FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
For the month of February 2008
6 February 2008
BRITISH SKY BROADCASTING GROUP PLC
(Name of Registrant)
Grant Way, Isleworth, Middlesex, TW7 5QD England
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F
Form 20-F X Form 40-F
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
Yes No X
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): Not Applicable
EXHIBIT INDEX
Exhibit
EXHIBIT NO. 1 Press release of British Sky Broadcasting Group plc
announcing Interim Results released on 6 February 2008
BRITISH SKY BROADCASTING GROUP PLC
Results for the half year ended 31 December 2007
High Quality Growth
Operational Performance: Record product sales, increased loyalty
* Net customer growth in the quarter of 167,000 to 8.832 million
- New customer additions of 385,000
- Churn reduced to 10.0%
- Record ARPU of GBP421
* Record total product sales of over 1.6 million, up 28% from the previous
quarter
- Record Sky+ growth of 434,000 to 3.131 million, up 16%
- HD growth of 64,000 to 422,000, up 18%
- Multiroom growth of 120,000 to 1.531 million, up 9%
- Sky Broadband growth of 260,000 to 1.199 million, up 28%
- Record Sky Talk growth of 236,000 to 915,000, up 35%
Financial Performance: Strong top-line growth for the half year
* Group revenue increased by 11% on the comparable period(1) to
GBP2,458 million
* Gross margin increased by two percentage points on the comparable period to
65%(2) (excluding exceptional item)
* Operating profit of GBP295 million included GBP91 million of
investment in Sky Broadband and Sky Talk, GBP12 million
investment in Easynet Enterprise and an exceptional charge of
GBP12 million(3)
* Adjusted operating profit of GBP307 million(3) (excluding exceptional item)
reflected strong operating metrics
* Basic loss per share of 6.4 pence includes net exceptional items of
GBP282 million(4); adjusted earnings per share of 9.7
pence (2007: 11.3 pence)
* Interim dividend increased by 8% to 7.1 pence per share
(1) Six months ended 31 December 2006
(2) Gross margin in the six months to 31 December 2006 excludes an exceptional
receipt of GBP65 million from a third party channel provider, accounted for
within programming costs
(3) Adjusted operating profit for the six months to 31 December 2007, excludes
an exceptional non operating item of GBP12 million relating to EDS legal costs
(4) Net exceptional items include GBP12 million relating to EDS legal costs, an
impairment of GBP343 million relating to the Group's investment in ITV, a GBP67
million gain relating to an exchange transaction for National Geographic, GBP4
million relating to mark-to-market in derivative financial instruments that do
not qualify for hedge accounting and related tax adjustments of GBP2 million
Jeremy Darroch, Chief Executive said:
"We have made good progress during the quarter. Our focus on value and quality
has delivered a strong level of new customer additions, a 35% year on year
increase in product sales, record ARPU, and lower churn. Our business continues
to strengthen."
"We enter calendar year 2008 in good shape. A combination of outstanding choice,
quality and value leadership leaves us well positioned. An 8% increase in our
interim dividend reflects our confidence."
Enquiries:
Analysts/Investors:
Robert Kingston Tel: 020 7705 3726
Francesca Pierce Tel: 020 7705 3337
E-mail: investor-relations@bskyb.com
Press:
Matthew Anderson Tel: 020 7705 3267
Robert Fraser Tel: 020 7705 3036
E-mail: corporate.communications@bskyb.com
There will be a presentation to analysts and investors at 09:30 a.m. (GMT) today
at The Commonwealth Club, 25, Northumberland Avenue, London, WC2N 5AP. A live
webcast of this presentation will be available today on Sky's corporate website,
which can be found at www.sky.com/corporate.
A conference call for US analysts and investors will be held at 10:00 a.m. (EST)
today. Details of this call have been sent to North American institutions and
can be obtained from Dana Johnston at Taylor Rafferty on +1 212 889 4350. A live
webcast of this call will be available today on Sky's corporate website, which
can be found at www.sky.com/corporate.
An interview with Jeremy Darroch, CEO in audio / video and transcript will be
available from 7:00 a.m. GMT today at www.sky.com/corporate and www.cantos.com.
Results highlights
All financial results have been prepared in accordance with International
Financial Reporting Standards ("IFRS"), including comparatives.
Customer Metrics
'000s 31-Dec-07 30-Sep-07 Net additions
--------------------------------------- ------------------- ----------------------- -----------------------
Total customers(1)(2)(3) 8,832 8,665 167
Additional products:
Sky+(4) 3,131 2,697 434
Multiroom(5) 1,531 1,411 120
HD 422 358 64
Broadband 1,199 939 260
Telephony 915 679 236
Other KPIs:
Churn for the quarter (annualised) 10.0% 11.3% n/a
ARPU GBP421 GBP411 n/a
======================================= =================== ======================= =======================
(1) Includes DTH customers in Republic of Ireland. (535,000 as at 31 December
2007; 513,000 as at 30 September 2007.)
(2) DTH customers include only primary subscriptions to Sky (no additional Sky+
or Multiroom subscriptions are counted). This does not include Freesat customers
who do not subscribe to an additional Sky service or churned customers viewing
free-to-air channels
(3) DTH customers include customers taking Sky packages via DSL through Tiscali
TV
(4) Sky+ includes HD households
(5) Multiroom includes households subscribing to more than one digibox. (No
additional units are counted for the second or any subsequent Multiroom
subscriptions within one household.)
Financial Summary (unaudited)
GBP'millions 6 months to Dec-07 6 months to Dec-06 % movement
----------------------------------- ----------------------- ----------------------- -----------------------
Income statement:
Revenue(6) 2,458 2,220 +11%
Gross profit 1,600 1,472 +9%
% Margin 65% 66% -
Operating profit(7) 295 395 -25%
% Margin 12% 18% -6%
Exceptional operating items((8)) (12) 59 -
Adjusted operating profit 307 336 -9%
Impairment of available-for- (343) - -
sale investment
(Loss) profit for the period (112) 246 -
Cash flow information:
EBITDA 415 486 -15%
Cash generated from operations 429 365 +18%
Net debt((9)) (1,973) (1,940) +2%
=================================== ======================= ======================= =======================
Per share information (pence): 6 months to Dec-07 6 months to Dec-06 % movement
----------------------------------- ----------------------- ----------------------- -----------------------
Loss per share - basic (6.4) 14.0 -
EPS - adjusted(10) 9.7 11.3 -14%
=================================== ======================= ======================= =======================
(6) Revenue for the six months to 31 December 2007 ("the half"), includes GBP107
million from Sky Broadband and Sky Talk and GBP84 million from Easynet
Enterprise
(7) Operating profit for the half includes net operating losses of GBP91 million
from Sky Broadband and Sky Talk and GBP12 million from Easynet Enterprise and a
GBP12 million exceptional charge
(8) Exceptional operating items include amounts relating to EDS legal costs in
both 2008 and 2007 and a one-off gain of GBP65 million from a third party
channel provider in 2007
(9) Cash, cash-equivalents, short-term deposits, net of borrowings and
borrowings related financial instruments
(10) Adjusted EPS for the half excludes GBP12 million litigation fees relating
to EDS, an impairment of GBP343 million relating to the Group's investment in
ITV, a GBP67 million gain relating to an exchange transaction for National
Geographic, GBP4 million relating to mark-to-market of derivative financial
instruments that do not qualify for hedge accounting and related tax adjustments
of GBP2 million
OVERVIEW
Our transformation into a multi-product business continues apace. Despite a
challenging backdrop, we continued to grow from strength to strength in line
with our targets, assisted by the increased breadth of our product offering.
