Results for the six months ended 31 December 2015

SKY PLC

Unaudited results for the six months ended 31 December 2015

* 2014/15 statutory EPS (basic) included the profit on the sale of our shareholdings in ITV and Nat Geo

EXCELLENT FIRST HALF RESULTS: EXCITING PLANS FOR 2016

Strong demand from customers

· 337,000 new customers joined Sky in Q2; highest UK and Ireland customer growth for ten years

· Customers bought 1.1 million new products, with strong demand for both TV and broadband

Extending our leadership on screen

· Key rights secured: Showtime, HBO, Premier League and USA PGA Tour

· Over 100 Sky original dramas in development or production

Market leading innovation gathering pace

· 10 million homes now connected

· Significant enhancements coming to Sky+

· On Demand, Box Sets and Sky Go Extra services rolling out in Germany and Italy

· Launch of an even better NOW TV box

· Sky Q, our ground-breaking new TV product, available to buy in the UK and Ireland from February

Excellent financial performance

· Further strong revenue growth of 5% to £5.7 billion

· Highest ever first-half operating profit, up 12% to £747 million

· Increase in interim dividend to 12.6 pence per share

New Chairman and Deputy Chairman announced

· Nicholas Ferguson CBE to step down as Chairman and as a Director after 12 years on the Board

· James Murdoch appointed Chairman; Martin Gilbert appointed Deputy Chairman

Unless otherwise stated, all results are on an adjusted like-for-like basis including the results of Italy and Germany & Austria for the full period. Prior period adjusted results down to operating profit are stated on a constant currency basis, at a rate of €1.39:£1, being the average rate for the current period.

Jeremy Darroch, Group Chief Executive, commented:

"We have had another very strong half as we continue to transform Sky, broadening our business and expanding into new markets and customer segments. This strategy is delivering today and opening up significant growth opportunities for the future. We are pursuing those opportunities with energy and purpose.

"Today's results show that our approach is working and customers are responding in record numbers. Over 337,000 new customers joined Sky in the second quarter and we sold 1.1 million extra paid-for products. This has delivered strong financial performance with revenue growth of 5%, a 12% increase in operating profit and 10% growth in earnings per share.

"All of our markets are now clearly benefiting from our leadership in content and innovation and being part of the broader Sky. The launch of Sky Q will redefine our top-end TV experience and extend our market-leading portfolio of products to serve the needs of every customer.

"We have extended our lead in content with a ground-breaking new long-term deal with Showtime, which complements both Sky's original productions and our partnership with HBO to make Sky Atlantic the best destination for world-class drama across Europe. This will bring customers the return of great shows that include Fortitude, Game of Thrones and The Affair alongside new productions such as Vinyl, Billions and The Young Pope.

"We have also announced that Nick Ferguson, our Chairman since 2012, will step down from the Sky Board at the end of April after 12 years as a Director. The entire Board offers its warmest thanks to Nick for his leadership as Chairman and the major contribution he has made to Sky over many years. We're delighted that James Murdoch has agreed to step into the role of Chairman. James' deep knowledge of the international media industry and his passion for supporting Sky's ongoing success will make an even greater contribution to our business in the future.

"We're excited about 2016 and we start the year with good momentum. With an outstanding set of new initiatives and products for our customers, we are well positioned to deliver further strong growth and returns for shareholders."

Results highlights

Group operational performance (Q2)

SUMMARY OF GROUP OPERATIONAL AND FINANCIAL PERFORMANCE

In the first half of the year, we continued to make strong progress. We have focused on our core areas, making the right investments in market-leading content and innovation, and delivered outstanding customer service. We have converted these into strong revenue and profit growth. Alongside our subscription business, we have continued to build our transactional services and adjacent businesses to maximise monetisation of our investments in content.

Across the enlarged Sky group, we are executing well and making good progress on integration, sharing plans and expertise to capture the significant growth opportunity ahead. This has driven strong demand for our products and services. We added 337,000 new customers in Q2, taking our total retail customer base to 21.5 million. We added 1.1 million new paid-for products, with growth across all markets.

