2nd May 2007 07:02
British Sky Broadcasting Group PLC02 May 2007 BRITISH SKY BROADCASTING GROUP PLC Results for the nine months ended 31 March 2007 Customer response to "See, Speak, Surf" and Sky+ drives record product sales in the third quarter More customers are choosing more of Sky's products than ever before • New customer additions of 340,000 in the third quarter, up 25% year-on-year • Net customer growth of 51,000, up 28% year-on-year to 8.492 million • Third quarter growth in Sky+ households of 199,000, up 34% year-on-year to 2.167 million, 25% penetration target exceeded three years ahead of plan • HD subscribers of 244,000 within 10 months, third quarter growth of 60,000 • Sky Broadband customers more than double to 553,000 with gross bookings of 669,000 by 29 April 2007(1) • Sky Talk customers increase by 83% to 408,000(1) • 974 exchanges unbundled, 61% coverage of the U.K.(1) Strong top-line growth and accelerating underlying operating profit growth • Revenue increased by 10% to £3,376 million, including £41 million from residential broadband and £117 million from Easynet Enterprise • Adjusted gross margin excluding residential broadband and Easynet Enterprise of 62% up from 60% in the comparable period(2) • EBITDA of £750 million (2006: £756 million) including a net exceptional gain of £56 million • Operating profit of £613 million including losses of £137 million in residential broadband and Easynet Enterprise and a net exceptional gain of £56 million • Underlying operating profit up by 4% to £694 million (excluding residential broadband, Easynet Enterprise and exceptional items), an increase of 8% year-on-year in the third quarter • Basic EPS of 22.1p (2006: 23.2p) and adjusted EPS of 19.5p (2006: 23.3p)(3) James Murdoch, Chief Executive said: "Customer response to our "See, Speak, Surf" campaign has been very encouraging.Total sales of our TV, broadband and telephony products surpassed one millionfor the second consecutive quarter and now exceed three million in the year todate, an increase of more than 50% on the prior year and almost double that oftwo years ago. "In just eight months, Sky Broadband has passed the milestone of 500,000customers who are enjoying fast speeds, wireless access and significantsavings. Our network now reaches over 60% of U.K. homes and we are on track forour goal of more than 700,000 broadband customers by the end of June. "Our investments in customer service, value and quality are driving morecustomers to choose more services from Sky than ever before. "Changes to our retention and acquisition strategy are delivering valuablebenefits to the quality and profitability of our business. We are delivering onour multi-product strategy and customers are responding in record numbers." Enquiries: Analysts/Investors: Andrew Griffith Tel: 020 7705 3118Robert Kingston Tel: 020 7705 3726 E-mail: [email protected] Press: Matthew Anderson Tel: 020 7705 3267Robert Fraser Tel: 020 7705 3036 E-mail: [email protected] A conference call for U.K. and European analysts and investors will be held at8:30 a.m. (BST) today. To register for this, please contact Silvana Marsh atFinsbury on +44 20 7251 3801. A live webcast of this call and replay facilitywill be available on Sky's corporate website, http://www.sky.com/corporate. There will be a separate conference call for US analysts and investors at 10.00a.m. (EST) today. Details of this call have been sent to US institutions and canbe obtained from Dana Johnston at Taylor Rafferty on +1 212 889 4350. A livewebcast of this call and replay facility will be available on Sky's corporatewebsite, http://www.sky.com/corporate. (1) Data stated as at 29 April 2007. As at 31 March 2007 there were 574,000 Sky Broadband gross bookings, 457,000 activated broadband customers and 355,000 Sky Talk customers (2) Adjusted gross margin excludes an exceptional gain from a third party channel provider of £65 million, included within programming expenses (3) Adjusted EPS excludes mark-to-market in derivative financial instruments that do not qualify for hedge accounting, an exceptional gain of £65 million and an exceptional charge of £9 million Results highlights All financial results have been prepared in accordance with InternationalFinancial Reporting Standards ("IFRS"), including comparatives. Customer Metrics'000s 31-Mar-07 31-Dec-06 Net additions______________________________________________________________________________Total customers(1)(2)(3) 8,492 8,441 51Additional products:Sky+(4) 2,167 1,968 199Multiroom(5) 1,297 1,226 71HD 244 184 60Broadband 457 193 264Telephony 355 223 132Other KPI's:Churn 13.7% 11.9% -ARPU £406 £394 -______________________________________________________________________________ (1) Includes DTH subscribers in Republic of Ireland. (484,000 as at 31 March 2007, 407,000 as at 31 March 2006.) (2) DTH subscribers include only primary subscriptions to Sky (no additional Sky+ or Multiroom subscriptions are counted). This does not include customers taking Sky's freesat offering or churned customers viewing free-to-air channels. (3) DTH subscribers include subscribers taking Sky packages via DSL through Homechoice. (4) Sky+ includes HD households (5) Multiroom includes