11th Oct 2013 16:18
11 October 2013
Headline: Annual Financial Report
British Sky Broadcasting Group plc - Annual Report and Annual General Meeting
British Sky Broadcasting Group plc (the "Company") released its preliminary announcement of annual results for the year ended 30 June 2013 ("Preliminary Announcement") on 26 July 2013. Further to the Preliminary Announcement, the Company can now confirm that the Annual Review 2013, Annual Report 2013, Notice of Annual General Meeting 2013 and Form of Proxy were mailed to shareholders on 11 October 2013. These documents (excepting the proxy card) are now available on the Company's website at www.sky.com/corporate/investors. The Notice of Annual General Meeting 2013 can be accessed at: www.sky.com/corporate/investors/shareholder_information/annual_general_meeting.
All of the documents will be submitted to the National Storage Mechanism and will shortly be available for viewing at www.hemscott.com/nsm.do.
The Company's 2013 Annual General Meeting will be held at 11.00 a.m. on 22 November 2013 at the Edinburgh International Conference Centre, The Exchange, Edinburgh EH3 8EE.
The appendix to this announcement contains additional information which has been extracted from the Annual Report 2013 for the purposes of compliance with the Disclosure and Transparency Rules and should be read together with the Preliminary Announcement, which can be downloaded from the Company's website at www.sky.com/corporate/investors/latest_results. This announcement should be read in conjunction with and is not a substitute for reading the full Annual Report 2013. A glossary of terms is available on pages 118 to 119 of the Annual Report 2013. Together these constitute the information required by Disclosure and Transparency Rule 6.3.5 which is required to be communicated to media in full unedited text through a Regulatory Information Service. Page and note references in the text below refer to page numbers and notes in the Annual Report 2013.
Appendix
Statement of Directors' responsibilities
As set out above, the following responsibility statement is repeated here solely for the purpose of complying with Disclosure and Transparency Rule 6.3.5. This statement relates to and is extracted from page 60 of the Annual Report 2013. Responsibility is for the full Annual Report not the extracted information presented in this announcement or the Preliminary Announcement.
Directors' responsibility statement
The Directors confirm that to the best of their knowledge:
1. The financial statements, prepared in accordance with IFRSs, give a true and fair view of the assets, liabilities, financial position and profit or loss of the Company and the undertakings included in the consolidation taken as a whole; and
2. The management report, which is incorporated into the Directors' report, includes a fair review of the development and performance of the business and the position of the Company and the undertakings included in the consolidation taken as a whole, together with a description of the principal risks and uncertainties that they face.
By order of the Board
Jeremy Darroch Andrew Griffith
Chief Executive Officer Chief Financial Officer
25July 2013 25 July 2013
OVERVIEW AND RECENT DEVELOPMENTS
During the current year, total revenue increased by 7% to £7,235 million, compared to the year ended 30 June 2012 ("the prior year"). Adjusted operating profit for the current year increased by 9% to £1,330 million, resulting in an adjusted operating profit margin of 18.4%, compared to 18.0% in the prior year. Reported operating profit was £1,291 million, compared to £1,243 million in the prior year. Adjusted free cash flow was 13% higher at £1,028 million, compared to £910 million in the prior year.
Adjusted profit for the year was £969 million, generating adjusted basic earnings per share of 60.0 pence, compared to an adjusted profit of £875 million and adjusted basic earnings per share of 50.8 pence in the prior year. Reported profit for the year was £979 million, generating basic earnings per share of 60.7 pence, compared to a profit of £906 million and basic earnings per share of 52.6 pence in the prior year.
Our successful transition to more broadly-based growth, combined with the acquisition of the O2 consumer broadband and fixed-line telephony business, has delivered an increase of 3,269,000 subscription products in the year to a total of 31,634,000. Of this increase, 706,000 arose from the O2 acquisition and 2,563,000 from organic growth.
