BRITISH SKY BROADCASTING GROUP PLC
Unaudited results for the three months ended 30 September 2011
GOOD GROWTH IN TOUGH CONDITIONS
Adjusted results Reported results
Three months 2012 2011 Variance 2012 2011 Variance
to 30 Sept
Revenue GBP1,657m GBP1,526m +9% GBP1,657m GBP1,526m +9%
EBITDA (2) GBP381m GBP335m +14% GBP413m GBP328m +26%
Operating
profit (2) GBP295m GBP255m +16% GBP327m GBP248m +32%
Earnings per 11.6p 9.7p +20% 12.9p 10.5p +23%
share (basic) (3)
* Strong financial performance:
- Revenue growth of 9% to GBP1.66 billion
- Adjusted operating profit up 16% to GBP295 million with further
margin improvement
- 20% increase in adjusted basic earnings per share to 11.6 pence
- 39% growth in adjusted free cash flow to GBP96 million
* Good growth in total customers and products, up 77,000 and
683,000 respectively
* Continued improvement in product mix with 2.9 million customers
taking all three of TV, broadband and telephony, up by 29%
* Strong customer loyalty despite pressure on consumers
* Good quarter on-screen supporting growth in advertising and
wholesale businesses
* Excellent response to Sky Go; over 1.6 million customers in
first three months
Jeremy Darroch, Chief Executive, commented:"We continue to
deliver strong financial results and good growth in
customers and products. In tough market conditions, our move to more
broadly based growth and multiple products is serving us well. New
customers are choosing Sky over other providers, existing customers are
taking more from us and our financial performance is accelerating, with
another quarter of double-digit growth in operating profit, EPS and
free cash flow."Looking ahead, the environment is likely to remain
challenging as a result of the pressures facing consumers in the
UK and Ireland. Our job is to give customers the quality and value
they're looking for, with a better choice of programmes, more
innovation and peace of mind with a price freeze for 12 months.
In particular, customers can look forward to more outstanding
TV as we step change our investment in new British
comedy and drama, begin coverage of Formula 1 and continue to offer the
best US shows like Glee, Terra Nova and Boardwalk Empire."
Results highlights
Customer Metrics (unaudited)
Quarterly
As at As at Growth to
30-Sep-11 30-Sep-10 Growth 30-Sep-11
Total products ('000s) 26,058 22,586 +3,472 +683
TV 10,213 9,956 +257 +26
HD 3,925 3,154 +771 +103
Multiroom 2,295 2,158 +137 +45
Broadband 3,485 2,802 +683 +150
Telephony 3,248 2,570 +678 +147
Line rental 2,892 1,946 +946 +212
Total customers ('000s) 10,371 9,979 +392 +77
Products per customer 2.5 2.3 +0.2
Other metrics
Customers taking each of
TV, broadband & talk 28% 23% +5%
ARPU(1) GBP535 GBP510 +GBP25
Churn (quarterly
annualised) 11.1% 11.2%
An additional KPI summary table containing further detailed disclosure
may be found in Schedule 1.
Business Performance (2)(unaudited)
GBP'millions 3 months to 3 months to
30 Sep-11 30 Sep-10 Movement
Revenue 1,657 1,526 +9%
Adjusted operating profit 295 255 +16%
% Adjusted operating profit margin 17.8% 16.7% +110 bps
Adjusted EBITDA 381 335 +14%
Adjusted free cash flow 96 69 +39%
Adjusted basic earnings per share (3) 11.6p 9.7p +20%
1 Quarterly annualised. Calculations have been restated to include
customers taking standalone home communications products and to reflect
the impact of the Sky magazine closure. Further details are provided in
Schedule 2.
2 A reconciliation of adjusted operating profit and adjusted EBITDA
from continuing operations to reported measures as well as cash
generated from continuing operations to adjusted free cash flow from
continuing operations is set out in Appendix 3.