households subscribing to more than one digibox. (No additional units are counted for the second or any subsequent Multiroom subscriptions within one household.) Financial Summary (unaudited) 9 months to Mar-07 9 months to Mar-06£'millions Reported Exceptional(6) Adjusted Reported_____________________________________________________________________________________Income statement:Revenue 3,376 - 3,376 3,079Gross Profit 2,223 (65) 2,158 1,872% Margin 65.8% - 63.9% 60.8%Operating Profit 613 (56) 557 660% Margin 18.2% - 16.5% 21.4%Profit for the period 388 (45) 343 425Cash flow information:Cash generated from operations 732 (56) 676 696Net debt(9) 1,810 - 1,810 667_____________________________________________________________________________________ Per share information (pence): 9 months to Mar-07 9 months to Mar-06_____________________________________________________________________________________ EPS - basic 22.1 23.2EPS - adjusted(10) 19.5 23.3_____________________________________________________________________________________ (6) Exceptional items include a one-off receipt from a third party channel provider for £65 million, £9 million charge for litigation costs and £8 million mark-to-market gain on financial derivatives (7) Revenue includes £41 million from residential broadband and £117 million from Easynet Enterprise (8) Operating profit includes a net operating loss of £120 million from residential broadband and £17 million from Easynet Enterprise (9) Cash, cash-equivalents, short-term deposits, borrowings and borrowings related financial instruments (10) Adjusted EPS excludes mark-to-market in derivative financial instruments that do not qualify for hedge accounting, an exceptional gain of £65 million and an exceptional charge of £9 million OVERVIEW The third quarter saw record levels of demand for our portfolio of products andservices, with total new product and upgrade sales volumes of over 1.2 million,more than double third quarter sales in the prior year. At the same time wecontinued to implement changes to our promotional strategy leading to a £12increase in ARPU from the previous quarter to £406 and, as expected, a higherquarterly churn rate of 13.7%. The combined impact of record demand and ourfocus on subscriber profitability led to strong year-on-year revenue growth andaccelerated operating profit growth in the third quarter. The third quarter marked the launch of our "See, Speak, Surf" campaign, thefirst time Sky has marketed a combined TV, broadband and telephony offering andwhich emphasised the leading quality and value of our products. This, togetherwith our outstanding TV offering, led to a number of important achievementsduring the period: * Gross DTH additions of 340,000 were the highest third quarter additions in six years; * Sky+ broke through 25% penetration three years ahead of target; * Sky broadband surpassed half a million customers within eight months of launch; * Sky Talk customers reached 408,000 after a quarter of record growth; * HD remains our fastest selling additional TV product with 244,000 subscribers in just 10 months; and * Record new product and upgrade sales of over 1.2 million in the quarter reaching more than three million year-to-date, an increase of over 50% on the comparable period. Good net customer growth of 51,000, a 28% increase year-on-year, was achieveddespite the changes made to our promotional strategy as detailed on 31 January2007. The third quarter saw the first full quarter of impact from steps taken toimprove price transparency, through the removal of viewing package discountspreviously used to acquire and retain customers. Churn increased to 13.7%, up by1.8 percentage points from the previous quarter. On an underlying basis, weestimate that churn fell by 0.4 percentage points to 11.0% when compared to thethird quarter of the prior year. ARPU, which increased by £12 quarter-on-quarteror £11 year-on-year to £406, is now benefiting as a direct result of thesechanges, as well as from increased new product penetration. The financial performance of the group was strong in the third quarter,reflecting the operational strength of the business. Revenue increased by 9%year-on-year in the third quarter or by 10% in the nine months ("the period").Year-on-year growth in third quarter underlying operating profit accelerated to8%, up from 1% at the half-year, leading to 4% growth for the period. Operating profit for the period also reflected a net exceptional gain of £56million, with the majority recognised in the second quarter, consisting of twoitems: a £65 million one-off payment received from a third party channelprovider as a result of a contractual entitlement to a proportion of the valueof certain of its channels; and a £9 million charge within other operatingexpenses as part of our litigation with EDS, an information and technologysolutions provider, in relation to work carried out between 2000 and 2002 onour customer relationship management systems. Following the expiry of an agreement at the end of February 2007, Sky's basicchannels ceased to be carried on Virgin Media's platform. On 12 April 2007Virgin Media ("VM") issued legal proceedings in the High Court against Sky inrelation to