Results for the twelve months ended 30 June 2018

Results for the twelve months ended 30 June 2018 

EXCELLENT RESULTS; STRONG PLANS IN PLACE FOR THE FUTURE

Excellent financial and operating results

· 5% increase in like-for-like revenue to £13.6 billion

· 11% increase in Established Business EBITDA to £2.5 billion; 9% increase in EBITDA

· Operating costs down 70 basis points as a percentage of revenue

· Earnings per share (EPS) up 10% to 67.3 pence

· Statutory results: operating profit of £1,034 million, up 7%, and EPS of 47.5 pence, up 17%

· Sky Q in 3.6 million homes, up 2.3 million year on year

· Q4 customer growth up 39%; over 23 million European households enjoying Sky

· Q4 product growth up 81%; 63 million products now in Sky homes

Extending our leadership in content

· Put in place major new partnerships; Netflix, BT Sport, Mediaset Premium, Spotify

· Secured significant exclusive rights; Serie A, Premier League, Austrian Bundesliga, Formula 1

· Investment in home grown content paying off; continued increase in the commercial success of Sky original productions

Delivering greater value to our customers across the Group

· Excellent year for UK business with strong customer demand for Sky Q, Sky Fibre and Sky Mobile

· Comprehensively upgraded service in Germany, kick-starting next leg of growth in this market

· Transforming Italy into a diversified, multiplatform business; launched Sky over DTT and over fibre, plans for triple-play in 2019

Strong set of plans in place for future growth

Jeremy Darroch, Group Chief Executive, commented:

"It's been an exceptional year. We've delivered another set of strong results with like-for-like revenues up 5%, Established Business EBITDA up 11% and EPS up 10%. Over half a million new customers joined Sky this year and we now have 63 million products in customer's homes as they continue to choose Sky over other providers. As a consequence, we have extended our leadership position as Europe's largest direct-to-consumer media and entertainment business.

"Our strong performance reflects the execution of our strategy over an extended period of time, driving sustained growth in revenue, profits and shareholder returns. We do this by providing our customers more of the best content, world class innovation in products and services, combined with industry leading front-line service. Together with an increasingly agile and efficient organisation, we are able to deliver for shareholders whilst ensuring the customer experience is better than anywhere else.

"Importantly, this strategy is now widely implemented across the Group. In the UK and Ireland, our largest market, we've delivered an excellent operational and financial performance whilst scaling our new initiatives. In Germany and Austria, we have comprehensively upgraded all our services as part of our plans for sustained long-term growth in what is Europe's largest TV market. In Italy, we've had a ground-breaking year, opening up significant new growth opportunities for our business by offering new services over DTT and fibre, allowing us to reach new segments of the market.

"Alongside this, we've put in place further building blocks for future growth. We've secured more exclusive coverage of major sports events for our customers and our investment in Sky original productions is being widely recognised by customers and critics alike. We've rolled out Sky Q to all our major territories meaning a growing number of customers can enjoy the benefits of Europe's best home entertainment service, and our agreements with Netflix, Mediaset, BT and Spotify will further enhance and extend our customer offer.

"We therefore enter the year ahead with good momentum. We have an excellent set of plans and we're focused on executing them well. We are proud that Sky is recognised globally as an outstanding business and are confident we have the right assets and capabilities to continue creating long term growth opportunities and to capitalise on the strong position we've built."

Unless otherwise stated, results are presented throughout on an adjusted, like-for-like, constant currency basis. For further details see page 3.

GROUP FINANCIAL PERFORMANCE

Results highlights1

(5) Investment Business EBITDA is on an adjusted basis and includes the results of new businesses through to their third fiscal year. Sky Mobile and Sky Spain are included in Investment Business.

SUMMARY OF GROUP OPERATIONAL AND FINANCIAL PERFORMANCE

Today Sky operates in seven markets, providing a broad set of entertainment and communications services to over 23 million households, who are enjoying 63 million Sky subscription products. In total, our services now reach over 120 million people across Europe.

Our strategic priorities remain unchanged; to expand our leadership in direct-to-consumer media, grow our revenues and profits and create sustainable value for shareholders over the medium term by providing:

· The best and broadest range of content for every household;

· The best innovation in products and services;

· The best front-line service delivery from the leading brand; and

· Consistently improving our operational capability and efficiency.

In addition, we are opening up new opportunities for growth by developing additional services and entering new geographic markets.