Our operational performance delivered good revenue growth, up 5% for the period to £5,718 million. A good performance on operating costs converted this into a 12% increase in operating profit to £747 million. Reflecting this strong performance, the Board has declared a 2% increase in the interim dividend to 12.6 pence.

UK and Ireland

The UK and Ireland delivered a very strong performance. In the quarter, retail customers grew by 205,000 - our strongest Q2 performance in 10 years - and we added 778,000 new paid-for products, taking our product base to over 39 million. We added a further 146,000 TV customers in the quarter, while churn was down 30 basis points year on year to 10.2%, the lowest Q2 level for four years.

We are making good progress in broadband as the strong performance of the first quarter continued. In the second quarter, broadband growth was up 27% year on year to 144,000. Across the half we attracted 277,000 new broadband customers, an increase of 53% year on year. This performance reflects the quality of our offer and our superior customer service, with Sky ranked by Ofcom as the best performing provider in terms of customer satisfaction. Alongside this, we are pleased with the progress we are making in our plans to add mobile to our offering.

This excellent operational performance delivered revenue growth of 6% to £4,072 million, and operating profit up 16% to £756 million.

Germany and Austria

In Germany and Austria we added 120,000 customers in Q2, bringing total customer growth for the past 12 months to over 370,000 and making Germany one of Europe's fastest-growing pay TV markets. This was a good performance against the backdrop of churn rising to the more normalised level of 9.8% due to the expected impact of customers reaching the end of 24-month contracts. Paid-for product growth was strong at 345,000 with HD growth up 8% year on year to 161,000.

Revenue increased 10% to £693 million driven by strong customer growth. The operating loss of £34 million was due to the annual increase in Bundesliga costs, step-up in Champions League costs under the new 2015-18 deal, and the change in amortisation profile a year ago which meant that we amortised six months of Bundesliga costs in the current period compared to only five months in the prior year. Operating costs also rose as we chose to invest in box sets, higher marketing and rolling out our connected home strategy, incurring one time hardware costs in the form of wifi connectors.

Italy

In Italy we traded well in a highly promotional environment, which saw heavy discounting from competitors against the backdrop of our loss of the Champions League rights. We increased our customers by 12,000 in the quarter and added 23,000 paid-for products as customers continue to respond to our broad content offering and the roll out of our connected home strategy. We delivered an excellent performance on churn - down 10 basis points year on year to 9.9%, supported by very good uptake of our new customer loyalty programme.

Revenue decreased 3% to £953 million due to a reduction in customers over the past year and the absence of advertising revenues from the FIFA World Cup which were present in the prior year. Operating profit of £25 million (2015: £31 million) was down £6 million, as the lower revenue was partially offset by the ongoing success of our operating efficiency programme, as well as savings in programming costs.

Content

Customers across our markets are responding well to our world class content.

The quality of our movie channels and on demand titles has delivered record results in movie viewing. Over Christmas, we had highest ever weekly audience to Sky Movies in the UK and our pop up channels were popular across our markets. The Bond 007 channels in Germany and Italy each achieved almost one million views of leading titles, and the Harry Potter channel reached more than 3 million viewers in the UK.

Our breadth of sports coverage has also delivered record breaking audiences. In golf, the British Masters was the most watched European Tour event of the season and rugby's Super League Grand final achieved its highest UK audience for five years. In Italy we set an all-time record in MotoGP, with a 48% share of viewing for the season finale on Sky Sports MotoGP HD and Cielo.

Our range of stand-out entertainment and drama is also resonating with our customers. In Italy, the final of X Factor delivered a record audience, up over 30% versus the prior year. In the UK Flash, Supergirl and Arrow all achieved over 1 million viewers, while Fungus the Bogeyman was our best performing Christmas special in four years. On Sky Living, Blindspot provided the channel with its strongest launch programme ever, while Sky Arts achieved a record audience with Portrait Artist of the Year.

Our customers are embracing the opportunity to view our world-class content on catch-up, on demand and on mobile devices. This is demonstrated by the response to our critically acclaimed original production The Last Panthers. The live premiere of the first episode was watched by 300,000 viewers across Europe, growing by a factor of four to more than 1.3 million over the following 30 days as customers watched the show whenever and wherever they chose.