the supply of VM TV channels to Sky and the supply of Sky basicchannels to VM, alleging infringement of Chapter II of the Competition Act 1998and/or Article 82 of the EC Treaty. We have acknowledged service of VM's claimand are due to file our defence with the High Court in due course. We disputeVM's claims, which we consider to be without foundation and which we will defendvigorously. Were Sky's basic channels to remain off VM's platform, the Companyestimates the impact of lower wholesale carriage fees and advertising revenueswould adversely affect operating profit by £15 to £20 million in the year to 30June 2007. Excluding this financial impact we remain on track for our 2007financial year targets. OPERATIONAL REVIEW Gross additions of 340,000 were 25% higher than the prior year and were thehighest third quarter additions in six years. Investment in new products isaccelerating demand; during the quarter, 26% of Sky+ additions, 17% of HDadditions and around 25% of broadband additions were new Sky customers. As detailed on 31 January 2007, we took steps to improve price transparency partway through the second quarter by reducing and then removing viewing packagediscounts in retention and acquisition. The three months to March 2007 saw afull quarter of impact from this change in strategy, resulting in a short-termincrease in churn to 13.7%, up 1.8 percentage points from the previous quarter.Excluding the impact of this change in strategy, we estimate that churn fell by0.4 percentage points to 11.0% compared with the third quarter of the prioryear. Third quarter ARPU started to see the positive impact from this change instrategy, with quarter-on-quarter growth of £12 to a record £406 and we expectcontinued benefits to the quality and profitability of the business. Net additions in the third quarter of 51,000 were 28% higher than the thirdquarter of 2006. This performance was despite changes made to our promotionalstrategy, as detailed above. Both the mix of products and the balance ofpackages remain strong, with increasing new product penetration across thecustomer base. Sky+ households exceeded our 2010 penetration target of 25% three years ahead ofplan, increasing by 199,000 to 2.167 million in the third quarter. Our premiumTV product, Sky HD, is our fastest selling additional TV product with 244,000subscribers in only 10 months. Penetration of our multiroom product continues toshow steady progress with 1.297 million subscribers or 15.3% of the base. Gross Sky Broadband bookings reached 669,000 by 29 April 2007. Broadbandcustomers of 553,000 by 29 April 2007 increased from 259,000 at the end ofJanuary and 74,000 at the end of October, with 82% on-net. Of these on-netcustomers, approximately 70% opted for a paid-for package. Growth in off-netcustomers benefited from the launch of "See, Speak, Surf", for which thestandard price of £26 per month is available to all customers within ourtargeted 70% exchange footprint. The Group had a further 32,000 customersregistered to UK Online, Easynet's residential broadband service, bringing thetotal number of broadband customers to 585,000. A total of 928 exchanges wereunbundled by 31 March 2007 increasing to 974 by 29 April 2007, with 61% coverageof U.K. households. We expect to achieve 70% coverage by the end of thisfinancial year, six months ahead of plan. Our telephony (Sky Talk) customer base increased by around 60% to 355,000 withrecord net additions of 132,000 in the third quarter, benefiting from itsinclusion for the first time in a large-scale above-the-line marketing campaign"See, Speak, Surf" and the re-launch of two Sky Talk packages. A third ofbroadband customers as at the end of March had also opted for a Sky Talkpackage, up from 19% in the second quarter and 17% in the first quarter,illustrating the attractiveness of our new packages. Growth continued in themonth of April with 408,000 Sky Talk customers at 29 April 2007. FINANCIAL SUMMARY The financial performance in the period reflects a full nine monthsconsolidation of residential broadband and Easynet Enterprise, compared to justthree months in the comparable period. Group revenue of £3,376 million included£41 million from residential broadband and £117 million from Easynet Enterprise.Group operating profit of £613 million included net operating losses of £120million from residential broadband, £17 million of losses from EasynetEnterprise and a net exceptional gain of £56 million. Revenue Group revenue showed good growth increasing by 10% on the comparable period to£3,376 million (2006: £3,079 million), despite the advertising sector downturnand a fall in wholesale subscription revenue. Retail subscription revenue increased by 7% on the comparable period to £2,514million (2006: £2,355 million) and included £40 million from residentialbroadband and Easynet Enterprise. Underlying growth was primarily driven by a 5%increase in the average number of DTH customers. ARPU saw a marked accelerationin the third quarter to £406, benefiting from the changes made to ourpromotional strategy part-way through the second quarter. Wholesale subscription revenue fell by 5% to £162 million and included theimpact from the expiry (and non-renewal) of the