MIDDLESEX, UNITED KINGDOM--(Marketwire - Apr 28, 2011) -
BRITISH SKY BROADCASTING GROUP PLC
Unaudited results for the nine months ended 31 March 2011
STRONG THIRD QUARTER
Adjusted results Reported results
Nine months
to 31 March 2011 2010 Variance 2011 2010 Variance
Revenue GBP4,833m GBP4,232m +14% GBP4,833m GBP4,232m +14%
EBITDA GBP1,030m GBP868m +19% GBP992m GBP895m +11%
Operating
profit GBP790m GBP636m +24% GBP752m GBP663m +13%
Earnings per
share (basic) 30.5p 23.4p +30% 30.3p 32.2p -6%
All comparatives are restated to reflect continuing operations
Strong demand in a challenging consumer environment
* Total product growth of 801,000 in the quarter
* Over 10.1 million customers with 51,000 net additions in the quarter
* Total HD customers 47% higher than the prior year at 3.7 million
* 543,000 net additions in home communications in the quarter; 3.2
million households now choose our great value broadband
* 26% of customers now take all three of TV, broadband and telephony
Building more value for customers with outstanding content and innovation
* Successful launch of Sky Atlantic and Sky Living
* Secured exclusive, live rights to the Football League and Carling
Cup, and an extension to the Champions League contract
* Launch of Sky Anytime+, our video on demand product, with access
to hundreds of movies and TV box sets at no extra monthly cost
Excellent financial performance with growth across the board
* Strong revenue growth, up 14% to GBP4.8 billion
* Adjusted EBITDA of GBP1,030 million, up 19%
* Adjusted operating profit up 24% to GBP790 million; operating margin
expansion of 130 basis points to 16.3%
* Record adjusted basic EPS of 30.5 pence, up 30%
* Adjusted free cash flow up 60% to GBP615 million
Results highlights
Customer Metrics (unaudited)
Closing Quarterly Net 9 Month Net
Base Additions Additions'000s
31-Mar-11 31-Mar-11 31-Mar-10 31-Mar-11 31-Mar-10
Total Product Growth 24,591 801 940 2,994 2,989
Net Customer
Additions 10,147 51 62 287 328
Additional products
Sky+HD 3,686 189 428 747 1,197
Multiroom 2,237 18 63 116 227
Broadband 3,161 155 101 537 302
Telephony 2,916 159 118 549 380
Line rental 2,444 229 168 758 555
Total Additional
Product Growth 14,444 750 878 2,707 2,661
Other Metrics
ARPU (quarterly annualised) GBP544 GBP503
Churn (quarterly annualised) 10.4% 9.9%
Business Performance (unaudited) (1)
GBP'millions 9 months to 9 months to % movement
Mar-11 Mar-10
Revenue 4,833 4,232 +14%
Adjusted operating profit 790 636 +24%
% Adjusted Operating Profit
Margin 16.3% 15.0%
Adjusted EBITDA 1,030 868 +19%
Adjusted free cash flow 615 385 +60%
Adjusted basic earnings per 30.5p 23.4p +30%
share(2)
Net debt as at end of period 817 1,161 -30%
Reported Results (unaudited)(1)
GBP'millions 9 months to 9 months to % movement
Mar-11 Mar-10
Revenue 4,833 4,232 +14%
Operating profit 752 663 +13%
Cash generated from 1,126 1,194 -6%
operations
Basic earnings per share 30.3p 32.2p -6%
1 All comparatives are restated to reflect continuing operations,
excluding the Easynet operations divested on 1 September 2010. A
reconciliation of adjusted operating profit and adjusted EBITDA from
continuing operations to reported measures and cash generated from
continuing operations to adjusted free cash flow from continuing
operations is set out in Appendix 3.
2 Adjusted basic EPS is calculated from adjusted profit for the period
from continuing operations. A reconciliation of reported profit to
adjusted profit from continuing operations is set out in note 4 to the
consolidated financial information.
