2nd Feb 2005 07:00
British Sky Broadcasting Group PLC02 February 2005 2 February 2005 BRITISH SKY BROADCASTING GROUP PLC Results for the six months ended 31 December 2004 BSkyB announces 192,000 net DTH subscriber additions for the second quarter, 25% year on year operating profit (before goodwill) growth, and a 44% increase in earnings per share (before goodwill and exceptional items) to 12.1 pence • Net DTH subscriber growth of 192,000 in the quarter to over 7.6 million • Sky+ households increase by 168,000 in the quarter to 642,000 • Multiroom households increase by 116,000 in the quarter to 473,000 • Total revenue increases by 10% to £1,945 million • Operating profit before goodwill increases by 25% to £354 million • Earnings before goodwill and exceptional items increase by 44% to £234 million • Profit after tax up 18% to £154 million • Earnings per share before goodwill and exceptional items increase by 44% to 12.1 pence • Interim dividend of 4 pence per share declared, an increase of 45% Commenting on the announcement, James Murdoch, Chief Executive said: "The business delivered a strong set of financial results in the first half yearwith good sales and profit growth. During the quarter, we launched a number of important initiatives consistentwith the long-term growth strategy we outlined in August 2004. We have a fullprogramme of work ahead of us in 2005, including the continued roll-out of oursegmentation project and implementation of new customer management systems. Wewill continue to develop these and other initiatives in pursuit of our long-termstrategic goals and targets." Enquiries: Analysts/Investors: Andrew Griffith Tel: 020 7705 3118Robert Kingston Tel: 020 7705 3726 E-mail: [email protected] Press: Julian Eccles Tel: 020 7705 3267Robert Fraser Tel: 020 7705 3036 E-mail: [email protected] Finsbury: James Murgatroyd Tel: 020 7251 3801 There will be a presentation to analysts and investors at 09:30 a.m. (GMT) todayat The Grange City Hotel, 8-14 Cooper's Row, London, EC3N 2BQ. A conference call with the press will be held at 11:00 a.m. (GMT) today. Toregister for this, please contact Simon Moyes at Finsbury on +44 20 7251 3801. A conference call for US analysts and investors will be held at 10.30 a.m. (EST)today. Details of this call have been sent to North American institutions andcan 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 thispress release, will be available today on Sky's corporate website which may befound at www.sky.com/corporate. Interviews with James Murdoch, CEO, and JeremyDarroch, CFO, in video/audio and transcript will be available from 7:00 a.m.(GMT) today at www.sky.com/corporate and at www.cantos.com. OVERVIEW On 4 August 2004, Sky announced a range of initiatives to deliver on itslong-term growth strategy. During the three months to 31 December 2004 ("thequarter"), Sky has made good progress on the work outlined in August 2004 and,with a full programme planned for 2005, is in a strong position to makecontinued progress on its long-term strategy. The Group has delivered a strong financial performance during the six months to31 December 2004 ("the period"), with a 44% increase in earnings per share(before goodwill and exceptional items). Total revenues increased by 10% overthe six months to 31 December 2003 ("the comparable period") to £1,945 millionand, for the first time, the Group generated over £1 billion of revenue during asingle quarter. Operating profit before goodwill increased by 25% on thecomparable period to £354 million, resulting in an operating profit marginbefore goodwill of 18.2%, up from 16.0% for the comparable period. Profit after tax for the period grew to £154 million, with earnings per sharebefore goodwill and exceptional items of 12.1p, an increase of 44% on thecomparable period. During the quarter, the Group returned £128 million toshareholders through a share buy-back programme and an interim dividend paymentof 4 pence per share has been declared. OPERATING REVIEW At 31 December 2004, the total number of direct-to-home ("DTH") digitalsatellite subscribers in the UK and Ireland was 7,609,000, representing a netincrease of 192,000 subscribers in the quarter. Sky remains on track to achieveits target of eight million DTH subscribers by 31 December 2005. The total number of Sky+ households increased by a record 168,000 in the quarterto 642,000, which represents 8.4% penetration of total DTH subscribers. Whilstcontinuing to penetrate the existing subscriber base, Sky+ also attractsconsumers who previously had not chosen Sky. 28% of new Sky+ households in thequarter were first time subscribers. The growth in Sky+ penetration has also led to further good growth in the numberof households taking two or more subscriptions. The total number of Multiroomhouseholds increased by 116,000 in the quarter to 473,000, which represents 6.2%penetration of total DTH subscribers. The total number of Multiroomsubscriptions reached 500,000 at 31 December 2004 as some households take morethan two subscriptions. DTH churn for the quarter (annualised) was 9.5%, a decrease of 0.3% points onthe three months to 30 September 2004 ("the first quarter"). Annualised average revenue per DTH subscriber ("ARPU") in the period was £386,an increase of £17 over the comparable period and £9 over the first quarter. On 1 October 2004, Sky launched a long-term marketing