The successful execution of this strategy is reflected in today's excellent operational and financial results. Customers continue to choose Sky over other providers. We added over half a million new customers and a further 3.1 million new products this year, with Q4 growth up 39% and 81% respectively. Revenues are up 5%, driven by growth in each of our main territories and across our broad product set. EBITDA is up 11%, excluding our investments in Mobile and Spain, with EPS up 10% to 67.3 pence.

PLANS FOR 2018/19

This year we have put in place the building blocks for future growth which will enable us to give more choice, quality and value to our customers. As we enter the new financial year, our focus is on executing our plans and securing returns from these initiatives that will drive growth in revenues and profits, in turn generating greater shareholder value.

The best and broadest range of content for every household

Building on this year's on-screen success, we will continue to broaden our offer and meet consumers' demand for a range of high quality content.

Our Sky original programming goes from strength to strength. Over the course of the next 12 months we will grow our original output which is increasingly focused on high quality local stories for local markets as a key differentiator to acquired content:

· Gross investment on original drama will increase by around 25% and will be further monetised through our international sales arm, Sky Vision, which has hit its £200 million revenue target two years early.

· Invest around four times more in Germany & Austria versus a year ago, where our original content strategy is least developed.

· Almost 50% of our shows will be returning franchises, including the next series of Riviera, Babylon Berlin and Gomorrah, to name a few.

· Our first major co-production with HBO, Chernobyl, will air in 2019.

Sky original productions will sit alongside the best content from the US from our long term international partnerships:

· Returning series of major dramas from the likes of HBO and Showtime including Big Little Lies, Billions and the final series of Game of Thrones.

· Aggregation of all important entertainment for customers with the addition of Netflix to the Sky Q platform together with Spotify. Netflix will also launch as a standalone app on our streaming services, starting first with NOW TV in the UK and Ireland.

In sports, we will enhance our market-leading coverage in each of our territories by building on the recent choices we have made over the sports we invest in:

· Broadcast the top matches in the Serie A exclusively for the first time in Italy, together with the majority of Champions League, Europa League and Formula 1.

· UEFA Champions League to be exclusive to pay-TV in Germany and Austria for the first time. We'll also commence our new four-year deal with the Austrian Bundesliga, with most matches exclusive to Sky.

· Start of our new, long term Formula 1 contract in UK and Ireland, broadcasting 95% of races exclusively.

· Wholesale of BT Sport in the UK, meaning our customers can access Premier League, Champions League and Europa League matches all through one Sky subscription.

· Exclusive live coverage of the Ryder Cup across all major territories in September.

The best innovation in products and services

We will continue to transform the customer experience by delivering sustained world class innovation in our products and services. We want to make the Sky experience better for all customers and make it easier for them to enjoy the Sky experience on their terms.

Sky Q is already Europe's best home entertainment service. We have now launched Sky Q in each of our major markets and scaled it to 3.6 million customers by the end of Q4. This is delivering significant long-term benefits including lower churn, more incremental ARPU and higher customer satisfaction scores.

From here we will scale Sky Q's growth and continually enhance the service with a strong pipeline of innovation ahead over the next 12 months:

· Developing a hands-free TV experience with our next-generation of voice control.

· Improve personalisation with addition of individual profiles, enhancing the platform's data-driven recommendations.

· Introduce a kids mode, giving parents peace of mind over what their children can watch.

· Double the amount of Ultra-HD (UHD) content available, with HDR launching in 2019.

· Roll out Sky Soundbox to Germany and Italy, transforming the TV sound experience for customers in those markets.

· Launch Sky Q without the need for a satellite dish in Austria and Italy, opening up new growth opportunities with customers who cannot have a satellite dish.

In broadband, we aim to offer more customers faster download speeds and a better all-round experience when using broadband-driven services by significantly increasing our fibre broadband penetration. We will:

· Launch a next generation router in the UK with enhanced Wifi capabilities.

· Introduce a new superfast Fibre broadband product, Sky Fibre 1Gb, in Ireland, offering the fastest speeds available to customers.

· Partner with Open Fiber in Italy to access their next generation Fibre-to-the-Home (FTTH) broadband network and launch our own triple-play service from Summer 2019.