Jeremy Darroch, Chief Executive, commented:"The business has delivered
another good performance in what has clearly been a tough consumer
environment and we are benefiting from
the transition to more broadly based growth. Good progress on multiple
fronts is translating into strong financial results with double digit
growth in revenue, profit and cash flow."At a time of significant
pressure on household budgets, we have added
over 800,000 subscription products as more customers choose Sky for a
greater variety of services. Take-up of high definition remains very
strong and we have had another excellent quarter in home
communications, with 26% of customers saving money by taking all three
of TV, broadband and home phone."The strength of our financial
performance has been equally broadly
based, with good revenue growth across retail, wholesale and
advertising. Strong cost control and continued margin expansion has
delivered 24% growth in operating profit and free cash flow is up 60%.
"Customers are choosing Sky for a better choice of television and 2011
is shaping up to be our best year yet on screen. Our new channel, Sky
Atlantic, has got off to an excellent start with 10 million viewers in
the first two months. Alongside Sky 1 and Sky Living, it forms part of
an outstanding entertainment line-up that will bring even more value to
customers in the months ahead, including a growing commitment to UK
drama and comedy."We remain cautious on the economic outlook for
calendar 2011. Our approach in the current environment will be to stay
flexible on costs while delivering for customers through a combination
of great value, high-quality content, leading innovation and better
service. As these results show, the whole team remains focused on
executing our strategy."
OPERATIONAL REVIEW
Operational Performance
In a challenging consumer environment, the business has made a strong
start to calendar 2011 and our growth is benefiting from becoming more
broadly based. We generated total product growth of 801,000, including
a particularly strong performance in home communications. Within total
product growth, net DTH additions were 51,000, taking total customers
to 10.147 million. Despite the tougher consumer environment we saw good
customer loyalty with churn of 10.4% and, as customers continue to
respond to the quality and value of our wider product range, ARPU
increased 8% to GBP544 per annum.
Our multi-product strategy achieved continued success in the quarter
with good performances in both High Definition (HD) and home
communications. While household spending is under pressure, customers
continue to save money by switching their home communication services
to Sky. We achieved 543,000 additions across broadband, telephony and
line rental, 40% higher than the prior year. In particular, we saw good
demand for our broadband service with net additions of 155,000, a 53%
increase on the prior year. This performance means that over one in
four customers now take all three of TV, broadband and telephony.
We closed the quarter with 3.7 million HD customers, an increase of
nearly 50% in the last twelve months. Demand for HD continues to be
strong, although as expected, net additions of 189,000 were lower than
the prior year, in which we experienced exceptionally high demand in
response to the launch of our free HD box.
Content
We have delivered a strong quarter on screen, in particular by
accelerating the development of our entertainment channels to
complement our traditional strengths in sports, news and movies.
Sky Atlantic launched on 1 February with the UK and Ireland premiere of
HBO's critically acclaimed 'Boardwalk Empire'. Showcasing a breadth of
uncompromising, intelligent and highly valued content, the channel has
achieved significant early success, reaching over 10 million viewers in
the first two months. When combined with the convenience and
flexibility of the Sky+ box, the quality of programming on Sky Atlantic
is proving to be event TV, with over half of all viewing to the channel
taking place on a time-shifted basis.
Sky Living was re-launched successfully this quarter as part of our
expanded portfolio of entertainment channels and is expected to appeal
particularly strongly to female viewers. The channel's first ever
in-house drama commission, 'Bedlam' starring Will Young, achieved a
cumulative audience of just under one million viewers on its debut.
Sky 1 is core to our commitment to bring customers more original UK
entertainment, and we delivered that on screen this quarter with the
commissioned drama, 'Mad Dogs', which reached a cumulative audience of
over two million. 'Got to Dance', Sky 1's nationwide dance competition
returned with great success, with 12 shows achieving average audiences
of over one million viewers, while Sky 1's latest Martina Cole
adaptation, 'The Runaway', achieved a cumulative audience of over
750,000 for its first episode.
