist in determining the most appropriate capital management strategy, including the future dividend policy.”

Today’s news follows Sky TV’s confirmation last week that Tex Teixeira – a longtime executive who has held a number of top sports roles and who was one of former CEO John Fellet’s top lieutenants – is leaving the company this month. It also announced that Tom Gordon, a former head of finance at Vodafone NZ, was joining as CFO.

Sky TV shares closed Monday at $1.75.

The stock, which had a 10:1 consolidation in mid-September, is up 5.4 per cent for the year.

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