3 August 2005
BRITISH SKY BROADCASTING GROUP PLC
Results for the twelve months ended 30 June 2005
BSkyB announces total revenue of over GBP4 billion, record profits and
year on year growth in gross subscriber additions
Operating highlights
- Net DTH subscriber growth of 83,000 (2004: 81,000) in the quarter to
7.8 million (2004: 7.4 million)
- Sky+ households increased by 118,000 (2004: 75,000) in the quarter to
888,000 (2004: 397,000)
- Multiroom households increased by 82,000 (2004: 23,000) in the quarter
to 645,000 (2004: 293,000)
Financial highlights
- Turnover increased by 11% to GBP4,048 million
- Operating profit before goodwill and exceptional items increased by 34%
to GBP805 million, a margin of 20%
- Profit after tax increased by 32% to GBP425 million
- Earnings per share before goodwill and exceptional items increased by
58% to 29.0 pence
- Proposed final dividend of 5 pence per share generating a full year
dividend of 9 pence per share
James Murdoch, Chief Executive said:
"The team delivered a set of results this year that demonstrates the
health of our business and the strong position that the Company occupies
in this rapidly evolving marketplace. We remain focused on providing the
leading entertainment service in the UK and Ireland that continues to meet
the changing needs of our customers and their families, offering great value
and world-beating quality. In a highly competitive environment, we are
confident in our ability to achieve our goals"
Results highlights
Key subscriber information 2005 2004 Change % Change
Net DTH subscriber 83,000 81,000 2,000 2%
additions(1)
Total DTH subscribers(2) 7,787,000 7,355,000 432,000 6%
Net Sky+ household 118,000 75,000 43,000 57%
additions(1)
Total Sky+ households(2) 888,000 397,000 491,000 124%
Net Multiroom household 82,000 23,000 59,000 257%
additions(1)
Total Multiroom households(2) 645,000 293,000 352,000 120%
Profit and loss account Twelve months to 30 June
(GBPm)
2005 2004 Change % Change
Turnover 4,048 3,656 392 11%
Operating profit before
goodwill and 805 600 205 34%
exceptional items(3)
Operating profit margin
before goodwill 19.9% 16.4% 3.5% 21%
and exceptional items
Profit before taxation,
goodwill and 757 514 243 47%
exceptional items(3)
Profit after taxation
before goodwill and 555 356 199 56%
exceptional items(3)
Profit after taxation 425 322 103 32%
Cash flow information (GBPm) Twelve months to 30 June
2005 2004 Change % Change
Operating cash inflow 978 882 96 11%
Net debt 379 429 -50 -12%
Per share information(pence) Twelve months to 30 June
2005 2004 Change % Change
Earnings per share before
goodwill and 29.0 18.3 10.7 58%
exceptional items(3)
Earnings per share 22.2 16.6 5.6 34%
1. In the three months to 30 June
2. As at 30 June
3. The reconciliation to the nearest equivalent GAAP measure can be found
in Appendix 2
Enquiries:
Analysts/Investors:
Andrew Griffith Tel: 020 7705 3118
Robert Kingston Tel: 020 7705 3726
E-mail: investor-relations@bskyb.com
Press:
Julian Eccles Tel: 020 7705 3267
Robert Fraser Tel: 020 7705 3036
E-mail: corporate.communications@bskyb.com
Finsbury:
Alice Macandrew Tel: 020 7251 3801
There will be a presentation to analysts and investors at 9:30 a.m.
(BST) today at Goldman Sachs, River Court Conference & Training Centre,
7th Floor, River Court, 120 Fleet Street, London EC4A 2BB and a press
conference at 11:30 a.m. at the same venue.
A conference call for US analysts and investors will be held at 10:00 a.m.
EST today. Details of the call have been sent to US institutions and can
be obtained from John Sutton at Taylor Rafferty on +1 212 889 4350.
A live webcast of the presentation to analysts and investors, together
with this presentation will be available today on Sky's website, which
may be found at www.sky.com/corporate.
Interviews with James Murdoch, CEO, and Jeremy Darroch, CFO, in video,
audio and text, are available from Sky's website and at www.cantos.com.
OPERATING REVIEW
At 30 June 2005, the total number of direct-to-home ("DTH") digital
satellite subscribers in the UK and Ireland was 7,787,000, representing
a net increase of 83,000 subscribers in the three months to 30 June 2005
("the quarter"). During the year, the number of subscribers to one or
more premium channels increased by over 250,000 to 5,619,000. The Group
remains on track to achieve its target of eight million DTH subscribers
by 31 December 2005.
The Group recorded gross DTH subscriber additions in the quarter of
303,000, reflecting further progress since the launch of a number of
strategic initiatives, including the 'What do you want to watch?'
marketing campaign on 1 October 2004, and despite a more challenging
consumer environment.
The total number of Sky+ households increased by 118,000 in the quarter to
888,000, reflecting an 11% penetration of total DTH subscribers. Since
relaunching with a revised pricing structure in October 2003, the number
of Sky+ subscribers has increased at an average rate of 110,000 every
quarter, equal to the growth in total DTH subscribers over the same period.
This product continues to receive high satisfaction ratings and attract
new customers to Sky with 14% of new additions in the quarter taking Sky+.
The total number of Multiroom households has more than doubled year on year,
increasing by 82,000 in the quarter to 645,000, 8% penetration of total
DTH subscribers.
DTH churn for the quarter (annualised) was in-line with the fourth quarter
of last year at 10.5% and down from 11.1% for the previous quarter. Churn
for the twelve months ended 30 June 2005 ("the year") was 10.3%, in-line
with the Group's stated goal of around 10%.
