BSkyB to buy back $1.2 billion of shares, hikes dividend 20 pct despite full-year profit fall

LONDON – Satellite broadcaster British Sky Broadcasting PLC confirmed widespread speculation by announcing a big return of cash to shareholders while reporting a 23 per cent gain in operating profit.

The satellite broadcaster, which is 39 per cent owned by Rupert Murdoch’s News Corp., said Friday it is raising its full-year dividend by a hefty 20 per cent and revealed plans for a 750 million pounds ($1.2 billion) share buyback program.

“This may not be enough for the mega bulls, but a good start in our view,” said Steve Liechti, analyst at Investec Securities.

BSkyB shares were up half a per cent to 720 pence in early trading on the London Stock Exchange. They had been trading at 850 pence in early July before the phone hacking scandal at News Corp.’s News of the World tabloid became particularly acute.

The market was expecting some sort of return to shareholders after News Corp. withdrew its bid for the 61 per cent of shares it does not own. The bid was shelved earlier this month after the phone hacking revelations by the News of the World, which was subsequently closed down.

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James Murdoch remained in place as chairman of BSkyB following Thursday’s board meeting, despite concerns that more of his time will be taken up in dealing with the fallout of the hacking scandal which has so far led to the resignation of two senior News Corp. executives.

“The board discussed governance generally, that included the role of the chairman,” said BSkyB CEO Jeremy Darroch. “In the end the board was unanimous in its conclusions.”

Adjusted operating profit, excluding one-time gains a year ago, rose to 1.1 billion pounds from 872 million pounds a year earlier. On the net level, profits were 8 per cent lower at 810 million pounds ($1.3 billion).

Revenue was up 16 per cent to 6.6 billion pounds.

During the year, the company passed the 10 million customer mark, and it said 27 per cent of its customers have signed up for its triple play of television, broadband and telephone, up from 21 per cent a year earlier.

“It is to the credit of Sky’s first-class management team that the company has continued to deliver throughout the offer period that ended earlier this month,” Murdoch said.

As part of the share buyback plan, BSkyB said News Corp. had agreed to sell shares to insure that its stake does not increase its stake above the present 39 per cent.

BSkyB, which has built its success on a stable of exclusive sports rights and movies, added Formula 1 racing to its schedule in a deal with the British Broadcasting Corp.

The BBC, which had exclusive rights to show Formula 1 but is under pressure to cut costs, has agreed to a deal in which it continues to broadcast half of the races including the season finale while BSkyB gained rights to show all of them.

Darroch declined to say how much it had paid to add an attraction in “the top tier of sports property.”