Total product sales increased strongly year on year and we have maintained the
rapid growth of our broadband and telephony businesses. Our focus on customer
quality continues, and our decision to reduce the level of viewing package
discounts in acquisition and retention led to a three-fold increase year on year
in new customers paying a full price subscription, as well as improved customer
loyalty. This initiative, together with an increase in TV pricing and growing
new product penetration, delivered record ARPU and the lowest level of churn for
three years.
Key operational highlights for the three months to 31 December 2007 ("the
quarter") were:
o Net new customer growth of 167,000
o Gross additions of 385,000 with churn at a three-year low of 10.0%
o Record ARPU at GBP421, year on year growth of 7%
o Product sales in the quarter of 1.6 million, year on year growth of 35%
o Record Sky+ growth of 434,000, with 3.1 million households or 35% of our
customer base taking the product
o An additional 260,000 broadband and 236,000 talk customers, establishing
Sky as the fastest growing broadband and telephony provider
o 47% of customers now take an additional product, up from around 30% in the
prior year.
As previously announced, and in accordance with IAS 39 "Financial Instruments:
Recognition and Measurement" ("IAS 39"), the results reflect an impairment
charge of GBP343 million relating to the Group's investment in ITV. The
impairment charge has been treated as an exceptional item and was determined
with reference to ITV's equity share price at the 28 December 2007.
Our financial performance for the six months to 31 December 2007 saw reported
operating profit reduce to GBP295 million reflecting investment in future growth
and the impact of the new Barclays Premier League contract, loss of carriage
fees and related advertising revenue as a result of the non-carriage of our
basic channels on cable. Revenue increased by 11% to GBP2,458 million with good
growth in customers and ARPU. Operating profit of GBP295 million was stated
after GBP103 million of investment in Sky Broadband, Sky Talk and Easynet
Enterprise, as well as exceptional legal costs of GBP12 million. Excluding these
items, operating profit was GBP410 million. Customer demand for Sky+ remained
strong, which will generate important future benefits including increased
customer loyalty. While strong Sky+ growth incurs a short term cost, this was
partially offset by supply chain efficiencies arising as a result of the Amstrad
acquisition.
OUTLOOK
Looking forward to the second half of the financial year, we are well positioned
to grow. We are confident in the quality and value of our products at all levels
and continue to focus on delivering high quality customer growth in line with
our 2010 goal, whilst increasing the number of products and services our
existing customers choose.
Financially, we anticipate that the operating profit performance for the full
year will be in line with our expectations. Looking to 2009, we expect that the
peak of investment in broadband will be behind us; baseline profit will already
include both higher sports costs for the new Barclays Premier League contract,
which is fixed for a further two years, and lower revenue from any continuation
of non-carriage of our basic channels on cable.
OPERATIONAL REVIEW
New DTH customer additions were 385,000 for the quarter. In contrast to the
second quarter of 2007, these sales were achieved with a significant reduction
in the use of short-term viewing package discounts and included a standard
installation fee across all products. We continued to focus on full priced
viewing package sales using the genuine quality and value leadership of our
products to drive growth. This approach is creating a strong and sustainable
business for the long-term.
Total product sales continue to grow strongly, increasing by 28% on the previous
quarter to around 1.6 million. During the quarter, 19% of HD additions, 40% of
Sky+ additions, and 44% of broadband additions were new Sky customers,
reflecting the highest ever uptake of Sky+ and broadband amongst new customers.
DTH churn for the quarter (annualised) reached 10.0%, its lowest level for three
years, representing a 1.3 percentage point reduction from the previous quarter.
This was driven by the reduction in viewing package discounts and our focus on
high quality customer acquisitions, as well as growth in additional product
penetration and continual improvements to the customer experience.
ARPU increased by 7% year on year and 2% quarter on quarter to a record GBP421.
This reflects a full quarter's benefit of the 2007 price increase, contribution
from increased penetration of additional products and the benefit from the
phasing out of viewing package discounts in customer acquisition and retention.
Sky+ households exceeded three million with a record 434,000 net additions in
the quarter to reach 35% penetration of the base, up four percentage points on
the previous quarter. Multiroom households grew by 120,000 in the quarter, now
17% of the base; and Sky HD also showed good growth, increasing by 18% to
422,000, 5% of the base. Recognition for Sky HD was received during the quarter
at the Royal Television Society Innovation Awards 2007. Sky obtained the
'Raising The Bar Award' for introducing a technology which set a new 'gold
standard' of expectations.
Sky Broadband, the UK's fastest growing broadband provider, added a further
260,000 subscribers during the quarter to reach 1.2 million customers, with
around two-thirds of on-net customers choosing a paid-for product. At the end of
the quarter the Group also had an additional 29,000 business and professional
broadband customers registered to its UK Online branded service. During the
quarter, Sky Broadband received recognition for its service at the uSwitch
"Broadband Satisfaction Awards", being voted winner in the following categories:
"Supplier most likely to be recommended", "Best value for Money" and "Ensuring
Customers are on the best deal". In addition, the JD Power "2007 UK Broadband
Internet Service Provider Satisfaction Study" quoted Sky as one of the industry
leaders in terms of overall satisfaction, performing significantly above
industry average in terms of value and choice. Notably, Sky ranked as the number
one choice for customers interested in obtaining their telecoms services from
one provider.
Sky Talk had a record quarter of growth with net additions of 236,000, an
increase of 54% on the previous quarter's additions, with 97% of the closing
telephony base taking either the Freetime or Unlimited packages. As at 31
December 2007, 54% of broadband customers also took Sky Talk. Despite such rapid
growth, less than 10% of our total customer base now takes all three of TV,
broadband and telephony, providing a significant opportunity for future growth.