We had a strong quarter in sports with Premier League and Champions
League viewing up year on year. Looking ahead, we secured more high
quality sports content for customers, improving on existing
arrangements in winning exclusive, live rights to the Football League
and Carling Cup and extending our Champions League contract; both at
attractive rates.
Innovation
We continue to innovate to add value for our customers. This quarter we
enhanced our mobile content proposition with the launch of Sky News for
iPad. The ground breaking app offers users bespoke content with access
to live and on-demand video, expert analysis and rich interactive
graphics. The app achieved over 100,000 downloads in the first week,
making it the most downloaded free app on iTunes. Currently available
free for a limited period, Sky News for iPad will remain free to Sky TV
customers as part of their regular subscription, with other customers
paying a monthly fee for access.
In April, we began a major new marketing campaign to launch our video
on demand product, Sky Anytime+, which combines the power of our
satellite and broadband platforms to bring customers greater
flexibility and convenience at no extra monthly cost. The on-demand
service houses a constantly updating library of over 600 movies as well
as documentaries, sports and children's programming. We expanded the
content offering to include HBO material such as 'Treme', 'Game of
Thrones' and 'Boardwalk Empire' as well as box sets from some of the
most talked about TV series including 'The Sopranos', '24', and 'Lie To
Me'.
We continue to develop the Sky 3D channel with the expansion of our
content offering across a wide range of genres. In March, we broadcast
our 100th live 3D sporting event and have now shown nine different
sports in 3D, including the Masters from Augusta for the first time. In
a further demonstration of the breadth of 3D content now available, we
broadcast the 'Toy Story' trilogy, the world's first 3D opera, the
final of 'Got To Dance', and the season finale of Sky Arts' music
programme 'Songbook'. We are also working with partner channels to
expand further our range of 3D content, adding to our content
syndication relationship with ESPN to broadcast its coverage of the
2011 FA Cup Final on Sky 3D.
The Bigger Picture
During the quarter, we continued to make a positive contribution to the
community through our Bigger Picture programme.
Building on our work to open up the arts to more people, this quarter
saw the start of Sky Arts' Books on Tour season, with live programmes,
performances and workshops at the Bath Literature Festival in February
and Cumbria Literature Festival in March. As part of our drive to
encourage participation in sport, we continued to roll out our Sky
Sports Living for Sport initiative to secondary schools across the UK.
During the quarter, the number of young people who have taken part in
the programme passed 30,000, and independent research has shown
improved self-confidence and higher than average attainment in English
and Maths among pupils involved. Sky Rainforest Rescue, our campaign
with WWF to combat deforestation in Brazil's Amazon rainforest,
maintained its momentum with GBP800,000 raised to date, which Sky is
matching pound for pound. According to independent research, the
campaign has achieved among the highest levels of awareness of any
corporate charity partnership in the UK.
FINANCIAL SUMMARY
The strong operating performance translated into excellent financial
results for the nine months to 31 March 2011 (the period). Broadly
based revenue growth across retail, wholesale and advertising
contributed to a strong increase in group revenue. At the same time,
our continued focus on operating efficiency contributed to higher
operating profit, margin expansion and earnings growth.
The results for the period include the acquisition of Living TV, which
completed on 12 July 2010. In the period, Living TV contributed GBP84
million in revenue and GBP68 million of costs.
Unless otherwise stated, all figures and growth rates exclude
exceptional items and are from continuing operations (including Living
TV in the current year and excluding Easynet from both the current year
and the prior year comparative).
Revenue
Group revenue increased by 14% to GBP4,833 million (2010: GBP4,232
million)with growth in all major business areas.
Retail subscription revenue grew by 14% to GBP3,997 million (2010: GBP3,
518 million) reflecting the success of our multi-product strategy and a
larger customer base.