3 Adjusted basic EPS is calculated from adjusted profit from continuing
operations for the period. A reconciliation of reported profit from
continuing operations to adjusted profit from continuing operations is
set out in note 4 to the consolidated financial information.
OVERVIEW
We have made a good start to the year. In what remains a challenging
consumer environment, our financial performance was strong with
double-digit growth in earnings and cash flow and further expansion in
adjusted operating margin to reach 17.8% - the highest first quarter
level for six years. We have continued to grow our customer base and
improve product take-up, adding 683,000 net products this quarter,
which, combined with a strong on-screen performance, delivered 9%
growth in revenue.
We continue to balance growth and returns sensibly, pursuing growth
where it makes sense and investing carefully for customers. We believe
this is the right approach to deliver a strong financial performance in
the near-term while at the same time building solid foundations for the
future.
Operational performance
Our focus on delivering for customers is reflected in strong product
growth in the three months to 30 September 2011 ('the quarter'). We
added 683,000 total net products, growing the base by 15% year on year
to reach 26.1 million. Within this we added 77,000 net new households
to reach 10.4 million. By expanding our addressable market for home
communications beyond our existing TV base we now have a growing number
of standalone home communications customers. So while TV growth was
lower at 26,000, we added 51,000 new standalone customers,
demonstrating the flexibility we have in our business to adjust to
market conditions.
Our value proposition in home communications continues to resonate well
with customers. We delivered over half a million product additions this
quarter, including 150,000 new broadband customers. We also saw good
growth in our additional TV services - HD and multiroom. We grew our HD
service by 103,000 customers in the context of an overall decline in HD
TV set sales. Multiroom customers increased by 45,000; up strongly year
on year and three times higher than the previous quarter following our
short marketing campaign. Overall, product mix is improving with 2.9
million customers now taking all three of TV, broadband and telephony,
up 29% year on year. The benefits of improved product mix are reflected
in strong customer loyalty with churn stable at 11.1%.
ARPU continued to grow well, increasing by GBP25 to reach GBP535,
representing growth of 5% versus the prior year. The largest driver of
higher ARPU was the greater average number of products taken by our
customers with growth in each of the TV and home communication related
elements. Our ARPU calculation for the period includes standalone
communications customers. The prior year comparative has also been
restated to produce a like for like equivalent on this basis as well as
the loss of benefit from the zero VAT rating of the Sky customer
magazine. Had we not made this change, our year on year ARPU growth
would have been greater at GBP29, with Q1 ARPU of GBP543. For the detail
of the adjustments please refer to Schedule 2 on page 10.
We have further enhanced our home communications proposition by
expanding our network footprint. This quarter we unbundled another 155
exchanges and migrated or provisioned a further 183,000 customers onto
our own network to reach 1.9 million, or 54% of our broadband base. By
managing the entire broadband and telephony line we are improving the
service to our customers and reducing our cost base. We intend to
extend our UK coverage further this year by another 200 exchanges,
increasing our exchange footprint beyond the current level of 81%.
Content
It has been a very strong quarter on-screen where we have continued to
build on our traditional strengths, as well as delivering a step change
in our entertainment offering.
We've increased investment in home grown content and delivered more
original British comedy and drama. We achieved two of the biggest
comedy launches in multichannel history with our in house commissions
'Trollied' and 'Mount Pleasant' and the opening episode of 'An Idiot
Abroad 2' achieved the third largest audience in the history of Sky 1.
We are also bringing our customers other unmissable shows such as the
new season of 'Glee', which is exclusively on pay TV. In the second
quarter we have more new UK comedies including 'Spy' starring Robert
Lindsay and 'The Cafe' starring Ralf Little and we will continue
bringing customers the best of the US with Steven Spielberg's 'Terra
Nova' having already begun on Sky 1.