Annualised average revenue per DTH subscriber ("ARPU") in the quarter was
GBP384, GBP2 higher than the previous quarter reflecting increased Multiroom
subscriptions, a greater number of pay-per-view ("PPV") events and higher
net revenues from SkyBet.
During the year the business delivered a set of initiatives to further
extend the range of products and services available to its customers.
- Today, Sky is announcing the introduction of the 'Sky Gnome', an
innovative portable and wireless device that will enable customers to
listen to the audio output from their favourite digital TV and radio
channels throughout the home.
- In June 2005, Sky announced a simplified pricing and packaging
structure that offers customers increased choice and flexibility. The
basic-tier package will be replaced by six distinct "genre-mixes"
allowing customers to select various combinations of basic-tier
channels alongside premium sports and movies. Whilst increasing the
number of available packages fivefold, Sky also reduced the number of
price points from 96 to 15.
- Before the end of this calendar year, customers who subscribe to a
top-tier package and have a broadband internet connection will be able
to download movies 'on-demand' and enjoy Sky Sports programming through
their PC free of charge. Initially planned to launch with over 200
movies, which will increase over time, customers will be able to browse
and download movies, trailers, behind the scenes footage and reviews at
any time through an easy to use, intuitive application. From day one,
over 5 million Sky Sports subscribers will have access to highlights
from all their favourite sports, including Barclays Premier League and
UEFA Champions League football, rugby, golf and cricket. As an added
benefit, Sky World customers will also be able to receive the latest
video updates from Sky News and Sky Sports News via their mobile phone.
- In October 2004, Sky added Sky+160 to its product portfolio. This
product offers customers around four times as much storage as the
standard Sky+box and has two USB connections, increasing its
compatibility for future developments.
- At the same time, Sky launched a new freesat service offering customers
around 200 television and radio channels and interactive services for a
one-off fee. This provides an attractively priced alternative for
approximately 50% of UK households who either cannot receive Freeview
or require an aerial upgrade.
- Following on from the success of Sky+, Sky plans to launch Europe's
most comprehensive high definition television service ("HDTV") in the
first half of calendar year 2006. Good progress was made during the
year building the required broadcast infrastructure and facilities and
developing the HDTV box, which has the connectivity and flexibility to
offer advanced services in the future. This service will initially
comprise a number of HD channels, including sports, movies and
documentaries and will offer customers the ultimate TV experience.
- Sky Sports share of viewing (according to viewing figures from
the Broadcasters Audience Research Board ("BARB")) in UK
television homes was 12% higher than the same quarter last
financial year, with England playing Australia in cricket's NatWest
Challenge and the British and Irish Lions tour of New Zealand both
achieving record audience figures. During the year, Sky concluded a
number of major sports agreements including:
- Exclusive live rights from the England and Wales Cricket Board to
broadcast all international and the primary domestic cricket series
in England and Wales until 2009
- Exclusive live rights from the Rugby Football Union to broadcast
England's Autumn Internationals and Zurich Premiership matches until
2010
- Exclusive live rights to the European Rugby Cup until 2010
- Exclusive live rights from the Football League to broadcast around
100 matches per season from the League's competitions until 2009
In addition to these, Sky Sports also added coverage of equestrian events,
international netball, badminton and yachting to further increase the range
of programming on its dedicated channels, which includes coverage of over
150 different sporting disciplines.
- During the year, Sky made progress in the renegotiation of three major
movie studio contracts, focusing on better quality, better rights and
improved value. Sky Movies screens over 450 different films every week
across its 11 multiplex screens, offering unrivalled choice and
convenient viewing.
- Named as 'News Channel of the Year' by the Royal Television Society for
the fourth year running, Sky News remains the UK's leading news channel
both in terms of ratings and critical acclaim. Later this year, Sky
News will unveil a new on-air look and schedule when it begins
broadcasting from its recently completed state-of-the-art studio
complex at Sky's main campus in Osterley.
- Sky One relaunched in September 2004 with a new on-air look and strong
line-up of acquired and commissioned programming. The channel's
commitment to offer modern, quality programming is reflected by a 3.9%
increase in the share of viewing by ABC1 adults in network homes in the
first half of calendar year 2005. The upcoming Autumn schedule features
a strong line-up with 'Nip/Tuck' returning in a two series exclusive
agreement, the second co-produced series of the '4400' and new US drama
series 'Weeds' and 'Threshold'.
FINANCIAL REVIEW
Total revenue for the year increased by 11% over the year ended 30
June 2004 ("the comparable period") to GBP4,048 million. Operating profit
before goodwill and exceptional items increased by 34% on the comparable
period to GBP805 million, resulting in operating profit margin before
goodwill and exceptional items of 20%, up from 16% for the comparable
period.
The Group generated earnings per share before goodwill and exceptional
items of 29.0 pence, up from 18.3 pence for the comparable period, and
returned a total of GBP551 million to shareholders through an ordinary
dividend and a share buy-back programme.
Revenue
Total revenues increased by 11% on the comparable period to GBP4,048 million.
DTH revenues increased by 12% on the comparable period to GBP2,968 million.
This was mainly driven by 6% growth in the average number of DTH subscribers
and a 5% increase in the average revenue per DTH subscriber, mainly as a
result of the January and September 2004 price rises and increased Multiroom
subscription revenues.
Wholesale revenues increased by 2% on the comparable period to GBP219
million. After adjusting for a one-off receipt of monies from NTL following
an audit of sums due to the Group in the first quarter of last financial year,
this represents a 5% increase on the comparable period. This has primarily
been driven by the changes to wholesale prices in January and September 2004
and the payment for carriage of Sky Sports Extra and PREMPLUS.
