To hand the conference over to Ms. Sophie Moloney, Chief Executive Officer, please go ahead.
[Foreign language] . Hello everyone and welcome to Sky's 2025 results briefing. I'm Sophie Moloney, your Chief Executive, and I'm pleased to be joined by Andrew Hirst, Sky's Interim Chief Financial Officer. I'll begin with an overview of this year's performance before taking you through each of the key business areas. Andrew will then provide more detail on the numbers before I take you through the outlook for the year ahead, including briefly touching on the recent acquisition, given we're just a few weeks post-completion. We'll then hand back to the operator to open the lines for your questions. We're pleased to have delivered results within the updated guidance given at the half-year in what's been a demanding financial year that included the delivery of a challenging migration to a new satellite set against the backdrop of a tough economic environment.
Having completed the satellite migration during H2, not long thereafter, we announced the exciting acquisition of Discovery New Zealand, now called SkyFree. This morning, after many months of negotiations and hard work, we've announced the renewal of the New Zealand Rugby rights from 2026 - 2030. It's thrilling to have secured this important partnership with an exciting suite of rugby content for our customers and through an agreement that makes economic sense for our business. With each of these key strategic outcomes acknowledged, it's been a vitally important six months at Sky, and these achievements are a testament to the dedication of the Sky team with a strong focus on execution. To the highlights, and continuing from the half-year, our results include a number of one-off impacts that are largely non-cash or cash neutral. We've adjusted for these items to show the underlying performance of the business.
Particular call-outs include the disciplined cost control that's evident in EBITDA and the ongoing ability to generate strong cash flow. That supported another step up in the dividend with 15.8% growth year -on -year. Turning to our report cards in the second year of the three-year target, in two categories, our targets for CapEx intensity and employee engagement, the results are already lined up with our FY2026 ambition. The critical customer NPS metric has been improving every month since the completion of the satellite migration as our teams got back to more reasonable levels of demand. The revenue target has been outside our grasp, and that's put pressure on our EBITDA margin. Despite the revenue challenges, we're still on track to deliver the revenue-linked targets for programming costs and CapEx.
Perhaps most importantly for our owners on the call, we're firmly on track to deliver on the promised dividend of $0.30 per share in FY2026. To revenue, while our key growth engines of Sky Sport Now, Broadband, and Advertising were firing, adding over $22 million this year, it wasn't sufficient to counter the decline in Sky Box. Direct satellite migration impacts to Sky Box have been adjusted. However, additional impacts such as customer churn and delays to planned revenue-generating initiatives, primarily across Sky Box and Advertising, remain unaddressed. The combined effect of which is at least $5 million. That said, growth in newer revenue streams has increased revenue diversity with Sky Box making up 62%, down from 78% five years ago and 68% two years ago.
The EBITDA bridge on slide six shows how, despite the revenue headwinds, we were able to manage our costs to soften the impact on earnings. That discipline reduced expenses by 0.8%, including savings of $15.6 million across programming and other cost management initiatives. We've continued to reinvest growth. That's largely variable costs from adding broadband and streaming customers, along with investing to grow digital advertising. We have been clear that Sky's multi-platform approach is a key competitive strength. By combining two highly aligned and complementary businesses pursuant to our recent strategic acquisition, that strength has multiplied. Sky is now a significant player in the free-to-air space through established and much-loved brands. With a boost to Sky's position in digital through the fast-growing SkyFree BVOD platform, which was, until recently, the one missing product from our portfolio.
Importantly, this is without incurring the significant development cost of building a platform and audience from scratch. It serves to extend our audience reach and bring the younger, more diverse profile that's valued by rights partners and advertisers, and will also play a role in our revenue ambitions, adding a low-cost path to paid through subscription services. No one else comes close to offering the quality and depth of year-round local and international sport that's available on Sky. Each decision on where we invest is tested against our unmatched viewership data. That data also shows fans watch a variety of sports, minimizing Sky's exposure and increasing the value of the bundle, which is secured through long-term agreements and heads by content breadth and staggered renewals. As examples, this year we've added to the bundle through six-year partnerships with New Zealand Cricket and the U.S.