At 30 June 2013, the total number of TV Customers in the UK and Ireland was 10,422,000, representing a net increase of 134,000 in the current year, including subscribers to our new internet TV service NOW TV launched in July 2012. The total number of HD customers was 4,786,000, representing 46% of total TV Customers. This represents growth in HD customers of 10% in the current year. The number of Multiroom customers also continued to grow, increasing by 87,000 in the current year to 2,489,000; 24% penetration of total TV Customers. Sky Go Extra, our new paid-for mobile TV service, had a total of 166,000 customers at 30 June 2013, just five months after launch.
Strong growth in our home communications products is driven by both organic growth and the acquisition of the O2 consumer broadband and fixed-line telephony business. The number of Broadband customers increased by 905,000 in the current year to 4,906,000. The number of Telephony customers reached 4,501,000, representing an increase of 733,000 in the current year. The number of Line Rental customers increased by 801,000 in the current year to 4,364,000. In all, 35% of our customer base now takes all three of TV, broadband and telephony, up from 32% last year.
We are progressing with our plans to connect more Sky+HD boxes to the internet with 2,709,000 TV households with connected boxes as at 30 June 2013, an increase of 1,714,000 year on year.
Sky Go, our mobile video service, attracts a great response from customers with quarterly unique users at 3,257,000 in the fourth quarter compared to 2,740,000 in the fourth quarter last year, an increase of 19%.
Our total customer base increased by 552,000 to 14,830,000 comprising 11,153,000 retail customers and 3,677,000 wholesale customers taking at least one paid-for Sky channel, increases of 547,000 and 5,000 respectively on the prior year.
Churn for the current year was 10.8% (2012: 10.2%) which reflects the continuing pressure on household budgets in a tough economic environment, but was within our 10% to 11% target range.
During the year we unbundled 358 additional exchanges, increasing our footprint to approximately 88% network coverage.
The Board of Directors is proposing a final dividend of 19.0 pence per ordinary share, resulting in a total dividend for the year of 30.0 pence, representing growth of 18% over the prior year full-year dividend. The ex-dividend date will be 13 November 2013 and, subject to shareholder approval at the Company's Annual General Meeting ("AGM"), the dividend will be paid on 6 December 2013 to shareholders of record on 15 November 2013.
On 29 November 2011, at the Company's AGM, the Company was granted the authority to return £750 million of capital to shareholders via a share buy-back programme (the "November 2011 Authority"). This authority was subject to an agreement between the Company and Twenty-First Century Fox, Inc. (formerly known as News Corporation) (and others) dated 28 July 2011 whereby following any market purchases of shares by the Company, Twenty-First Century Fox, Inc. would sell to the Company sufficient shares to maintain its percentage shareholding at the same level as applied prior to those market purchases. The price payable to Twenty-First Century Fox, Inc. would be the price payable by the Company in respect of the relevant market purchases (the "2011 Share Buy-back Agreement").
At the Company's AGM on 1 November 2012, the Company was granted the authority to return a further £500 million of capital to shareholders via a share buy-back programme (the "November 2012 Authority"). This authority was subject to an agreement between the Company and Twenty-First Century Fox, Inc. (and others) dated 28 July 2012 on substantially the same terms as the 2011 Share Buy-back Agreement.
On 25 July 2013, the Board agreed to seek the necessary approvals to return a further £500 million of capital to shareholders via a share buy-back programme. Shareholder approvals will be sought at the Company's AGM on 22 November 2013. The Company has entered into an agreement with Twenty-First Century Fox, Inc. (and others) under substantially the same terms as the 2011 Share Buy-back Agreement. The agreement is conditional on the appropriate shareholder approvals being granted. The effect of the agreement is to provide that there will be no change in Twenty-First Century Fox, Inc.'s economic or voting interests in the Company as a result of the share buy-back programme.