The quality of our content means it is attracting a worldwide audience. Sky Vision has sold the first series of Fortitude in over 120 territories. In addition, the first series of Gomorrah was sold in over 110 countries, and The Young Pope, our major new Sky Original Production, has already been pre-sold to over 80 territories across the world, reflecting the quality of the content that we are producing at Sky.

Plans for 2016: Content

We are making progress across Europe, securing long-term, strategic deals to complement our own investment in original production. This combination enables us to offer our customers exclusive, world-class content.

Building on our new HBO deal announced in November, we have agreed a significant pan-European partnership with Showtime, one of the US' most exciting networks. The agreement means our customers can exclusively enjoy new Showtime dramas like Billions, which premiered in the US on 17 January 2016 with the best series debut performance ever for a Showtime original series. Other new series include the return of Twin Peaks and new seasons of hits such as Ray Donovan and The Affair, alongside an acclaimed catalogue including Dexter, Californication, and House of Lies on demand. From HBO we can look forward to Vinyl, co-created by Martin Scorsese and Mick Jagger, which premieres in February, and the return of Game of Thrones in April.

To complement our acquired content, our Sky original productions are reaching scale. Looking into 2016, we have over 100 dramas in production or development, including nine returning series. Our pipeline is diverse and compelling, from new dramas such as The Young Pope to returning seasons of Fortitude, The Tunnel and Gomorrah.

In sport, we have acquired exclusive rights to the English Premier League in Italy for the next three seasons and we can look forward to our best season ever in the UK in 2016/17 with the addition of new Friday night matches, enhanced first picks, and Saturday afternoon games in Ireland. In Germany, we have extended our long-term partnership with the US PGA Tour, with exclusive rights to over 40 golf events each year, and the popular handball Champions League.

Innovation

We are continuing to transform the viewing experience for our customers across all territories. Our leadership in technology and innovation makes it even easier for customers to access our great content when and where they want. This approach improves customer engagement, satisfaction and loyalty, and opens up further revenue opportunities.

Our connected home strategy is progressing well across the group. We now have more than 10 million connected homes, which represents growth of over 2 million year on year. This has led to almost 1.6 billion views across our connected services in the past six months, as customers continue to embrace the greater choice and flexibility we offer.

In the UK, over 7.5 million customers are connected, representing growth of 1 million year on year. This has resulted in a record 688 million connected views in Q2, up 33% year on year. Customers continue to enjoy our Sky Box sets, with viewing of titles such as The Walking Dead, Grey's Anatomy and The Sopranos up over 30% year on year. Our expanded kids portfolio, highlighted on the EPG home page from the start of this year, has driven a fourfold increase in downloads of this content genre.

In Italy, downloads reached over 70 million in the last six months, up over 40% year on year, with over 5 million downloads alone in a record breaking Christmas week on Sky Movies.

In Germany, where we started to roll out the strategy more recently, over 750,000 customers are connected with over 318,000 customers connecting in Q2 alone. In the quarter we launched our full On Demand service, giving customers access to thousands of titles, and the complete seasons of the latest series on Sky Box Sets. We also launched a new user interface, giving customers a more intuitive and exciting way to discover the breadth of our content.

We continued to expand our transactional services with Sky Store growing fast and already generating annualised revenues of £100 million. Our UK Buy & Keep service was the number 1 digital retailer in the UK for many new releases with our bestselling films in the quarter including Minions, Jurassic World and Inside Out. In November we launched our Spectre 'pre-order' campaign and this, along with our recent Star Wars campaign, have seen amongst the largest ever digital pre-order sales in the UK.

Our streaming services continue to meet the needs of a different customer segment. In the UK, NOW TV sports transactions were up 30% year on year to 472,000, as awareness of the service increased and we introduced the new Sky Sports month pass. In Germany, we strengthened Sky Online with more exclusive content including box sets from the former Snap catalogue, and we extended the service to Windows 10 smartphones, tablets and desktops.