The best front-line service delivery from the number one brand

We already deliver an industry leading customer service experience and have a number of initiatives in place that will further extend our leadership position focused on two key areas:

· First, we'll reduce the need for customers to contact Sky by:

o Continue to focus on root cause identification and fix of issues, including re-designing customer journeys.

o Introduce new digital functionality to broaden the range of self-service tasks, like Optimal Character Recognition technology which will be able to assist in-home diagnostic tests.

o Scale loyalty programme enrolment in the UK and Italy; launch new programme in Germany and Austria this autumn.

· At the same, time, we'll better manage customer contacts through "Digital First" by:

o Further scale the service app across our territories, already downloaded 11 million times.

o Increasingly use BOTs to further automate customer messaging, freeing up our service agents' time to work on solving more complex customer issues.

o Launch a new scheduling system for customers, enabling us to offer same-day, or at short notice, engineer visits.

Consistently improving our operational capability and efficiency

We will continue to achieve greater efficiency in the business to further reduce operating costs as a percentage of revenue: 

· Further roll out Digital First service delivery across the Group, reducing incoming call volumes and optimising our contact centre estate.

· Conduct zero-based organisational efficiency programmes, renegotiate key contracts and take choices on discretionary spend.

· Deliver greater network efficiency, introducing innovative new products and technologies, and migrating customers away from expensive legacy products (e.g. BT Connect to Sky Fibre).

Achieving greater efficiency will help fuel further investment in our operational capability. We will further enhance our infrastructure, including building an innovation centre in our Osterley campus, roll out products and services around the Group, deepen our data and insight capabilities, and extend our market-leading brand.

Opening up new opportunities for growth by developing additional services and entering newgeographic markets

We will further extend our position as Europe's largest direct-to-consumer media and entertainment business by deploying Sky's leading brand and platform more widely. This year half a million customers joined Sky Mobile despite a slower handset replacement cycle. In addition, we successfully launched new TV propositions into Spain and Switzerland. In the year ahead, we will continue to scale our presence in each of these markets:

· Firmly establish Sky Mobile as the customer choice for freedom and flexibility at the same time as growing our sales and distribution capability across all our routes to market.

· Execute our new deal with Telefonica, enabling us to deliver excellent value to customers at the same time as accessing new technologies such as 5G.

· Broaden our distribution in Spain, building on our new strategic partnership with Mas Movil that provides their customers with access to Sky.

· Extend our position in Switzerland by adding a broader range of sports to the Sports app, launching Sky Cinema on the Sky Show app, plus developing our relationships with the leading telco operators.

DETAILED OPERATIONAL AND FINANCIAL PERFORMANCE BY MARKET

UK and Ireland

In the UK and Ireland we have delivered an excellent operational and financial performance at the same time as landing key initiatives for future growth such as Sky Q, Sky Fibre and Sky Mobile. We grew revenue by £331 million or 4% to £8,931 million. Established Business EBITDA increased by 11% to £1,995 million, and by 9% post our investment in Sky Mobile and our expansion into the Spanish TV market.

We added 270,000 new customers this year, including 20,000 in Q4. We grew total products by 2.7 million, including 290,000 new TV products taking our total TV customer base to 11.7 million. Fibre penetration increased to 38% of our broadband customers, up from 27% a year ago, and Sky Mobile is now taken by over half a million subscribers, after adding 95,000 in Q4.

Against the backdrop of a broadly flat TV advertising market in the UK, we grew our advertising revenues by 6% this year. This was primarily driven by strong growth in advanced advertising and Sky AdSmart, our targeted advertising platform, whose revenues increased 29% versus the prior year.

Our 12-month rolling churn was 10.3%, reducing 120 basis points from a year ago, with TV churn reducing to its lowest level for a decade. This is a direct result of the plans we put into place 18 months ago, including better and broader content; putting more of our best products like Sky Q and Sky Fibre into our customers' homes; taking a more targeted and disciplined approach to discounting; and launching our VIP loyalty programme, which has now scaled to 1.8 million customers. ARPU remained stable at £45, with a mix of customer price points combining with a strong increase in customer volume to achieve broad-based revenue growth.

Other highlights from the year include:

· Securing Premier League rights for seasons 2019-22 with more games and top picks while paying 16% less per game; successfully renewed EFL rights, with 81% more matches.

· Excellent performances from Sky original programmes: Riviera and Tin Star became our first and second most successful original dramas to date.

· Good growth in Sky Q, now in 2.7 million homes; with notable enhancements including adding Spotify to the platform, making voice control standard, and launching Sky Soundbox.