In the year to 30 June 2013, the Company repurchased for cancellation 80,549,699 ordinary shares, representing 5% of the Company's issued share capital as at 30 June 2013, for a total consideration of £627 million which included stamp duty and commission of £3 million. This comprised 25 million shares under the November 2011 Authority and 56 million shares under the current November 2012 Authority. The closing share count at the end of the financial year was 1,593,905,182.
US$800 million of 3.125% Guaranteed Notes, repayable in November 2022, were issued in November 2012. At the time of issuing these notes, the US dollar proceeds were swapped into pounds sterling (£503 million). After hedging, 100% of the resulting sterling liability was subject to fixed interest rates at an average rate of 3.23%.
On 30 April 2013, the Group completed the purchase of the O2 consumer broadband and fixed-line telephony business from Telefónica UK. Total consideration comprised £180 million of cash relating to the purchase price, contingent consideration of £20 million and a £5 million provisional cash adjustment relating to working capital and active subscribers.
Principal risks and uncertainties
The Group risk register is reported formally to the Audit Committee twice a year and focused risk reporting on selected themes occurs on a quarterly basis. Additional information on the Group's internal control and risk management processes is set out in the Corporate Governance Report (see page 44).
This section describes the current principal risks and uncertainties facing the Group. In addition to summarising the material risks and uncertainties, the table below gives examples of how we mitigate those risks.
The Group has a formal risk management framework embedded within the business to support the identification and effective management of risk across the Group.
The divisions within the Group are each responsible for managing and reporting risk in accordance with the Group's risk management policy and standards that have been approved by the Audit Committee. The risks are then consolidated into a Group risk register which provides an overview of the Group risk profile.
Description of risk | Mitigation |
Market and competition:
The Group operates in a highly competitive environment and faces competition from a broad range of organisations. Technological developments also have the ability to create new forms of quickly evolving competition.
A failure to develop the Group's product proposition in line with changing market dynamics and expectations could erode the Group's competitive position.
Great content is central to Sky's product proposition and increased competition could impact the Group's ability to acquire content that its customers want on commercially attractive terms.
Economic conditions have been challenging in recent years and the future remains uncertain. A significant economic decline could impact the Group's ability to continue to attract and retain customers.
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The Group continues to make significant investments in innovation.
The Group's product development strategic aim is to be at the forefront of progressive technology.
Please see the "Review of our business" section for further details of these products.
The Group regularly reviews its pricing and packaging structures to ensure that its product proposition is appropriately placed within the market.
The Group works closely with its marketing partners to ensure that the value of its offering is understood and communicated effectively to its customers.
The Group makes significant investments in the origination of UK content as well as acquisition from across the world.
The Group also works to develop and maintain the brand value associated with its individual channels. |
Regulatory breach and change:
The Group is subject to regulation primarily under UK, Irish and European Union legislation.
The regimes which apply to the Group's business include, but are not limited to:
Ø Gambling - Alderney Gambling Commission regulation;
Ø Broadcasting - the Group is subject to Ofcom's licensing regime under the Broadcasting Acts 1990 and 1996 and the Communications Act 2003.
Ø These obligations include the requirement to comply with the relevant codes and directions issued by Ofcom including, for example, the Broadcasting Code, the Code on the Scheduling of Television Advertising and the Cross Promotions Code.
Please see page 16 of the Business Review for further details of our UK broadcasting licences;
Ø Platform services - as a provider of EPG and CA services, the Group is subject to regulation under the Communications Act 2003 which, amongst other things, requires it to provide EPG and CA services to other broadcasters on fair, reasonable and non-discriminatory terms; and
Ø Telecommunications - the Group is subject to the General Conditions of Entitlement adopted under the Communications Act 2003 which impose detailed requirements on providers of communications networks and services.
The Group is also subject to generally applicable legislation including, but not limited to, competition (antitrust), consumer protection, data protection and taxation.
The Group is currently, and may be in the future, subject to proceedings, and/or investigation and enquiries, from regulatory authorities. The Group's ability to operate or compete effectively could be adversely affected by the outcome of investigations or by the introduction of new laws, policies or regulations, changes in the interpretation or application of existing laws, policies and regulations, or failure to obtain required regulatory approvals or licences.