drive to encourageconsumers to re-appraise the Sky brand and the range of content available frompay television. The 'What do you want to watch' advertising campaign waslaunched across numerous media including television, press and cinema andfeatured a wide array of content from channels retailed by Sky. New pricing and packaging initiatives have been introduced since 1 October tobroaden the range of entry points to pay-TV. These included the launch of thepremium 'Sky+160' product, more focused marketing of the popular Family Pack, anew entry level Sky 'starter pack' and a free satellite offering. Also,installation costs have been waived on all popular Sky packages, eliminating thehigher upfront costs for subscribers not choosing the top tier 'Sky World'package. The development of these marketing initiatives will continue toroll-out during 2005. Sky has continued to invest in quality programming to increase customer loyaltyand satisfaction, and to drive subscriber growth. On 12 October 2004, Skyannounced that it had been awarded exclusive live rights by the Rugby FootballUnion to English international and domestic rugby union until the end of the2009/10 season. The new agreement covers the five seasons from the start of the2005/06 season and follows on from the current TV agreement. Under this newagreement, Sky Sports will broadcast live all of England's Autumn Internationalsand over 30 Zurich Premiership matches each season. With exclusive HeinekenEuropean Cup Rugby and all Southern Hemisphere rugby, including the Lions Tourin June 2005, Sky Sports will show over 100 live rugby union games this year. On 14 December 2004, the England and Wales Cricket Board ("ECB") announced itsintention to award exclusive live rights to all international and domesticcricket in England and Wales from 2006 to 2009 to Sky. Under the new agreement,it is proposed that Sky will broadcast live all of England's home Test andOne-Day International matches, including the Ashes series in 2009, Twenty20matches and a number of Natwest series games. Sky One's new season launched on 14 September 2004 with a new on-air look and astrong line-up of both international and newly commissioned British shows,including 'Deadwood', 'the 4400', 'Battlestar Galactica', 'Hex', a new series of'Dream Team', 'The Long Way Round' and reality event 'The Match'. The finale of 'The Match,' on Sunday 10 October, delivered the second best everpeak audience for Sky One, recording a higher viewing share than BBC2, Channel 4and 'five' in multichannel homes. The continued investment in Sky One and focuson peak time programming is delivering a strong Winter schedule, with new seriesof '24' and 'Nip/Tuck' and new shows such as 'Rescue Me'. Multichannel TV viewing in Sky digital households continues to growyear-on-year, accounting for over 50% of viewing for the first time, accordingto the viewing figures from the Broadcasters' Audience Research Board ("BARB")at 31 December 2004. The combined multichannel TV viewing share in Sky digitalhouseholds of 51% compares favourably to digital terrestrial televisionhouseholds where the large majority of viewing, around 80%, continues to be ofthe five analogue terrestrial channels, BBC1, BBC2, ITV1, Channel 4 and 'five'. Sky's wholly-owned channels recorded the highest ever weekly combined share ofTV viewing in the week ending 2 January 2005, achieving 9.6% of total TV viewingin all TV households. Live sports events such as Liverpool vs Chelsea, the moviepremier of Bruce Almighty and Sky News enabled Sky to win a higher viewing sharein all TV households than Channel 4 for a full week for the first time. On 23 November 2004, Sky Movies announced a multi-year exclusive UK agreement tobroadcast The Academy Awards from 2005. For the 77th Academy Awards on 27February 2005, Sky has launched network-wide coverage which included fullreporting of the nominations in January and culminates with live uninterruptedcoverage of the event itself on Sky Movies. Extended highlights and additionalthemed programming will be shown on Sky One, Sky Travel and the BiographyChannel, with up-to-the-minute news coverage on Sky News. FINANCIAL REVIEW Revenue Total revenues increased by 10% on the comparable period to £1,945 million. DTH revenues increased by 11% on the comparable period to £1,426 million. Thiswas mainly driven by 6% growth in the average number of DTH subscribers and a 5%increase in the average revenue per DTH subscriber following the January andSeptember 2004 prices rises and increased Multiroom revenues. Cable wholesale revenues increased by 6% to £109 million, an increase of £6million on the comparable period. Adjusting for a one-off receipt of auditmonies received from NTL in the first quarter of last year, this represents a£10 million increase on the comparable period. With the level of subscribersremaining broadly flat, the increase is attributable to the wholesale pricechanges in January and September 2004 and the carriage of Sky Sports Extra and PREMPLUS. An 8% increase in advertising revenues on the comparable period to £159 millionreflects growth of 5% in the overall UK television advertising sector andcontinued growth in the Group's share of the sector to 11.6%. The Groupoutperformed UK television advertising sector growth in 2004 and, with themajority of agency deals now in place, expects this to continue