By Kate Holton
LONDON (Reuters) - European pay-TV group Sky (L:SKYB) said on Wednesday it expects to perform strongly in its new financial year after better-than-expected 2014/15 profits prompted investors to rethink their growth forecasts for the newly-enlarged group.
Sky, formed from the combination of Britain's BSkyB, Sky Deutschland and Sky Italia to serve 21 million customers in Europe, posted full-year results boosted by record demand in Germany and Austria, a stabilisation in Italy and continued solid growth in Britain and Ireland.
With customer loyalty improving, the firm founded by Rupert Murdoch posted an 18 percent jump in operating profit to 1.4 billion pounds, sending its shares up an initial 5 percent at the market open in London.
At 0722 GMT, they were up 1.2 percent, giving it a value of 19.5 billion pounds.
"The signs are encouraging for both 2016 and the medium-term," said analysts at Citi. "We expect consensus upgrades.
Our long-term thesis is that the market underestimates the growth potential for Sky."
Full-year results showed the group had withstood competitive challenges in Britain, where it enjoyed its highest annual organic customer growth in 11 years, driven by demand for broadband and its satellite and online TV services.
It added record customer growth in Germany and Austria, with total product growth up 56 percent on the year, and in Italy its customer base remained stable, after three years of decline.
"We think the outlook for growth is good," Chief Executive Jeremy Darroch told reporters. "The prospects for growth for the business over the next year, and there after ... are very good."
The upbeat outlook comes despite Sky facing an important year in its history, with the firm which made its name by showing top-level sport about to lose the rights to the European Champions League this year at home to BT (L:BT).
The group is also set to launch a mobile service in 2016 through a partnership with Telefonica's (MC:TEF) O2 in a bid to provide content to customers in the home and on the go, which will enable it to better compete with BT and Virgin Media (O:LBTYA).
"Yes, the market is more competitive in the UK with BT and Over The Top players offering new alternatives but Sky has now
demonstrated they can still grow nicely thanks to a superior TV product," said Barclays (LONDON:BARC) in a note, in reference to the challenge from online players such as Netflix (NASDAQ:NFLX).