· Consistently received lowest level of complaints in Ofcom's quarterly report across each of TV, broadband and telephony, placing us top for customer service for nine consecutive quarters.

· My Sky App downloaded over 5 million times and now upgraded to include engineer tracking.

Germany and Austria

Over the past four years we have made considerable progress pursuing the significant growth opportunity in Germany and Austria, implementing a strategy to invest for the long term, broadening out the business and replicating many of the things that have proved successful in the UK and Italy. In doing so, we have added 1.4 million new customers, 2.7 million paid-for-products, and €626 million more revenue over that time.

This year we implemented a major set of initiatives to propel our next phase of growth, comprehensively upgrading our products and services to significantly improve the experience for customers. These included:

· Transforming the customer experience through the launch of Sky Q, which is already in over 1 million homes (820,000 at the end of the quarter) after Sky+ Pro customers were upgraded via a software download.

· Delivering a major new user-interface update across all devices and services.

· Broadening out the content offering, achieving a 9% increase in viewing to Sky channels and our first Sky original drama, Babylon Berlin, winning eight national TV awards.

· Securing exclusive coverage of 98% of Austrian Bundesliga football matches for the next four seasons.

· Connected a further 588,000 homes so that 2.5 million customers now have access to our on demand catalogue.

· Improving the customer service experience, including a new retention focussed contact centre in Berlin and the launch of Mein Sky service app, now downloaded 750,000 times.

· Simplified the pricing structure, including consistent standalone price points for our premium channels, giving customers clearer choice and better value.

· Started broadcasting from our new Sky Sports studio, significantly increasing the quality of our sports coverage.

While implementing these initiatives we rebalanced our trading strategy to rely less on discounts and to better reflect the value customers are receiving from the enhanced Sky experience. As planned, this important ground-work has resulted in higher acquisition ARPU, up €2 year on year, alongside a spike in churn to 15.0% on a 12-month rolling basis as lower value customers roll off the platform. Our expectation is that churn will return to normalised levels from here, reflecting similar customer responses in our other markets, particularly as we scale Sky Q penetration and launch a loyalty programme in the autumn to replicate the considerable success we have had in the UK and Italy.

While the primary focus of the business this year was to deliver these key initiatives, we added 200,000 new customers, including 30,000 in Q4. We grew revenues by 6% to £2,023 million on the back of customer growth, greater product penetration, and our highest ever levels of advertising revenue. EBITDA of £119 million was only £28 million lower than the prior year despite the £153 million step up in Bundesliga costs as we pushed hard on operating efficiency, reducing SG&A costs as a percentage of revenue by 300 basis points.

Italy

This has been a ground-breaking year in Italy in which we have actively put in place a number of initiatives that have transformed the growth opportunity in this market. We enhanced our multi-platform strategy, introducing new ways to take Sky TV and opening up new customer segments of the market, at the same time as enhancing the content proposition. These included:

· Rolling out Sky Q, now in 92,000 households and generating very high customer satisfaction scores.

· Launching a brand new Sky pay-TV service delivered via digital terrestrial television (DTT) after striking a deal with Mediaset to use their transmission capacity.

· Introducing Sky over Fibre, delivering Sky TV over broadband-only for the first time.

· Acquiring exclusive rights to broadcast 266 live Serie A games per season from 2018/19 - 2020/21, more than twice as many exclusive matches versus today, and with 16 of the 20 biggest matches each season.

· Securing exclusive rights for the majority of both UEFA Champions League and Europa League matches from next season.

· Supplying nine additional Mediaset Premium film and TV series channels to existing Sky customers.

· Agreeing a long term wholesale deal with Open Fiber, which will allow us to launch our own triple-play service over their next generation fibre-to-the-home network from Summer 2019.

Bringing all this together meant in the fourth quarter we added 57,000 new customers, the best net growth for 28 quarters, and 133,000 new paid-for-products. This was a strong performance against the backdrop of churn increasing slightly to, what we consider, a more normal level of 10.1%.

Revenues grew 6% to £2,631 million, with ARPU increasing to its highest ever level of €45, up from €42 in Q4 2017, as we increased product penetration and implemented a price rise. Advertising revenue grew by 13%, significantly outperforming the TV advertising market primarily driven by strong performance from our free-to-air and digital channels. EBITDA grew strongly, up 29% to £342 million, as operating cost management meant this strong revenue growth flowed through.