Wholesale subscription revenue was 34% higher at GBP236 million (2010:
GBP176 million) as a result of increased take-up of our premium channels
on cable as well as the acquisition of Living TV.
Advertising revenue of GBP348 million (2010: GBP247 million) was 41%
higher, benefiting from our increased share of the TV advertising
sector and the consolidation of the sale of airtime on Living TV. We
maintained our outperformance of the overall sector, which we estimate
grew by 12% year on year, reflecting our greater share and continued
growth in pay TV customers. Advertising revenue now includes revenue
related to our online properties and Sky Magazine; of which GBP15
million(2010: GBP15 million) was reclassified from 'other revenue'.
Installation, hardware and service revenue was GBP89 million (2010:
GBP139 million), reflecting our decision to reduce the upfront cost of
our Sky+HD box in January 2010. Other revenue of GBP163 million (2010:
GBP152 million) was 7% higher, benefiting from higher Sky Bet revenues.
Direct Costs
Programming costs were 14% higher at GBP1,621 million (2010: GBP1,421
million) as we continue to bring customers high-quality, differentiated
content. Sports contributed the largest increase reflecting the
acquisition of the fifth Premier League pack and both the Ashes and the
Ryder Cup earlier in the year. Entertainment costs increased as we
launched Sky Atlantic and continued to invest in more top quality drama
on Sky 1. Movie costs were lower year on year, benefiting from improved
terms on contract renewals. Third party channel costs were slightly
higher, due to an additional 13 HD channels on the platform supplied by
third party providers.
Direct network costs increased by 31% to GBP418 million (2010: GBP319
million) as a result of continued strong growth in our home
communications business, with 8.5 million broadband, telephony and line
rental products, 37% higher than the prior year.
Other Operating Costs
Marketing costs increased by GBP69 million to GBP893 million (2010: GBP8
24 million) reflecting the upfront expense associated with strong product
sales in the period and the successful above-the-line marketing
campaigns promoting home communications, Sky Sports and the launch of
Sky Atlantic.
Subscriber management and supply chain costs were GBP41 million lower
(2010: GBP473 million) benefiting from the continued success of our
efficiency programmes.
Trasmission, technology and fixed network costs were up by 29% to GBP29
3 million (2010: GBP227 million) and 23% excluding the Living TV
acquisition. Increases resulted from higher network infrastructure
costs as our fixed line business gains scale and also from the
inclusion of costs for network services previously accounted for within
the Group by Easynet.
Administration costs, excluding exceptional items, were GBP386 million
(2010: GBP332 million) reflecting the acquisition of Living TV and a
higher non-cash IFRS 2 'Share-based payment' charge and associated
National Insurance costs. The phasing of the Group's share-based
compensation schemes and gains in the share price when compared to the
prior year contributed to a GBP31 million increase in the period,
despite the volumes of awards made remaining broadly constant.
Excluding this amount and the integration of Living TV, administration
costs as a percentage of sales were down 50 basis points year on year.
The IFRS 2 charge and related National Insurance costs for the year are
expected to be around GBP86 million, an increase of GBP41 million.
Earnings
Adjusted profit before tax from continuing operations of GBP727 million
(2010: GBP557 million) includes the Group's share of joint ventures and
associates' profits of GBP26 million (2010: GBP21 million) and a net
interest charge of GBP89 million (2010: GBP100 million).
Adjusted taxation from continuing operations was GBP195 million (2010:
GBP150 million). We expect the adjusted tax rate on continuing
operations to be approximately 27% for the full year (2010: 27%). The
reduced corporation tax rate announced in the budget statement comes
into effect in the final quarter of our financial year and therefore has
only a modest positive effect in the current year.
Adjusted profit for the period from continuing operations was GBP532
million (2010: GBP407 million), generating an adjusted basic earnings
per share of 30.5 pence (2010: 23.4 pence).
