FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
For the month of August 2004
4 August 2004
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 NO. 1 Press release of British Sky Broadcasting Group plc announcing
year end results released on 4 August 2004
4 August 2004
BRITISH SKY BROADCASTING GROUP PLC
Announcement of new long-term growth strategy
- Group sets new long-term operating targets:
-10 million direct-to-home ("DTH") subscribers in 2010
-Multiroom penetration of 30% of DTH subscribers in 2010
-Sky+ penetration of 25% of DTH subscribers in 2010
- Growth to be characterised by sustained and substantial profitability
throughout the period
- Programme of up to GBP450 million additional capital investment over the
next four years in infrastructure to support growth
- Financial strategy to include return of surplus capital to shareholders
in addition to ordinary dividends
- Details of new strategy to be presented at 9.00 a.m. this morning
Announcement of results for the year ended 30 June 2004
- 7.4 million DTH subscribers at 30 June 2004, up 81,000 in the quarter
- Total revenues increases by 15% to GBP3,656 million
- Operating profit before goodwill and exceptional items increases by 65%
to GBP600 million
- Profit after tax increases by 75% to GBP322 million
- Earnings per share before goodwill and exceptional items of 18.3 pence,
up 8.1 pence
- Proposed final dividend payment of 3.25 pence per share generating a
full year total dividend of 6.0 pence per share.
- Free cashflow of GBP676 million reduces net debt to GBP429 million
Commenting on the announcement, James Murdoch, Chief Executive said:
"This has been a year of good progress for BSkyB. We have reported the second
full year of positive earnings since the launch of Sky digital and strong cash
generation, confirming that the Group is in robust financial health with clear
momentum on which to build for the future. Today's announcement of new long-term
growth targets and a return of cash to shareholders demonstrates our confidence
in the exciting growth potential of this business and our ongoing commitment to
deliver value to shareholders. The framework that we are setting out today is
one that is designed not only to ensure sustained and substantial profitability
for the business, but also to position the Group to continue to be a dynamic
leader in the rapidly evolving UK digital television sector."
Enquiries:
Analysts/Investors:
Neil Chugani Tel: 020 7705 3837
Andrew Griffith Tel: 020 7705 3118
E-mail: investor-relations@bskyb.com
Press:
Julian Eccles Tel: 020 7705 3267
Robert Fraser Tel: 020 7705 3036
E-mail: corporate.communications@bskyb.com
Finsbury:
Alice Macandrew Tel: 020 7251 3801
James Murdoch, Chief Executive of BSkyB, will be giving a detailed strategy
presentation and answering questions for analysts and investors at 09.00 a.m.
(BST) today at The Old Billingsgate Market, 16 Lower Thames Street, London, EC3R
6DX and to press at 11.30 a.m. at the same venue.
The strategy presentation will be webcast live and will be available at
www.sky.com/corporate
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 John Sutton at Taylor Rafferty on +1 212 889 4350.
PART I
STRATEGIC UPDATE
The Group has made significant progress towards the achievement of its existing
short-term operating and financial targets and has attained a position of robust
financial health. The Group now considers it appropriate to set out its strategy
for the next phase of its growth.
Accordingly, the Chief Executive, James Murdoch, will today set out the Group's
strategy to maximise value for shareholders by focusing on profitable subscriber
growth. Sky will today announce the following new long-term operating targets:
- 10 million DTH subscribers in 2010;
- Multiroom penetration of 30% of DTH subscribers in 2010; and
- Sky+ penetration of 25% of DTH subscribers in 2010.
In the interim, the Group remains on track to meet its 8 million DTH subscriber
target and its GBP400 ARPU target, both by December 2005.
The key themes of the presentation will be as follows:
The significant long-term potential for growth of pay television in the UK and
Ireland
At 30 June 2004, pay television penetration of households in the UK and Ireland
was 43%. The Group believes that, in the long-term, pay television penetration
will be around 80% of UK television households. This implies that, over time, a
further 10 million homes are expected to take pay television services. The Group
believes that this view is supported by evidence from other television markets,
particularly in the US; by demographic factors, including generational
differences in the take-up of pay television; and by current and prospective
technological advances and enhancements, such as the development of the Personal
Video Recorder ("PVR") and high definition television. Sky is well placed to
benefit from this growth.