PGA Golf, and an eight-year deal with Six Nations Rugby. We know what we should hold exclusively or co-exclusively, and we've also made choices on what not to hold. Both our content bundle and data are core strategic assets that we intend to continue enhancing and strengthening. It's not all about sport, with entertainment also playing a vital role to keep customers engaged week in, week out. We have a strong lineup in entertainment from multiple global and local partners and with Sky Original Productions. That said, we've been working on a refreshed entertainment strategy that creates greater flexibility to secure and curate content that resonates. We're reducing our reliance on output deals and pass-through channels to move towards a fresh, more responsive approach to viewership trends.
We mentioned in the acquisition presentation the content coming onto our balance sheet at no cost, with providing the runway to execute this change and to capture content synergies. This is predominantly in the entertainment content space. You can see from the chart that it's also delivering highly complementary genre strengths to enhance our content position. Moving then to the operational performance of the business, and starting on slide 11 with Sky Box and Pod. The encouraging news is that in the context of the pressure on consumer wallets, the migration impacts of waking up the Sky Box customer base and consequent service interruptions resulting in discounts back in line with FY2023, coupled with our reduced marketing spend, activations were stable at 21,000 and disconnections improved by 8.5%. Churn was lower and even more so in earlier 10-year groups.
With more good news and validation of our new product strategy, that churn among new device customers is less than half of that for the classic Sky Box. Importantly, it's 62% lower in the five-year plus group that makes up 84% of our base. That leads nicely to a key headline that 167,000 households are now part of the new Sky experience. Aside from the lower churn, this is important on many levels, given that these are digital products, thereby unlocking access to video on-demand content that increases value for customers, has a lower cost to serve, and with the pathway to add revenue from digital ad replacement. That said, revenue did soften, largely due to a lower opening customer number and average base. That was somewhat offset by ARPU growth from sports price increases and higher penetration of this pack to 72.5% from 71% last year.
Given the clear benefits of the new Sky experience, there will be no letup by my team in continuing to enhance viewing experience and helping our customers make the switch from satellite only with their home broadband permits. Turning to slide 15, Sky Sport Now continues to fire. In the second half, we've reconfigured the subscription model by removing weekly passes to encourage a step up to monthly subscriptions. It's been a positive move with good growth in monthly subscribers. That's evident in the 20% increase in recurring customers, which is how we will report from this point. Understanding some customers' preference for more flexibility, as we continue to test and learn with our digital offers, we later trialed a day pass option at $29.99 to capture transactional revenue, and that too has been a superb success. Both changes show up in the revenue growth of 16% for the year.
That includes a 19% increase in H2 compared to the second half of last year, which included several World Cups. Neon performance has been steady within the period, but not where we want it to be. What is particularly pleasing is the increase in engagement. What's clear, the launch of New Zealand's first SVOD ad tier 18 months ago is working as planned, offering choice at a lower price point and adding incremental digital revenue that shows up in the advertising line. This tier now sits at 23% of the Neon base and has been an important part of our strategy through a tough trading period. Advertising has been going from strength to strength and is soon to be boosted further as we scale faster in both linear and digital.
Revenue grew by 7% as we started to unlock new digital inventory, grew partnerships, had a full year contribution from Neon, and again increased year in linear, this time by 11%. In October, we launched digital ad insertion on Sky Sport Now, which enables more personalized ad delivery in live sport and gives advertising customers the opportunity for more precise targeting. Unlocking more products for digital ad replacement is firmly on our roadmap, with some of that activity having moved to FY2026 due to satellite migration. Through the SkyFree acquisition, we've secured a meaningful share of the important linear market and a strong stake in the fast-growing digital ad space. We've included a bit more detail on the TV advertising market to give some color on recent trends in the linear and digital space.
Since 2019, while it's true that linear TV decline has been running at 5.8% CAGR, since 2020, digital video growth is at 17% CAGR, with the TV segment we play in running at 19%. Achieving scale and at the same time acquiring the FreeNow BVOD platform means we're well positioned to manage any change in mix. There are many factors at play, but the size of the prize we're going after is meaningful, and we have proven capability and exceptional content for us to go after this opportunity. The result for commercial is solid and a testament to the value-add Sky offers its customers in a competitive environment and the hard work and innovation of this team. As examples, our premium accommodation solution is now well established, and we've added the new revenue stream from the Samsung reseller partnership.