Our targeted advertising platform, Sky Adsmart, continues to have great momentum. More than 700 advertisers have now used the service in over 4,000 campaigns, with more than 70% either new to Sky or new to TV advertising entirely. In addition, we launched the capability on the Sky Sports news channel in the quarter, so over 70 channels now utilise the technology.

Plans for 2016: Innovation

With our continued focus on improving the customer experience, broadening our product range, and giving customers more reasons to join Sky and take additional products from us, we have exciting plans for the year ahead for all our customers.

Sky+ remains at the heart of our offer for millions of customers. From next month, customers in the UK and Ireland will receive the latest software update to their EPG, giving them an even easier way to enjoy their favourite box sets as a full series can be downloaded into their planner in one go. Later in the year we will launch a brand new homepage, showcasing more of our best content and providing customers with an easy place to continue watching programmes they have yet to finish. In Italy, we will launch our full Sky Box Set service in March, whilst Sky Adsmart will be introduced later in the year.

Earlier this month, Sky Go received its biggest redesign since launch in the UK, making the user interface (UI) more engaging and intuitive. Features will be added throughout the year, including a recommendation service and a 'Watch next episode' prompt within Sky Box sets, giving more prominence to on demand content, a similar approach to that already adopted in Italy and Germany. On the mobile platform we're launching a fantastic new Sky Kids app, giving Sky+ customers access to a host of on demand and advert-free kids content. The app has been especially designed for kids, and includes the ability to select age appropriate content, giving parents peace of mind over their kids' viewing. The app will launch initially in the UK, and will roll out to our other markets in time.

Later in the year, we will launch a new Sky+HD box in Germany and Italy, giving customers updated features and technology. The box will be compatible with Sky Q functionality, giving our customers the ability to access Sky Q features, as detailed below, at a later date.

We launched NOW TV in the UK in 2012, and it has enabled us to reach a whole new segment of consumers. From next month, we will begin rolling out a new UI to our NOW TV customers, giving them an easier way to access the content they want. A new integrated homepage will give customers editorial recommendations on what to watch and the catch-up section will be curated directly by our content partners.

Later in the year we will be launching a brand new NOW TV box, offering seamless access to over 60 free-to-air channels alongside the pay content. This will be our most advanced NOW TV product to date and will offer a streaming service to customers who want to access live free-to-air television alongside some pay content, all in one integrated offering.

Next month we bring our ground-breaking Sky Q product to market in the UK. Not only will Sky Q redefine how we watch TV, but it makes it easier than ever for customers to access the best of the web and their own personal content along with their favourite TV shows, on the big screen and on their devices.

The Sky Q suite of products connects wirelessly, making TV viewing seamless, and enables customers to access a whole range of fantastic features. These include pausing viewing on one TV screen and picking up in another room, saving recordings onto a tablet to watch anywhere, and watching different programmes on up to five screens simultaneously whilst also recording four other channels.

In 2016, Sky Q will evolve with the addition of the UK's most comprehensive Ultra HD service, powerful voice search and its own app for mobile devices, plus more partnerships and content. Sky Q will sit alongside Sky+HD and NOW TV, giving us three complementary and outstanding products to offer our customers.

These significant additions to our portfolio, together with our ongoing commitment to help our customers get the most out of their Sky subscription, means that we are extremely well placed to serve the needs of all customers.

Service

Our ability to invest in making our products and services even better for customers is underpinned by our efficient, flexible and agile operating model.

Our customer service leads the industry in the UK, with Ofcom's latest survey again rating us as number one for customer service. Our Digital First initiative is using our digital channels in the UK more effectively in front-line customer service, enabling our customers to have faster, more flexible service. One third of our customer service interactions in the UK are now made via our digital channels and this has reduced calls per customer by 9% year on year, the equivalent of 2.5 million fewer calls per year, and over 35% of our UK sales are now made online. This increased digital interaction is leading to improved customer satisfaction, with NPS at an all-time high and more than double the same period last year. Our approach is helping us reduce costs in the business and drive customer satisfaction even higher.