The role and growth profile of free to air (FTA) digital reception
The Group believes that the development of digital television in the UK will be
characterised by two distinct trends operating over different timescales, before
reaching long-term equilibrium:
- The migration of FTA analogue homes to FTA digital reception equipment,
over the next six to eight years, based on current expectations as to the
timing of analogue terrestrial switch off ("Switch Off"); and
- The continuing long-term migration from FTA services to pay television,
expected to take another 15 years to reach equilibrium. The Group believes
that equilibrium represents maturity of the market when UK pay television
penetration will be around 80% of households.
Between now and Switch Off, the Group expects rapid take up of digital FTA
penetration as the replacement cycle for FTA analogue reception equipment is
stimulated by the prospect of Switch Off.
Throughout this period and irrespective of the date of Switch Off, the long-term
migration of FTA homes to pay television is expected to continue.
This means that after rapid growth in the next few years, digital FTA is likely
to peak before falling back to around 20% over time, with the balance migrating
to pay television.
Sky's clear strategies to stimulate consumer take up of pay television services
Given the size of the potential opportunity, Sky's focus will be on raising the
rate of subscriber growth by addressing the key barriers to consumer take-up.
The Group has several initiatives in place to address these barriers. These
include:
- Reintroducing the Sky Brand;
- Emphasizing the broad range of existing entry points to pay television
in terms of available packages;
- Improving segmentation of the addressable market by using a new
prospects database which will facilitate more targeted marketing;
- Continuing disciplined investment in "must-see" programming;
- Introducing a wider range of new products, such as enhanced versions of
Sky+ and a new high definition television service;
Sky believes that through innovative marketing initiatives, designed to address
misconceptions about its services identified through extensive consumer
research, most of the barriers to take up can be overcome with relatively few
changes to its existing product proposition. The Group intends to invest in
future growth by a sustained increase in its above-the-line marketing
expenditure, which will initially rise by between 40% and 50% in 2005.
Subscriber acquisition cost is expected to increase marginally in the short-term
and by around 10% in the medium-term.
The investment requirements of the business during this phase of growth and the
implications for the future development of the Group's profitability
The new growth strategies identified are designed to deliver improved subscriber
and turnover growth and to drive significant long-term value. As a result, the
Group intends to invest in the short-term to deliver this long-term growth.
Consequently, the Group expects a short-term compression in operating margin in
2006, but expects to generate significant operating margin growth from 2007
onwards, thus creating a highly profitable business with greater scale in the
longer-term.
In order to support its growth strategy, the Group announces the following
capital expenditure programmes:
- Customer Relationship Management - The Group intends to continue the
programme of work started in 2002, to maintain its first class customer
service which is fundamental to the future of the business.
- Property - The Group intends to invest in a property programme to
ensure that its Osterley campus is a flexible, efficient and
environmentally-friendly place to work, and fully scalable with the long-term
growth and expansion of the business.
- Advanced Technology Centre - The Group is currently building this
facility as the final part of its business continuity programme to mitigate
further any single points of failure in its Broadcast Network.
- Increased contact centre capacity and training facility - The Group has
identified the need to increase capacity at its call centres to service future
subscriber growth. The Group is also planning to build a new training centre
for its customer-facing staff, that will help keep customer service standards
at the forefront of the industry.
The capital expenditure on these projects is expected to total GBP450 million,
which will be incurred over the next four years; this will be in addition to
core capital expenditure, which is expected to remain at around GBP100 million
annually. The peak of this expenditure is expected in 2005.
The Group's intention to return surplus capital to shareholders
Following this review of long-term strategy and the investment requirements of
the business, the Board is considering the appropriate financial strategy and
capital structure for the next phase of Sky's growth. This financial strategy
will be consistent with the Group's desire to maintain an investment grade
credit rating and retain financial flexibility going forward. The financial
strategy is also expected to include returns to shareholders in addition to the
ordinary dividend that was resumed earlier this year.
The proposed final dividend of 3.25 pence per share will result in a total
dividend of 6 pence per share for the 2003/04 financial year. The Board expects
to adopt a progressive dividend policy and intends that the total ordinary
dividend in 2004/05 will grow broadly in line with Group earnings.
The Board is considering additional mechanisms to allow further distributions to
shareholders in due course. As a first step, the Board intends to take advantage
of the opportunity presented by November's Annual General Meeting by proposing
resolutions renewing the annual authority previously granted to it by
shareholders to buy back up to 5% of its issued ordinary share capital. If
approved, the Group expects to utilise a proportion of the share repurchase
authority during the remainder of the current financial year, subject to market
conditions.