in 2005. SkyBet revenues increased by £27 million on the comparable period to £118million and underlying gross margin in SkyBet increased to 10%, reflectingstrong growth in betting and gaming through interactive TV. Lower revenues from the SkyBuy retail service, and from the expiry of a numberof contracts and services, led to an 18% reduction in Sky Active revenues on thecomparable period to £46 million. Underlying revenues in Sky Active (excludingthese items) rose by 11% to £42 million, reflecting growth in areas such asinteractive advertising, games and third party betting and gaming. Other revenues increased by 4% on the comparable period to £87 million, mainlydue to the growth of set-top box revenues associated with the increase in Sky+and Multiroom sales. Programming costs Total programming costs increased by £25 million on the comparable period to£808 million. Sports costs increased by £33 million to £373 million. As previously announced,all contracts, including the new FA Premier League ("FAPL") contract and the newFootball Association ("FA") contract are now amortised on a straight-line basisacross the season, resulting in a greater charge in the first half of thefinancial year. Adjusting for the effect of this change, sports costs would havereduced by £24 million on the comparable period. This underlying reduction isprincipally due to savings achieved in the renewal of the FAPL and FA contracts,slightly offset by the Ryder Cup, a bi-annual event, and cricket's ICC ChampionsTrophy, both of which occurred in September 2004. Other programming costs, including Movies, News, Entertainment and Third PartyChannels, reduced by £8 million on the comparable period to £435 million. Thisreduction has been mainly driven by savings in US-dollar denominated moviescosts, partially offset by the increased investment in Sky One programming. Gross margin (defined as total revenues less total programming costs, divided bytotal revenue) increased from 55.7% for the comparable period to 58.5%. On alike-for-like basis (adjusting for the effect of the change in sports rightsamortisation phasing noted above) gross margin would have increased by 6percentage points. Other operating costs Other operating costs before goodwill increased by £83 million on the comparableperiod to £783 million. Marketing costs were £258 million, an increase of £43 million on the comparableperiod. This increase was driven by higher acquisition and retention costs,reflecting increased direct marketing and installation offers across all productcategories, and increased above-the-line spend due to the launch of the 'What doyou want to watch' advertising campaign and marketing of the new Sky Oneschedule. The Group continues to expect above-the-line marketing costs toincrease by 40% to 50% in the 2005 financial year compared to the 2004 financialyear. Betting costs increased by £20 million to £106 million, in-line with theincrease in SkyBet revenue. The remaining other operating costs, including subscriber management costs,transmission and related function costs and administration costs, increased by£20 million on the comparable period to £419 million. This was primarily due tocosts associated with an expanding broadcast and support infrastructure,including the Advanced Technology Centre, IT systems and an increased number ofown-productions. During the quarter the Group sold its 49.5% investment in Granada SkyBroadcasting ("GSB") to ITV for £14 million cash consideration. After deductingthe carrying value of the investment in GSB and writing back the originalgoodwill relating to the increase of the Group's interest in GSB to 49.5% inMarch 1998, which had previously been eliminated against reserves, the disposalgenerated an accounting loss under UK GAAP of £23 million in the quarter. After goodwill of £57 million, the Group's share of operating profits of jointventures of £8 million, loss on disposal of the groups share in GSB of £23million (as above) and net interest payable of £32 million, the Group made aprofit before tax of £250 million. Taxation The total net tax charge for the period was £96 million. This reflects a currenttax charge of £66 million and a deferred tax charge of £30 million. Excludingthe effect of goodwill, joint ventures and exceptional items, the Group'sunderlying effective tax rate on ordinary activities has moved from 29.9% forthe comparable period to 30.6%, as a result of a decrease in the proportion ofallowable tax deductions. The mainstream corporation tax liability for the period was £71 million and, inaccordance with the quarterly instalment regime, £36 million was paid in January2005. Earnings Profit after tax for the period grew by 18% on the comparable period to £154million, generating earnings per share of 12.1 pence, an increase of 3.7 penceper share on the comparable period. Cashflow Earnings before interest, tax, depreciation and amortisation ("EBITDA"),excluding exceptional items, were 18% higher on the comparable period at £402million. The Group continued to reduce net debt by a further £60 million to £369million at 31 December 2004. In addition to strong growth in EBITDA, the Groupalso realised £14 million from the sale of the Group's 49.5% investment in GSBto ITV and £9 million from the receipt of dividends and net funding repaymentsfrom joint ventures. The Group utilised cash in a number of