The next opportunity comes with the launch of the business edition of the new Sky Box and Pod in the first half of FY2026. This enables digital viewing to access to video on demand and third-party apps in these premises. Sky Broadband has built real scale in the last year, moving past 50,000 customers. We've had growth across all plans, but as with other providers, we've seen a shift in the mix following the doubling of planned speeds by network provider Chorus. That's lowered average revenues, but margins remain healthy, including cost efficiencies as we've achieved scale. With that, I'll hand over to Andrew, who will take you through the numbers.
Thanks, Sophie, and good morning everyone. Starting with the headline results, as Sophie's already mentioned, all metrics have been delivered within guidance. As you will see when I take you through the next slide, there are a number of one-off adjustments impacting the results, many of which were referenced at the half-year. In terms of the underlying result, revenue is at the lower end of guidance, which reflects the continued tough economic climate as well as delays in a number of planned initiatives due to the need to focus on satellite migration. EBITDA is in the middle of guidance, reflecting this revenue pressure, but partly offset by a strong focus on our cost base and response. Net profit after tax is down on last year as it was impacted by higher depreciation, reflecting the recent period of elevated CapEx and new products.
In terms of cash flow, we had another strong year of cash generation, with free cash flow of $24.8 million, which was 4.6% higher than the prior year, and on an adjusted basis was $36.7 million, just slightly down on last year. Digging into the detail on the next slide, I'll walk you through the one-off items that we're adjusting for. Firstly, for revenue and other income, we had $4.4 million of revenue impact from satellite migration, made up of $1.5 million of discounts and credits provided to customers who were impacted by service interruptions, and $2.9 million due to a two-month delay to the planned sports price increase on Sky Box. Offsetting this, we had $4.9 million of other income from an accounting adjustment to the lease term for our previous satellite lease.
For operating expenses, as reported at the half-year, programming costs include an $18.3 million non-cash cost for accelerated content amortization following the change we made for Neon content. Operating expenses also included $1.4 million of content impairment, $3.4 million of transformation costs, $2.3 million of transaction costs relating to the acquisition of SkyFree, and $2.9 million of costs related to satellite migration. Finally, we had $13.2 million of satellite migration CapEx, which was well within the $10 million- $20 million range we guided to. Moving to the next slide, where we have provided a wrap on the direct impacts of the migration project.
As we said from the outset, and well before we became aware of the need to accelerate, we have commercial agreements in place with Optus to support us with the cost of migration, meaning we always expected the project would be largely cash neutral by the end of FY2026. Despite there being increased costs and revenue impacts as a result of the accelerated timeframe and unexpected service issues, that was always still our expectation. On this slide, we've shown the impacts on revenue, OpEx, and CapEx, as well as the financial support we are receiving from Optus to help fund these impacts. To date, we've spent $17.7 million on CapEx, with a further $2 million- $4 million expected in FY2026 as we complete a dual L&D rollout.
The revenue and incremental cost impacts, all of which have been in FY2025, have amounted to $7.3 million, bringing the total migration cost over the three years to $27 million- $29 million. We have received $10.2 million of CapEx support from Optus, which has come through our leasing cash flows, with a further $6.1 million to come in FY2026. In addition, due to the acceleration in service issues with the old satellite, Optus agreed it would compensate us for up to $10 million for our incremental costs and revenue impacts. We have concluded a claim process with Optus and will receive $8.2 million of compensation, which will come through as other income in FY2026. We will exclude this from our underlying results in the same way that we have excluded the costs and revenue impacts in FY2025.