In sports, average Premier League audiences were up 18% year on year
and Champions League matches featuring home nations teams were 27%
higher. With good performances in British sport this quarter, our
coverage of the US Open tennis reached its highest level ever and
England's home cricket Test series against India recorded the second
highest audience for a summer tour behind the 2009 Ashes series.
Innovation
We continue to innovate to add value for customers and make the whole
experience of TV better with Sky. Our Sky Go service launched in July,
providing customers with greater flexibility and convenience to watc
h
live and on-demand TV on the move via PCs, Macs, iPhones, iPads and
Xbox. Customers can register up to two devices for Sky Go. The service
offers access to a range of channels, including all five Sky Sports
channels; TV customers have access to channels in line with their
subscription.
In just three months Sky Go has gained over 1.6 million unique users
across all platforms. At no extra charge to TV customers, this is
another example of how we are seeking to build more value into our
customers' subscriptions. We will continue to develop Sky Go over the
coming months by adding more content and extending the service to
Android devices and other platforms.
As part of our mobile content strategy we continue to increase the
coverage of our Wi-Fi network via The Cloud with new agreements reached
with Wagamama and Phones 4u as well as renewing our agreement with the
City of London for a further five years. Ahead of the launch of the
customer proposition later this fiscal year, the technical integration
of The Cloud's network is progressing well and we now have over 5,700
live hotspots.
The Bigger Picture
As part of our commitment to making a positive contribution to life in
the UK and Ireland, we have delivered a number of important components
of our Bigger Picture programme during the quarter.
In another successful summer of cycling, over 200,000 people
participated in 21 free Sky Ride city events across the UK and Ireland,
including our first event in Dublin. Our professional road racing team,
Team Sky, recorded its first stage wins in the Tour de France and
secured second and third place overall in the Vuelta a Espana, its
first podium finishes in a Grand Tour. These both contribute to our
overall goal of inspiring one million more people to cycle regularly.
In August, we were placed first in the FTSE 100 Carbon Reporting
Assessment in recognition of our commitment to environmental
leadership, as well as being highlighted as a leader on Climate Change
through the Carbon Disclosure Project. Our Sky Rainforest Rescue
project, a partnership with WWF, has now raised GBP1.3 million and our
Sky Rainforest Rescue pod toured the UK over the summer receiving over
30,000 visitors and helping us to raise awareness of climate change.
We had a strong response for the first round of the 'Sky Arts Ignition
Series', where we will partner with six leading arts organisations over
three years to create new ground-breaking works of art. We are
currently considering the applications and will announce our first
project winner in the coming quarter.
FINANCIAL SUMMARY
We delivered a strong financial performance in the quarter. Good
revenue growth and excellent progress on costs delivered 16% growth in
adjusted operating profit and 20% growth in adjusted basic EPS.
Efficiency programmes across the business have allowed us to hold
operating costs broadly flat year on year, more than offsetting the
increased investment in programming to deliver adjusted operating
margin expansion of 110 basis points to 17.8%.
Unless otherwise stated, all figures and growth rates included within
the financial section exclude exceptional items and are from continuing
operations.
Revenue
Group revenue increased to GBP1,657 million (2011: GBP1,526 million), up
9% year on year, benefitting from the broadly based growth in retail and
other lines of business.
Retail subscription revenue increased by 7% to GBP1,368 million (2011:
GBP1,278 million), reflecting strong product growth and a larger
customer base.
Our strong performance on-screen and growing portfolio of channels
supported continued growth in our wholesale and advertising businesses.
Wholesale subscription revenue increased by 22% to GBP83 million (2011:
GBP68 million) and advertising revenue increased by 3% to GBP105 million
(2011: GBP102 million). We continue to outperform the overall TV
advertising sector, and after the successful integration of Living TV,
grew our estimated share 350 basis points year on year to 21.1%.
Installation, hardware and service revenue was lower year on year at
GBP24 million (2011: GBP30 million), reflecting our introduction of a
free home move service and fewer visits as a result of more reliable
set-top boxes. Other revenue was 60% higher at GBP77 million (2011:
GBP48 million) with the higher revenue principally from sales of set-
top boxes to Sky Italia. The costs associated with these box sales are
included in subscriber management and supply chain costs.