During the quarter we continued to build on our extensive content offering, with
the renewal of two key sports rights contracts. Live rights were secured to the
Rugby League for a three year period from 2009, providing Sky Sports viewers
with over 100 matches a year, including exclusive live coverage of Super League.
We also secured rights to the Football League competitions for three years from
August 2009, including at least 95 matches a season and continued live coverage
of The Coca Cola Championship and Carling Cup matches. Strong audience figures
were achieved during the quarter and exclusive Sky Box Office coverage of the
Hatton vs. Mayweather WBC Welterweight fight, attracted a record number of
pay-per-view buys for a sporting event.
Sky One also had a strong quarter, both through content acquisitions and our
commissioned programming. During the quarter, four out of the top ten rated
programmes on Sky One were internally commissioned, with "Noel's Christmas
Presents" achieving record audiences on our entertainment channels this
financial year.
Sky Anytime on PC and Sky.com were both re-launched during the quarter. The
enhanced Sky Anytime on PC service is the first online download service to offer
Sky Movies customers the latest films from all six major Hollywood studios. In
addition to a wide selection of films, sport, entertainment and pay-per-view
movies, the service also re-launched with content from additional third-party
channels such as National Geographic and The History Channel, as well as the
recently launched Sky Real Lives. Sky.com now showcases a variety of rich
content, allowing users to browse entertainment, news and sports in one place,
as well as offering a gateway into newly launched Sky websites such as Sky
Motoring and Sky Property.
Sky's first zero emission van began its trial in the quarter, complementing a
shift to bio-diesel in part of the van fleet, and a shift to hybrid cars for
team managers. Sky's autostandby technology that powers down Sky set top boxes
automatically is now in 3.8 million boxes, saving customers money and reducing
carbon emissions. Carbon savings from this change now nearly match the company's
operational footprint, prior to emissions offsetting.
External recognition of our environmental contribution increased this quarter,
with Sky receiving the "Community and Environmental Responsibility" award from
Management Today. In addition, the company secured a Green Fleet Hero Award,
plus a Green Award for Sustainable Business (presented by the United Nations
Environment Programme).
Sky continues to respond to its customers' recognition of the educational value
of broadband and television through the extension of our Sky Learning
proposition to bring learning to life for customers of all ages. Its services
include a new online search engine 'Sky Learning Explorer', as well as
relationships with leading educational providers such as the Open University.
Sky Learning's programme Sky Living for Sport also extended beyond schools this
quarter to launch a new partnership with the charity "V" to promote volunteering
amongst 16-24 year olds. Sky Learning has been endorsed as an important
supplement to traditional classroom tools by the Innovation Unit which is funded
by government.
FINANCIAL SUMMARY
Our financial performance for the six months to 31 December 2007 reflected
strong top-line growth, investment in high quality programming and strong demand
for additional products. Total revenue increased by 11% on the six months to 31
December 2006 ("the comparable period", "2007") to GBP2,458 million (2007:
GBP2,220 million) with reported operating profit of GBP295 million (2007: GBP395
million). Excluding exceptional legal costs of GBP12 million, adjusted operating
profit was GBP307 million (2007: GBP336 million excludes GBP65 million
exceptional gain from a third party channel provider and GBP6m relating to
exceptional litigation fees). Group operating margin was 12.0% on a reported
basis and 12.5% when adjusted for exceptional items. Pay TV operating margin,
adjusted for exceptional items, was 18.4% down from 19.8% in the comparable
period, due to the start of the new Premier League contract and the loss of
carriage fees and related advertising revenue from the non-carriage of our basic
channels on Virgin.
Revenue
Group revenue growth was strong, increasing by 11% on the comparable period to
GBP2,458 million (2007: GBP2,220 million). Group revenue included GBP107 million
from Sky Broadband and Sky Talk (2007: GBP22 million) and GBP84 million from
Easynet Enterprise (2007: GBP77 million).
Retail subscription revenue increased by 13% on the comparable period to
GBP1,853 million (2007: GBP1,638 million), the highest growth rate for four
years, reflecting a 5% increase in the average number of DTH customers and ARPU
growth of 7%. ARPU benefited from a combination of the removal of viewing
package discounts, the 2007 TV package price increase, a record pay per view
event and the increased penetration of additional TV products and broadband and
telephony.
Wholesale subscription revenue fell by GBP21 million to GBP88 million (2007:
GBP109 million), reflecting the non-carriage of our basic channels on cable, as
well as an overall reduction in cable TV premium subscribers.
Advertising revenue fell by GBP4 million to GBP167 million (2007: GBP171
million), reflecting the non-carriage of our basic channels on cable. Excluding
this impact, our advertising share for the six months to December 2007 was up
year on year by 0.3 percentage points to an average of 14.2%.
Sky Bet revenue was GBP24 million (2007: GBP20 million), an increase of 20% on
the comparable period, benefiting from the consolidation of 365 Media Group plc
and growth in internet sports betting and TV games. Revenue from betting is
accounted for on a net basis, representing the retained margin.
Installation, hardware and service (IHS) revenues increased by 24% to GBP148
million (2007: GBP119 million). Excluding Sky Broadband related revenue of GBP14
million, IHS revenues increased 15%, driven by strong product sales to new and
existing customers in addition to the introduction of a standard installation
fee across all products.
Other revenue of GBP178 million (2007: GBP163 million) increased by GBP15
million, and includes GBP14 million related to Sky Broadband and GBP82 million
to Easynet Enterprise. Excluding these, other revenue declined by GBP5 million
due to lower revenue from Sky Active and reduced sublicense revenue on sports
rights. Revenues from the first time consolidation of Amstrad were also reported
within other revenue.
Gross margin
Gross profit was GBP1,600 million or 65% as a percentage of sales (2007: 66%).
Excluding the one-off receipt of GBP65 million from a third party channel
provider in the comparable period, adjusted gross margin increased by two
percentage points.
Programming costs of GBP858 million increased by GBP110 million on the
comparable period (2007: GBP748 million). Excluding the one-off receipt of GBP65
million in the prior year, programming costs increased by 6% on the comparable
period (2007: GBP813 million) with 12% growth in sports rights being partially
offset by savings in news and third party channel costs. Sports costs of GBP466
million in the half year, increased by GBP51 million, reflecting the new Premier
League agreement for the seasons 2007/8 to 2009/10. The annual cost of these
rights is fixed over the three year period of the contract. Third party channels
costs, adjusted for the one-off receipt of GBP65 million in the prior year,
decreased by GBP8 million to GBP148 million. Benefits from recent renegotiations
of third party carriage agreements, more than offset payments to Setanta for
including their Premier League games in commercial subscriptions. Movie costs of
GBP143 million were flat on the comparable period with a foreign exchange
benefit offset by increased investment in our Sky Anytime and Sky Movies
portals. News and entertainment costs of GBP101 million were GBP2 million higher
than the comparable period, with continued investment in Sky One being partially
offset by savings at Sky News.