The final net impact will depend on the level of CapEx spend in FY2026, but as you can see, the migration has been largely cash neutral to Sky. Turning to the next slide on operating costs, where you will see the benefit of our cost discipline in the face of a challenging revenue year. On an adjusted basis, expenses were down $5 million year- on- year, starting with programming costs, which reduced by $7 million. That saving has been achieved through smart and sometimes tough choices on content renewals and acquisition, in all cases driven by our data on what our customers value. We have one-off events both this year and last. This year we had the Paris Olympics and All Blacks Northern Tour, and last year we had the World Cups, the FIFA Women, ICC Men, Netball, and Men's Rugby.
Subscriber-related costs reduced by $10 million, a 12% saving that was across areas like marketing, people cost savings from changes made during the year, and efficiencies from outsourced partners in streamlining operations. Broadcast and infrastructure is the only area where costs increased, with the majority of the $14 million uplift related to the cost of growth in Sky Broadband, as well as a smaller increase due to growth in our streaming products. Finally, in the other cost category, productions included lower consultancy and people costs, which more than offset continued investment in our ad sales business. Turning to slide 23, looking at CapEx. Adjusted CapEx, which excludes the $13.2 million of satellite migration spend, has returned to our target range of 7% - 9% of revenue.
It's down 17% year -on- year, reflecting a return to normal after a two-year period of accelerated investment to build inventory and new customer products. While the product rollout continues, our investment is now at run rate levels. We have continued to direct over half our CapEx spend towards growth. This includes investment in boxes, pods, and broadband routers, costs associated with installations for newly acquired customers, and the continued rollout of developments such as IP failover and digital ad tech. The enhanced and maintained category, which has remained fairly stable for the last few years, included platform, digital, and data focus enhancements and transmission equipment and system upgrades.
Returning now to slide 24 on cash flow, it's pleasing to report that we've again had a strong cash flow year with cash flow of operations of $120 million, albeit this is lower than last year due to weakened capital movements and the one-off costs of the new satellite migration. CapEx was $4 million lower than last year, despite including the $13 million of satellite migration spend as we moved past the accelerated investment phase in new products over recent years. Lease costs were $9 million lower, largely because of the $9.5 million of Optus CapEx rebates that I talked about earlier. A total of $30 million was distributed to shareholders by way of dividends. That's a 21% increase year -on -year. Finally, we closed FY2025 with $32 million of cash on hand and an undrawn bank facility of $100 million.
Moving from cash flow to capital management on slide 25, and starting with dividends, our adjusted free cash flow available for distributions was $36.7 million. This is after adjusting for the cash impact of one-off items and net of the offsetting benefit from the Optus CapEx rebates. The board has recommended a final dividend for FY2025 of $0.135 per share, bringing the total for the year to $0.22 per share, which equates to 82.5% of the adjusted free cash flow. As a reminder, dividends are fully imputed. With regards to capital management activity, as you know, our most recent buyback program was paused throughout the year due to the ongoing New Zealand Rugby negotiations, and the program closed on 31st March . For now, the board has decided to pause for further capital management options as we prioritize the integration of SkyFree.
This pause will be reviewed periodically as we get further into the integration and synergy realization process. Just on SkyFree, on the next slide, I'll give you a quick reminder of the FY2026 expectations. The chart here should be familiar as they were included in our completion information on August 1. On the left, you can see the pro forma underlying free cash flow impact for FY2026, which we expect to be positive. On the right, you can see how we get to the $10 million of incremental EBITDA on a group basis by the end of FY2028 through executing on identified synergies. A few other aspects to note with regards to SkyFree in FY2026. We expect an 11-month gross revenue contribution of approximately $85 million from linear and digital advertising, including revenue share arrangements with WBD.
CapEx is expected to be $3 million- $4 million, and we've assumed net integration costs over FY2026 and FY2027 of $6.5 million, which is net of a contribution from WBD. We will commence the acquisition accounting work shortly. This will have an impact on the FY2026 P&L as it determines the fair value of assets acquired, such as content, and therefore impacts things like amortization expense, but it has no impact on cash flow. We expect to provide a further update on SkyFree at the half-year, assuming the acquisition accounting work is completed by then. I do note that we expect it to result in a one-off bargain purchase gain in FY2026. Finally, from an integration and operational perspective, we've appointed an experienced Chief Transition Officer and put in place an integration governance framework. We have a 12-month transitional service arrangement in place with WBD.