Advertising revenues increased by 5% on the comparable period to GBP329
million. This has been driven by 4% growth in the UK television advertising
sector and continued growth in the Group's share of this sector.
Total SkyBet revenue for the year was GBP261 million, a 37% increase on the
comparable period. Gross margin increased from 8% to 10% driven by the
introduction of fixed odds games during the year, such as roulette and
multi-line slot games. On 8 April 2005, the Gambling Act was passed by
Parliament. Once implemented, the Act will present an opportunity to offer
'gaming' services combining TV and interactivity. 'Gaming' includes games of
chance and skill and therefore the Act will permit the launch of true casino
games such as poker, in addition to the fixed odds games already available on
SkyBet.
The SkyBuy retail service was wound down and closed during the year. This,
together with the expiry of a number of historical interactive contracts and
services led to a reduction in Sky Active revenues of GBP24 million to GBP92
million. Underlying revenues (excluding these items) rose by 10% to GBP87
million, reflecting the growth in areas such as interactive advertising,
games and third party betting and gaming.
Programming costs
Total programming costs decreased by GBP75 million on the comparable period to
GBP1,636 million. This reduction has been primarily driven by contractual
savings in the renewal of sports contracts and the benefit of improved rates at
which the group is able to purchase US dollars to satisfy its movie commitments.
Sports costs, which represent 46% of total programming costs, decreased by
GBP56 million on the comparable period to GBP747 million. The renewal of the
FA Premier League and Football Association contracts led to substantially all
of this reduction which was partly offset by the Ryder Cup, a bi-annual event
and investment in production costs behind increased coverage in a number of
sports, most notably football, with an increase of 32 live Barclays Premiership
games and delayed footage or extended highlights of every Barclays Premiership
match through the Football First service.
Movie costs decreased by GBP37 million on the comparable period to GBP356
million primarily due to an improved rate at which the Group's US dollar
denominated movies were amortised as a result of the weaker dollar. Savings
from the renewal of a non-major studio agreement were offset by the additional
costs associated with an increase in the average number of movie subscribers.
News and entertainment costs were GBP171 million, an increase of GBP16 million
on the comparable period. This increase is primarily due to the higher operating
costs of Sky News following the commencement of the contract to supply news to
'five' and the coverage of the Tsunami disaster and the elections at home and
abroad. After adjusting for the GBP17 million accelerated stock amortisation
charge in the final quarter of last financial year, entertainment costs increased
by 22% on the comparable period. This increase reflects the greater investment in
acquired and commissioned programming for Sky One.
Third party channel costs increased by 1% on the comparable period to GBP362 million,
representing a 6% increase in the average number of DTH subscribers offset by a 6%
reduction in the cost per subscriber. This saving has been primarily been driven by
the renewal of our contracts on improved terms and the termination of our contract
with Granada Sky Broadcasting ("GSB"), slightly offset by new channels joining the
pay-TV line-up, including FX, Turner Classic Movies ("TCM") and UKTV Style Gardens.
Gross margin (defined as total revenues less total programming costs) for the year
was 60%, representing an increase of 7 percentage points on the comparable period.
Other operating costs
Total other operating costs before goodwill and exceptional items increased by
GBP262 million on the comparable period to GBP1,607 million.
Transmission and related costs for the year were GBP171 million, an increase of
GBP25 million on the comparable period reflecting higher engineering, broadcast
support and maintenance costs associated with an expanding broadcast infrastructure,
resulting from projects including the creation of the new Sky News Centre and the
Advanced Technology Centre ("ATC").
Marketing costs increased by GBP119 million to GBP515 million, 13% of total revenue,
equal to the average rate over the last three years. During the year, the Group
launched a number of marketing initiatives to attract new subscribers and drive the
penetration of the yield enhancing Sky+ and Multiroom products. This increase reflects
the strong growth in the number of gross additions, with three times as many new joiners
taking Sky+ from the outset compared to last year. As a consequence of this activity,
the blended subscriber acquisition cost ("SAC") for the year was GBP237. The number of
existing customers upgrading to Sky+ increased by over 40% year on year and the
number upgrading to Multiroom increased by almost 150% over the same period.
These products generate high levels of satisfaction and offer an attractive return on
investment through lower churn and a higher propensity to take premium packages and
multiple subscriptions. Above the line marketing costs for the year were GBP74 million,
an increase of 50% on the comparable period as a result of the continuation of the 'What
do you want to watch?' campaign and marketing of the new Sky One schedule.
Subscriber management costs increased by GBP25 million on the comparable period to
GBP396 million. This reflects the growing subscriber base, increased call volumes due
to higher levels of sales activity and a higher level of Sky+ and Multiroom installations.
Administration costs before goodwill and exceptional items increased by GBP32 million
on the comparable period to GBP289 million, mainly due to increased technology,
facility, IS development costs and a one-time charge of GBP14 million for restructuring
costs following an efficiency and effectiveness review of the business.
Betting costs increased by GBP61 million to GBP236 million in line with the strong
growth in SkyBet revenues.
Operating profit before goodwill and exceptional items increased by 34% on the
comparable period to GBP805 million. Operating profit margin before goodwill and
exceptional items increased from 16% to 20%, despite the small dilutive effect of
the structurally lower margin SkyBet business, which currently generates a margin
of around 10%.
Goodwill
The goodwill associated with planetfootball.com was fully written off in June 2004
resulting in a GBP3 million reduction in goodwill on the comparable period to
GBP116 million.
