SBD Global/April 21, 2017/Finance

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  • Sky Profits Fall 11%, Partly Due To Rising Cost Of Live Premier League Coverage

    Sky's profits fell 11% in the nine months to the end of March as the European broadcaster "continued to be hit by the rising costs of live Premier League football," according to David Bond of the FINANCIAL TIMES. A £494M ($633M) increase in the cost of the rights caused operating profits to fall to £1.01B ($1.29B), down from £1.14B in the same period last year, "reflecting the fierce competition to show exclusive football games from rival BT." Sky CEO Jeremy Darroch said that the drop was "bang in line" with the company's plan for '17. The rise in costs was "largely offset by efficiency savings and revenue growth," the company said. The "slide in profits" comes as U.K. communications regulator Ofcom considers 21st Century Fox's £11.7B ($15B) bid for the 61% of Sky which it does not already own. Darroch declined to comment on Ofcom's ongoing inquiries. Sky said that it increased revenues during the period by 5% on a constant currency basis to £9.6B ($12.3B), despite a 3% fall in advertising revenue in its core business in the U.K. The company said that it "outperformed the rest of the British TV advertising market," which was down by about 8% in the first quarter (FT, 4/20). In London, Sam Dean reported Sky added 769,000 customers in the last nine months, with 100,000 new customers in the third quarter. It also reported "strong profit growth in its Italian division," where profits were up by £64M ($82M) to £91M ($116.6M), and Germany and Austria, where it reported a £4M ($5.1M) profit compared to a £39M loss in the same period last year (TELEGRAPH, 4/20).

    BATTLING NETFLIX: In London, Alexandra Frean reported Sky joined HBO to form a $250M global drama production joint venture as it "battles the rising popularity" of online TV services such as Netflix and Amazon Prime. The broadcaster made the announcement as it reported its 5% increase in revenues. The co-production deal with HBO to produce "high-end drama" comes as U.S. groups Netflix and Amazon are "spending huge sums on quality shows to lure viewers" from traditional TV channels. Netflix said that it plans to spend $6B on content this year and analysts at JP Morgan expect Amazon to spend $4.5B on video this year. Darroch said that the HBO deal would provide Sky with "a slate of shows that could be exploited in Sky's home markets and beyond." He anticipates two drama series, with "international points of view and casting," coming from the deal every year. The first is expected next year (LONDON TIMES, 4/20).

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  • Adidas CEO Expects Operating Margin In China To Shrink, U.S. Margin To Grow

    New adidas CEO Kasper Rørsted said that the company "expects its huge operating margin in China to shrink slightly in the long term, while its small U.S. margin grows markedly in the near term," according to Adam Jourdan of REUTERS. Rørsted, on his first visit to China since taking the helm in September, said that adidas' margin in Greater China of 35% last year would "stabilize and slightly decline." Meanwhile, North America, with a margin of 6.3% last year from 2.5% in '15, was playing "catch-up." Rørsted: "We expect a dramatic improvement in margins in the United States, but we expect over time also a slowdown in the margin development in China." The sports apparel market, "buoyed" by supportive government policies and health-conscious consumers, has been a "bright spot in China amid tougher conditions for firms from snack makers to cinema operators in the world's second-largest economy." Rørsted said that adidas would "invest heavily" in China, where he saw "huge long-term potential." The firm is on track to add 2,000 stores in China and hit 12,000 by '20 (REUTERS, 4/20).

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  • Finance Notes: VfB Stuttgart Plans To Sell 24.9% Of Company, Daimler To Buy Stake

    VfB Stuttgart is "already planning for life back in the Bundesliga after 12 months in the German second division." As part of structural reforms, the club hopes to attract more than €100M ($107.1M) of investment, with Stuttgart-based automobile company Daimler "putting up nearly half of that." Stuttgart "suffered a surprise relegation last season," but is first in the Second Bundesliga with five matches left. Stuttgart plans to sell 24.9% of the public company to investors, with Daimler paying €41.5M ($44.5M) for 11.75% in the listed company, which the club values at more than €300M ($321.6M) (DEUTSCHE WELLE, 4/19).

    Mediaset has taken a hit of €341.3M ($365.9M) "in its dispute with Vivendi over the sale of the Mediaset Premium." The Italian company said that its '16 results had been "radically altered by serious damage on the Italian activities of the Group by Vivendi's contractual violations." Mediaset reported an operating loss of €189.2M for '16, after declaring an operating profit of €231.4M in '15 (BROADBAND TV NEWS, 4/20).

    Pro12 side Cardiff Blues has "fallen further into the red" with board member Martyn Ryan warning that the professional game in Wales is "now at crisis point and should look to create two super regions with the financial clout to be competitive." It comes as the Blues posted pre-tax losses of £1.49M for the financial year to the end of June '16. While the previous year was a 13-month period, "on a like-like for basis," losses widened from £657,950 to £1.49M. Revenues were down £800,000 from £9.2M to £8.4M (RUNNING RUGBY, 4/17).

    Serie A side Palermo President Paul Baccaglini revealed the name of the company that acquired a 100% stake in the club. A statement on the club's website said, "Respecting the timing during the presentation of the new Palermo project, we announce that the company that will acquire 100% of Palermo shares will be YW &F Global Limited" (FOOTBALL ITALIA, 4/19).

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