Other operating costs
Other operating costs, excluding programming costs, of GBP1,305 million (2007:
GBP1,077 million) increased by GBP228 million on the comparable period and
include Sky Broadband and Sky Talk operating costs of GBP195 million, Easynet
Enterprise of GBP96 million and an exceptional legal expense of GBP12 million.
Excluding these items, other operating costs increased by GBP114 million on the
comparable period to GBP1,002 million (2007: GBP888 million), reflecting strong
product growth.
The acquisition of Amstrad plc was declared unconditional on 5 September 2007.
Third party revenue from the acquisition is consolidated within "Other revenue"
with related costs recorded in subscriber management and administration. The net
financial benefit of bringing the manufacture of Sky's set-top boxes by Amstrad
in-house, is recorded within marketing costs.
Marketing costs increased by GBP30 million to GBP405 million (2007: GBP375
million). This reflects the upfront cost of strong Sky+ sales, higher year on
year above the line spend and the costs of servicing an overall larger
subscriber base, partially offset by lower subscriber additions overall.
Subscriber acquisition costs ("SAC") were level year on year at GBP246 with the
levy of a standard installation fee and supply chain efficiencies arising from
the acquisition of Amstrad, helping to offset the cost of strong Sky+ sales.
Marketing costs include GBP15 million relating to Sky Broadband and Sky Talk and
GBP3 million for Easynet Enterprise.
Subscriber management costs increased by GBP66 million to GBP379 million (2007:
GBP313 million). More than half of this increase was driven by a full six months
of Sky Broadband and Sky Talk investment, as well as the first time
consolidation of Amstrad. The remaining increase was due to the cost of higher
year on year product sales, which has a corresponding benefit to installation
and hardware revenues. Subscriber management costs include GBP56 million
relating to Sky Broadband and Sky Talk and GBP10 million for Easynet Enterprise.
The remaining other operating expenses totalled GBP521 million (2007: GBP389
million), up by GBP132 million on the comparable period and including GBP124
million of Sky Broadband costs and GBP83 million of Easynet Enterprise expenses.
Excluding these items, underlying other operating costs increased by GBP49
million to GBP314 million (2007: GBP265 million), reflecting the consolidation
of new businesses such as Amstrad and 365 Media Group and higher depreciation
from our recent investment in infrastructure and systems. Administration costs
also included GBP12 million exceptional legal charges relating to ongoing
litigation against EDS.
Exceptional items
In accordance with IAS 39 "Financial Instruments: Recognition and Measurement"
("IAS 39"), following a review of the carrying value of the Group's investment
in ITV plc at 28 December 2007, we have recognised an impairment loss of GBP343
million. This was determined with reference to ITV's equity share price at the
28 December 2007 (the last trading day of the Group's reporting period).
Sky entered into an arrangement with Fox Entertainment Group for the effective
exchange of a 50% share in the National Geographic Partnership UK for 21%
interests in National Geographic Channel (NGC) Network International, LLC, and
NGC Network Latin America, LLC, which effectively operate the National
Geographic Channel's television operations outside of the US. This transaction
resulted in a gain of GBP67 million, recorded as a gain on disposal of joint
ventures.
The Group reported an exceptional charge of GBP12 million within administration
expenses (2007: GBP6 million) relating to costs from the Group's claim against
EDS, which provided services to the Group as part of the Group's investment in
CRM systems software and infrastructure. Litigation is now in the court hearing
stage and we currently expect to incur exceptional costs of around GBP18 million
in total for the 2008 financial year in respect of this claim.
Earnings
After the Group's share of operating profits from joint ventures of GBP8 million
(2007: GBP6 million), the gain on disposal of a joint venture of GBP67 million,
a net interest charge of GBP63 million (2007: GBP45 million) and an impairment
charge of GBP343 million relating to the Group's investment in ITV, the Group
made a loss before tax in the period of GBP36 million (2007: profit of GBP356
million).
Including a tax charge of GBP76 million, the Group's loss after tax for the
period was GBP112 million (2007: profit of GBP246 million), generating a basic
loss per share of 6.4 pence (2007 earnings per share: 14.0 pence). Excluding all
exceptional items, profit after tax for the period was GBP170 million (2007:
GBP199 million), generating adjusted earnings per share of 9.7 pence (2007: 11.3
pence). The issued share capital at the start and end of the period was 1,753
million.
Cash flow
EBITDA for the period was GBP415 million (2007: GBP486 million). Including a
working capital inflow of GBP14 million (2007: GBP121 million outflow), the
Group generated cash from operations of GBP429 million (2007: GBP365 million).
Working capital in the comparable period was impacted by the receipt of an
exceptional third party settlement.
Free cashflow increased by 21% on the comparable period and included net
interest payments of GBP64 million, (2007: GBP60 million) tax payments of GBP80
million (2007: GBP39 million) and capital expenditure of GBP153 million (2007:
GBP158 million). Capital expenditure included GBP55 million of broadband and
Easynet Enterprise related spend. After net acquisition spend of GBP71 million
mainly relating to the purchase of Amstrad plc, dividends paid to shareholders
of GBP156 million and other sundry items, net debt as at 31 December 2007 was
GBP1,973 million.
CORPORATE
The Directors are declaring an interim dividend of 7.1 pence per Ordinary Share,
an increase of 8% on the comparable period, reflecting the Group's strong cash
generation and confidence in the future prospects of the business. The
ex-dividend date will be 26 March 2008 and the dividend will be paid on 18 April
2008 to shareholders of record on 28 March 2008.
During the quarter, the Group announced changes to the Board of Directors which
saw Rupert Murdoch stepping down from his role as Chairman and as a Director of
the Company. He is succeeded by James Murdoch, who was appointed to Sky's Board
as Non-Executive Director in February 2003 and was Chief Executive Officer from
November 2003 until December 2007. This followed a consultation with major
shareholders. The Board appointed Jeremy Darroch, previously Sky's Chief
Financial Officer, as Chief Executive Officer.
