BSkyB internet push drives record profits

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BSkyB (LSE: BSY.L - news) 's push on internet services helped the company deliver record annual results going into its battle with BT (LSE: BT-A.L - news) , with pre-tax profit up 10pc to £1.26bn.

Revenues rose 7pc to £7.24bn on the back of existing customers taking 3.3 million extra services, including 1.4 million new broadband and phone subscribers from the acquisition of O2's home communications business.

The strong performance drove an 18pc increase in BSkyB's full-year dividend and a new £500m share buyback.

There were continued signs that the company is struggling to grow its core satellite television business, which has more than 10.3m customers. In the fourth quarter, new television subscriptions rose by 34,000, but most of the growth came from Now TV, the internet-only venture introduced last year.

Now TV also offers day pass access to live Sky Sports channels for £9.99 and sold more than 50,000 over the year.

Chief executive Jeremy Darroch said the company's growth had become more "broadly based" but cautioned the market would remain "challenging" next year. The company faces its strongest ever competitor in the shape of BT, which is investing heavily to introduce its own live sport channels next week.

"In our television business, there has been an excellent response from customers to our new services," said Mr Darroch.

"We've seen an explosion in on-demand and mobile viewing as more people connect their Sky boxes to broadband and watch TV on laptops and mobile devices with Sky Go.

"We see an exciting opportunity for future growth in this area and we intend to increase investment over the next year to accelerate growth and returns from these new services."

Average revenue per user, a closely-watched measure of success in bundling media and telecoms pckages, rose £29 on last year to £577.

The company plans to drive further rises by increasing the proportion of its set-top boxes that are linked to the internet over the next year, allowing it to sell more on-demand films. Currently a quarter are connected, up by two thirds in the last 12 months.

It will also push the £5 per month subscription version of the Sky Go apps, which allow customers to download programmes to the smartphone or tablet to watch offline.

BSkyB predicted its outlay on new equipment to increase take up of such extra services hit operating profit by up to £70m next year, though the higher revenue resulting will mean pre-tax profit will be flat.

Shares were up nearly 1.5pc in early trading but fell back and as of late morning are down more than 3pc.