For the most part, we are leaving the two businesses to run largely independently for the first two to three months before the integration work really kicks off. On that note, that's all from me. I will now hand you back to Sophie to cover off the outlook and FY2026 guidance.
Thanks, Andrew. Great job. Turning to slide 28, and having completed the acquisition of SkyFree just three short weeks ago, our guidance at this time is on a standalone Sky basis. Our revenue guidance reflects the ongoing economic challenges we expect to continue for at least the first half. FY2026 includes the first six months of the new New Zealand Rugby Agreement, albeit the first year reduction will be more muted as a portion of the final payments on the existing deal flow through to FY2026. While we'll continue to be disciplined in our cost management, we will also reinvest in marketing, customer experience, and people after a challenging FY2025 and to lay the groundwork for acceleration from FY2027. That sees EBITDA guidance within a range of $142 million - $162 million, excluding one-off transaction and net integration costs.
As noted, we're no longer guiding on NCAT as it's not considered a meaningful metric for market valuation purposes. CapEx guidance of $60 million - $70 million is in line with our 7% - 9% of revenue target and excludes satellite migration spend of between $2 million - $4 million. Finally, I take great pleasure in confirming our dividend guidance of at least $0.30 per share, which reflects the target we set back in 2023 to double the dividend. This excludes one-off items in line with our policy, and at $0.30, would deliver an impressive 36% uplift on FY2025. On slide 29, it's a reminder of our purpose. We're privileged to share stories, share possibilities, and to share joy. Our ambition is to do this in a way that makes Sky New Zealand's most engaging and essential media company, and our strategic pathways are key to creating this value.
Importantly, especially with the SkyFree acquisition, is our enduring commitment to be a responsible and sustainably profitable New Zealand-focused business. In connection with our strategic pathways, we'll continue our focus on the priorities we've progressed in FY2025, with crew engagement and new Sky experience, content engagement, and advertising each playing a crucial role in our future success. At the same time, successfully integrating SkyFree and optimizing the benefits that the acquisition presents across both businesses is a key priority. I can tell you, three weeks in, and we're hugely excited at the possibilities this unique opportunity brings. That said, I can assure you we'll be appropriately focused so not to lose sight of the existing opportunities we have in front of us within both businesses. Achieving on both fronts is a bottom line for my team. In this way, we'll be setting the scene to accelerate our growth from FY2027. With that, I'll now hand back to the operator, and we look forward to your question. Thank you.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you're on a speakerphone, please pick up the handset to ask your question. Your first question today comes from Rob Morrison with Craigs. Please go ahead.
Morning, guys. Congratulations on securing the rugby.
Thank you.
First question. My pleasure. First question on the payout ratio. You've given some good color on what you expect for FY2026. If I assume the midpoint of that range, it does look like if you pay the $0.30 per share dividend, it will be at the top of your payout ratio. With the rugby benefit flowing through in FY2027, would you expect to pay the dividend out, you know, something closer to the midpoint or maybe lower end of the payout range then?
Thanks, Rob. You're right. In terms of the payout ratio for FY2026, in terms of the way that we've guided the market, we haven't actually got to 2027 as yet. That will be part of the conversation. Overall, we're always looking to drive better margin in the business. I won't be able to confirm that right now, but we'll look forward to doing so in due course.
No worries. Given again the good data detail you've given us, we can work out what the programming costs are, your expectation for them in FY2026. It looks like about $245 million at the midpoint is down quite a lot, $22 million. What's driving that if the rugby isn't a significant input?
The question is what's driving the reduction in 2026? Is that your question?
Yeah, correct. Yeah, the $22 million programming cost card reduction.
Yeah, so there's obviously, as I think we mentioned, we had one-off events in 2024 and 2025. There's a little less of those in 2026. In particular, in 2025, we had the Olympics, which was a reasonably big number. Yeah.
We have, as we talked about, been very focused right across the portfolio and looking at our entertainment spend as well, which has driven some further savings there.
Would those two together be, say, 75%, I guess the majority of that step down in cost?