contract to supply Sky's basicchannels to Virgin Media part way through the quarter. Advertising revenue increased by £1 million to £258 million, significantlyoutperforming the overall TV advertising sector, which we estimate contracted by5% over the same period. Outperformance was driven by higher advertising shareyear-on-year, up from an average of 13% in nine months to March 2006 to 14% inthe nine months to March 2007. Sky Bet revenue was £34 million, an increase of 26% on the comparable period,benefiting from two months of consolidation of 365 Media Group plc and goodgrowth in internet sports betting and TV games. The integration of 365 MediaGroup plc (acquired in February 2007) is on track and performing in line withour expectations. We have also made a good start to the launch of Sky Poker,with around 20,000 paying customers registered since its launch on 8 February2007. Installation, hardware and service revenue was £167 million, up from £103million in the comparable period. This increase reflects the strong grossadditions and customer upgrades, as well as a higher proportion of premiumpriced hardware sales and new contribution from sales of residential broadbandequipment. Other revenue was £241 million (2006: £167 million) with the majority of theincrease driven by the full inclusion of Easynet Enterprise for the nine monthsto 31 March 2007 of £114 million, compared to just three months in 2006 of £38million. On an underlying basis, other revenues were broadly level year-on-year,with declines in Sky Active offset by growth in website revenues including revenues from 365 Media Group plc. Gross margin Reported programming costs were £1,153 million, including an exceptional £65million credit from a third party channel provider. Programming costs excludingthis exceptional gain increased by £11 million on the comparable period. Thelargest increase came from sports costs which increased by £57 million due toone-off events in cricket and golf, and several England football internationalaway games. Profit Reported operating profit of £613 million (2006: £660 million) included a netexceptional gain of £56 million, residential broadband losses of £120 millionand Easynet Enterprise losses of £17 million. Excluding residential broadband, Easynet and exceptional gains, operating profitwas £694 million, an increase of 4% on the comparable period with 8% growthyear-on-year in the third quarter as the benefits of changes made to ourpromotional strategy flowed through. Offsetting this, year-on-year profit growthin the first nine months was affected by a substantially weaker TV advertisingsector, continued decline in cable wholesale revenue and the high levels of newcustomers joining Sky and customer upgrades which lead to higher short-termcosts. Total operating costs excluding programming increased by £398 million to £1,610million on the comparable period, including £295 million of operating expensefrom residential broadband and Easynet Enterprise. Marketing costs increased by £72 million to £546 million, the majority of whichwas driven by the inclusion of residential broadband and Easynet Enterprise. Onan underlying basis, the short-term costs associated with strong gross additionswere partially offset by efficiencies in subscriber acquisition costs.Subscriber management costs increased by £128 million to £467 million,reflecting the inclusion of residential broadband and Easynet Enterprise, higherinstallation costs (partially offset by higher revenue), higher call-centrecosts and increased depreciation relating to the implementation of new customerrelationship management ("CRM") systems. Administration and transmission costs increased by £77 million and £121 millionrespectively, primarily due to the inclusion of residential broadband andEasynet Enterprise costs and higher depreciation from infrastructure investment.Administration costs also included a £9 million exceptional charge relating tothe legal costs of the Group's claim against EDS, which provided services to theGroup as part of the Group's investment in CRM systems software andinfrastructure. The amount which may be recovered by the Group will not befinally determined until the resolution of the claim and we currently expect toincur costs of around £20 million during the current financial year, which willbe recognised as an exceptional cost. After the Group's share of operating profits from joint ventures of £9 million(2006: £9 million) and a net interest charge of £66 million (2006: £60 million)which included a positive £8 million mark-to-market movement (2006: £4 millionloss) on the value of non-IFRS hedge accounted derivatives and £13 million ofdividends declared by ITV plc during the quarter, the Group made a profit beforetax in the period of £556 million (2006: £609 million). The total tax charge for the period was £168 million (2006: £184 million), at aneffective rate of 30% (2006: 30%). Earnings The Group's profit for the period was £388 million (2006: £425 million),generating basic EPS of 22.1p (2006: 23.2p). Adjusted profit for the period was£343 million (2006: £428 million), generating adjusted earnings per share of19.5 pence compared to 23.3 pence in the comparable period. The 2005/6 