We continue to improve our performance as we share best practice across the group. In Italy, our commitment to a 'one call' solution and the optimisation of our digital channels has also contributed to a 13% year on year reduction in calls. In November we launched our innovative Extra loyalty scheme based on the tenure of our customers. Two months after launch over one million customers have signed up to the initiative, driving a 4% improvement in customer satisfaction scores year on year to record levels.

GROUP FINANCIAL PERFORMANCE

Unless otherwise stated, all growth rates and comparative amounts are presented on an adjusted like-for-like basis and on a constant currency basis using current period exchange rates. The financial results of Italy and Germany are thereby translated at a rate of €1.39:£1. For a reconciliation to amounts at actual exchange rates see page 3.

Revenue

Group revenues grew by 5% to £5,718 million (2015: £5,437 million). This consisted of 6% growth in the UK and Ireland to £4,072 million (2015: £3,831 million) while Germany grew 10% to £693 million (2015: £628 million). Italy's revenues were down 3% to £953 million (2015: £978 million) due to lower average customers, the discontinuation of programme sales to Mediaset Premium, and the absence of advertising revenues from the 2014 FIFA World Cup.

Subscription revenue, our largest category, delivered strong growth of £188 million (+4%) across the group. Over the past 12 months we have added nearly 1 million retail customers and over 3.9 million products. UK subscription revenue grew 5% due to TV and line rental price rises, and strong customer growth. Germany grew by 10% driven by good customer growth, whilst subscription revenue was down 4% in Italy.

Transactional revenue was our fastest growing area, up 19%. This is currently predominantly a UK revenue stream and the strong performance was driven by 35% growth in Sky Store, and two PPV sports events in the quarter.

Our commercial businesses continue to perform well. Group advertising revenue was up 8% with a particularly strong performance in Italy (up 16%) which continues to benefit from the strength of our Italian free-to-air channels, where we added MTV8 to our channel portfolio, and the success of X Factor and Moto GP. Advertising revenue was up 21% in Germany driven by the increased reach of our channels due to higher customer numbers year on year, and an additional Bundesliga match day in the period. Advertising revenue in the UK was up 5% with good growth in Adsmart.

Programme and channel sales revenue grew 18% benefiting from the growth in sales from our original commissions in Sky Vision and first time consolidation of Blast! Films and Jupiter Entertainment.

Costs

Total costs grew by 4%, below the rate of revenue growth.

Programming costs were up 4% as we broadened our content portfolio. We benefitted from the absence of the Ryder Cup in all territories, the Champions League in both Italy and the UK and the FIFA World Cup that we broadcast in Italy. These savings were partially offset by the negative impact from the previously communicated change in the amortisation profile of rights in Germany, which better reflects how customers consume these rights. This impact was worth £17 million in the current period.

In Italy, we gained exclusive rights to the Fox Sports channel and we now broadcast exclusive Europa League coverage. In the UK, we have invested in our entertainment portfolio with original commissions and key acquisitions. Programming costs in Germany were higher year on year due to the increased Bundesliga and Champions League costs, as well as increased costs associated with having a larger customer base. In movies, we invested in pop-up channels across the group which achieved record audiences.

Direct network costs increased 7%, as we saw strong growth in home communications customers and increased fibre penetration over the past 12 months.

Sales, general and administration costs increased by 4%, primarily due to increased marketing costs to support our strong product growth in the UK and Germany. We continued to drive efficiencies through the service estate with calls handled down 9% in the first half and we are continuing to push operating efficiency initiatives across the group.

Profit and earnings

Group operating profit grew strongly, up 12% to £747 million (2015: £667 million). Operating profit growth was driven by an excellent performance on revenue and good control over our cost base, resulting in an 80 basis point expansion in our operating margin.

Adjusting for depreciation and amortisation of £302 million, group EBITDA was up 8% to £1,049 million (2015: £973 million).

The share of joint ventures and associates' profits was £8 million (2015: £24 million) and net finance costs increased by £21 million to £106 million (2015: £85 million) due to higher gross debt.

The tax charge of £138 million (2015: £132 million) was at an effective tax rate of 21%.