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The Group manages these risks through active engagement in the regulatory processes that affect the Group's business.
The Group actively seeks to identify and meet our regulatory obligations and to respond to emerging requirements. This includes, for example:
Ø Gambling - controls and processes are in place to monitor our compliance with, and our adherence to, our obligations under the Alderney Gambling Commission regulations. We are subject to regular independent audit by the Commission against the regulations;
Ø Broadcasting - compliance controls, processes and contacts are in place in Entertainment, Movies, Sports and News services. Interaction with Ofcom is co-ordinated between the Compliance, Regulatory and Legal departments;
Ø Platform services - processes are in place to monitor third party broadcaster access to the digital satellite platform and to ensure that this is provided on fair, reasonable and non-discriminatory terms; and
Ø Telecommunications - compliance controls, processes and contacts are in place overseen by the Customer Compliance Committee to monitor compliance and performance against the General Conditions of Entitlement.
The Group maintains appropriate oversight and reporting, supported by training, to provide assurance that it is compliant with regulatory requirements. |
Customer service:
The Group's business is based on a subscription model and its future success relies on building long-term relationships with its customers. A failure to meet its customers' expectations with regards to service could negatively impact the Group's brand and competitive position. |
The Group strives consistently to exceed its customer expectations, to put its customers first, to understand what they want and to be responsive to what they say.
The Group makes significant investments in order to deliver continuous development and improvement to its customer service capabilities.
The Group has increased, and is continuing to increase the number of contact centres located across the United Kingdom and Ireland and has implemented ongoing training and development plans.
The Group benchmarks its customer service experience and strives to be the best in class.
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Technology and business interruption:
The products and services that the Group provides to its customers are reliant on complex technical infrastructure.
A failure in the operation of the Group's key systems or infrastructure, such as the broadcast platform, customer management systems or the telecommunications networks on which the Group relies, could cause a failure of service to our customers and negatively impact our brand.
Details of our infrastructure and technology are set out on pages 14 to 15 of the Business Review.
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The Group makes significant investment in technology infrastructure to ensure that it continues to support the growth of the business.
The Group is committed to achieve best in class business continuity standards and makes significant investments in the resilience and robustness of its business infrastructure.
The Group also organises regular scenario based group-wide business continuity exercises to ensure ongoing readiness of key staff, systems and sites. |
Supply chain:
The Group relies on a number of third parties and outsourced suppliers operating across the globe to support its supply chain.
A significant failure within the supply chain could adversely affect the Group's ability to deliver products and service to its customers. |
The Group continues to invest in its supply chain infrastructure to support its business plan commitments.
A robust supplier selection process is in place with appropriate ongoing management and monitoring of key partners and suppliers.
The Group performs regular audits of key suppliers and of their installations and, wherever possible, has dual supply capability.
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Financial:
The effective management of its financial exposures is central to preserving the Group's profitability.
The Group has some exposure to the European financial crisis although the Group's net euro cash flows are approximately 3% of total group revenues and the Group's practice is to hold less than £10 million on deposit in euros.
A number of the Group's syndicate banks are headquartered in Europe but the Group does not currently anticipate drawing the RCF. |
The Group's finance teams are embedded within the business to provide support to management and to ensure accurate financial reporting and tracking of our business performance. Reporting on financial performance is provided on a monthly basis to the senior management and the Board.
The Group continually invests in the improvement of its systems and processes in order to ensure sound financial management and reporting.
The Group manages treasury risk by minimising risk to capital and providing appropriate protection against foreign exchange and interest rate movements.
Cash investment is made in line with the Group's strict treasury policy which is approved by the Audit Committee and sets limits on deposits based on counterparty credit ratings. No more than 10% of cash deposits are held with a single bank counterparty, with the exception of overnight deposits which are invested in a spread of AAAm-rated liquidity funds.