Big chunk of it, yeah.
Cool, thanks.
Thank you. Your next question comes from Ari Dekker with Jarden. Please go ahead.
Good morning. Can I just start with how trading's going for the first, I mean, almost two months of 2026? What are you sort of seeing? Is it the same sort of rate of momentum in Sky Box customers, or is it different?
Look, the first month has gone well. We're obviously in peaceful areas, you'll appreciate. We are seeing some ongoing headwinds from a churn level in terms of our customers calling into us. We're really mindful of that, and that's why we've guided the market as we have. We really are very focused on getting back to those more reasonable levels of churn, which have come back from last year, thankfully, and off the back of the satellite migration being completed. Seeing more customers move on to our new Sky experience too, with the improved churn as we move customers onto that product. There's a lot to look forward to in this financial year, but we are being really mindful of the economic climate and nurturing customers through it. The month of July, we're in a good place, but yeah, we're really mindful of that ongoing context.
Yeah, just so I make sure I'm interpreting this correctly in terms of the payments to New Zealand Rugby, and not quite getting the full benefit, or a full half-year benefit of the reduced rights there. Are you essentially making an exit payment under the old deal that will flow through in 1 January? That's offsetting what would otherwise just have been what we would have expected, a 50% of the benefit in 2026 and 50% in 2027?
Yeah, look, broadly, I wouldn't characterize it necessarily as an exit. It was just that in the last year of the deal, there was some overflow, and you've also got some, you know, it is the calendar year versus financial year. Broadly, you're correct, Ari, in terms of your assessment.
Yeah, and then I guess just in terms of, and I mean, I may be wrong on this, but you've got a Sky shareholder vote on the rugby rights, which, you know, they'd be very surprised if they wanted the upheaval of not having them. I guess the question is what information will you be providing to shareholders to help inform their decision on whether to vote for the rights deal?
Yeah, spot on. We obviously work with Easybr idgeco and our corporate lawyers to make sure we're giving all of the relevant information to the Companies Act, which we will be doing. I think the critical container for you to reference is the 47% - 49% of revenue. I think that toggling to revenue is super important, right? Because if revenue isn't where we want it to be, we need to make sure we're managing that cost line. That's a vitally important part of that messaging. No doubt you'll have interest when the notice of meeting comes out for our ASM. We're going to be providing shareholders with the information we think they need and look forward to a positive outcome.
Just on Discovery , I don't want to read too much into it because I guess it's a little bit at the margins. I mean, I think you talked about full-year revenue of $95 million. I mean, 11 months, $85 million, you know, is this the first of what is a small downgrade in the revenue outlook for Discovery ? Because, yeah, 11/12 of $95 million is a bit more than $85 million, or are you just rounding it?
It's literally rounding. Nothing more, nothing less. You know.
Yeah, I don't think it's a downgrade, and I think it is really important to understand we are, we will look at the half-year to do an update, obviously, but we're obviously guiding Sky as a complete standalone core business. Certainly no downgrade's been given, Ari.
Okay, and just on CapEx, $60 million- $70 million. I guess I was just a little bit surprised that, you know, like the top end of the range, $70 million. What are the things that are going to swing it for you in terms of up to that top end of the range, or, you know, just to get a sense of how cautious you're being on that guidance?
I think, you know, look, it's obviously we don't have the issues we have, we don't have the spend we had in the last couple of years, obviously on the rollout of new products, but we're still working through quite a significant CapEx load. I appreciate that, you know, that's a range that's sort of towards the top end of the $7 million -$9 million, but we're pretty comfortable we'll fall within that in the rounding. I don't think we're at risk of falling outside that range.
Yeah, and then last question, and I recognize actually, you know, that this was covered off at the half-year as well, but can you just give a little bit more color on the accelerated content amortization? You know, $18 million, obviously, or $18 million, $19 million isn't insignificant. You know, the references there and the notes aren't super clear on just what's going on there.
We provided quite a bit of detail. I think you'll find it in the annual report around that and also on the half-year. It also relates to a shift in the way we're doing the amort from an old policy to one that's based on dealership, which has a more accelerated program. We're still spreading the amort over an 18-month period, but it's more loaded to the front end. There's quite a bit of detail in the annual report around that.