We would like to extend our thanks and appreciation to Rupert Murdoch who became
Director of the Company in 1990 and has served as Chairman since 1999. The board
would like to pay tribute to his unique contribution. During the course of his
involvement, Sky has grown from a start-up to Europe's most valuable pay TV
company, reaching one in three households in the UK and Ireland, and more
recently has expanded into the broader communications industry.
On 5 February 2008, Nicholas Ferguson, Senior Independent Non-Executive
Director, was appointed as an additional member of the company's Corporate
Governance and Nominations Committee.
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 of the
related IFRS measures.
Forward-looking statements
This document contains certain forward-looking statements within the meaning of
the United States Private Securities Litigation Reform Act of 1995 with respect
to the Group's financial 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+ and other services penetration, churn,
DTH and other revenue, profitability and margin growth, cash flow generation,
programming costs, subscriber management costs, administration costs and other
costs, marketing expenditure, capital expenditure programmes and proposals for
returning capital to shareholders.
These statements (and all other forward-looking statements contained in this
document) are not guarantees of future performance and are subject to risks,
uncertainties and other factors, some of which are beyond the Group's control,
are difficult to predict and could cause actual results to differ materially
from those expressed or implied or forecast in the forward-looking statements.
These factors include, but are not limited to, the fact that the Group operates
in a highly competitive environment, the effects of laws and government
regulation upon the Group's activities, its reliance on technology, which is
subject to risk, change and development, failure of key suppliers, its ability
to continue to obtain exclusive rights to movies, sports events and other
programming content, risks inherent in the implementation of large-scale capital
expenditure projects, the Group's ability to continue to communicate and market
its services effectively, and the risks associated with the Group's operation of
digital television transmission in the U.K. and Ireland.
Information on the significant risks and uncertainties are described in the
"Risk Factors" section of Sky's Interim Management Report for half year ended 31
December 2007. Copies of the Interim Management Report are available from the
British Sky Broadcasting 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.
Appendix 1 - TV Subscriber and Market Data
Second quarter as First quarter as at Second quarter as
at 31 December 2007 30 September 2007 at 31 December 2006
DTH homes1,2 (3) 8,832,000 8,665,000 8,441,000
Total TV homes in the U.K. and Ireland(4) 27,093,000 26,966,000 26,766,000
DTH homes as a percentage of 33% 32% 32%
total U.K. and Ireland TV homes
Cable - U.K. 3,528,000 3,428,000 3,397,000
Cable - Ireland 601,000 592,000 605,000
Total pay TV homes 12,961,000 12,685,000 12,443,000
Total pay TV homes as a percentage of total U.K. 48% 47% 46%
and Ireland TV homes
Sky+ homes(5) 3,131,000 2,697,000 1,968,000
Multiroom homes(6) 1,531,000 1,411,000 1,226,000
HD homes 422,000 358,000 184,000
DTT (freeview only) - U.K.(7) 9,332,000 9,139,000 7,703,000
(1) Includes DTH customers in Republic of Ireland of 535,000 as at 31 December
2007
(2) DTH customers includes only primary subscriptions to Sky (no additional Sky+
or Multiroom subscriptions are counted). This does not include Freesat customers
who do not subscribe to an additional Sky service or churned customers viewing
free-to-air channels
(3) DTH homes include subscribers taking Sky packages via DSL through Tiscali TV
(4) Total U.K. homes estimated by BARB and taken from the beginning of the month
following the period end (latest figures as at 31 December 2007). Total Ireland
homes estimated by Ireland's Central Statistics Office
(5) Sky+ homes includes HD households
(6) Multiroom includes households subscribing to more than one digibox. (No
additional units are counted for the second or any subsequent Multiroom
subscriptions)
(7) DTT homes (Freeview only) estimated by OFCOM and taken from the end of the
previous quarter (latest figures as at 30 September 2007) except for prior year
comparative which is actual at 31 December 2006. Prior year figures have been
restated (previously sourced from BARB) and relate to unique TV households
Appendix 2 - Glossary
------------------------------------------- ------------------------------------------------------------
Useful definitions Description
------------------------------------------- ------------------------------------------------------------
Adjusted earnings per share Adjusted profit divided by the weighted average number of
ordinary shares during the year.
------------------------------------------- ------------------------------------------------------------
Adjusted operating profit Operating profit before taking account of exceptional
items.
------------------------------------------- ------------------------------------------------------------
Adjusted profit for the period Profit for the period adjusted to remove mark-to-market
movements in derivative financial instruments that do not
qualify for hedge accounting and exceptional items.
------------------------------------------- ------------------------------------------------------------
ARPU Average Revenue Per User: the amount spent by the Group's
residential subscribers in the quarter, divided by the
average number of residential subscribers in the quarter,
annualised.
------------------------------------------- ------------------------------------------------------------
Churn The number of DTH subscribers over a given period that
terminate their subscription in its entirety, net of
former subscribers who reinstate their subscription in
that period (where such reinstatement is within a twelve
month period of the termination of their original
subscription), expressed as a percentage of total
subscribers.
------------------------------------------- ------------------------------------------------------------
Customer A subscriber to a DTH service.
------------------------------------------- ------------------------------------------------------------
DTH Direct-to-home: the transmission of satellite services
with a reception through a mini-dish.
------------------------------------------- ------------------------------------------------------------
EBITDA Earnings before interest, taxation, depreciation and
amortisation is calculated as operating profit before
depreciation and amortisation or impairment of goodwill
and intangible assets.
------------------------------------------- ------------------------------------------------------------
Free cash flow The amount of cash generated by Sky after meeting
obligations for interest and tax, and after all capital
investment and net cash flows relating to our joint
ventures and associates.
------------------------------------------- ------------------------------------------------------------
Gross margin Revenue less programming expenses as a proportion of
revenue.
------------------------------------------- ------------------------------------------------------------
Gross profit Revenue less programming expense.
------------------------------------------- ------------------------------------------------------------
HD High Definition.
------------------------------------------- ------------------------------------------------------------
Multiroom Installation of one or more additional set-top-boxes in
the household of an existing DTH customer.
------------------------------------------- ------------------------------------------------------------
Net debt Cash, cash-equivalents, short-term deposits, net of
borrowings and borrowings related derivative financial
instruments.
------------------------------------------- ------------------------------------------------------------
On-net Customers subscribing to our unbundled broadband product.
------------------------------------------- ------------------------------------------------------------
Product Any service chosen by a Sky customer. These include DTH,
Sky+, Multiroom, Sky HD, Sky Broadband and Sky Talk.
------------------------------------------- ------------------------------------------------------------
Sky Broadband and Talk Sky Broadband, Sky Talk and UK Online combined.
------------------------------------------- ------------------------------------------------------------
Sale A sale is a gross addition of any product.