areas including theshare buy-back programme (£128 million), capital expenditure (£123 million),dividend payments relating to the final dividend for the 2004 financial year(£63 million), net interest payments (£32 million) and taxation (£28 million). During the period, the Group made progress on a number of capital expenditureand infrastructure projects in line with the plans outlined on 4 August 2004.This has led to an increase in capital expenditure of £58 million on thecomparable period to £123 million. The Group spent £51 million on a combinationof infrastructure projects including the acquisition of four freehold propertiespreviously leased at its Osterley Campus and construction work on several otherprojects, including the new Sky News Centre, which commenced production of the'five' news service on 29 December 2004. Investment in the customer relationshipmanagement ("CRM") programme during the period amounted to £25 million as theGroup continues the programme of work started in 2002 to upgrade its customerservice systems. A total of £19 million was incurred on the final stages of theconstruction and fit-out of the Advanced Technology Centre ("ATC") building. Theremaining £28 million, regarded as 'core' or 'maintenance' capital expenditure,was spent on IT infrastructure, broadcast equipment and new product development,including High Definition TV, which is expected to launch in 2006. IFRS The Group is required to adopt International Financial Reporting Standards('IFRS') in the preparation of its consolidated financial statements from 1 July2005. The Group's first results reported under IFRS will therefore be theresults for the quarter ended 30 September 2005. In order to provide comparativeinformation under IFRS in advance, the Group intends to release its results forthe year to 30 June 2005, restated under IFRS, in September 2005. Informationregarding the Group's transition to IFRS was provided in the Group's 2004 AnnualReport and further details will be given in the Group's interim resultspresentation today. Dividend As part of the Group's financial strategy, the Directors are declaring aninterim dividend of 4 pence per Ordinary Share. The ex-dividend date will be 30March 2005 and the dividend will be paid on 22 April to shareholders of recordon 1 April 2005. CORPORATE At the Company's AGM on 12 November 2004, Sky received approval fromshareholders to repurchase up to 97 million shares, representing approximatelyfive per cent of issued share capital. During the quarter, Sky repurchased forcancellation 22.8 million shares for a total consideration of £128 million,including stamp duty and commissions. The Company intends to continue todistribute surplus cash to shareholders through the buy-back programme, withinthe limits of available distributable reserves and subject to market conditions. Use of non-GAAP financial information This results announcement contains certain information on the Group's resultsand cash flows that have been derived from amounts calculated in accordance withUK Generally Accepted Accounting Principles ("UK GAAP"), but are not themselvesUK GAAP measures. This should not be viewed in isolation as alternatives to theequivalent UK GAAP measure and should be read in conjunction with the equivalentUK GAAP measures. Further disclosures are also provided under "Use of Non-GAAPFinancial Information" in Appendix 2. 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 regard to DTH subscriber growth, advertising revenue growth andmarketing expenditure. 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 governmentregulation upon the Group's activities, its ability to continue to obtainexclusive rights to movies, sports events and other programming content, risksinherent in the implementation of large-scale capital expenditure projects, theGroup's ability to continue to communicate and market its services effectively,and the risks associated with the Group's operation of digital televisiontransmission in the UK and Ireland. Information on some risks and uncertainties are described in the "Risk Factors"section of Sky's Annual Report on Form 20-F for the year ended 30 June 2004.Copies of the Annual Report on Form 20-F are available on request from BritishSky Broadcasting Group plc, Grant Way, Isleworth TW7 5QD. All forward-lookingstatements in this document are based on information known to the Group on thedate hereof. The Group undertakes no obligation publicly to update or revise anyforward-looking statements, whether as a result of new information, futureevents or otherwise. Appendix 1 Subscribers to Sky Channels Prior year Q1 2004/05 Q2 2004/05 Q2 as at as at as at 31/12/03 30/09/04 31/12/04 DTH homes1,2 7,208,000 7,417,000 7,609,000 Total TV homes in the UK andIreland3 25,955,000 26,176,000 26,249,000 DTH homes as a percentage oftotal UK and Ireland TVhomes 28% 28% 29% Cable - UK 3,282,000 3,305,000 3,292,000Cable - Ireland 580,000 575,000 584,000Total Sky pay homes 11,070,000 11,297,000 11,485,000DTT - UK 4 2,075,000 3,451,000 4,216,000Total Sky homes 13,145,000 14,748,000 15,701,000 Total Sky homes as apercentage of total UK andIreland TV homes 51% 56% 60% Sky+ homes 250,000 474,000 642,000 Multiroom homes5 237,000 357,000 473,000 1: Includes DTH subscribers in Republic of Ireland (347,000 as at 31 December 2004).