sharebuyback programme resulted in the number of shares outstanding falling by 3% to1,753 million at 31 March 2007 (2006: 1,809 million). Exceptional items The Group reported a net exceptional gain of £56 million within operatingprofit, consisting of two items. Included within third party costs is a £65million credit resulting from the payment relating to a proportion of the valueof certain third party channels. Partially offsetting this was a charge of £9million recorded within administration expenses relating to the legal costs ofthe Group's claim against EDS. Cash flow Operating profit for the period was £613 million, generating reported EBITDA of£750 million. Excluding Easynet Enterprise and residential broadband losses andexceptional items, underlying EBITDA increased by 6% to £803 million. Followinga working capital outflow of £18 million (2006: £60 million), the Groupgenerated a cash inflow from operations of £732 million (2006: £696 million).Capital expenditure of £254 million included £135 million investment inresidential broadband and Easynet Enterprise. After acquisition spend of £1,061million, relating to the investment in ITV, You Me TV and 365 Media Group plc,interest of £93 million, cash taxes of £86 million and returns to shareholdersof £331 million, net debt as at 31 March 2007 was £1,810 million. CORPORATE As requested by the Secretary of State for Trade and Industry, Ofcom and the OFTsubmitted reports on 27 April 2007 on the acquisition by BSkyB of a 17.9% stakein ITV plc. On the same day, Ofcom and the OFT published statements indicatingthe key findings in their respective reports. Ofcom has advised that theinvestment raises public interest issues, in relation to sufficient plurality ofnews provision for both cross media and television news in the U.K.. The OFT hasreported that it believes that the test for a merger reference of the investmentto the Competition Commission is met on competition grounds. The decisionwhether to refer the investment to the Competition Commission lies with theSecretary of State for Trade and Industry and we continue to engage fully in theprocess. CORPORATE RESPONSIBILITY During the quarter, Sky continued its commitment to engage customers andemployees in its environmental programme, The Bigger Picture, and brokesignificant new ground as it extended its activities in the field of education. In March, Sky began the introduction of an innovative new feature that will helpcustomers to reduce their household energy bills by automatically switchinginactive Sky HD and Sky+ boxes into standby mode overnight. The 'Auto Standby'feature will be introduced to more than two million customers' boxes in phasesover the next few months and Sky plans to extend it to the majority of DTHcustomers by mid-2008. When 'Auto Standby' is available in all Sky HD and Sky+boxes, the total energy savings could reduce the U.K.'s carbon dioxide emissionsby 32,000 tonnes a year. On 23 April, Sky joined with seven other leading U.K.companies to unveil 'We're In This Together', a new campaign to providecustomers with products and services that make it easier to reduce householdemissions. The campaign has the support of the Prime Minister, the NationalConsumer Council, and The Church of England. As part of a broad 'Sky Learning' initiative, Sky launched an online search toolthat makes recommendations for television programmes related to GCSE subjects.The Sky Learning website, www.sky.com/learning, is a free service thathighlights the broad range of educational programming available on the hundredsof channels on the satellite platform. During the quarter, Sky also launched anew subscription offer for schools and its Living For Sport programme reachedthe milestone of its 500th school in the UK. Sky received further external recognition for its environmental programme afterbeing awarded the Climate Change award at the City of London Corporation'sannual Sustainable City Awards. The judges commended Sky for engaging customersthrough "practical and inspiring ways to become better informed and moreprogressive about energy use". The company also retained its position as theonly broadcast company in the Global 100 Most Sustainable Corporations Index2007. Use of measures not defined under IFRS This press release contains certain information on the Group's financialposition, results and cash flows that have been derived from measures calculatedin accordance with IFRS. This information should not be read in isolation of therelated IFRS measures. Forward-looking statements This document contains certain forward-looking statements within the meaning ofthe United States Private Securities Litigation Reform Act of 1995 with respectto the Group's financial condition, results of operations and business, andmanagement's strategy, plans and objectives for the Group. These statementsinclude, without limitation, those that express forecasts, expectations andprojections with respect to the potential for growth of free-to-air and pay-TV,fixed line telephony, broadband and bandwidth requirements, advertising growth,DTH subscriber growth, Multiroom, Sky+ and other services penetration, churn,DTH and other revenue, profitability and margin growth, cash