------------------------------------------- ------------------------------------------------------------
Sky+ Sky's fully-integrated Personal Video Recorder (PVR) and
satellite decoder.
------------------------------------------- ------------------------------------------------------------
Underlying Excluding contribution from Sky Broadband and Talk,
Easynet Enterprise and exceptional items.
------------------------------------------- ------------------------------------------------------------
Viewing share Number of people viewing a channel as a percentage of
total viewing audience.
------------------------------------------- ------------------------------------------------------------
Appendix 3 - Consolidated condensed financial information
Consolidated Income Statement for the half year ended 31 December 2007
---------------------------------------------------------------------------------------------------------
2007/08 2006/07 2006/07
Half year Half year Full year
Notes GBP million GBP million GBP million
---------------------------------------------------------------------------------------------------------
Revenue 2 2,458 2,220 4,551
Operating expense 3 (2,163) (1,825) (3,736)
Operating profit 295 395 815
---------------------------------------------------------------------------------------------------------
Share of results of joint ventures and associates 8 6 12
Investment income 19 24 46
Finance costs (82) (69) (149)
Profit on disposal of joint venture 4 67 - -
Impairment of available-for-sale investment 5 (343) - -
(Loss) profit before tax (36) 356 724
---------------------------------------------------------------------------------------------------------
Taxation (76) (110) (225)
(Loss) profit for the period (112) 246 499
---------------------------------------------------------------------------------------------------------
(Loss) earnings per share from (loss) profit for
the period (in pence)
Basic 6 (6.4p) 14.0p 28.4p
Diluted 6 (6.4p) 14.0p 28.2p
-------------------------------------------------------------------------------------------------------
| Adjusted earnings per share from adjusted profit |
| for the period (in pence) |
| Basic 6 9.7p 11.3p 26.3p |
| Diluted 6 9.7p 11.3p 26.1p |
-------------------------------------------------------------------------------------------------------
Consolidated Statement of Recognised Income and Expense for the half year ended
31 December 2007
---------------------------------------------------------------------------------------------------------
2007/08 2006/07 2006/07
Half year Half year Full year
GBP million GBP million GBP million
---------------------------------------------------------------------------------------------------------
(Loss) profit for the period (112) 246 499
---------------------------------------------------------------------------------------------------------
Net movement reported directly in equity
Cash flow hedges 9 21 39
Tax on cash flow hedges (3) (6) (12)
Loss on available-for-sale investments (192) (207) (151)
Transfer to profit on impairment of
available-for-sale investment 343 - -
157 (192) (124)
Total recognised income and expense for the period 45 54 375
---------------------------------------------------------------------------------------------------------
Consolidated Income Statement for the three months ended 31 December 2007
-------------------------------------------------------------------------------------------------------------------
2007/08 2006/07
Three months
Three months ended 31
ended 31 December December
GBP million GBP million
-------------------------------------------------------------------------------------------------------------------
Revenue 1,273 1,149
Operating expense (1,121) (934)
------------------------------------------------------------------------------------------------------------------
|EBITDA 214 262|
|Depreciation and amortisation (62) (47)|
------------------------------------------------------------------------------------------------------------------
Operating profit 152 215
-------------------------------------------------------------------------------------------------------------------
Share of results from joint ventures and associates 5 4
Investment income 4 10
Finance costs (42) (39)
Profit on disposal of joint venture 67 -
Impairment of available-for-sale investment (343) -
(Loss) profit before tax (157) 190
-------------------------------------------------------------------------------------------------------------------
Taxation (39) (60)
(Loss) profit for the quarter (196) 130
-------------------------------------------------------------------------------------------------------------------
Earnings per share from (loss) profit for the
quarter (in pence)
Basic and diluted (11.2) 7.4
Adjusted basic and diluted 4.7 5.0
-------------------------------------------------------------------------------------------------------------------
The consolidated income statement for the three months ended 31 December 2007 is
not extracted from the Group's Interim Management Report for the period ended 31
December 2007.
Consolidated Balance Sheet as at 31 December 2007
-------------------------------------------------------------------------------------------------------------------
31 December 31 December 30 June
2007 2006 2007
Notes GBP million GBP million GBP million
-------------------------------------------------------------------------------------------------------------------
Non-current assets
Goodwill 845 659 741
Intangible assets 283 209 261
Property, plant and equipment 682 593 670
Investments in joint ventures and associates 106 31 34
Available-for-sale-investments 611 771 797
Deferred tax assets 47 79 54
Trade and other receivables 36 - -
Derivative financial assets 8 - -
2,618 2,342 2,557
-------------------------------------------------------------------------------------------------------------------
Current assets
Inventories 664 609 384
Trade and other receivables 570 568 524
Short-term deposits 1 202 15
Cash and cash equivalents 389 402 435
Derivative financial assets 5 6 5
1,629 1,787 1,363
-------------------------------------------------------------------------------------------------------------------
Total assets 4,247 4,129 3,920
-------------------------------------------------------------------------------------------------------------------
Current liabilities
Borrowings 98 548 16
Trade and other payables 1,627 1,469 1,295
Current tax liabilities 138 140 144
Provisions 10 4 8
Derivative financial liabilities 21 36 36
1,894 2,197 1,499
-------------------------------------------------------------------------------------------------------------------
Non-current liabilities
Borrowings 2,038 1,751 2,014
Trade and other payables 96 63 84
Provisions 37 18 18
Derivative financial liabilities 240 245 258
2,411 2,077 2,374
-------------------------------------------------------------------------------------------------------------------
Total liabilities 4,305 4,274 3,873
-------------------------------------------------------------------------------------------------------------------
Shareholders' (deficit) equity 8 (58) (145) 47
-------------------------------------------------------------------------------------------------------------------
Total liabilities and shareholders' (deficit) 4,129
equity 4,247 3,920
-------------------------------------------------------------------------------------------------------------------
Consolidated Cash Flow Statement for the half year ended 31 December 2007
----------------------------------------------------------------------------------------------------------------------
2007/08 2006/07 2006/07
Half year Half year Full year
Notes GBP million GBP million GBP million
----------------------------------------------------------------------------------------------------------------------
Cash flows from operating activities
Cash generated from operations 9 429 365 1,007
Interest received 22 32 46
Taxation paid (80) (39) (128)
Net cash from operating activities 371 358 925
----------------------------------------------------------------------------------------------------------------------
Cash flows from investing activities
Dividends received from joint ventures and associates 5 4 9
Net funding to joint ventures and associates (2) - (3)
Purchase of property, plant and equipment (91) (131) (292)
Purchase of intangible assets (62) (27) (64)
Purchase of available-for-sale investments (7) (975) (947)
Purchase of subsidiaries (net of cash and cash
equivalents purchased) (71) (19) (104)
Decrease in short-term deposits 14 445 632
Net cash used in investing activities (214) (703) (769)
----------------------------------------------------------------------------------------------------------------------
Cash flows from financing activities
Proceeds from borrowings 54 550 295
Repayment of borrowings (8) (191) (192)
Proceeds from disposal of shares in Employee Share
Ownership Plan ("ESOP") 16 8 37
Purchase of own shares for ESOP (23) (13) (76)
Purchase of own shares for cancellation - (214) (214)
Interest paid (86) (92) (154)
Dividends paid to shareholders (156) (117) (233)
Net cash used in financing activities (203) (69) (537)
----------------------------------------------------------------------------------------------------------------------
Net decrease in cash and cash equivalents (46) (414) (381)
----------------------------------------------------------------------------------------------------------------------
Cash and cash equivalents at the beginning of the period 435 816 816
Cash and cash equivalents at the end of the period 389 402 435
----------------------------------------------------------------------------------------------------------------------
Notes to the consolidated interim financial statements
1 Basis of preparation
The financial information set out in this press release does not constitute
statutory financial statements for the half year ended 31 December 2007, for the
purpose of the Companies Act 1985, but is extracted from the condensed
consolidated interim financial statements prepared in accordance with IAS 34
'Interim Financial Reporting' ("IAS 34") as presented in the unaudited Interim
Management Report dated 31 December 2007. Copies of the Interim Management
Report are available from the British Sky Broadcasting web page at
www.sky.com/corporate. The financial information for the full year ended 30 June
2007 is extracted from the statutory financial statements for that year. A copy
of the statutory accounts has been delivered to the Registrar of Companies. The
Group's auditors have reported on those accounts; their reports were unqualified
and did not contain statements under s. 237(2) or (3) Companies Act 1985.