The Board also intends to put in place a Scheme of Arrangement that will enable
additional returns of cash to shareholders by way of special dividends or share
buy-backs in future and expects to put proposals to shareholders in due course.
PART II
FINANCIAL RESULTS FOR THE PERIOD TO 30 JUNE 2004
OVERVIEW
Sky has delivered another year of strong financial results, producing its second
full year of positive earnings since the launch of Sky digital. This has been
driven by double-digit revenue growth and strong operational gearing. Key
operational metrics of subscriber growth, churn and ARPU for the quarter were
negatively affected by the exceptionally strong confluence of sports programming
on the BBC and ITV in the quarter. The European Football Championship Finals
2004 and the Wimbledon Tennis Championships were both broadcast in June 2004 and
accentuated seasonal trends in subscriber behaviour.
Total revenues for the twelve months ending 30 June 2004 ("the year") increased
by 15% over the twelve months to 30 June 2003 ("the comparable period") to
GBP3,656 million. Total operating costs before goodwill and exceptional items
increased by 8% to GBP3,056 million, generating an operating profit before
goodwill and exceptional items of GBP600 million. The operating profit margin
before goodwill and exceptional items was 16.4%, up from 11.4% in the comparable
period.
Profit after tax increased by GBP138 million to GBP322 million. Earnings per
share before goodwill and exceptional items was 18.3 pence, representing an
increase of 79% on the comparable period.
OPERATING REVIEW
At 30 June 2004, the total number of direct-to-home ("DTH") digital satellite
subscribers in the UK and Ireland was 7,355,000, representing a net increase of
81,000 subscribers in the three months to 30 June 2004 ("the quarter"). The mix
of packages taken by subscribers continues to be weighted towards premium
packages, with 52.4% of all DTH subscribers taking the top tier Sky World
package at the end of the year, a decline of just one percentage point from the
level of 53.4% at 30 June 2003.
The total number of households in the UK and Ireland receiving one or more Sky
channels increased to over 14 million in the quarter. This was driven by DTH
growth, a small increase in the number of households subscribing to a television
service via cable, and an increase in the number of households receiving the
Freeview free-to-air ("FTA") digital terrestrial channels, as FTA-only homes
continued to replace analogue with digital reception equipment.
Sky announced on 9 June 2004 that it will be introducing a Free Satellite
service, offering access to almost 200 television and radio channels and
interactive services, to be available later this year, without a monthly
subscription fee. Consumers will be able to purchase a package of reception
equipment, including a viewing card and professional installation, direct from
Sky for a cost of approximately GBP150. This offers an easy upgrade path to a
Sky subscription for viewers who choose subsequently to add a pay television
service to their viewing options.
DTH churn for the year stands at 9.7%. The modest increase on last quarter's
churn figure is partly attributable to the concentration of sport on the
terrestrial channels during summer 2004.
Annualised average revenue per DTH subscriber ("ARPU") in the quarter was
GBP380, an increase of GBP14 over the three months to 30 June 2003. The Group
expects the next increase in ARPU to take place during the second quarter of
the 2005 financial year as a result of the recently announced changes in UK and
Ireland retail pricing, which start to become effective from September 2004.
The number of Sky+ households continued to grow strongly, increasing by 75,000
in the quarter to reach 397,000. Sky+ continues to drive new subscribers to Sky,
with 22% of new Sky+ customers in the quarter being new to Sky digital. The
growth in Sky+ penetration continues to drive the uptake of the Multiroom
product, with the number of households taking two or more digiboxes increasing
from 270,000 to 293,000 in the quarter.
Programming
Multichannel television's combined share of total television audience continues
to grow, increasing by 9% over the previous year to 26% in the quarter, and
overtaking BBC1's share (25%) for the first time ever, according to viewing
figures from the Broadcasters' Audience Research Board ("BARB") at 30 June 2004.
Despite the intense competition in the quarter from one-off events on
terrestrial channels, the viewing share of Sky channels across all UK television
homes has been maintained comfortably above 6%.
Sky Sports enjoyed another strong year, with an 11% increase in viewing share
across UK television homes over the comparable period. The fourth quarter
delivered further strong audience figures, with eight live football finals shown
in just 14 days during May, including Sky's first UEFA Champions League Final.