Reported profit for the period from continuing operations was GBP528
million (2010: GBP561 million) generating basic earnings per share of
30.3 pence (2010: 32.2 pence). Reported profit for the period including
discontinued operations was GBP581 million (2010: GBP542 million)
resulting in reported basic earnings per share of 33.3 pence (2010:
31.1 pence).
Cash Flow and Financial Position
Adjusted free cash flow was 60% higher at GBP615 million (2010: GBP385
million). Net debt at the end of the period was GBP817 million,
consisting of GBP2,111 million gross debt and GBP1,294 million cash and
cash equivalents.
Reported cash generated from continuing operations was 6% lower at
GBP1,126 million (2010: GBP1,194 million) as a result of a receipt for
the EDS settlement in the comparative period. Excluding this impact,
cash from operations was up 21% reflecting strong EBITDA growth and
improved working capital.
Exceptional Items
Reported operating profit from continuing operations of GBP752 million
included GBP26 million of restructuring costs from Living TV and costs
of GBP12 million relating to the News Corporation proposal. Both amounts
were classified as administration costs.
Reported profit after tax also included a GBP34 million exceptional
gain,of which GBP16 million were mark to market gains relating to
derivative financial instruments not qualifying for hedge accounting
and gains and losses arising from designated fair value hedge accounting
relationships, and a GBP15 million non-cash tax credit for a tax
settlement relating to the network operations retained from the Easynet
business. The related tax effects on exceptional items was a GBP3
million gain. Exceptional items in the prior period amounted to a gain
of GBP154 million.
Corporate
News Corporation Proposal
On 3 March the Secretary of State for Culture, Media and Sport
published undertakings in lieu offered by News Corporation to address
the concerns raised by Ofcom's report on public interest considerations
in respect of media plurality. The undertakings, intended to ensure the
continued editorial independence and integrity of Sky News, were
subject to a public consultation period ending on 21 March. To date,
there has been no further announcement on the outcome of the public
consultation.
BSkyB will continue to co-operate with the ongoing regulatory process.
Shine Disposal
On 5 April, the Group sold its stake in the Shine Group for a maximum
consideration of GBP36 million, of which GBP31 million has been
received to date. The remaining consideration is contingent on certain
post transaction criteria and is currently held in escrow. The expected
profit on disposal that will arise from the sale is GBP10 million.
ECJ Ruling on Import Duty
On 14 April, the Group won an appeal in the Court of Justice of the
European Union (ECJ) in relation to the import duty charged on our set
top boxes. The ECJ agreed that the primary purpose of our set top
boxes, for the purposes of import duty, was to act as a television
receiver such that no customs duty is payable.
The Group has paid GBP53 million of duty on set top boxes from 30 June
2008 to 14 April 2011, GBP51 million of which has been expensed through
the income statement. In the coming period we will begin the process of
recovering the over-paid duty.
Enquiries:
Analysts/Investors:
Lang Messer Tel: 020 7032 2657
Chris Wiles Tel: 020 7032 2654
E-mail: investor-relations@bskyb.com
Press:
Robert Fraser Tel: 020 7705 3000
Bella Vuillermoz Tel: 020 7705 3000
E-mail: corporate.communications@bskyb.com
A conference call for UK and European analysts and investors will be
held at 08:30 a.m. (BST) today. Participants must register by
contacting Emily Dimmock or Yasmin Charabati on +44 20 7251 3801 or at
bskyb@finsbury.com . In addition, a live webcast of this presentation to
UK/European analysts and investors will be available via
http://www.sky.com/investors and subsequently available for replay.
There will be a separate conference call for US analysts and investors
at 10.00 a.m. (EST) today. Details of this call have been sent to US
institutions and can be obtained from Dana Diver at Taylor Rafferty on
+1 212 889 4350. A live conference call and supporting materials will
be available on Sky's corporate website, http://www.sky.com/corporate .
A replay will be subsequently available.
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