Exceptional items
During the second quarter, the Group sold its 49.5% investment in GSB to ITV for
GBP14 million cash consideration. After deducting the carrying value of the
investment in GSB and writing back the original goodwill relating to the
increase of the Group's interest in GSB to 49.5% in March 1998, which had
previously been eliminated against reserves, the disposal generated an
accounting loss under UK Generally Accepted Accounting Principles ("UK GAAP")
of GBP23 million.
In the quarter, the Group received GBP13 million from the liquidators of ITV
Digital as a full and final settlement in respect of amounts owed to the Group.
These amounts had been fully provided for in the year ended 30 June 2002 therefore
generating a non-recurring operating exceptional item.
Joint Ventures
The Group's share of net operating profits from its joint ventures was GBP14 million
for the year, compared to a GBP5 million net operating loss for the comparable period.
After adjusting for a one-off GBP11 million write down in relation to Attheraces ("ATR")
in the final quarter of last financial year, this represents an increase in net operating
profits of GBP8 million, generated primarily from ATR.
Interest
Total net interest payable for the year reduced by GBP19 million to GBP62 million
primarily as a result of an increase in interest receivable due to higher levels of
cash on deposit at higher interest rates.
Taxation
The total net tax charge for the period of GBP206 million includes a current tax charge
of GBP159 million, a deferred tax charge of GBP68 million and a tax charge in relation
to exceptional items of GBP4 million, offset by a GBP25 million adjustment in respect of
prior years. Excluding the effect of goodwill, joint ventures and exceptional items, the
Group's underlying effective tax rate on ordinary activities for the year was 30%.
The net GBP25 million adjustment in respect of prior years comprises a GBP7 million
benefit in respect of consortium relief on losses purchased from ATR and the favourable
settlement of some prior year items.
The mainstream corporation tax liability for the year was GBP161 million and in
accordance with the quarterly instalment regime, GBP75 million was paid in the year and
GBP40 million was paid in July 2005. The final payment is due in October 2005.
Earnings
Profit after tax for the year was GBP425 million, generating earnings per share before
goodwill and exceptional items of 29.0 pence, an increase of 58% on the comparable
period. At 30 June 2005, the total number of shares outstanding was 1,867,523,599.
Cash flow
Earnings before interest, tax, depreciation and amortisation ("EBITDA") before
exceptional items increased by 28% on the comparable period to GBP897 million.
After a GBP55 million positive movement in working capital, a GBP13 million
receipt from the liquidators of ITV digital and other items, the Group generated
an operating cash inflow of GBP978 million. After taxation of GBP103 million and
net interest payable of GBP63 million the Group utilised cash in a number of areas,
including the share buy-back programme (GBP416 million, including GBP3 million of
stamp duty and commissions), capital expenditure (GBP230 million) and dividend
payments (GBP138 million) resulting in a reduction in net debt during the year from
GBP429 million to GBP379 million at 30 June 2005.
During the year, the Group progressed a number of capital expenditure and
infrastructure projects in line with the plans announced on 4 August 2004. The Group
spent GBP75 million on a combination of infrastructure projects including the
acquisition of four freehold properties previously leased at its Osterley campus
and the construction of the Sky News centre. The Group continued work on the CRM
programme to upgrade its customer service systems, investing GBP59 million during
the year, with roll-out scheduled to commence in the second half of this calendar
year. As part of the Group's business continuity plan, GBP24 million was
invested to build and fit out the Advanced Technology Centre. The remaining GBP72
million, regarded as 'core' capital expenditure, was spent on IS infrastructure,
broadcast equipment and new product development, including HDTV.
IFRS
The Group is required to adopt International Financial Reporting Standards
("IFRS") in the preparation of its consolidated financial statements from 1
July 2005. In November 2005, the Group will report its first results under
IFRS for the quarter ending 30 September 2005. In order to provide comparative
figures under IFRS in advance, the Group will publish detailed information
regarding the transition on 14 September 2005. This will include audited
reconciliations of the 2005 Income Statement, Balance Sheet and Cash Flow to
UK GAAP from IFRS detailing the impact of the Group's new accounting policies,
and unaudited quarterly 2005 Income Statements to provide comparatives for 2006.
Further details on the transition to IFRS, including unaudited headline results
for the 2005 financial year, will be provided at the Group's preliminary results
presentation today.
Distributions to shareholders
The Board of Directors are proposing a final dividend of 5 pence per ordinary
share, resulting in a total dividend for the year of 9 pence per share. The
ex-dividend date will be 26 October 2005 and, subject to shareholder approval
at the Company's Annual General Meeting ("AGM"), the dividend will be paid on
18 November 2005 to shareholders of record on 28 October 2005.
At the Company's AGM on 12 November 2004, the Company received approval from
shareholders to repurchase up to 97 million shares, representing approximately
five percent of its issued share capital. During the year, the Company
repurchased for cancellation 74.3 million shares for a total consideration of
GBP416 million, including stamp duty and commissions. The programme is ongoing,
and will continue until the authority granted on 12 November 2004 expires at the
next AGM on 4 November 2005.
It remains the overall financial policy of the Board to achieve an appropriate
balance between distributions arising from strong free cash flow generation to
shareholders, and maintaining a prudent degree of strategic and financial
flexibility.
The Board considers that an on-market share repurchase programme is a flexible,
equitable and tax-efficient means by which to make distributions to shareholders
which are incremental to the ordinary dividend. As a result, the Board currently
intends to propose resolutions at the AGM in November 2005 to renew the annual
authority last granted by shareholders in 2004 to buy back up to a further 5%
of its issued share capital.