Over the half year the weighted average number of shares excluding those held by the Employee Share Ownership Plan ('ESOP') for the settlement of employee share awards was 1,706 million (2015: 1,676 million). The closing number of shares excluding the ESOP shares at 31 December 2015 was 1,706 million (2015: 1,702 million).

Adjusting items

Statutory profit for the period of £524 million (2015: £536 million) is after the deduction of operating expenses of £223 million principally comprising advisory and transaction fees incurred on the purchase of the remaining minority shareholdings in Sky Deutschland GmbH (formerly "Sky Deutschland AG"), the costs of integrating Sky Italia and Sky Deutschland GmbH in the enlarged group, the costs of a corporate efficiency and restructuring programme and the ongoing amortisation of acquired intangible assets. We also made a small net gain on the sale of a number of strategic minority equity stakes in technology start-up companies. These included the sale of our investment in Elemental Technologies, acquired by Amazon, and our investment in 1Mainsteam, acquired by Cisco.

Group cash flow and financial position

Group free cash flow was £283 million (2015: £450 million). Free cash flow was lower year on year largely due to the first time consolidation of the cash flows of Italy and Germany for a full six month period which impacted working capital and capex.

Net debt as at 31 December was £5.7 billion (2015: £6.3 billion), a reduction of £600 million as the result of positive operating cash flow, the sale of our majority stake in Sky Bet and a £232 million benefit on retranslation of Euro denominated debt into sterling at a rate of €1.36 (2015: €1.28). The reduction was despite the cash outflow of £270 million to purchase the remaining minority shareholdings of Sky Deutschland GmbH. The ratio of net debt to EBITDA at 31 December was approximately 2.6 times (2015: 3.2 times).

Gross debt as at 31 December was £7.7 billion of which approximately 70 per cent was in Euros, the balance being sterling or fully swapped to sterling. During the period, we redeemed a $750 million bond that matured and separately issued a new €500 million 10 year fixed rate bond.

The group has excellent liquidity with cash of £1.9 billion as at 31 December 2015 and access to a £1 billion Revolving Credit Facility which remained wholly undrawn throughout the period. Our bond portfolio is long dated with a weighted average maturity of 7.4 years and no debt falling due until October 2017. We have an investment grade credit rating, being rated BBB by Standard and Poor's and Baa2 by Moody's, both with stable outlook.

Distribution to shareholders

The Directors have declared an interim dividend of 12.55 pence per share (2015: 12.30 pence per share), an increase of 2% on last year which continues our twelve year unbroken track record of growth. It remains our policy to seek to pay out approximately 50% of earnings via the ordinary dividend and this payout ratio is currently exceeded having 'looked through' the short term dilution of the German and Italian acquisitions in prior periods. The ex-dividend date will be 24 March 2016 and the dividend will be paid on 21 April 2016 to shareholders appearing on the register at the close of business on 29 March 2016.

CORPORATE

Board appointments

After 12 years on the Board, Nicholas Ferguson CBE has decided to step down as Chairman and as a Director of the company at the end of April. After joining as a Non-Executive Director in 2004, he was appointed as Chairman in 2012 and has led the Board during a period of strong growth for the company, including the transaction to bring together the Sky businesses across Europe.

The Board has appointed James Murdoch to succeed Mr Ferguson as Chairman. He has been a Director of the company since February 2003 and previously served as Chief Executive from November 2003 to 2007 and as Chairman from 2007 to 2012. Martin Gilbert has been appointed as Deputy Chairman, while Andrew Sukawaty becomes Sky's Senior Independent Director.

Sky Deutschland delisting

On 15 September 2015, Sky completed the acquisition of the remaining approximately 4% minority shareholdings in Sky Deutschland GmbH. As a result, Sky Deutschland GmbH was delisted from the Frankfurt Stock Exchange on 24 September 2015.

 Schedule 1 - Group KPI Summary (unaudited)

Page 3 and table above

- Wholesale customers taking at least one paid-for Sky channel. The customer numbers are as reported to us at the end of December 2015.

- In the UK and Ireland, paid-for products includes TV, Sky+ HD, Multiscreen, Sky Go Extra, Broadband, Line Rental and Telephony.