GROUP FINANCIAL PERFORMANCE

Unless otherwise stated, all numbers are presented on an adjusted basis for the twelve months ended 30 June 2018. For comparative amounts in the prior year down to operating profit, numbers are translated at a constant currency rate of €1.13:£1 being the average exchange rate prevailing in the twelve months to 30 June 2018, while content revenue and programming costs also exclude the one-off sale of the Rio Olympic rights in Italy in the prior year. For a reconciliation to amounts at actual exchange rates see page 3. Full details including prior year comparatives are in Appendix 2.

Revenue

Group revenues increased by £588 million, or 5% to £13,585 million. We delivered growth in each territory, with the UK and Ireland up 4% (+£331 million), Germany and Austria up 6% (+£107 million) and Italy up 6% (+£150 million).

We also delivered revenue growth in each category. Direct-to-Consumer revenue, our largest revenue category, grew by 3% (+£396 million) to £11,830 million driven by a number of factors, including: the increased size of our customer base; greater product penetration such as Sky Q, Sky Fibre and Sky Mobile; a higher number of pay as you go buys; the full year benefit from our home communications price rise in the UK in March 2017 and a price rise in Italy in October 2017.

Content revenue strongly increased by 15% (+£110 million) to £838 million as we monetised our growing investment in original programming. Similarly advertising revenue grew 10% (+£82 million) to £917 million with each territory outperforming its market.

Costs 

We made excellent progress in operating efficiency, with operating costs as a percentage of revenue reducing by 70 basis points.

We continued to invest on screen for customers, with programming costs up 4% (+£225 million). This includes a £153 million step up in Bundesliga costs in Germany and greater investment in original drama. This was partly offset by a change to our sports rights amortisation in the UK, following the repackaging of our sport channels, to an approach similar to that of Italy and Germany. As a result, we expense 97.5% of the Premier League costs from the 2017/18 season to this fiscal year, with 2.5%, or £35 million, deferred into the first quarter of 2019 fiscal year.

Direct network costs increased by 21% as we scaled growth in Sky Mobile to over half a million customers, grew broadband subscribers and increased fibre penetration to 38% of our total broadband subscriber base.

Sales, general and administrative costs were up only 2% (+£79 million), and down 70 basis points as a percentage of revenue to just 33%. We absorbed our increased investment in brand to support Sky original dramas and the launch of Sky Q in Italy and Germany, as well as higher depreciation as a result of investment in the roll-out of Sky Q set-top-boxes, Group integration and our UK campus. This performance reflects the strong progress we have made driving operating efficiency through the business as well as the benefit of capitalising rather than fully expensing Sky Q costs.

Profit and earnings

As a result of our strong revenue growth and excellent progress in operating efficiency, Established Business EBITDA was up 11% to £2,456 million (2017: £2,208 million). EBITDA was up 9% after including the net costs of our investments in Sky Mobile and our streaming TV service in Spain.

Adjusting for depreciation and amortisation of £775 million, EBIT was up 7% to £1,574 million (2017: £1,473 million). Tax was £1 million lower at £214 million, at an effective rate of 15.5% (2017:17.0%) mainly reflecting the reduction in the UK rate and the recognition of tax allowances in Italy. Profit after tax was £1,168 million (2017: £1,048 million), resulting in earnings per share of 67.3 pence, up 10% (2017: 61.4 pence). The total weighted average number of ordinary shares was 1,716 million (2017: 1,710 million shares).

Statutory results and adjusting items

Statutory operating profit for the year of £1,034 million (2017: £964 million) increased by 7%, reflecting 5% growth in statutory revenue, progress in operating efficiency and the movement in foreign currency exchange rates.

Adjusted operating profit is before the deduction of net operating expenses of £540 million (2017: £504 million) comprising three elements: (i) the ongoing amortisation of acquired intangible assets and related acquisition costs, (ii) one off costs associated with the offers for the Company and (iii) adjusting items including the costs of corporate efficiency and restructuring programmes and the costs of integrating Sky Italia and Sky Deutschland, which were partly offset by income received with respect to regulatory receipts and proceeds from settlements. A reconciliation of statutory and adjusted numbers is provided in Appendix 2.

Cash flow and net debt

Free cash flow of £552 million was £277 million lower than the prior year, mainly reflecting the investment in deploying Sky Q to customers in each of our markets (c£180 million), as well as a peak year for the payment of upfront deposits on key sports rights including Premier League, Serie A, and English Cricket Board (c£230 million).