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: Total UK homes estimated by BARB and taken from the beginning of the month following the period end (latest figures as at January 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).4: DTT homes estimated by BARB and taken from the beginning of the following month (latest figures as at 1 January 2005). These figures may include Sky or Cable homes that already take multichannel TV.5: Multiroom includes households subscribing to more than one set-top box. (No additional units are counted for the second or any subsequent Multiroom subscriptions.) 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 certainnon-GAAP measure, is shown below. -------------------- ---------------------------------------------------------Non-GAAP measure Most comparable GAAP measure-------------------- ---------------------------------------------------------Operating profit Operating profitbefore goodwill -------------------- ---------------------------------------------------------Earnings before Profit after taxationgoodwill and exceptional items-------------------- ---------------------------------------------------------Earnings per share Earnings per sharebefore 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.-------------------- ---------------------------------------------------------CRM Customer Relationship Management-------------------- ---------------------------------------------------------Digibox Digital satellite reception equipment-------------------- ---------------------------------------------------------Earnings before Profit on ordinary activities after taxation beforegoodwill and goodwill and exceptional itemsexceptional items -------------------- ---------------------------------------------------------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 Current corporation tax charge for the yearTax liability -------------------- ---------------------------------------------------------Multichannel viewing Share of viewers of non-analogue televisionshare -------------------- ---------------------------------------------------------Multiroom Installation of one or more additional digiboxes in the household of an existing 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-------------------- ---------------------------------------------------------SBO Sky Box Office: Sky's pay-per-view service offering films, sporting events and concerts-------------------- ---------------------------------------------------------Set-top box Digital satellite reception equipment-------------------- ---------------------------------------------------------Sky + Sky's fully-integrated Personal Video Recorder (PVR) and satellite decoder-------------------- ---------------------------------------------------------Transponder Wireless communication devices on satellites which send programming signals to minidishes.-------------------- ---------------------------------------------------------Viewing Number of people viewing a channel as a percentage of share total viewing audience-------------------- --------------------------------------------------------- Consolidated Profit and Loss Account for the half year ended 31 December 2004 ---------------- ----- ------------ ------------ ---------- ------------ ----------- --------- --------- Before Before Goodwill goodwill and Goodwill and 2004/05 goodwill and and 2003/04 2003/04 exceptional exceptional Half year exceptional exceptional Half year Full year items items Total items items Total Total £m £m £m £m £m £m £m Notes (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (audited)---------------- ----- ------------ ------------ ---------- ------------ ----------- --------- ---------Turnover:Group andshare of jointventures'turnover 1,983 - 1,983 1,809 - 1,809 3,738Less: share ofjoint ventures'turnover (38) - (38) (43) - (43) (82)Group turnover 2 1,945 - 1,945 1,766 - 1,766 3,656---------------- ----- ------------ ------------ ---------- ------------ ----------- --------- ---------Operatingexpenses, net 3 (1,591) (57) (1,648) (1,483) (58) (1,541) (3,175)---------------- ----- ------------ ------------ ---------- ------------ ----------- --------- ---------EBITDA 402 - 402 341 - 341 702Depreciation (48) - (48) (58) - (58) (102)Amortisation 8 - (57) (57) - (58) (58) (119)---------------- ----- ------------ ------------ ---------- ------------ ----------- --------- ---------Operating profit 354 (57) 297 283 (58) 225 481---------------- ----- ------------ ------------ ---------- ------------ ----------- --------- ---------Share of jointventures' andassociates'operatingresults 8 - 8 (5) - (5) 5Loss ondisposal ofinvestments injoint ventures 4,9 - (23) (23) - - - -Profit ondisposal offixed assetinvestments 4,9 - - - - 2 2 51Amountswritten backto fixed assetinvestments,net 4,9 - - - - 24 24 24Profit onordinaryactivitiesbeforeinterest andtaxation 362 (80) 282 278 (32) 246 561---------------- ----- ------------ ------------ ---------- ------------ ----------- --------- ---------Interestreceivable andsimilar income 15 - 15 3 - 3 10Interestpayable andsimilar charges (47) - (47) (45) - (45) (91)Profit onordinaryactivitiesbefore taxation 330 (80) 250 236 (32) 204 480---------------- ----- ------------ ------------ ---------- ------------ ----------- --------- ---------Tax on profiton ordinaryactivities 5 (96) - (96) (74) - (74) (158)Profit onordinaryactivitiesafter