Direct Costs
Programming costs increased by GBP53 million to GBP535 million (2011:
GBP482 million) as we expanded the depth and breadth of our offering to
give customers an even better choice of programming. Entertainment costs
accounted for GBP26 million of the increase and included our investment
in Sky Atlantic and additional UK commissioned content. Sports costs
increased by GBP15 million reflecting a strong quarter of cricket with
India's tour of England and the West Indies Twenty20 series. Third
party channel costs were GBP9 million higher as a result of having nine
additional HD channels and higher subscriber volumes with 24% growth in
the HD customer base versus the prior year. Movies and news costs were
broadly level year on year.
Direct network costs increased by 26% to GBP162 million (2011: GBP129
million) as a result of the 32% increase in home communications
products year on year. Gross margin improved as a greater proportion of
customers are on our own fully unbundled network.
Other Operating Costs
We have delivered an excellent performance on costs. Despite a larger
customer base and continued high volumes of product sales in the
business, our wide-scale efficiency programmes have delivered a 310
basis point reduction in other operating costs as a percentage of
revenue year on year.
Marketing costs fell by 11% to GBP270 million (2011: GBP302 million),
due to lower gross additions and improved efficiency in routes to
market;including a 23% increase in sales through our online channels. In
addition, we reduced above-the-line advertising costs year on year and
benefitted from savings from our decision to close the Sky customer
magazine.
Underlying subscriber management and supply chain costs were flat year
on year despite a larger customer base. The increase of GBP19 million to
GBP161 million relates to the cost of sales of set-top boxes to Sky
Italia; for which the corresponding revenue is recorded within other
revenue and from which we both derive scale benefits and make positive
margin.
Transmission, technology and fixed network costs were GBP9 million
higher as a result of additional support and maintenance costs and an
increase in running costs of an enlarged network and our new studios.
Also included are two additional months of cost compared to the prior
year for network services previously accounted for within the Group by
Easynet (prior to the disposal of that business on 1 September 2010)
and additional content delivery costs relating to new products such as
Sky Go.
Administration costs (excluding exceptional items) were 7% higher at
GBP134 million (2011: GBP125 million) reflecting additional legal fees
related to regulatory inquiries and the impact from the first time
inclusion of costs relating to The Cloud which was consolidated from
February 2011.
Earnings
On an adjusted basis, profit before tax was GBP274 million (2011: GBP232
million) and included the Group's share of joint ventures and
associates' profits of GBP7 million (2011: GBP7 million) and a net
interest charge of GBP28 million (2011: GBP30 million).
Adjusted taxation was GBP72 million (2011: GBP63 million) resulting in
an effective rate of 26% for the quarter. The adjusted tax charge on
continuing operations for the year is expected to be between 25% and
26% (2011: 27%). The lower rate year on year reflects principally the
reduction in the rate of UK Corporation Tax.
Adjusted profit for the period was GBP202 million (2011: GBP169
million),generating an adjusted basic earnings per share from continuing
operations of 11.6 pence (2011: 9.7 pence).
Over the entire period the weighted average number of shares excluding
those held by the Employee Share Ownership Plan for the settlement of
employee share awards was 1,741 million.
Cash Flow and Financial Position
Cash generated from continuing operations was GBP131 million higher at
GBP348 million (2011: GBP217 million) as a result of EBITDA growth and
improved working capital.
Capital expenditure increased by GBP24 million to GBP125 million (2011:
GBP101 million). The majority of the increase relates to investment in
our broadband network as we unbundled a particularly high number of
exchanges this quarter than in the comparative period. Capex for this
financial year is expected to be slightly weighted towards the first
half as we achieve the majority of our planned exchange unbundling and
complete the final stages of the technical fit-out of Sky Studios.