All non-sterling debt is swapped at inception to ensure appropriate currency and interest rate protection is in place, and trading currency risk is hedged up to 5 years in advance.
The Group manages its tax risk by ensuring that risks are identified and understood at an early stage and that effective compliance and reporting processes are in place.
The Group continues to maintain an open and proactive relationship with the regulating tax authorities which are primarily HM Revenue & Customs. The Group aims to deal with any taxation issues, wherever possible, as they arise in order to avoid unnecessary disputes.
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Security:
The Group must protect its customer and corporate data and the safety of its people and infrastructure as well as needing to have in place fraud prevention and detection measures.
The Group is responsible to third party intellectual property owners for the security of the content that it distributes on various platforms (Sky's own and third party platforms).
A significant breach of security could impact the Group's ability to operate and deliver against its business objectives.
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The Group takes measures ranging from physical and logical access controls to encryption, or equivalent technologies, to manage its security risks.
The Group continues to invest in new technological controls and in improving broader business process and works closely with law enforcement agencies and policy makers in order to protect its assets and to comply with its contractual obligations to third parties. |
Projects:
The Group invests in, and delivers, significant capital expenditure projects in order continually to drive the business forward. The failure to deliver key projects effectively and efficiently could result in significantly increased project costs and impede our ability to execute our strategic plans. |
A common project management methodology is used to enable the Group to manage, monitor and control its major capital expenditure projects and strategic programmes. This includes standardised reporting and monthly reviews by senior management.
Third party partners will, where appropriate, be engaged to provide support and expertise in our large strategic programmes, complex initiatives and for emerging technologies.
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Intellectual property protection:
The Group, in common with other service providers, relies on intellectual property and other proprietary rights, including in respect of programming content, which may not be adequately protected under current laws or which may be subject to unauthorised use.
Please see page 11 of the Business Review.
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We maintain an ongoing programme to support appropriate protections of our intellectual property and other rights. This includes, for example, the use of automated on line monitoring tools, the implementation of on screen imprinting of content together with an active programme to protect our trade marks. |
People:
People at Sky are critical to the Group's ability to meet the needs of its customers and achieve its goals as a business.
The failure to attract or retain suitable employees across the business could limit the Group's ability to deliver its business plan commitments. |
Making Sky a great place to work is central to the Group's strategy. The Group champions diversity and develops talent through a number of activities, including the Graduate program, Development Studio, an apprenticeship scheme and a leadership programme.
The Group has well established channels and procedures to recruit and retain its employees and to ensure that an adequate number of suitable employees work within its customer service teams and across all its operations.
Further detail on our people is set out on pages 21 to 23 of the Business Review. |
Transactions with related parties and major shareholders
a) Entities with joint control or significant influence
During the year the Group conducted business transactions with companies that form part of the Twenty-First Century Fox, Inc. group (formerly known as News Corporation), a major shareholder in the Company.
Transactions with related parties and amounts outstanding in relation to those transactions and with related parties at 30 June are as follows:
2013 £m | 2012 £m | |
Supply of goods or services by the Group | 89 | 79 |
Purchases of goods or services by the Group | (156) | (199) |
Amounts owed to the Group | 7 | 12 |
Amounts owed by the Group | (102) | (98) |
At 30 June 2013 the Group had expenditure commitments of £97 million in relation to transactions with related parties and with related parties (2012: £462 million) of which £97 million (2012: £58 million) related to minimum television programming rights commitments and nil (2012: £404 million) related to expected ongoing smartcard costs.
Goods and services supplied
During the year, the Group supplied set-top boxes, programming, airtime, transmission, marketing, consultancy services, customer relationship management services and a licence to use the Sky brand to Twenty-First Century Fox, Inc. companies.
Purchases of goods and services and certain other relationships
During the year, the Group purchased programming, digital equipment, smartcards and encryption services, set-top box technologies, advertising and IT services from Twenty-First Century Fox, Inc. companies.