- In Italy, paid-for products includes TV, Multivision and paying HD.

- In Germany and Austria, paid-for products includes TV, Second Smartcard, Premium HD and Mobile TV.

- ARPU is quarterly annualised, residential and presented as a monthly amount.

- Churn is 12 month rolling and includes residential customers only, unless otherwise stated.

Enquiries:

There will be a presentation for analysts and investors at 9.00 a.m. (GMT) at Allen & Overy, One Bishops Square, London, E1 6AD. Participants should register by contacting Holly Dymock on +44 20 7251 3801 or at [email protected].

There will be a separate conference call for US analysts and investors at 10.00 a.m. (ET). To register for this please contact Dana Diver at Taylor Rafferty on +1 212 889 4350. Alternatively you may register online at http://www.invite-taylor-rafferty.com/_sky/2016Q2.

US Conference Call:

Conference ID: 2630408

Speaker line: 719-785-1753

Participant dial in: 888-481-2877 or 719-457-2645

A live webcast of both conference calls will be available via the Sky website at http://www.sky.com/corporate. Replays will subsequently be available.

Related Party Transactions

Details of transactions with related parties during the six month period to 31 December 2015 are provided in Appendix 1.

Principal risks and uncertainties

A summary of the Group's principal risks and uncertainties is provided in Appendix 3.

Responsibility statement

The Directors confirm that to the best of their knowledge:

· The unaudited condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the EU.

·The interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules.

The names and functions of the Directors of Sky plc can be found on pages 38-39 of the 2015 Annual Report.

By order of the Board

Jeremy Darroch

Chief Executive Officer

Use of measures not defined under IFRS

This press release contains certain information on the Group's financial position, results and cash flows that have been derived from measures calculated in accordance with IFRS. This information should not be read in isolation from the related IFRS measures.

Forward looking statements

This document contains certain forward looking statements with respect to the Group's financial condition, results of operations and business, and our strategy, plans and objectives for the Group. These statements include, without limitation, those that express forecasts, expectations and projections, such as forecasts, expectations and projections in relation 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, DTH and OTT customer growth, On Demand, NOW TV, Sky Go, Sky Go Extra, Sky+ HD, Sky Q, Sky Store, Sky Online, mobile, Multiscreen and other services, penetration, revenue, administration costs and other costs, advertising growth, churn, profit, cash flow, products and our broadband network footprint, content, wholesale, marketing, synergies and integration, and capital expenditure.

Although the Company believes that the expectations reflected in such forward looking statements are reasonable, these statements 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 the document in Appendix 3 - "Principal risks and uncertainties".

All forward looking statements in this document are based on information known to the Group on the date hereof. The Group undertakes no obligation publicly to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

Appendix 1 - Condensed Consolidated Interim Financial Statements

Condensed Consolidated Statement of Comprehensive Income for the half year ended 31 December 2015

Condensed Consolidated Balance Sheet as at 31 December 2015

Condensed Consolidated Cash Flow Statement for the half year ended 31 December 2015

Condensed Consolidated Statement of Changes in Equity for the half year ended 31 December 2015

Notes to the Condensed Consolidated Interim Financial Statements

1 Basis of preparation

The unaudited condensed consolidated interim financial statements for the half year ended 31 December 2015 have been prepared in accordance with International Accounting Standard 34 "Interim Financial Reporting" ("IAS 34") as adopted for use in the European Union and issued by the International Accounting Standards Board. The condensed consolidated interim financial statements have been prepared on a going concern basis and have been prepared using accounting policies and methods of computation consistent with those applied in the financial statements for the year ended 30 June 2015, except for new accounting pronouncements which have become effective this period, none of which had a material impact on the Group's results or financial position.

The condensed consolidated interim financial statements are presented on a condensed basis as permitted by IAS 34 and therefore do not include all disclosures that would otherwise be required in a full set of financial statements and should be read in conjunction with the 2015 Annual Report. The condensed consolidated interim financial statements do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006 and are unaudited for all periods presented. The financial information for the full year ended 30 June 2015 is extracted from the financial statements for that year. A copy of the statutory accounts has been delivered to the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain any statement under section 498(2) and (3) of the Companies Act 2006.