Net debt as at 30 June 2018 was £6.5 billion (30 June 2017: £6.2 billion). On a pro-forma basis reflecting Sky Bet sale proceeds actually received on 10th July, net debt would have been £6.0 billion, representing a net debt to EBITDA ratio of 2.6 times.

During the period the Group repaid its October 2017 and February 2018 bonds (£787 million) from existing cash resources. The Group continues to maintain a strong financial position and has ample headroom to its financial covenants, including excellent liquidity with cash of £1.6 billion as at 30 June 2018 and access to a Revolving Credit Facility totalling £1 billion.

BIGGER PICTURE

We have made great progress on our commitment to remove all single-use plastics from our operations, products and supply chain by 2020. We are pleased that take-away coffee cups, plastic cutlery, plastic straws and sauce sachets have all disappeared from every Sky office in the UK and Ireland, and we're on track to remove these items by September from our offices in Germany and Italy. Our Sky Ocean Rescue campaign will have kept over 175 tonnes of single-use plastic out of the environment by the end of this calendar year. And there's a lot more to come. We've partnered with the likes of National Geographic, Premier League, WWF and Volvo Ocean Race. Together, we're encouraging hundreds of millions more people to make small changes that help the planet.

We have made our first investments through Sky Ocean Ventures too. Our objective is to find and invest in big ideas that can keep plastic out of our oceans. So far we've invested in Skipping Rocks Lab and Choose Water, two companies turning sustainable materials into alternatives to plastic packaging. We've also partnered with Imperial College London to help us assess more ideas like these.

CORPORATE

SkyBet sale

We completed the sale of our 20% stake in Sky Bet to The Stars Group Inc. on 10th July 2018. At the closing of the transaction, we received £427 million in cash and 7.6 million shares in The Stars Group worth at close on 9th July approximately £208 million. This, together with the original sale of our majority stake in 2015, has crystalised a total value of c£1.4 billion for Sky shareholders.

IFRS 15

IFRS 15 'Revenue from Contracts with Customers' has been adopted from 1 July 2018, and will change the phasing of revenue recognised for certain of our products. We will continue to manage the business using our existing 'cash-led' accounting policies and therefore the results of our segments will exclude the impact of IFRS 15. We will clearly present the impact of IFRS 15 within our consolidated statutory results.

On transition to IFRS 15, we will recognise material new contract assets for accrued revenue and costs to obtain customer contracts on the balance sheet. However, material changes in statutory revenue and operating profit are not expected.

Offers for Sky

The Company has remained in an offer period throughout the year, following the announcement of a recommended pre-conditional cash offer by 21st Century Fox for Sky in December 2016. 

On 25 April 2018, Comcast announced a firm pre-conditional cash offer for Sky at an offer price of £12.50 per Sky share. Following the year end, on 11 July 2018, 21st Century Fox announced a recommended pre-conditional cash offer for the shares in the Company which it (or its affiliates) did not already own at an offer price of £14.00 per Sky share. Subsequently and also on 11 July 2018, Comcast announced an increased cash offer of £14.75 per Sky share which the Independent Committee of the Board recommended shareholders to accept. The pre-conditions to both offers have now been satisfied or waived, and an offer document relating to the Comcast offer has been published.

The increased Comcast offer and increased 21st Century Fox offer both include an amount in lieu of a final dividend in respect of the financial year ended 30 June 2018, with Comcast and 21st Century Fox each reserving the right to reduce their respective offer prices by some or all of the amount of any dividend (which is announced, declared, paid or becomes payable to Sky shareholders). As a result, the Board is not proposing a final dividend at this stage.

On 12 April 2018, further to the proposed acquisition of 21st Century Fox by Disney, the Takeover Panel Executive ruled that Disney must make a "chain principle" mandatory cash offer for Sky at £10.75 per Sky share following the closing of the Disney acquisition of 21st Century Fox if, at that time, 21st Century Fox had not acquired 100% of the Sky shares or Comcast or another third party had not acquired a majority of the Sky shares. On 13 July 2018 and subsequent to the increased offer by Disney for 21st Century Fox, the Takeover Panel Executive announced that the price payable pursuant to any required chain principle bid would be £14.00 in cash. Sky notified the Hearings Committee of the Panel that it would appeal that determination, and that appeal will be heard by the Hearings Committee on 27 July 2018.