taxation 234 (80) 154 162 (32) 130 322---------------- ----- ------------ ------------ ---------- ------------ ----------- --------- ---------Equity dividends 6 (77) (53) (116)Retained profit for the period 10 77 77 206---------------- ----- ------------ ------------ ---------- ------------ ----------- --------- ---------Earnings pershare - basic 7 12.1p (4.1p) 8.0p 8.4p (1.7p) 6.7p 16.6pEarnings pershare - diluted 7 12.0p (4.1p) 7.9p 8.3p (1.6p) 6.7p 16.6p---------------- ----- ------------ ------------ ---------- ------------ ----------- --------- --------- All results relate to continuing operations.There were no recognised gains or losses in either period other than those included within the profit and loss account.The accompanying notes are an integral part of this consolidated profit and loss account. Consolidated Profit and Loss Account for the three months ended 31 December 2004 -------------------------- ------------ ------------ ------------- ------------ ----------- ------------ Before Three months Before Goodwill Three months goodwill and Goodwill and ended 31 goodwill and and ended 31 exceptional exceptional December 2004 exceptional exceptional December 2003 items items Total items items Total £m £m £m £m £m £m (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)-------------------------- ------------ ------------ ------------- ------------ ----------- ------------Turnover:Group and share of jointventures' turnover 1,024 - 1,024 938 - 938Less: share of jointventures' turnover (19) - (19) (22) - (22)Group turnover 1,005 - 1,005 916 - 916-------------------------- ------------ ------------ ------------- ------------ ----------- ------------Operating expenses, net (841) (28) (869) (784) (29) (813)-------------------------- ------------ ------------ ------------- ------------ ----------- ------------EBITDA 188 - 188 166 - 166Depreciation (24) - (24) (34) - (34)Amortisation - (28) (28) - (29) (29)-------------------------- ------------ ------------ ------------- ------------ ----------- ------------Operating profit 164 (28) 136 132 (29) 103-------------------------- ------------ ------------ ------------- ------------ ----------- ------------Share of joint ventures' and associates'operating results 7 - 7 (8) - (8)Loss on disposal ofinvestments injoint ventures - (23) (23) - - -Profit on disposal offixed asset investments - - - - 2 2Amounts written offfixed asset investments - - - - (1) (1)Profit on ordinaryactivities beforeinterest and taxation 171 (51) 120 124 (28) 96-------------------------- ------------ ------------ ------------- ------------ ----------- ------------Interest receivable andsimilar income 8 - 8 2 - 2Interest payable andsimilar charges (25) - (25) (21) - (21)Profit on ordinaryactivities beforetaxation 154 (51) 103 105 (28) 77-------------------------- ------------ ------------ ------------- ------------ ----------- ------------Tax on profit on ordinaryactivities (42) - (42) (37) - (37)Profit on ordinaryactivities after taxation 112 (51) 61 68 (28) 40-------------------------- ------------ ------------ ------------- ------------ ----------- ------------Equity dividends (77) (53)Retained lossfor the period (16) (13)-------------------------- ------------ ------------ ------------- ------------ ----------- ------------Earnings per share - basic 5.8p (2.7p) 3.1p 3.6p (1.5p) 2.1pEarnings per share -diluted 5.8p (2.7p) 3.1p 3.6p (1.5p) 2.1p-------------------------- ------------ ------------ ------------- ------------ ----------- ------------ Consolidated Balance Sheet at 31 December 2004 ----------------------------- ------- ----------- ----------- -------- 31 December 31 December 30 June 2004 2003 2004 £m £m £m Notes (unaudited) (unaudited) (audited)----------------------------- ------- ----------- ----------- --------Fixed assetsIntangible assets 8 360 478 417Tangible assets 451 346 376Investments 9 27 37 35 838 861 828----------------------------- ------- ----------- ----------- --------Current assetsStocks 627 662 375Debtors: Amounts falling due within one year - deferred tax assets 45 50 49 - other 339 393 321 384 443 370----------------------------- ------- ----------- ----------- --------Debtors: Amounts falling due after more than one year - deferred tax assets 76 128 102 - other 36 61 42 112 189 144----------------------------- ------- ----------- ----------- --------Cash and liquid resources- current asset investments - - 173- cash at bank and in hand 707 318 474 707 318 647----------------------------- ------- ----------- ----------- -------- 1,830 1,612 1,536----------------------------- ------- ----------- ----------- --------Creditors: Amounts falling due within one year - other creditors (1,481) (1,399) (1,170)----------------------------- ------- ----------- ----------- --------Net current assets 349 213 366----------------------------- ------- ----------- ----------- --------Total assets less currentliabilities 1,187 1,074 1,194----------------------------- ------- ----------- ----------- --------Creditors: Amounts falling due after more than one year - long-term borrowings (1,076) (1,077) (1,076) - other creditors (27) (24) (28) (1,103) (1,101) (1,104)----------------------------- ------- ----------- ----------- --------Provisions for liabilities and charges (1) - - 83 (27) 90----------------------------- ------- ----------- ----------- --------Capital