Okay, thank you.
Your next question comes from Aaron Ibbotson with Forsyth Barr. Please go ahead.
Thank you and good morning. I guess we have covered some of the programming costs, but sorry to come back to Neon. I just wanted to clarify, you know, if you look on a sort of like-for-like basis, part of the reduced content costs for this year or programming costs, does that relate to the accelerated amortization? Maybe related to that, should we expect a difference between cash costs and amortization then if you have now sort of taken a non-cash amortization this year? I assume the total cash paid is still going to be the total cash paid, even though you treat it as non-cash and non-recurring for this year.
Yeah, there's not a big swing between reporting and cash, and I think the numbers we're talking about in terms of the reductions are all on an underlying basis, excluding that one-off impact. The number that we were talking about earlier is excluding that $18.3 million charge.
The $18.3 million, which was non-cash, is still going to be cash at some stage, no?
No.
When is that cash going out?
Over time, if some of it's already gone and some of it's coming, it's just a question of how we've accounted for it in the balance sheet.
Okay, fair enough. On Sky Sport Now, very good result. I'm just trying to get my head around the dynamics a little bit. You've talked, you've sort of moved away from this weekly, which is appreciated and a good initiative. If I look at ARPU up 10%, subscribers up 20%, and revenues up 17%. One of the dynamics here, have you had a lot of subscribers coming on late, which you haven't captured yet? Should we expect very strong this year, or is there some other, have you had increased churn or something? Why do those two not even remotely add up, basically?
Thank you for your acknowledgement of the weekly going and going to the monthly. One of the initiatives that we did launch this year in terms of revenue growth was the day pass at $29.99, which was a bit of a test and learn, and it's going exceedingly well. As some Kiwis prefer the flexibility of that. I think there's a, and you know, if I look at that win-back pool that we're showing, it is a phenomenal direct marketing opportunity, super low cost. We're like you, excited about the growth we're seeing in Sky Sport Now. If there's a more specific query that we can answer, if you want to reframe it again, happy to try.
Sorry. If I look on slide 13, you know now Sky Sport Now excluding weekly, that's gone from 125,000 to 150,000, so up 20%. Your ARPU has gone from sort of 41 to 45, up 10%. That adds up to 30%, but your revenues are just growing 17%. Your daily cost that you highlighted should move in the opposite direction because presumably that is not included in the 150,000. You know, why is your customers and your ARPU growing faster, so to speak, than your revenues so much faster?
Any thoughts on the call right now?
You can come back to them.
We'll come back to you and make sure we've got the response you need on that, Aaron, thank you.
I guess similarly then on Neon, your ARPU is up 7%, your customers are flat, and your revenues are flat. What's happening there?
I don't know. I think as far as answering to both questions, the customers at a point in time, this is what they ask throughout the year because obviously they come and they go. We're reporting here numbers at a point in time.
Okay, it just seems very unlucky, I guess, in both of those, but okay.
You get the volatility in the sport around events. Customers will come for events, and then the numbers drop. That's part of the challenge here. We're not reporting average customers, we're reporting at a point in time ones.
I've got two more short ones. Is it too early to observe any change in like-for-like churn of subscribers on the new versus old Sky Box or pod? Positive or negative, have you observed an increased churn or reduced churn or no change if you put them in a like-for-like tenure?
Yeah, it's 54% lower churn for new Sky Box customers. It definitely is a significantly improved position, and it's 62% lower for those who've been with us for more than five years. A super positive trend for us there, which is why we're excited to come back to the development roadmap in this financial year, post-migration, to make sure we're actually continuing to evolve that experience for our customers. It's a big focus for the team.
That is also reflected in the customer impetus on that new product.
Yeah, which correlates, right? The Net Promoter Score is higher with the new Sky experience. More good things to come from that digital product.