In pursuing a continued buy-back authority, the Board is sensitive to the
concerns expressed by some Independent Shareholders. Accordingly, as part of the
buy-back proposals, the Board intends to enter into an agreement with News UK
Nominees Limited, which would limit the exercise of its voting rights to the
level held at the time of the 2005 AGM (expected to be no more than 37.2%).
This voting arrangement will be conditional on the buy-back proposals being
approved by shareholders. Further details of the proposals will be sent to
shareholders in advance of the AGM.
Use of non-GAAP financial information
This results announcement contains certain information on the Group's results and
cash flows that have been derived from amounts calculated in accordance with UK
Generally Accepted Accounting Principles ("UK GAAP"), but are not themselves UK
GAAP measures. These should not be viewed in isolation as alternatives to the
equivalent UK GAAP measure and should be read in conjunction with the equivalent
UK GAAP measures. Further disclosures are also provided under "Use of Non-GAAP
Financial Information" in Appendix 2.
Forward-looking statements
This document contains certain forward-looking statements within the meaning
of the United States Private Securities Litigation Reform Act of 1995 with
respect to the Group's financial condition, results of operations and business,
and management's strategy, plans and objectives for the Group. These statements
include, without limitation, those that express forecasts, expectations and
projections with regard to the potential for growth of free-to-air and pay-TV,
advertising growth, DTH subscriber growth and Multiroom and Sky+ penetration, DTH
revenue, profitability and margin growth, cash flow generation, subscriber
acquisition costs and marketing expenditure, capital expenditure programmes and
proposals for returning capital to shareholders.
These statements (and all other forward-looking statements contained in this document)
are not guarantees of future performance and are subject to risks, uncertainties and
other factors, some of which are beyond the Group's control, are difficult to predict
and could cause actual results to differ materially from those expressed or implied or
forecast in the forward-looking statements. These factors include, but are not limited to,
the fact that the Group operates in a highly competitive environment, the effects of
government regulation upon the Group's activities, its reliance on technology, which is
subject to risk, change and development, its ability to continue to obtain exclusive rights
to movies, sports events and other programming content, risks inherent in the implementation
of large-scale capital expenditure projects, the Group's ability to continue to
communicate and market its services effectively, and the risks associated with the
Group's operation of digital television transmission in the UK and Ireland.
Information on some risks and uncertainties are described in the "Risk Factors" section
of Sky's Interim Report on Form 6-K for the period ended 31 December 2004. Copies of the
Interim Report on Form 6-K are available on request from British Sky Broadcasting Group plc,
Grant Way, Isleworth TW7 5QD or from the British Sky Broadcasting web page at
www.sky.com/corporate. All forward-looking statements in this document are based on
information known to the Group on the date hereof. The Group undertakes no obligation
publicly to update or revise any forward-looking statements, whether as a result of
new information, future events or otherwise.
Appendix 1
Subscribers to Sky Channels
As at As at
30/06/04 30/06/05
DTH homes1,2 3 7,355,000 7,787,000
Total TV homes in the UK and 26,066,000 26,321,000
Ireland4
DTH homes as a percentage of
total UK and
Ireland TV homes 28% 30%
Cable - UK 3,321,000 3,287,000
Cable - Ireland 574,000 585,000
Total Sky pay homes 11,250,000 11,659,000
Total Sky pay homes as a
percentage of total 43% 44%
UK and Ireland TV homes
Sky+ homes 397,000 888,000
Multiroom homes5 293,000 645,000
DTT - UK 6 3,084,000 4,940,000
1: Includes DTH subscribers in Republic of Ireland
(363,000, as at 30 June 2005).
2: DTH subscribers includes only primary subscriptions
to Sky (no additional units are counted for Sky+ or
Multiroom subscriptions). This does not include
customers taking Sky's freesat offering or churned
customers viewing free-to-air channels.
3: DTH homes include subscribers taking Sky packages
through Kingston Interactive Television and Homechoice.
4: Total UK homes estimated by BARB and taken from the
beginning of the month following the period end
(latest figures as at 1 July 2005). Total Ireland homes
estimated by Nielsen Media Research, conducted on an
annual basis in July with results available in September
(latest figures as at July 2004).
5: Multiroom includes households subscribing to more than
one digibox. (No additional units are counted for the
second or any subsequent Multiroom subscriptions.)
6: DTT homes estimated by BARB and taken from the beginning
of the following month (latest figures as at 1 July 2005).
These include Sky or Cable homes that already take
multi-channel TV.
Appendix 2
Use of Non-GAAP Financial Information
A summary of certain non-GAAP measures included in this results
announcement, together with the most comparable GAAP measure and
descriptions of certain non-GAAP measures, is shown below.
Non-GAAP measure Most comparable GAAP measure
Operating profit before Operating profit
goodwill
Profit before taxation, Profit before taxation
goodwill and exceptional
items
Profit after taxation Profit after taxation
before goodwill and
exceptional items
Earnings per share before Earnings per share
goodwill and exceptional
items
EBITDA Operating profit
Glossary
Useful definitions Description
ARPU Average Revenue Per User: the amount
spent by the Group's residential
subscribers in the quarter, divided by
the average number of residential
subscribers in the quarter,
annualised.
Churn The rate at which subscribers
relinquish their subscriptions,
expressed as a percentage of total
subscribers.
Digibox Digital satellite reception equipment.
EBITDA Earnings before interest, taxation,
depreciation and amortisation is
calculated as operating profit before
depreciation and amortisation or
impairment of goodwill and intangible
assets.
Effective tax rate Corporation tax charge expressed as a
percentage of Profit before Tax,
goodwill, interest, exceptional items
and share of results of joint
ventures.