and reserves - equityCalled-up share capital 10 960 970 971Share premium 10 1,437 1,428 1,437ESOP reserve 10 (23) (9) (30)Merger reserve 10 186 262 222Special reserve 10 14 14 14Capital redemption reserve 10 11 - -Profit and loss account 10 (2,502) (2,692) (2,524)Shareholders' funds (deficit) 10 83 (27) 90----------------------------- ------- ----------- ----------- -------- The accompanying notes are an integral part of this consolidated balance sheet. Consolidated Cash Flow Statement for the half year ended 31 December 2004 ------------------------------ ------ --------- --------- --------- 2004/05 2003/04 2003/04 Half year Half year Full year £m £m £m Notes (unaudited) (unaudited) (audited)------------------------------ ------ --------- --------- --------- Net cash inflow from operatingactivities 11a 407 401 882 Dividends received from jointventures 7 3 4------------------------------ ------ --------- --------- ---------Returns on investments andservicing of financeInterest received and similarincome 17 3 7Interest paid and similarcharges (49) (51) (89)Net cash outflow from returnson investments and servicingof finance (32) (48) (82)------------------------------ ------ --------- --------- ---------TaxationUK corporation tax paid (25) (21) (55)Consortium relief paid (3) (3) (3)Net cash outflow from taxation (28) (24) (58)------------------------------ ------ --------- --------- ---------Capital expenditure andfinancial investmentPayments to acquire tangiblefixed assets (123) (65) (132)Receipts from sales of fixedasset investments - 68 116Net cash (outflow) inflow fromcapital expenditure andfinancial investment (123) 3 (16)------------------------------ ------ --------- --------- ---------Acquisitions and disposalsFunding to joint ventures andassociates (4) (2) (5)Repayments of funding fromjoint ventures and associates 6 3 6Receipts from sale ofinvestments in joint ventures 14 - -Net cash inflow fromacquisitions and disposals 16 1 1------------------------------ ------ --------- --------- ---------Equity dividends paid (63) - (53)------------------------------ ------ --------- --------- ---------Net cash inflow beforemanagement of liquid resourcesand financing 184 336 678------------------------------ ------ --------- --------- ---------Management of liquid resources 79 (175) (511)------------------------------ ------ --------- --------- ---------FinancingProceeds from issue ofOrdinary Shares 2 10 20Purchase of own shares forEmployee Share Ownership Plan - - (22)Share buy-back (128) - -Capital element of financelease payments - - (1)Net decrease in debt due aftermore than one year 11b - (75) (75)Net cash outflow fromfinancing (126) (65) (78)------------------------------ ------ --------- --------- ---------Increase in cash 11b 137 96 89------------------------------ ------ --------- --------- --------- The accompanying notes are an integral part of this consolidated cash flowstatement. Notes to Financial Statements 1 Basis of preparation The interim accounts for the half year ended 31 December 2004 have been preparedin accordance with accounting policies consistent with those applied in theaccounts for the year ended 30 June 2004, which were approved by the Directorson 3 August 2004. The interim accounts for the six months ended 31 December 2004do not constitute statutory accounts and are unaudited, but have been formallyreviewed by Deloitte & Touche LLP. Their report is not modified in any respect.The interim accounts were approved by the Board on 1 February 2005. The financial information for the 2003/04 full year is extracted from thefinancial statements for that year which have been filed with the Registrar ofCompanies. The auditors' report on those financial statements was unqualifiedand did not contain any statement under section 237(2) or (3) of the CompaniesAct 1985. 2 Turnover The Group's turnover, whilst deriving from one class of business, has beenanalysed as follows: ---------------------------- ---------- --------- --------- 2004/05 2003/04 2003/04 Half year Half year Full year £m £m £m (unaudited) (unaudited) (audited)---------------------------- ---------- --------- --------- DTH subscribers 1,426 1,285 2,660Cable subscribers 109 103 215Advertising 159 147 312Sky Bet (i) 118 91 191Sky Active (i) 46 56 116Other 87 84 162 1,945 1,766 3,656---------------------------- ---------- --------- --------- (i) Additional detail has been provided with regard to the analysis of interactive revenues between the Group's betting and games revenues - "Sky Bet" - and other interactive revenues - "Sky Active" - and the prior year comparatives have been restated accordingly. 3 Operating expenses, net ---------------- --------------- ---------- ---------- --------------- --------- --------- --------- 2004/05 2003/04 2003/04 Half year Half year Full year Before goodwill Goodwill Total Before goodwill Goodwill Total Total £m £m £m £m £m £m £m (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (audited)---------------- --------------- ---------- ---------- --------------- --------- --------- ---------Programming(i) 808 - 808 783 - 783 1,711Transmissionand relatedfunctions (i) 87 - 87 77 - 77 146Marketing 258 - 258 215 - 215 396Subscribermanagement 193 - 193 191 - 191 371Administration(ii) 139 57 196 131 58 189 376Betting 106 - 106 86 - 86 175 1,591 57 1,648 1,483 58 1,541 3,175---------------- --------------- ---------- ---------- --------------- --------- --------- --------- (i) The amounts shown are net of £5 million (2003/04: half year £8 million; full year £11 million) receivable from the disposal of programming rights not acquired for use by the Group, and £14 million (2003/04: half year £13 million; full year £28 million) receivable in respect of the provision to third party broadcasters of spare transponder capacity. (ii) Administration costs for the 2003/04 full year include goodwill amortisation of £119 million. 