Adjusted free cash flow was GBP96 million, an improvement of 39% on the
prior year.
Exceptional Items
Reported operating profit of GBP327 million included the receipt of a
GBP39 million break fee from News Corporation and GBP7 million of costs
for related advisory fees.
Reported profit after tax of GBP225 million also included an exceptional
gain of GBP1 million relating to the re-measurement of derivative
financial instruments not qualifying for hedge accounting (2011: GBP5
million gain) and a GBP10 million charge relating to the tax effect on
exceptional items.
Corporate
ECJ Decision
On 4 October, the European Court of Justice handed down its judgment in
actions brought by the Premier League ('PL'), amongst others, against
pubs using foreign decoder cards and boxes to view live PL football.
The court determined that restrictions in agreements between the PL and
one of its licensee broadcasters, which obliged that broadcaster not to
supply decoding devices to persons outside the licensed territory, are
contrary to EU law. The court found that, although the PL did not have
copyright in the live coverage of its football matches, the PL title
sequences, logo, anthem and graphical elements did attract protection
under the Copyright Directive. The High Court will now need to apply
the ECJ's judgment to the facts of the cases before it.
AGM and Board
Our Annual General Meeting is scheduled for 29 November 2011. The
formal notice of meeting will be sent to shareholders in the week
commencing 24 October.
As previously communicated the Board has put in place an orderly
programme for replacing members of the Board of Directors as they
retire. It is the intention that Allan Leighton and David Evans retire
at this year's AGM. All Directors will stand annually for re-election
at the AGM in line with best practice.
Andrew Higginson has been appointed as a member of the Corporate
Governance & Nominations Committee.
The Board will also seek the necessary approvals to return GBP750
million of capital to shareholders via a share buy-back programme,
currently expected to commence immediately following shareholder
approval.
Enquiries:
Analysts/Investors:
Francesca Pierce Tel: 020 7032 3337
Lang Messer Tel: 020 7032 2657
E-mail: investor-relations@bskyb.com
Press:
Robert Fraser Tel: 020 7705 3000
Stephen Gaynor 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 Yasmin Charabati or Alastair Elwen on +44 20 7251 3801 or at
bskyb@RLMFinsbury.com. In addition, the live conference calls and
supporting materials 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.
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
tothe Group'sfinancial condition, results of operations and business,
and management's strategy, plans and objectives for the Group. These
statements include, without limitation, those that express forecasts,
expectations and projections with respect to the potential for growth
of free-to-air and pay-TV, fixed line telephony, broadband and
bandwidth requirements, advertising growth, DTH subscriber growth,
Multiroom, Sky+, Sky+HD and other services penetration, churn, DTH and
other revenue, ARPU, profitability and margin growth, cash flow
generation, programming costs, subscriber management and supply chain
costs, administration and other costs, marketing expenditure, capital
expenditure programmes, liquidity and proposals for returning capital
to shareholders.
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. Information on the significant risks and
uncertainties are described in the "Principal risks and uncertainties"
section of Sky's Annual Report for the full year ended 30 June 2010 (as
updated in Sky's results for the six months ended 31 December 2010).
Copies of the Annual Report and 31 December 2010 results are available
from the British Sky Broadcasting Group plc web page at www.sky.com/
corporate.
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.
Click on, or paste the following link into your web browser, to view
the associated PDF document that includes the tables Schedule 1 - KPI
Summary and Schedule 2 - Restated ARPU.
http://www.rns-pdf.londonstockexchange.com/rns/4257Q_-2011-10-18.pdf
This information is provided by RNS
The company news service from the London Stock Exchange
END
Contacts: RNS Customer Services 0044-207797-4400 Email Contact
http://www.rns.com
British Sky (NYSE:BSY)
Historical Stock Chart
From Jun 2024 to Jul 2024
British Sky (NYSE:BSY)
Historical Stock Chart
From Jul 2023 to Jul 2024