Mainstream Corporation Tax Current corporation tax charge for the
liability year.
Multichannel viewing share Share of viewers of non-analogue
terrestrial television.
Multiroom Installation of one or more additional
digiboxes in the household of an
existing DTH subscriber.
PVR Personal Video Recorder: Digital TV
receiver which utilises a built in
hard disk drive to enable viewers to
record without videotapes, pause live
TV, and record one programme while
watching another.
Sky + Sky's fully-integrated Personal Video
Recorder (PVR) and satellite decoder.
Viewing share Number of people viewing a channel as
a percentage of total viewing
audience.
Consolidated Profit and Loss Account for the year ended 30 June 2005
Notes Before Goodwill 2005
goodwill and Total
and exceptional GBPm
exceptional items (audited)
items GBPm
GBPm (audited)
(audited)
Turnover:
Group and
share of joint
ventures'
turnover 4,115 - 4,115
Less: share of
joint
ventures'
turnover (67) - (67)
Group turnover 1 4,048 - 4,048
__________________________________________________________________
Operating
expenses, net 2,4 (3,243) (103) (3,346)
__________________________________________________________________
EBITDA 897 13 910
Depreciation (92) - (92)
Amortisation - (116) (116)
__________________________________________________________________
Operating
profit 805 (103) 702
__________________________________________________________________
Share of joint
ventures' and
associates'
operating
results 3 14 - 14
Loss on
disposal of
investments in
joint ventures 4 - (23) (23)
Profit on
disposal of
fixed asset
investments 4 - - -
Amounts
written back
to fixed asset
investments,
net 4 - - -
Profit on
ordinary
activities
before
interest and
taxation 819 (126) 693
__________________________________________________________________
Interest
receivable and
similar income 5 30 - 30
Interest
payable and
similar
charges 5 (92) - (92)
Profit on
ordinary
activities
before
taxation 757 (126) 631
__________________________________________________________________
Tax charge on
profit on
ordinary
activities 6 (202) (4) (206)
Profit on
ordinary
activities
after taxation 555 (130) 425
__________________________________________________________________
Equity
dividends 7 (170)
Retained
profit for the
financial year 255
__________________________________________________________________
Earnings per
share - basic 8 29.0p (6.8p) 22.2p
Earnings per
share -
diluted 8 29.0p (6.8p) 22.2p
__________________________________________________________________
Notes Before Goodwill 2004
gooll and and Total
exceptional exceptional GBPm
items items (audited)
GBPm GBPm
(audited) (audited)
Turnover:
Group and
share of joint
ventures'
turnover 3,738 - 3,738
Less: share of
joint
ventures'
turnover (82) - (82)
Group turnover 1 3,656 - 3,656
__________________________________________________________________
Operating
expenses, net 2,4 (3,056) (119) (3,175)
__________________________________________________________________
EBITDA 702 - 702
Depreciation (102) - (102)
Amortisation - (119) (119)
__________________________________________________________________
Operating
profit 600 (119) 481
__________________________________________________________________
Share of joint
ventures' and
associates'
operating
results 3 (5) 10 5
Loss on
disposal of
investments in
joint ventures 4 - - -
Profit on
disposal of
fixed asset
investments 4 - 51 51
Amounts
written back
to fixed asset
investments,
net 4 - 24 24
Profit on
ordinary
activities
before
interest and
taxation 595 (34) 561
__________________________________________________________________
Interest
receivable and
similar income 5 10 - 10
Interest
payable and
similar
charges 5 (91) - (91)
Profit on
ordinary
activities
before
taxation 514 (34) 480
__________________________________________________________________
Tax charge on
profit on
ordinary
activities 6 (158) - (158)
Profit on
ordinary
activities
after taxation 356 (34) 322
__________________________________________________________________
Equity
dividends 7 (116)
Retained
profit for the
financial year 206
__________________________________________________________________
Earnings per
share - basic 8 18.3p (1.7p) 16.6p
Earnings per
share -
diluted 8 18.3p (1.7p) 16.6p
__________________________________________________________________
There were no recognised gains or losses in either year other than those
included within the profit and loss account.
Details of movements on reserves are shown in note 16.
The accompanying notes are an integral part of this consolidated profit and loss
account.
All results relate to continuing operations.
