Reported profit rose 3.8% to $62.7 million and revenue was up 7.3% to $426.9 million.
Sky said the improved financial position was primarily because of the continued success of the MY Sky HDi decoders, a positive period for advertising sales, higher average revenue per subscriber from revenue from the new SoHo channel, which launched late last year, and strong subscriber gain.
Sky increased its capital expenditure in the period to $68.6 million from $59.4 million in the previous corresponding period, an increase mainly caused by a rise in decoder costs of $8 million.
Forsyth Barr broker Suzanne Kinnaird said Sky was maintaining a cautious earnings outlook because it continued to invest in its business and there was some risk surrounding the number of households subscribing to the sports-tier package.
In the second half of the financial year, Sky planned to lease the eighth and final transponder to support more HD channels (SoHo, Sports 3) plus have the ability to transmit eight HD channels for the July 2012 London Olympics, she said.
"Sky is well positioned to deliver sustainable and ongoing growth in earnings and cash flow."
The capital expenditure "bubble" was expected to subside over the next couple of years and that would lead to substantial free cash flow to support higher dividend distributions, Ms Kinnaird said.
The recent media speculation on the threat of regulation, plus the possible weighting downgrade in the NZX50 gross index, had placed downward pressure on Sky's share price in recent weeks.
"We believe this has provided a strong buy opportunity based on Sky's favourable long-term outlook and attractive fundamentals," Ms Kinnaird said.
Looking at the release to the NZX, Ms Kinnaird said the company's net debt was $465 million after paying a special dividend of 25c, or $97 million. In the past few years, Sky had accelerated its investment in all areas.
Despite that investment, and the $97 million special dividend, net debt had increased by only $28 million over the past 12 months.
That demonstrated the company's ability to continue to pay high dividends in the future, whether that was through a higher payout ratio or periodic special dividends.
Sky increased its MY Sky subscribers nearly 52,000 to 331,041, continuing to exceed market expectations.
Its subscriber base increased 16,800 in the period, the highest increase since the first half of 2007, she said. Sky was on track to meet Forsyth Barr's target of 861,500 subscribers for the current financial year.
