Sky’s H1 FY26: 8% Revenue Growth and 77% Profit Jump Post-Acquisition
Sky Network Television posts a robust first half FY26 with 8% revenue growth and a 77% rise in underlying net profit, driven by the strategic acquisition and integration of Discovery NZ, now Sky Free.
- 8% revenue growth to NZD 415.4 million driven by Sky Free acquisition
- 29% increase in underlying EBITDA to NZD 78.2 million through cost discipline
- 77% rise in underlying NPAT to NZD 19.3 million; statutory NPAT NZD 52.4 million
- Interim dividend up 76.5% to 15.0 cents per share, reflecting strong cash flow
- Advertising revenue more than doubled with 35% linear TV market share and 62% digital audience growth
Strategic Acquisition Drives Growth
Sky Network Television Limited has delivered a strong financial performance in the first half of FY26, marking its first results since acquiring Discovery NZ, now rebranded as Sky Free. The acquisition has expanded Sky’s demographic reach and diversified its revenue streams, particularly in advertising and digital segments, underpinning an 8% increase in underlying revenue to NZD 415.4 million.
Despite a challenging economic environment marked by subdued consumer and corporate spending, Sky’s disciplined cost management and strategic integration efforts have propelled a 29% rise in underlying EBITDA to NZD 78.2 million. This performance was further bolstered by a gain on bargain purchase of NZD 34.4 million, reflecting the acquisition’s favourable terms.
Integration Progress and Synergies
The integration of Sky Free is advancing well, with early synergy capture of NZD 3.2 million already realised, within the previously guided NZD 3 to 5 million range for FY26. Sky’s management emphasises the complexity of merging technology platforms and teams but remains confident in meeting the August 2026 integration timeline. The combined entity now commands a 35% share of the linear TV advertising market, more than doubling Sky’s advertising revenue and significantly growing its digital audience by 62% to 1.2 million weekly viewers.
Content Strategy Refresh and Rights Renewals
Sky continues to leverage its unmatched sports content portfolio, securing long-term rights for New Zealand Rugby, Formula 1, and extending exclusive Olympic Games rights through to Brisbane 2032. The entertainment strategy has been refreshed to focus on premium mainstream content, including an expanded partnership with Paramount and a strategic exit from HBO Max co-exclusive content, allowing greater financial flexibility and control over content destiny. Locally curated channels and commissioned content are also priorities, enhancing engagement and audience diversity.
Financial Strength and Capital Management
Free cash flow surged to NZD 87.1 million, a significant improvement from NZD 7.5 million in the prior period, supported by operational improvements, lower capital expenditure, and acquisition-related cash inflows. The Board’s confidence is reflected in a 76.5% increase in the interim dividend to 15.0 cents per share, representing approximately 50% of the full-year guidance of at least 30 cents per share. Sky plans to review broader capital management options following the successful integration of Sky Free.
Outlook Amidst Economic Challenges
While trading conditions remain uncertain, Sky has narrowed its FY26 guidance to reflect the combined group’s performance, targeting revenue between NZD 820 million and NZD 835 million and EBITDA between NZD 145 million and NZD 160 million. The company anticipates continued earnings growth from FY27, underpinned by synergy realisation and strategic initiatives.
Bottom Line?
Sky’s successful acquisition and integration of Sky Free set the stage for sustained growth, but execution risks and economic headwinds warrant close investor attention.
Questions in the middle?
- How will Sky sustain advertising revenue growth amid ongoing economic softness?
- What are the key risks to meeting the full integration timeline and synergy targets for Sky Free?
- How will Sky’s refreshed content strategy impact subscriber retention and digital audience expansion?