There is an agreement between Twenty-First Century Fox, Inc. (formerly known as News Corporation) and the Group, pursuant to which it was agreed that, for so long as Twenty-First Century Fox, Inc. directly or indirectly holds an interest of 30% or more in the Group, Twenty-First Century Fox, Inc. will not engage in the business of satellite broadcasting in the UK or Ireland.
Share buy-back programme
During the year, the Company purchased, and subsequently cancelled, 31,525,314 ordinary shares held by Twenty-First Century Fox, Inc. as part of its share buy-back programme. For further details, see note 24.
b) Joint ventures and associates
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its joint ventures and associates are disclosed below.
Transactions between the Company and its subsidiaries, joint ventures and associates are disclosed in the Company's separate financial statements.
2013 £m | 2012 £m | |
Supply of services by the Group | 22 | 24 |
Purchases of goods or services by the Group | (66) | (67) |
Amounts owed by joint ventures and associates to the Group | 9 | 15 |
Amounts owed to joint ventures and associates by the Group | (9) | (10) |
Services supplied are primarily the provision of transponder capacity, marketing, airtime sales and support services. Purchases represent fees payable for channel carriage. Amounts owed by joint ventures and associates include £1 million (2012: £7 million) relating to loan funding.
These loans bear interest at a rate of one month LIBOR plus 1%. The maximum amount of loan funding outstanding in total from joint ventures and associates during the year was £7 million (2012: £16 million).
The Group took out a number of forward exchange contracts with counterparty banks during the year on behalf of the joint venture AETN UK. On the same dates as these forward contracts were entered into, the Group entered into equal and opposite contracts with AETN UK in respect of these forward contracts.
Consequently, the Group was not exposed to any of the net gains or losses on these forward contracts. The face value of forward exchange contracts with AETN UK that had not matured as at 30 June 2013 was £8 million (2012: £2 million).
During the year, US$4 million (2012: US$3 million) was paid to the joint venture upon maturity of forward exchange contracts and US$nil (2012: US$14 million) was received from the joint venture upon maturity of forward exchange contracts.
During the year, £2 million (2012: £2 million) was received from the joint venture upon maturity of forward exchange contracts, and £3 million (2012: £7 million) was paid to the joint venture upon maturity of forward exchange contracts.
During the year, €4 million (2012: €nil) was received from the joint venture upon maturity of forward exchange contracts and €nil (2012: €2 million) was paid to the joint venture upon maturity of forward exchange contracts.
At 30 June 2013 the Group had minimum expenditure commitments of £4 million (2012: £1 million) with its joint ventures and associates.
c) Other transactions with related parties
A close family member of one Director of the Company runs Freud Communications Limited ("Freud"), which has provided external support to the press and publicity activities of the Group. During the year the Group incurred expenditure amounting to £1 million (2012: £1 million) with Freud. At 30 June 2013 there was less than £1 million (2012: less than £1 million) due to Freud.
In addition to the foregoing, the Group has engaged in a number of transactions with companies of which some of the Company's Directors are also directors. These do not meet the definition of related party transactions.
d) Key management
The Group has a related party relationship with the Directors of the Company. At 30 June 2013, there were 14 (2012: 14) members of key management all of whom were Directors of the Company. Key management compensation is disclosed in note 6b.
Forward looking statements
This document contains certain forward looking statements with respect to our financial condition, results of operations and business, and our strategy, plans and objectives. These statements include, without limitation, those that express forecasts, expectations and projections, such as forecasts, expectations and projections with respect to new products and services, the potential for growth of free-to-air and pay television, fixed line telephony, broadband and bandwidth requirements, advertising growth, Direct-to-Home ("DTH") customer growth, Over-the-top ("OTT") customer growth, Multiroom, On Demand, NOW TV, Sky Go, Sky Go Extra, Sky+, Sky+HD and other services, churn, revenue, profitability and margin growth, cash flow generation, programming costs, subscriber management and supply chain costs, administration costs and other costs, marketing expenditure, capital expenditure programmes and proposals for returning capital to shareholders.
