Sky NZ Expands Audience and Dividends on Sky Free Acquisition

Sky Free Acquisition Drives Revenue and Audience Scale

Sky Network Television Limited (ASX:SKT) has posted a strong FY26 result, boosted significantly by the acquisition and integration of Sky Free (formerly Discovery NZ). Underlying revenue climbed 9% to NZD 826.1 million, with Sky Free contributing NZD 77.2 million in its first 11 months under Sky’s umbrella. This acquisition has not only expanded Sky’s audience reach to over 2.4 million New Zealanders weekly but also diversified its revenue streams, particularly in advertising, which more than doubled to NZD 131.7 million. Digital advertising now accounts for 22% of this segment, reflecting a successful pivot towards high-value, targeted ad products.

Sky Free’s integration delivered NZD 8 million in synergies in FY26, surpassing initial expectations, with management confident of achieving at least NZD 10 million incremental Group EBITDA by FY28 through further optimisation. This operational unification also saw the consolidation of Sky and Sky Free sales teams, simplifying advertiser engagement across platforms.

Dividend Growth Surpasses Targets Amid Strong Cash Flow

The Board declared a fully imputed final dividend of 17 cents per share, bringing the total FY26 dividend to 32 cents, a 45% increase year-on-year and more than double the FY23 dividend. This robust payout is supported by a 60% surge in normalised free cash flow to NZD 58.9 million and a healthy closing cash balance of NZD 79.1 million. Sky has committed to a target of 10% annual dividend growth over the next three years, with dividends to be paid quarterly starting December 2026, offering shareholders more frequent income streams.

Strategic Sports Rights Secured Through to 2034

Sky has fortified its premium sports portfolio with long-term broadcast agreements that extend its content leadership well into the next decade. These include exclusive New Zealand rights to NZ Rugby through 2030, the Olympic Games through Brisbane 2032, and a recently secured seven-year NRL partnership extending to 2034, pending shareholder approval. Additionally, Sky locked in a six-year extension for exclusive Premier League rights through to 2034, securing one of the world’s most-watched sporting competitions for New Zealand audiences.

These agreements underpin Sky’s unrivalled position as the nation’s leading live sports broadcaster and provide a steady, year-round lineup of premium content. The integration of free-to-air channels Three and ThreeNow enhances access and audience growth, with select matches and events made available on these platforms, supporting Sky’s strategy to build fandom and broaden reach.

Entertainment Strategy and Digital Growth

FY26 marked a strategic reset in Sky’s entertainment approach, shifting to a multi-studio, data-driven model that balances premium international content with a strengthened commitment to local New Zealand programming. Partnerships with Paramount, Sony Pictures Television, NBCUniversal, and BBC Studios underpin a steady pipeline of quality content, while Neon streaming service rebounded in H2 with a refreshed brand identity and improved user experience.

Streaming revenues grew 8% to NZD 128.3 million, led by a 13% increase in Sky Sport Now subscribers to 76,300 and a 2% rise in Neon revenue despite a slight subscriber decline. Broadband services also saw strong growth, with a 15% increase in customers driving a 28% revenue uplift to NZD 47.4 million. These digital gains offset a modest decline in Sky Box subscription revenue, which fell 0.6% due to customer churn but showed signs of stabilisation.

FY27 Guidance and Capital Management

Looking ahead, Sky anticipates challenging trading conditions in H1 FY27 amid economic uncertainty but remains focused on optimising its expanded business. The company’s FY27 guidance projects revenue between NZD 825 million and NZD 840 million, EBITDA in the range of NZD 155 million to NZD 165 million, and capital expenditure of NZD 60 million to NZD 65 million. Dividend guidance targets at least 35 cents per share, consistent with the 10% annual growth objective.

Sky’s strong balance sheet and cash flow generation provide flexibility for capital management initiatives, including a potential on-market share buyback following FY27 interim results, subject to no superior capital deployment opportunities. The company plans to maintain capital expenditure at 6-8% of revenue, balancing investment in growth with disciplined cost management.

Corporate Governance and Sustainability Commitments

Sky continues to emphasize strong governance, with a fully independent Board and active committees overseeing risk, remuneration, and content rights. The company has reduced its combined Scope 1 and 2 greenhouse gas emissions by 49% since FY23 and remains committed to sustainability initiatives aligned with te ao Māori principles.

Chief Executive Sophie Moloney highlighted the company’s transformation over three years, underscoring the strategic foundation laid by the satellite migration and Sky Free acquisition. The focus now shifts to growing revenue from non-subscription sources, expanding margins, and leveraging data and technology to unlock audience insights and simplify operations.

While the financial results and strategic positioning are strong, Sky’s future hinges on navigating economic headwinds and successfully executing its growth ambitions, including shareholder approval for the significant NRL rights deal and delivering on promised synergies.