Okay, and then finally, I guess to ask the obvious question, you have touched on it, but you are guiding for, you know, a not insignificant increase in sort of non-programming OpEx, even if I exclude some sort of reasonable assumption around broadband. You've done, you know, exceptionally well over the last few years. You're not really seeing any revenue pick up. What gives you the confidence, if I put it that way, to take your foot off the brake a little bit when it comes to costs? You mentioned advertising. Is there anything else? People is a quite broad measure.
Yeah, look, I think that there's just, there is an element where you have to, you do need to invest. We work, as you say, very hard to deliver on the guidance, the updated guidance we gave, and we've determined that we want to, as I just talked about, in terms of investment in the new Sky experience, in our overall customer experience from a marketing perspective, you know, we have a phenomenal array of content that we actually want to make sure our customers and future customers know about. There's no letup in our drive for margin growth, but we do think that it's important in this financial year, notwithstanding those revenue pressures, that we do look to invest a bit back into our business.
We have very clearly talked about obviously staying focused on our outcomes and doing the integration of SkyFree as we really set ourselves up for growth when hopefully the economy will also be in better shape, Aaron, so from FY2027 onwards really getting to accelerate. Of course, if revenue comes off further, we do know how to operate our business. We're very good at managing those costs, but we have made a, you know, we want to invest a bit more into the business to give ourselves that opportunity to accelerate that growth in FY2027.
Okay, thank you. That's it from me.
Thank you.
Your next question comes from Phil Campbell with UBS. Please go ahead.
Yeah, morning, Sophie and Andrew. Just a couple from me. I just wanted to get a little bit more detail. I know it's been a challenging year, but just a bit more detail on when you're looking at those 52,000 disconnections on the Sky Box. What are the kind of main reasons you're hearing from customers that they're kind of churning off or disconnecting? I suppose the reason for the question is I just want to try and forecast going forward because obviously the new box experience has got lower churn. Also, I think what's happening is the percentage of customers watching sport is obviously going up and they're probably less likely to churn as well. Just kind of interested in what's currently driving the reason for churning and then going forward and assuming that rate of disconnection should slow down a bit or reduce.
Yeah, look, the main reason is price, right? It's that people can't afford, want but can't afford, is the end value for money. If you're, you know, those codes come through, but it's definitely more about price at this stage as Kiwis are doing it pretty tough. I think your commentary around positivity looking forward, given some of those indicators that we've got, particularly around the new Sky Box and what it means for those Sky Box customers in terms of their churn profile. I would see that number moderate, but equally we've guided on the basis that this is going to be a tough economic operating condition for us and our customers, and the team will be working hard to nurture customers through it, but wanting to drive the right value, as you say, with protecting on that new Sky experience. I'm looking forward to that hopefully continuing to moderate as well.
Okay, the second question was, it might be a little bit too early, but obviously I think you took control of Discovery 1st of August. It's been a few weeks. What's kind of the impression now that you're inside the tent rather than being outside the tent?
Just hugely excited about the opportunity. You know, we obviously communicated that Juliet Peterson is going to be our new Chief Business Officer, looking after those businesses. Lauren's done a phenomenal job with Sky Sales, and there's just a lot of excitement. To be honest, it's all about trying to hold the teams back because we do want to make sure we get through the integration and we deliver on the investment case. We just see a lot of opportunity, and it's, yeah, it's hugely exciting as we look forward.
Anything that surprised you, positive or negative? You know, because obviously when you do the DD, once you get inside, it could be a little bit different.
All positive and on the upside at this stage, that's great to be able to report.
Okay, great. Thanks.
Thank you.
Once again, if you wish to ask a question, please press star one on your telephone and wait for your name to be announced. We'll pause a short moment for final questions to register. Thank you. There are no further questions at this time. I'll now hand back to Ms. Moloney for closing remarks.
Just for me to say thank you to all of you on the call and to all of our investors, in particular to our Board and my team for delivering in FY2025. I think, you know, to be able to be here and confirm the dividend guidance of $0.30 per share, being that target we gave back in FY2023, notwithstanding all of the conditions that we've been operating under, I think is a testament to all of that hard work. We look forward to communicating with our owners and our analysts shortly. Thank you very much for your time.
That does conclude our conference for today. Thank you for participating. You may now disconnect.