The condensed consolidated interim financial statements are based on the 26 weeks ended 27 December 2015 (fiscal year 2015: 26 weeks ended 28 December 2014). For convenience purposes, the Group continues to date its consolidated financial statements as at 30 June and its condensed consolidated interim financial statements as at 31 December.

Going Concern

The Group has updated the analysis which supported its assessment of going concern set out on page 77 of the 2015 Annual Report, and continues to believe that its existing external financing, together with internally generated cash inflows, will continue to provide sufficient sources of liquidity to fund its current operations, including its contractual obligations and commercial commitments, its approved capital expenditure requirements and any dividends proposed for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.

2 Operating Segments

The Group has three reportable segments that are defined by geographic area to reflect how the Group's operations are monitored and managed. The reportable segments presented reflect the Group's management and reporting structure as viewed by the Board of Directors, which is considered to be the Group's chief operating decision maker.

Segmental income statement for the half year ended 31 December 2015

Segmental income statement for the half year ended 31 December 2014

Results for each segment are presented on an adjusted basis. A reconciliation of statutory to adjusted results is shown in note 6 which also includes a description of the adjusting items. Transactions between segments are based on estimated market prices.

Revenue from Programme and Channel Sales was previously labelled Wholesale and Syndication.

3 Discontinued operations

On 19 March 2015, the Group completed the sale of a controlling stake in its online betting and gaming business, Sky Betting & Gaming ("Sky Bet"), to funds advised by CVC Capital Partners and members of the Sky Bet management team. Sky has retained an equity stake of 20% post completion in Sky Bet.

Sky Bet represented a separate major line of business for the Group. As a result, its operations have been treated as discontinued for the six months ended 31 December 2014. A single amount is shown on the face of the condensed consolidated income statement comprising the post-tax result of discontinued operations. The assets and liabilities of Sky Bet have been classified as held for sale in the condensed consolidated balance sheet at 31 December 2014, but were de-recognised as at 30 June 2015.

The results of discontinued operations, which have been included in the condensed consolidated income statement, were as follows:

During the prior period, Sky Bet contributed £43 million to the Group's net operating cash flows, and paid £1 million in respect of investing activities.

4 Profit on disposal of available-for-sale investments

On 17 July 2014, the Group sold a shareholding of 6.4% in ITV plc, consisting of 259,820,065 ITV shares for an aggregate consideration of £481 million. A profit of £429 million was realised on disposal, being the excess of the consideration above the previously written-down value of the shares for accounting purposes (£52 million).

On 5 November 2014, the Group sold a further shareholding of approximately 0.8% in ITV plc, consisting of 31,864,665 ITV shares for an aggregate consideration of £65 million. A profit of £58 million was realised on disposal, being the excess of the consideration above the previously written-down value of the shares for accounting purposes (£7 million).

The Group recognised a gain of £5 million as a result of measuring to fair value its equity interest in Sky Deutschland held prior to the acquisition.

5 Profit on disposal of associate

On 12 November 2014, the Group transferred a shareholding of 21% in NGC Network International LLC and a shareholding of 21% in NGC Network Latin America LLC to Twenty-First Century Fox, Inc. for an aggregate consideration of £410 million as part of the purchase of Sky Italia. A pre-tax profit of £296 million was realised on disposal.

6 Earnings per share

The movement in the number of ordinary shares outstanding for the period was:

(i) On 25 July 2014 the Company announced the placing of 156,132,213 new ordinary shares representing approximately 9.99% of existing issued share capital, for total gross proceeds of £1,358 million.

The weighted average number of ordinary shares for the period was:

Basic and diluted earnings per share are calculated by dividing profit attributable to equity shareholders of the parent company for the period into the weighted average number of shares for the period. In order to provide a measure of underlying performance, management has chosen to present an adjusted profit for the period which excludes items that may distort comparability. Such items arise from events or transactions that fall within the ordinary activities of the Group but which management believes should be separately identified to help explain underlying performance.