FOXTEL Announces Solid Subscriber and Financial Growth in a Tough Environment

Thursday, August 13th, 2009

FOXTEL today announced a result which achieved, despite the difficult trading environment, solid growth in subscriber numbers, revenues and profitability for the year ended 30 June 2009.

At 30 June 2009, FOXTEL had 1.63m direct and wholesale subscribers. FOXTEL managed subscribers increased by 110k (8%) over the previous year while wholesale subscribers fell by 15%. The growth in FOXTEL managed subscribers was driven by record gross additions which were up by over 7% on the prior year combined with sound churn performance. Churn, at 13.3% was slightly lower than the 13.4% in the prior corresponding period. Growth remained solid through the second half with the FOXTEL managed residential base growing by 56,000 compared with 54,000 in the first half. Churn improved in the second half to 12.9% compared with 13.3% in the same period last year.

FOXTEL’s revenue for the year ended 30 June 2009 reached $1.84b, an 11% increase on the prior year. This increase was driven by a combination of growth in subscribers and ARPU. Notwithstanding that there was only a minimal price increase during the year, ARPU grew soundly as a result of higher penetration of FOXTEL’s iQ and Multi-Room services. The FOXTEL iQ continued its strong growth trajectory throughout the year with over three-quarters of all new subscribers electing to take either the iQ or the High Definition iQ2. At the end of June 2009, 43% of all FOXTEL managed subscribers were taking the iQ and 26% taking Multi-Room.

Over 125,000 subscribers were taking the FOXTEL HD+ service, which represents an encouraging take up by FOXTEL customers of the services which were launched in late June 2008.

FOXTEL’s Chief Executive Mr Kim Williams AM welcomed the solid results and said, “Our results have been built on a continued commitment to innovation and investment and to providing our customers with a great value entertainment option – which we have developed through extensive customer research and daily customer feedback to our dedicated customer centre”.

During 2008 FOXTEL launched ten new channels including Sky Business News, 111 Hits, CBeebies, BBC Knowledge, Fox Sports HD, ESPN HD, Discovery HD, Nat Geo HD, BBC HD and A-PAC together with FOXTEL HD Box Office On Demand. FOXTEL has also launched an innovative new web site which offers an extensive collection of full screen video clips, can recommend must-see FOXTEL programming, and for the first time offers FOXTEL subscribers the ability to manage accounts online.

FOXTEL’s earnings before interest, tax, depreciation and amortisation (EBITDA) grew by 16% to $406m (from $351m) last year. This growth in EBITDA was delivered notwithstanding the significant investment in the successful launch of FOXTEL’s High Definition service at the beginning of the financial year and the accelerated rollout of iQ throughout 2008/09.

FOXTEL’s subscription television revenue increased from $1.43b to $1.56b an uplift of 9%, while other revenues grew 21% to $0.28b reflecting, in part, the ongoing growth in advertising revenue despite the difficult advertising environment. FOXTEL’s net profit before tax was $135m and reflects the impact of the significant uplift in iQ penetration with the associated lift in depreciation and amortisation charges.

FOXTEL’s financial position remains strong with leverage of 1.8x EBITDA, no debt falling due until mid-2012 and a strongly hedged position against any falls in the Australian dollar.

Subscription television continues to out-rate terrestrial viewing in FOXTEL homes. For the relevant ratings period to 30 June 2009 subscription television in homes with FOXTEL achieved a 60.1% share of viewing. Taking account of all homes (i.e. including those that do not subscribe) subscription television was the most viewed of all of the television providers over the ratings period with subscription television share increasing from 22.8% to 23.8%.

Mr Williams cautioned “while there are some welcome signs that the economy is starting to rebound, conditions still remain economically challenging with unpredictable outcomes for business and this will clearly provide FOXTEL with some challenges in maintaining its growth momentum – especially with potential increases in unemployment and the unpredictability in the positive movement in consumer sentiment”.

“FOXTEL will respond to the challenges in the current environment by continuing to invest and innovate. Over the coming financial year FOXTEL will launch over 25 new channels; a rich array of additional interactive and high definition services; together with an enhanced broadband offering that will allow customers to watch shows on their personal computers. We will also continue to drive the take up of FOXTEL IQ with a medium term aim that every subscriber have a FOXTEL IQ”, Mr Williams said.

“The Vancouver Winter Olympic Games will also provide FOXTEL with an opportunity to display a whole new approach to interactive High Definition sports broadcasting with live coverage of every event, every Gold Medal and every competing Australian on four dedicated channels available 24 hours a day from 13 February 2010 for the duration of the Games. It will provide this premium sports event as never seen by Australian consumers before,” said Mr Williams.

For further information call Adam Suckling on 0419 205 488.