Although the Company believes that the expectations reflected in such forward looking statements are reasonable, 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 our 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, those risks that are highlighted in this document in the section entitled "Directors' report - Business review - Principal risks & uncertainties", and information on the significant risks and uncertainties associated with our business is described therein.
No part of these results constitutes, or shall be taken to constitute, an invitation or inducement to invest in the Company or any other entity and must not be relied upon in any way in connection with any investment decision. All forward looking statements in this document are based on information known to us on the date hereof. Except as required by law, we undertake no obligation publicly to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.
RELATED PARTY ANNOUNCEMENT
On 26 July 2013, the Company announced an intention to seek the necessary Shareholder approvals at its AGM on 22 November 2013 (the "AGM") to return £500 million of capital to shareholders via an additional share buy-back programme (the "Share Buy-back Programme").
Consistent with the approach adopted for the Company's previous share buy-back programmes, as approved at the annual general meetings in 2011 and 2012, the Company intends to implement the Share Buy-back Programme by way of both ongoing on-market repurchases on the Main Market of the London Stock Exchange plc and off-market repurchases from Twenty-First Century Fox, Inc. (formerly known as News Corporation), the Company's largest shareholder. If Twenty-First Century Fox, Inc. were not to participate in the Share Buy-back Programme, any repurchase of ordinary shares by the Company would increase Twenty-First Century Fox, Inc.'s percentage shareholding in the Company and trigger the requirement under Rule 9 of the City Code on Takeovers and Mergers to make a general offer to all of the other shareholders to acquire their shares.
In order not to trigger this requirement, the off-market repurchases from Twenty-First Century Fox, Inc. will be governed by an agreement entered into with Twenty-First Century Fox, Inc. (the "21CF Agreement") under which, following any on-market purchases of ordinary shares by the Company, Twenty-First Century Fox, Inc. will sell to the Company sufficient ordinary shares to maintain its percentage shareholding at the same level as applied prior to those on-market purchases. This approach was adopted to make off-market repurchases from Twenty-First Century Fox, Inc. under the £500 million share buy-back programme approved at the 2012 AGM and the £750 million share buy-back programme approved at the 2011 AGM, and the commercial terms of the 21CF Agreement mirror those agreed under the previous £500 million and £750 million share buy-back programmes. This will ensure that there will be no change to Twenty-First Century Fox, Inc.'s economic or voting interests in the Company as a result of the Share Buy-back Programme.
As a result of Twenty-First Century Fox, Inc.'s 39.14% shareholding in the Company, Twenty-First Century Fox, Inc. is a related party of the Company under Listing Rule 11.1.4(1)(R) and the entry into the 21CF Agreement (the "Transaction") is classified as a related party transaction, pursuant to Listing Rule 11.1.5(R).
On the basis of the size of Twenty-First Century Fox, Inc.'s pro rata stake in the Share Buy-back Programme, which would not exceed £195.7 million (being 39.14% of £500 million), the Transaction is classified as a smaller related party transaction, pursuant to Listing Rule 11.1.10(R) and therefore does not automatically require shareholder approval pursuant to Listing Rule 11.1.7R, but does require shareholder approval in accordance with the Companies Act 2006.
The Board announces that it has nevertheless voluntarily decided to obtain shareholder approval for the Transaction as a related party transaction. The reasons for the Board's decision are outlined in the AGM circular distributed to the Company's shareholders today. As a consequence of the Board's decision to voluntarily treat the Transaction as a related party transaction in accordance with Listing Rule 11.1.7, the Transaction will require shareholder approval as a related party transaction, which the Board intends to seek from the Company's shareholders by ordinary resolution at the AGM in addition to the other approvals set out in the AGM circular.
Related Shares:
Sky