Whilst the financial information included in this press release has been
prepared in accordance with the recognition and measurement principles of
International Financial Reporting Standards ("IFRS"), this announcement does not
itself contain sufficient information to comply with IFRS.
The Group maintains a 52 or 53 week fiscal year ending on the Sunday nearest to
30 June in each year. In fiscal year 2008, this date will be 29 June 2008, this
being a 52 week year (fiscal year 2007: 1 July 2007, 52 week year). Similarly,
the condensed consolidated interim financial statements are based on the Sunday
nearest to 31 December in each year. In fiscal year 2008, this date was 30
December 2007 (fiscal year 2007: 31 December 2006) 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.
2 Revenue
-------------------------------------------------------------------------------------------------------------------
2007/08 2006/07 2006/07
Half year Half year Full year
GBP million GBP million GBP million
-------------------------------------------------------------------------------------------------------------------
Retail subscription 1,853 1,638 3,406
Wholesale subscription 88 109 208
Advertising 167 171 352
Sky Bet 24 20 47
Installation, hardware and service 148 119 212
Other 178 163 326
2,458 2,220 4,551
-------------------------------------------------------------------------------------------------------------------
3 Operating expense
-------------------------------------------------------------------------------------------------------------------
2007/08 2006/07 2006/07
Half year Half year Full year
GBP million GBP million GBP million
-------------------------------------------------------------------------------------------------------------------
Programming 858 748 1,539
Transmission and related functions 254 181 402
Marketing 405 375 734
Subscriber management 379 313 618
Administration 267 208 443
2,163 1,825 3,736
-------------------------------------------------------------------------------------------------------------------
Included within programming for the full year ended 30 June 2007 and half year
ended 31 December 2006 is a GBP65 million credit due to the Group arising from
certain contractual rights under one of the Group's channel distribution
agreements. This item was previously disclosed as a contingent asset in the
Group's June 2006 financial statements.
Included within administration for the half year ended 31 December 2007 is GBP12
million (2007: half year GBP6 million; full year GBP16 million) of expense
relating to legal costs incurred on the Group's ongoing claim against EDS (the
information and technology solutions provider (see note 10b)).
4 Profit on disposal of joint venture
On 12 December 2007, the Group sold its 100% stake in BSkyB Nature Limited, the
investment holding company for the Group's 50% interest in the NGC-UK
Partnership. As consideration for the disposal, the Group received 21% interests
in both NGC Network International LLC and NGC Network Latin America LLC (in
effect, 21% of National Geographic Channel's television operations outside of
the US). This realised a profit on disposal of GBP67 million.
5 Impairment of available-for-sale investment
The impairment of available-for-sale investment relates to the Group's
investment in ITV plc ("ITV"). As required by IAS 39, following a review of the
carrying value of the investment in ITV at 31 December 2007, the Group has
recognised an impairment loss of GBP343 million in the current period. The
impairment loss was determined with reference to ITV's closing equity share
price of GBP0.87 at 28 December 2007, the last trading day of the Group's fiscal
half year, and is attributable to the significant and prolonged decline in the
ITV equity share price.
In accordance with IAS 39, the effect of any further decline in the value of the
equity share price of ITV will be recognised in the income statement at the
relevant future balance sheet date. On 4 February 2008, the equity share price
of ITV was GBP0.79.
6 Earnings per share
--------------------------------------------------------------------------------------------------------------------
2007/08 2006/07 2006/07
Half year Half year Full year
Millions of Millions of Millions of
shares shares shares
--------------------------------------------------------------------------------------------------------------------
The weighted average number of shares for the
period was
Ordinary shares 1,753 1,765 1,759
ESOP trust ordinary shares (5) (3) (4)
Basic shares 1,748 1,762 1,755
--------------------------------------------------------------------------------------------------------------------
Dilutive ordinary shares from share options - 1 12
Diluted shares 1,748 1,763 1,767
--------------------------------------------------------------------------------------------------------------------
The calculation of diluted (loss) earnings per share excludes 22 million share
options (2007: half year 21 million; full year 17 million), which could
potentially dilute earnings per share in the future.
Basic and diluted (loss) earnings per share is calculated by dividing loss or
profit for the period into the weighted average number of shares for the period.
In order to provide a measure of underlying performance, management have 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 believe should be
separately identified to help explain underlying performance.