Consolidated Profit and Loss Account for the three months ended 30 June 2005
Before Goodwill Three
goodwill and months
and exceptional ended 30
exceptional items June
items GBPm 2005
GBPm (unaudited) Total
(unaudited) GBPm
(unaudited)
Group and
share of joint
ventures'
turnover 1,103 - 1,103
Less: share of
joint
ventures'
turnover (15) - (15)
Group turnover 1,088 - 1,088
_________________________________________________________________
Operating
expenses, net (857) (18) (875)
_________________________________________________________________
EBITDA 253 13 266
Depreciation (22) - (22)
Amortisation - (31) (31)
_________________________________________________________________
Operating
profit 231 (18) 213
_________________________________________________________________
Share of joint
ventures' and
associates'
operating
results 2 - 2
Profit on
ordinary
activities
before
interest and
taxation 233 (18) 215
_________________________________________________________________
Interest
receivable and
similar income 8 - 8
Interest
payable and
similar
charges (23) - (23)
Profit on
ordinary
activities
before
taxation 218 (18) 200
_________________________________________________________________
Tax charge on
profit on
ordinary
activities (44) (4) (48)
Profit on
ordinary
activities
after taxation 174 (22) 152
_________________________________________________________________
Equity
dividends (93)
Retained
profit for the
period 59
_________________________________________________________________
Earnings per
share - basic 9.2p (1.2p) 8.0p
Earnings per
share -
diluted 9.2p (1.2p) 8.0p
_________________________________________________________________
Before Goodwill Three
goodwill and months
and exceptional ended 30
exceptional items June
items GBPm 2004
GBPm (unaudited) Total
(unaudited) GBPm
(unaudited)
Group and
share of joint
ventures'
turnover 979 - 979
Less: share of
joint
ventures'
turnover (20) - (20)
Group turnover 959 - 959
_________________________________________________________________
Operating
expenses, net (797) (32) (829)
_________________________________________________________________
EBITDA 184 - 184
Depreciation (22) - (22)
Amortisation - (32) (32)
_________________________________________________________________
Operating
profit 162 (32) 130
_________________________________________________________________
Share of joint
ventures' and
associates'
operating
results (1) 10 9
Profit on
ordinary
activities
before
interest and
taxation 161 (22) 139
_________________________________________________________________
Interest
receivable and
similar income 5 - 5
Interest
payable and
similar
charges (23) - (23)
Profit on
ordinary
activities
before
taxation 143 (22) 121
_________________________________________________________________
Tax charge on
profit on
ordinary
activities (42) - (42)
Profit on
ordinary
activities
after taxation 101 (22) 79
_________________________________________________________________
Equity
dividends (63)
Retained
profit for the
period 16
_________________________________________________________________
Earnings per
share - basic 5.2p (1.1p) 4.1p
Earnings per
share -
diluted 5.2p (1.1p) 4.1p
_________________________________________________________________
Consolidated Balance Sheet at 30 June 2005
Notes 2005 2004
GBPm GBPm
(audited) (audited)
Fixed assets
Intangible fixed assets 9 301 417
Tangible fixed assets 10 526 376
Investments:
Investments in
associates 1 1
Investments in
joint : Share of 47 72
ventures gross assets
: Share of (26) (45)
gross
liabilities
: Transfer to 1 5
creditors
Total investments in
joint ventures and
associates 23 33
____________________________________________________________________
Other fixed asset
investments 2 2
Total investments 25 35
____________________________________________________________________
852 828
____________________________________________________________________
Current assets
Stocks 11 340 375
Debtors: Amounts falling due
within one year
- deferred tax asset 12 43 49
- other 12 299 321
342 370
____________________________________________________________________
Debtors: Amounts falling due
after more than one year
- deferred tax asset 12 57 102
- other 12 32 42
89 144
____________________________________________________________________
Cash and liquid resources:
- current asset
investments 54 173
- cash at bank and in
hand 643 474
697 647
____________________________________________________________________
1,468 1,536
____________________________________________________________________
Creditors: Amounts
falling due within one
year 13 (1,240) (1,170)
Net current assets 228 366
____________________________________________________________________
Total assets less
current liabilities 1,080 1,194
____________________________________________________________________
Creditors: Amounts falling due
after more than one year
- long-term borrowings 14 (1,076) (1,076)
- accruals and deferred
income 14 (25) (28)
(1,101) (1,104)
____________________________________________________________________
Provisions for
liabilities and charges 15 (13) -
(34) 90
____________________________________________________________________
Capital and reserves -
equity
Called-up share capital 16 934 971
Share premium 16 1,437 1,437
Employee Share Ownership
Plan ("ESOP") reserve 16 (32) (30)
Merger reserve 16 149 222
Special reserve 16 14 14
Capital redemption
reserve 16 37 -
Profit and loss account 16 (2,573) (2,524)
(34) 90
____________________________________________________________________
The accompanying notes are an integral part of this consolidated balance sheet.
Consolidated Cash Flow Statement for the year ended 30 June 2005
Notes 2005 2004
GBPm GBPm
(audited) (audited)
Net cash inflow from operating
activities 17a 978 882
_________________________________________________________________
Dividends received from joint
ventures 12 4
_________________________________________________________________
Returns on investments and servicing of
finance
Interest received and similar
income 28 7
Interest paid and similar charges (91) (89)
Net cash outflow from returns on
investments and servicing of
finance (63) (82)
_________________________________________________________________
Taxation
UK corporation tax paid (101) (55)
Consortium relief paid (2) (3)
Net cash outflow from taxation (103) (58)
_________________________________________________________________
Capital expenditure and financial
investment
Payments to acquire tangible fixed
assets (230) (132)
Receipts from sales of fixed asset
investments 1 116
Net cash outflow from capital
expenditure and financial
investment (229) (16)
_________________________________________________________________
Acquisitions and disposals
Funding to joint ventures and
associates (4) (5)
Repayments of funding from joint
ventures and associates 8 6
Receipts from sales of investments
in joint ventures 14 -
Net cash inflow from acquisitions
and disposals 18 1
_________________________________________________________________
Equity dividends paid (138) (53)
_________________________________________________________________
Net cash inflow before management
of liquid resources and financing 475 678
_________________________________________________________________
Management of liquid resources 17c 164 (511)
_________________________________________________________________
Financing
Proceeds from issue of Ordinary
Shares - 20
Proceeds from issue of shares held
in ESOP 4 -
Purchase of own shares for ESOP (14) (22)
Share buy-back (416) -
Capital element of finance lease
payments 17b - (1)
Net decrease in debt due after
more than one year 17b - (75)
Net cash outflow from financing (426) (78)
_________________________________________________________________
Increase in cash 17c 213 89
_________________________________________________________________
The accompanying notes are an integral part of this consolidated cash flow
statement.