4 Exceptional items ---------------------------------------- --------- --------- --------- 2004/05 2003/04 2003/04 Half year Half year Full year charge credit credit £m £m £m (unaudited) (unaudited) (audited)---------------------------------------- --------- --------- ---------Loss on disposal of investments in jointventures (i) (23) - -Profit on disposal of fixed assetinvestments (ii) - 2 51Amounts written back to fixed assetinvestments, net (iii) - 24 24Total non-operating exceptional items (23) 26 75---------------------------------------- --------- --------- --------- 2004/05 (i) Loss on disposal of investments in joint ventures On 1 November 2004, the Group sold its 49.5% investment in Granada SkyBroadcasting for £14 million in cash, realising a loss on disposal of £23million. This included the write back of £32 million of goodwill which hadpreviously been written off to reserves, as permitted prior to theimplementation of Financial Reporting Standard ("FRS") 10, "Goodwill andIntangible Assets". 2003/04 (ii) Profit on sale of fixed asset investments On 7 October 2003, the Group disposed of its listed investment in ManchesterUnited plc, realising a profit on disposal of £2 million. On 1 March 2004, the Group sold its 20% shareholding in QVC (UK), operator ofQVC - The Shopping Channel, for £49 million in cash, realising a profit ondisposal of £49 million. (iii) Amounts written back to fixed asset investments, net The Group reduced its provision against its minority equity investments infootball clubs by £33 million, following the disposal of its investment inManchester United plc in October 2003 for £62 million in cash. The Group alsoincreased its provision against its remaining minority equity investments infootball clubs by a further £9 million. 5 Tax on profit on ordinary activities Analysis of charge in period: ----------------------------------- --------- --------- --------- 2004/05 2003/04 2003/04 Half year Half year Full year charge charge charge £m £m £m (unaudited) (unaudited) (audited)----------------------------------- --------- --------- ---------Current taxUK corporation tax 74 69 127Adjustment in respect of prior years (8) (8) (8)Total current tax charge 66 61 119----------------------------------- -------- -------- --------Deferred tax:Origination and reversal of timingdifferences 29 8 34Decrease in estimate of recoverabledeferred tax asset in respect of prior years 1 5 5Total deferred tax charge 30 13 39----------------------------------- -------- -------- -------- 96 74 158----------------------------------- -------- -------- -------- At 31 December 2004, a deferred tax asset of £12 million (2003/04: half year £18million; full year £13 million) principally arising from UK losses in the Grouphas not been recognised. These losses can be offset only against taxable profitsgenerated in the entities concerned. Although the Directors ultimately expectsufficient profits to arise, there is currently insufficient evidence to supportrecognition of a deferred tax asset relating to these losses. The losses areavailable to be carried forward indefinitely under current law. A deferred tax asset of £64 million (2003/04: half year £64 million; full year£64 million) has not been recognised in respect of trading losses in the Group'sGerman holding companies of KirchPayTV and a deferred tax asset of £6 million(2003/04: half year £6 million; full year £6 million) arising principally onother timing differences has not been recognised, on the basis that these timingdifferences are not more likely than not to reverse. A deferred tax asset of £450 million (2003/04: half year £450 million; full year£450 million) has not been recognised in respect of potential capital lossesrelated to the Group's holding of KirchPayTV on the basis that these timingdifferences are not more likely than not to reverse. The Group has realised andunrealised capital losses in respect of football club and other investmentsestimated to be in excess of £25 million (2003/04: half year £21 million; fullyear £21 million) which have not been recognised as a deferred tax asset, on thebasis that they are not more likely than not to be utilised and thus reverse. 6 Equity dividends ----------------------------------- --------- --------- -------- 2004/05 2003/04 2003/04 Half year Half year Full year £m £m £m (unaudited) (unaudited) (audited)----------------------------------- --------- --------- --------Interim proposed dividend of 4.0p(2003/04 half year: 2.75p; 2003/04full year 2.75p) per Ordinary Share 77 53 53Final proposed dividend of nil(2003/04 half year: nil; 2003/04 fullyear: 3.25p) per Ordinary Share - - 63 77 53 116----------------------------------- --------- --------- -------- The Employee Share Ownership Plan ("ESOP") has waived its rights to dividends.Related Shares:
Sky