Sky Network (ASX:SKT) share price shoots 6% higher on upgraded guidance

The Sky Network Television Ltd (ASX: SKT) share price is shooting higher today following the release of an upgraded guidance announcement.

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The Sky Network Television Ltd (ASX: SKT) share price is shooting higher today following the release of an upgraded guidance announcement.

In early morning trade, shares in the television services company are up 6.8% to 15.5 cents. In comparison, the All Ordinaries Index (ASX: XAO) is up 1.1% to 6,617 points.

Upgraded guidance

According to the release, Sky advised it has upgraded its revenue and profit guidance for the remainder of FY21. The reforecasting exercise was based on the positive momentum experienced in the first four months of trading for the new financial year.

Sky's direct satellite customer base has grown for six consecutive months, driven by an improvement in FY21 annualised churn to 12.2%. This is a reduction from the 13% and 15% achieved in FY20 and FY19, respectively.

The company attributes it upturn in results to its customer management process and refocused sales efforts. This led to greater-than-anticipated growth in streaming revenue, particularly from the Neon entertainment platform.

As key metrics have outperformed earlier predictions, Sky increased its revenue guidance range for FY21. The company now calculates revenue to be around $680 million to $710 million, compared to the previous estimate of $660 million to $700 million.

In addition, earnings are expected to benefit from one-off cost savings as a result of the renegotiation of certain contract rights. Sky stated that it's also continuing to exercise careful cost control measures across its operations.

Off the back of the upgraded outlook and tight cost control, earnings before interest, tax, depreciation and amortisation (EBITDA) is also projected to lift. Current estimates put EBITDA for FY21 between $140 million and $155 million, a jump from the $125 million to $140 million declared in September.

Net profit after tax is also forecasted to swell to $20 million to $30 million, almost doubling prior guidance.

What did management say?

Sky chief executive Mr Martin Stewart commented on the strong start to the financial year:

While external economic factors remain challenging and uncertain, our internal performance in managing and serving our satellite customers well has resulted in much lower churn and improved acquisitions, leading to six consecutive months of growth in direct Sky satellite customers. We also continue to see pleasing growth from, and engagement with, our Neon streaming service.

The last few months have reinforced the 'power of our bundle' and our ability to offer a one-stop- shop for all of our customers' entertainment and sport needs. We are looking forward to making life even better for our satellite customers when we add Sky Broadband to the mix in early 2021.

Sky share price summary

Despite today's positive announcement, Sky shareholders would be disappointed with the company's share price performance over the last few years. Reaching as high as $6.27 in 2014, Sky shares can be picked up for now 15.5 cents, representing a massive fall of 97%.

Motley Fool contributor Aaron Teboneras has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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