--------------------------------------------------------------------------------------------------------------------
2007/08 2006/07 2006/07
Half year Half year Full year
GBP million GBP million GBP million
Reconciliation from (loss) profit for the period to adjusted profit
for the period
(Loss) profit for the period (112) 246 499
Remeasurement of all derivative financial instruments (not qualifying
for hedge accounting) (4) (8) (6)
Amount receivable from channel distribution agreement (see note 3) - (65) (65)
Legal costs relating to claim against EDS (see note 3) 12 6 16
Profit on disposal of joint venture (67) - -
Impairment of available-for-sale investment 343 - -
Tax effect of above items (2) 20 17
Adjusted profit for the period 170 199 461
--------------------------------------------------------------------------------------------------------------------
7 Dividends
--------------------------------------------------------------------------------------------------------------------
2007/08 2006/07 2006/07
Half year Half year Full year
GBP million GBP million GBP million
--------------------------------------------------------------------------------------------------------------------
Dividends declared and paid during the period
2006 Final dividend paid: 6.70p per ordinary share - 117 117
2007 Interim dividend paid: 6.60p per ordinary share - - 116
2007 Final dividend paid: 8.90p per ordinary share 156 - -
156 117 233
--------------------------------------------------------------------------------------------------------------------
The 2008 interim dividend is 7.1p per ordinary share being GBP125 million. The
dividend was proposed after the balance sheet date and is therefore not
recognised as a liability as at 31 December 2007.
8 Reconciliation of movement in shareholders' (deficit) equity
--------------------------------------------------------------------------------------------------------------------
Share Share ESOP Hedging Available Other Retained Total
-for share
sale holders'
capital premium reserve reserve - reserve reserves earnings (deficit)
GBP GBP GBP GBP GBP GBP GBP equity
million million million million million million million GBP million
--------------------------------------------------------------------------------------------------------------------
At 1 July 2006 896 1,437 (25) (52) - 311 (2,446) 121
Purchase of own shares for
cancellation (20) - - - - 20 (214) (214)
Recognition and transfer of cash
flow hedges - - - 21 - - - 21
Tax on items taken directly to
equity - - - (6) - - (1) (7)
Revaluation of available-for
sale-investment - - - - (207) - - (207)
Share-based payment - - 1 - - - 11 12
Profit for the period - - - - - - 246 246
Dividends - - - - - - (117) (117)
At 31 December 2006 876 1,437 (24) (37) (207) 331 (2,521) (145)
--------------------------------------------------------------------------------------------------------------------
Recognition and transfer of cash - - - 18 - - - 18
flow hedges
Tax on items taken directly to -
equity - - - (6) - 6 -
Revaluation of available-for-sale
investment - - - - 56 - - 56
Share-based payment - - (30) - - - 11 (19)
Profit for the period - - - - - - 253 253
Dividends - - - - - - (116) (116)
At 30 June 2007 876 1,437 (54) (25) (151) 331 (2,367) 47
--------------------------------------------------------------------------------------------------------------------
Recognition and transfer of cash - - - 9 - - - 9
flow hedges
Tax on items taken directly to
equity - - - (3) - - (1) (4)
Revaluation of available-for-sale
investment - - - - (192) - - (192)
Impairment of available-for-sale
investment - - - - 343 - - 343
Share-based payment - - 25 - - - (18) 7
Loss for the period - - - - - - (112) (112)
Dividends - - - - - - (156) (156)
At 31 December 2007 876 1,437 (29) (19) - 331 (2,654) (58)
--------------------------------------------------------------------------------------------------------------------
9 Notes to the consolidated cash flow statement
Reconciliation of (loss) profit before taxation to cash generated from
operations
----------------------------------------------------------------------------------------------------------------
2007/08 2006/07 2006/07
Half year Half year Full year
GBP million GBP million GBP million
----------------------------------------------------------------------------------------------------------------
(Loss) profit before tax (36) 356 724
Depreciation of property, plant and equipment 77 58 120
Amortisation of intangible assets 43 33 72
Profit on disposal of joint venture (67) - -
Impairment of available-for-sale investments 343 - -
Net finance costs 63 45 103
Share of results of joint ventures and associates (8) (6) (12)
415 486 1,007
----------------------------------------------------------------------------------------------------------------
Increase in trade and other receivables (95) (118) (47)
Increase in inventories (264) (294) (59)
Increase in trade and other payables 366 289 101
Increase (decrease) in provisions 12 (3) 1
(Increase) decrease in derivative financial instruments (5) 5 4
Cash generated from operations 429 365 1,007
----------------------------------------------------------------------------------------------------------------
10 Other matters
a) Contingent liabilities
In April 2007, Virgin Media Communications Limited, Virgin Media Television
Limited and Virgin Media Limited issued proceedings in the High Court in England
and Wales against British Sky Broadcasting Group plc and British Sky
Broadcasting Limited, alleging that the Group has infringed Article 82 EC and
the Chapter II prohibition by pursuing an anticompetitive strategy designed to
weaken Virgin Media group, which allegedly entailed: (i) a constructive refusal
to supply the Group's basic pay television channels to Virgin Media group for
supply via Virgin Media group's cable network in the UK; (ii) a refusal to pay
fair prices for the right to carry Virgin Media group's television channels as
part of the Group's retail channel offering; and (iii) the Group's purchase of a
significant shareholding in ITV (which purchase was, it is alleged, designed
principally to damage Virgin Media group's ability to compete in the supply of
pay television services, by preventing Virgin Media group from obtaining access
to attractive programming content). Virgin Media group seeks from the Court a
declaration that the Group occupies a dominant market position in specified pay
TV retail and purchasing markets in the UK and that the Group has, by its
conduct as alleged, abused its dominant position(s) contrary to Article 82 EC
and the Chapter II prohibition on these relevant markets. Virgin Media group
also seeks mandatory injunctions requiring the Group to transact with Virgin
Media group on fair and/or non-discriminatory terms for the supply of the
Group's basic pay television channels to Virgin Media and for the licensing of
Virgin Media group's television channels, for on-supply to the Group's
subscribers. Virgin Media group also seeks damages to compensate it for its
alleged losses arising from the Group's alleged conduct.
The Group intends to defend the proceedings vigorously and submitted its defence
to the High Court on 2 July 2007 denying Virgin Media group's allegations that
it had infringed Article 82 EC or Chapter II prohibition. A start date for trial
has been provisionally set for February 2009. It is, at this stage, too early to
estimate the likely outcome of the proceedings.
b) Contingent assets
The Group has served a claim, which is currently being heard in the High Court
of Justice, for a material amount against EDS (an information and technology
solutions provider) which provided services to the Group as part of the Group's
investment in customer management systems software and infrastructure. The
amount which may be recovered by the Group will not be finally determined until
resolution of the claim.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRITISH SKY BROADCASTING GROUP PLC
Date: 6 February 2008 By: /s/ Dave Gormley
Dave Gormley
Company Secretary