flow generation,programming and other costs, subscriber acquisition costs and marketingexpenditure, capital expenditure programmes and proposals for returning capitalto shareholders. These statements (and all other forward-looking statements contained in thisdocument) 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 materiallyfrom those expressed or implied or forecast in the forward-lookingstatements. These factors include, but are not limited to, the fact that theGroup operates in a highly competitive environment, the effects of laws andgovernment regulation upon the Group's activities, its reliance on technology,which is subject to risk, change and development, failure of key suppliers, itsability to continue to obtain exclusive rights to movies, sports events andother programming content, risks inherent in the implementation of large-scalecapital expenditure projects, the Group's ability to continue to communicate andmarket its services effectively, and the risks associated with the Group'soperation of digital television transmission in the U.K. 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 December2006. Copies of the Interim Report on form 6-K are available on requestfrom British Sky Broadcasting Group plc, Grant Way, Isleworth TW7 5QD or fromthe British Sky Broadcasting web page at www.sky.com/corporate. Allforward-looking statements in this document are based on information known tothe Group on the date hereof. The Group undertakes no obligation publicly toupdate or revise any forward-looking statements, whether as a result of newinformation, future events or otherwise. Appendix 1 - TV Subscriber and Market Data Third quarter Second quarter Third quarter as at 31 March as at 31 as at 2007 December 2006 31 March 2006 DTH homes (1) (2) (3) 8,492,000 8,441,000 8,099,000 Total TV homes in the U.K. and Ireland(4) 26,837,000 26,766,000 26,634,000 DTH homes as a percentage of total U.K. and Ireland TV homes 32% 32% 30% Cable - U.K. 3,406,000 3,397,000 3,298,000Cable - Ireland 596,000 605,000 602,000 Total pay TV homes 12,494,000 12,443,000 11,999,000 Total pay TV homes as apercentage of total U.K. and Ireland TV homes 47% 46% 45% Sky+ homes 2,167,000 1,968,000 1,430,000 Multiroom homes(5) 1,297,000 1,226,000 990,000 HD homes 244,000 184,000 - DTT - U.K.(6) 9,233,000 7,971,000 6,875,000 (1) Includes DTH subscribers in Republic of Ireland 484,000, as at 31 March 2007. (2) DTH subscribers includes only primary subscriptions to Sky (no additional Sky+ or Multiroom subscriptions are counted). 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 via DSL through Homechoice. (4) Total U.K. homes estimated by BARB and taken from the beginning of the month following the period end (latest figures as at 31 March 2007). Total Ireland homes estimated by Nielsen Media Research as at January 2007. (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 31 March 2007). These include Sky or Cable homes that already take multi-channel TV. Appendix 2 - Glossary Useful definitions Description________________________________________________________________________________Adjusted profit for the period Profit for the period adjusted to remove mark-to-market movements in derivative financial instruments that do not qualify for hedge accounting, exceptional items and any changes in the estimate of recoverable tax assets in respect of prior years.________________________________________________________________________________Adjusted earnings per share Adjusted profit divided by the weighted average number of ordinary shares during the year.________________________________________________________________________________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.________________________________________________________________________________Gross margin Revenue less programming expenses as a proportion of revenue.________________________________________________________________________________Gross profit Revenue less programming expense.________________________________________________________________________________Gross Sky broadband bookings The number of customers that have requested our broadband product, passed pre-sale checks and have been accepted by our booking system and invoiced for any relevant activation fees.________________________________________________________________________________Residential broadband Sky Broadband and UK Online combined.________________________________________________________________________________Gross Sky Bet revenue Gross stakes placed by customers on events taking place in the period and net customer losses in respect of casino, online roulette and similar interactive casino style games.________________________________________________________________________________HD High Definition.________________________________________________________________________________Underlying Excluding contribution from Sky Broadband and Easynet Enterprise and net exceptional amounts.________________________________________________________________________________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.________________________________________________________________________________Net debt Cash, cash-equivalents, short-term deposits, borrowings and borrowings related derivative financial instruments.