1. Turnover
2005 2004
GBPm GBPm
(audited) (audited)
Direct-to-home subscribers 2,968 2,660
Cable subscribers 219 215
Advertising 329 312
Sky Bet 261 191
Sky Active 92 116
Other 179 162
4,048 3,656
___________________________________________________________________
2. Operating expenses, net
Before Good- 2005
goodwill will Total
and and GBPm
excep- excep- (audited)
tional tional
items items
GBPm GBPm
(audited) (audited)
Programming (i) 1,636 - 1,636
Transmission and 171 - 171
related functions (i)
Marketing 515 - 515
Subscriber management 396 - 396
Administration (ii) 289 103 392
Betting 236 - 236
3,243 103 3,346
___________________________________________________________________
Before Good- 2004
good- will Total
will and GBPm
and excep- (audited)
excep- tional
tional items
items GBPm
GBPm (audited)
(audited)
Programming (i) 1,711 - 1,711
Transmission and 146 - 146
related functions (i)
Marketing 396 - 396
Subscriber management 371 - 371
Administration (ii) 257 119 376
Betting 175 - 175
3,056 119 3,175
___________________________________________________________________
(i) The amounts shown are net of GBP11 million (2004:
GBP11 million) receivable from the disposal of programming
rights not acquired for use by the Group, and GBP28
million (2004: GBP28 million) in respect of the provision
to third party broadcasters of spare transponder capacity.
(ii) Administration costs include a goodwill amortisation charge
of GBP116 million (2004: GBP119 million), net of an
exceptional credit of GBP13 million (2004: nil)
(see note 4).
3. Share of joint ventures' and associates' operating results
Goodwill
In the prior year, a credit of GBP11 million arose on the write back of negative
goodwill which had arisen on the acquisition of an additional 16.7% stake in
Attheraces Holdings Limited in April 2004, taking the Group's stake in
Attheraces to 50%. The remaining net GBP1 million charge relates to amortisation
of goodwill arising on the acquisition of certain joint ventures and associates.
4. Exceptional items
Credit Taxation 2005
(charge) (charge) Total
before credit GBPm
taxation GBPm (audited)
GBPm (audited)
(audited)
Settlement of ITV 13 (4) 9
Digital
programming
debtors (i)
Exceptional 13 (4) 9
operating items
___________________________________________________________________
Loss on disposal (23) - (23)
of investment in
joint ventures(ii)
Profit on - - -
disposal of fixed
asset investments(iii)
Amounts written - - -
back to fixed
asset
investments, net(iv)
Exceptional (23) - (23)
non-operating
items
Total exceptional (10) (4) (14)
items
___________________________________________________________________
Credit before Taxation 2004
taxation (charge) Total
GBPm credit GBPm
(audited) GBPm (audited)
(audited)
Settlement of ITV - - -
Digital
programming
debtors (i)
Exceptional - - -
operating items
___________________________________________________________________
Loss on disposal - - -
of investment in
joint ventures(ii)
Profit on 51 - 51
disposal of fixed
asset investments(iii)
Amounts written 24 - 24
back to fixed
asset
investments, net(iv)
Exceptional 75 - 75
non-operating
items
Total exceptional 75 - 75
items
___________________________________________________________________
2005
(i) Settlement of ITV Digital programming debtors
In July 2005, the Group received GBP13 million from the liquidators of ITV
Digital as a full and final settlement in respect of amounts owed to the Group.
(ii) Loss on disposal of investments in joint ventures
In November 2004, the Group sold its 49.5% investment in Granada Sky
Broadcasting Limited ("GSB") for GBP14 million in cash, realising a loss on
disposal of GBP23 million. This included the write back of GBP32 million of
goodwill which had previously been written off to reserves, as permitted prior
to the implementation of Financial Reporting Standard ("FRS") 10, "Goodwill and
Intangible Assets" ("FRS 10").
2004
(iii) Profit on disposal of fixed asset investments
In March 2004, the Group sold its 20% shareholding in QVC (UK), operator of QVC
- The Shopping Channel, for GBP49 million in cash, realising a profit on
disposal of GBP49 million.
In October 2003, the Group disposed of its listed investment in Manchester
United plc, realising a profit on disposal of GBP2 million.
(iv) Amounts written back to fixed asset investments, net
The Group reduced its provision against its minority equity investments in
football clubs by GBP33 million, due to the disposal of its investment in
Manchester United plc in October 2003, for GBP62 million in cash. The Group also
increased its provision against its remaining minority equity investments in
football clubs by GBP9 million.
5. Interest
(a) Interest receivable and similar income
2005 2004
GBPm GBPm
(audited) (audited)
Group
Interest receivable on cash and 29 8
liquid resources
Other interest receivable and - 1
similar income
29 9
___________________________________________________________________
Joint ventures and associates
Share of joint ventures' and 1 1
associates' interest receivable
___________________________________________________________________
Total interest receivable and 30 10
similar income
___________________________________________________________________
(b) Interest payable and similar charges
2005 2004
GBPm GBPm
(audited) (audited)
Group
On bank loans, overdrafts and other loans
repayable within five years, not by
instalments:
- GBP1 billion revolving credit facility 2 -
("RCF") (i)
- GBP600 million RCF (i) 4 6
- GBP200 million RCF (ii) - 2
US$650 million of 8.200% Guaranteed Notes, 33 30
repayable in 2009
GBP100 million of 7.750% Guaranteed Notes, 8 8
repayable in 2009
US$600 million of 6.875% Guaranteed Notes, 30 30
repayable in 2009
US$300 million of 7.300% Guaranteed Notes, 14 14
repayable in 2006
Finance lease interest 1 -
92 90
_____________________________________________________________ 