Group KPI Summary (unaudited)

- Revenue at constant currency is translated at €1.13 and excludes the 53rd week impact in FY16 and the one-off sale of Rio Olympic rights in FY17

- Wholesale customers are defined as customers taking at least one paid-for Sky channel. The customer numbers are as reported to us at the end of June 2018.

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

- In Italy, paid-for products includes TV, Multivision, Ultra HD, Sky Go plus and paying HD.

- In Germany and Austria, paid-for products includes TV, Multiscreen, Premium HD and Sky Go Extra.

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

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

- UK revenue excludes impact of Sky Bet and pre-acquisition sales to Sky Italy.

- FY13, FY14 and FY15 Revenue numbers for Germany and Austria and Italy are on a pro-forma basis.

Sky content highlights - on screen between July and December

Sky Uno, Sky Living & Sky One

Sky Atlantic

Sky Cinema

 Sky Sports 

Sky Arts

* Indicates a Sky original production

Appendix 1 - Consolidated Financial Information

Consoliated Income Statement for the year ended 30 June 2018

Consolidated Statement of Comprehensive Income for the year ended 30 June 2018

 Consolidated Balance Sheet as at 30 June 2018

Consolidated Cash Flow Statement for the year ended 30 June 2018

 Consolidated Statement of Changes in Equity for the year ended 30 June 2018

Notes to the consolidated financial statements

1 Basis of Preparation

The financial information set out in this preliminary announcement does not constitute statutory financial statements for the years ended 30 June 2018 or 2017, for the purpose of the Companies Act 2006, but is derived from those financial statements. Statutory financial statements for 2018, on which the Group's auditors have given an unqualified report which does not contain statements under s. 498(2) or (3) of the Companies Act 2006, will be filed with the Registrar of Companies by 31 December 2018. Statutory financial statements for 2017 have been filed with the Registrar of Companies. The Group's auditors have reported on those accounts; their reports were unqualified and did not contain statements under s. 498(2) or (3) of the Companies Act 2006.

Whilst the financial information included in this press release has been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRS. The consolidated financial statements have been prepared using accounting policies and methods of computation consistent with those applied in the financial statements for the year ended 30 June 2017, except for new accounting pronouncements which have become effective this year, none of which had a material impact on the Group's results or financial position.

The Group maintains a 52 or 53 week fiscal year ending on the Sunday nearest to 30 June in each year. In fiscal 2018, this date was 1 July 2018, this being a 52 week year (fiscal year 2017: 2 July 2017, 52 week year). For convenience purposes, the Group continues to date its consolidated financial statements as at 30 June and to refer to the accounting period as a "year" for reporting purposes.

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 year ended 30 June 2017

Results for each segment are presented on an adjusted basis. A reconciliation of statutory to adjusted results is shown in the Non-GAAP measures section which also includes a description of the adjusting items.

To provide a more relevant presentation, management has chosen to reanalyse the revenue categories from those previously reported. Revenues previously included in Subscription, Transactional, and Other have been aggregated into Direct to consumer revenue. Revenue previously labelled Programme and Channel sales is now labelled Content. To provide a more relevant presentation, management has chosen to reanalyse the segmental allocation of certain costs in the prior year, to be consistent with their presentation in the current year, resulting in the transfer of Sales, general and administration expense of £1 million from Germany & Austria and £3 million from Italy into the UK & Ireland segment.

During the period, the Group's pay TV business in the UK and Ireland repackaged its sport channel proposition, resulting in new sport-specific channels being retailed to the customer, which are consumed throughout the year. As a result, in accordance with the Group's accounting policy for the cost of sports rights, a portion of the total rights value has been allocated to the off-season period, and will be recognised on a straight-line basis over the off-season period. This change in accounting estimate has resulted in a reduction in programming expense of £35 million in the period.

5 Taxation

Taxation recognised in the income statement

6 Earnings per share

The weighted average number of shares for the year was:

Basic and diluted earnings per share are calculated by dividing the profit for the year attributable to equity shareholders of the parent company by the weighted average number of shares for the year. In order to provide a measure of underlying performance, management has chosen to present an adjusted profit for the year 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.

7 Dividends

As the 21st Century Fox Offer had not become effective at 31 December 2017, and in accordance with the terms of the offer, a special dividend was paid on 9 February 2018.

8 Intangible assets

9 Property, plant and equipment