________________________________________________________________________________On-net Customers subscribing to our unbundled broadband product.________________________________________________________________________________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.________________________________________________________________________________ Appendix 3 - Re-analysis of reported revenue by category To provide a more relevant presentation, management has chosen to re-analyse therevenue categories from those previously reported. Other revenue now principallyincludes income from Easynet Enterprise, Sky Active and technical platformservice revenue. Nine months to Separate Nine months to 31 March 2006 Transfer of installation, 31 March 2006 as previously Sky hardware and reported Active service Other Re-analysed £ million £ million £ million £ million £ million (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)__________________________________________________________________________________________________Retail Subscription 2,352 - - 3 2,355Wholesale Subscription 170 - - - 170Advertising 257 - - - 257Sky Bet 27 - - - 27Sky Active 67 (67) - - -Installation, Hardware and Service - - 103 - 103Other 206 67 (103) (3) 167 3,079 - - - 3,079__________________________________________________________________________________________________ 2005/06 Separate 2005/06 Full Year Transfer of installation, Full Year as previously Sky hardware and reported Active service Other Re-analysed £ million £ million £ million £ million £ million (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)__________________________________________________________________________________________________Retail Subscription 3,154 - - 3 3,157Wholesale Subscription 224 - - - 224Advertising 342 - - - 342Sky Bet 37 - - - 37Sky Active 91 (91) - - -Installation, Hardware andService - - 131 - 131Other 300 91 (131) (3) 257 4,148 - - - 4,148__________________________________________________________________________________________________ Consolidated Income Statement for the nine months ended 31 March 2007 Notes 2006/07 2005/06 Nine months Nine months ended ended 31 March 31 March £million £million (unaudited) (unaudited) Revenue 1 3,376 3,079Operating expense 2 (2,763) (2,419) ________________________________________________________________________________EBITDA 750 756Depreciation and amortisation (137) (96)________________________________________________________________________________ Operating profit 613 660________________________________________________________________________________ Share of results from joint venturesand associates 9 9Investment income 42 37Finance costs (108) (97)Profit before tax 556 609________________________________________________________________________________ Taxation (168) (184)Profit for the period 388 425________________________________________________________________________________ Earnings per share from profit for the period (in pence)Basic 22.1 23.2Diluted 22.1 23.1 ________________________________________________________________________________Adjusted basic 19.5 23.3Adjusted diluted 19.5 23.3________________________________________________________________________________ Consolidated Income Statement for the three months ended 31 March 2007 2006/07 2005/06 Three months Three months ended ended 31 March 31 March £million £million (unaudited) (unaudited) Revenue 1,156 1,063Operating expense (938) (817) ________________________________________________________________________________EBITDA 264 286Depreciation and amortisation (46) (40)________________________________________________________________________________ Operating profit 218 246________________________________________________________________________________ Share of results from joint ventures and associates 3 2Investment income 18 17Finance costs (39) (46)Profit before tax 200 219________________________________________________________________________________ Taxation (58) (68)Profit for the quarter 142 151________________________________________________________________________________ Earnings per share from profit for the quarter (in pence)Basic 8.1 8.3Diluted 8.1 8.3 Adjusted - basic 8.2 8.6Adjusted - diluted 8.2 8.6________________________________________________________________________________ Notes: 1. Revenue 2006/07 2005/06 Nine months Nine months ended ended 31 March 31 March £million £million (unaudited) (unaudited) Retail subscription 2,514 2,355Wholesale subscription 162 170Advertising 258 257Sky Bet 34 27Installation, hardware and service 167 103Other 241 167 3,376 3,079________________________________________________________________________________ 2. Operating expense 2006/07 2005/06 Nine months Nine months ended ended 31 March 31 March £million £million (unaudited) (unaudited) Programming 1,153 1,207Transmission and related functions 278 157Marketing 546 474Subscriber management 467 339Administration 319 242 2,763 2,419________________________________________________________________________________ This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Sky