The quarter also brought the climax of the Heineken Cup, Rugby Union's premier
European competition, and the conclusion of the England cricket team's
successful West Indies tour.
The 2004/05 football season, which starts in August 2004, will be the most
televised on Sky Sports, with viewers offered over 450 live matches. With the
commencement of the new Football Association Premier League broadcast contracts,
Sky Sports will now show 88 live games from the Barclays Premiership, up from
66, and an additional 50 live Premiership games, up from 40, will be offered on
the pay-per-view service, PREMPLUS. A new interactive service, Football First,
will offer one match per week in full on a delayed basis plus extended
highlights of every match played that day. Sky digital viewers can choose which
game they watch through the interactive service, Sky Sports Active.
Sky Movies' viewing share for the quarter was 3.2% in multichannel homes. Over
the Easter weekend, the multi-start premiere of 'Harry Potter and the Chamber of
Secrets' achieved a total audience of over 900,000 viewers. Following the
success of shows from the US such as 'Nip/Tuck' and '24', Sky One continues to
add unique programming with the HBO production, 'Deadwood', to be launched
exclusively on Sky One in September 2004, and 'Battlestar Gallactica'.
Significant one-off events continue to differentiate Sky One, with 'Rebecca
Loos: My Story' attracting 1.7 million viewers in April, and an episode of 'The
Simpsons' featuring Tony Blair also attracting over one million viewers.
Sky was awarded the contract to supply five with its news service in March 2004,
and Sky News launched a dedicated news service for Ireland on 10 May 2004. One
of the highlights in the quarter was Sky News' coverage of the celebrations of
the 60th anniversary of D-Day.
FINANCIAL REVIEW
Turnover
Total revenues grew by 15% on the comparable period to GBP3,656 million,
reflecting continued growth in the average number of DTH subscribers, the second
successive year of double-digit advertising revenue growth, and higher
interactive revenues.
DTH revenues for the year increased by 14% from GBP2,341 million for the
comparable period to GBP2,660 million. This was principally due to the 10%
growth in the average number of DTH subscribers and the 4% increase in average
DTH revenue per subscriber.
Advertising revenues continued to outperform the advertising market, increasing
by 10% on the comparable period to GBP312 million, principally due to growth of
6% in the Group's share of total UK advertising revenues. The Group remains
confident of outperforming UK advertising market growth for the remainder of
this calendar year.
Wholesale revenues increased to GBP215 million for the year, an increase of 6%
on the comparable period. This was mainly attributable to the one-off receipt
of audit monies from ntl as disclosed in the first quarter, and increases to
the average revenue per subscriber resulting from changes to wholesale pricing
from January 2004.
Total interactive revenues, which includes both Sky Active revenues and betting
revenues, increased by 41% to GBP307 million.
Sky Active revenues increased by 15% on the comparable period to GBP116 million.
This was due to a combination of increases in retail revenues through SkyBuy,
third party betting, revenues from interactive advertising, premium rate
telephony revenues and platform access fees paid by third party broadcasters and
interactive service providers.
SkyBet revenues increased by 63% on the comparable period to GBP191 million,
driven mainly by the 85% increase in the total number of bets placed across all
platforms. Consequently, betting costs, which include payouts, duty, levies and
taxes, increased by GBP67 million to GBP175 million.
Programming costs
Programming costs for the year increased by GBP107 million on the comparable
period to GBP1,711 million. Gross margin (total revenues less total programming
costs) for the year increased to 53.2% from 49.7% in the comparable period.
Sports costs, which accounted for 75% of the total increase in programming
costs, grew by GBP80 million to GBP803 million, driven by contractual increases
in rights costs and the addition of UEFA Champions League football this season.
A decrease in movie costs of GBP4 million on the comparable period to
GBP393 million reflected continued weakness of the US dollar and therefore a
favourable movement in the average rate at which the Group was able to purchase
dollars versus the comparable period. These savings were partially offset by
increased subscriber volumes and pricing increases in certain studio contracts.
Third party channel costs increased by GBP9 million on the comparable period to
GBP360 million. Increases due to the 10% increase in the volume of DTH
subscribers and new channels added to the platform, were partially offset by
savings resulting from contractual renegotiations as the Group renewed carriage
deals with MTV, Nickelodeon, Paramount, Music Choice, E4, Film Four and
Eurosport. As a result, the aggregate monthly cost of third party channels for
the fourth quarter was GBP4.19 per subscriber, a reduction of 43 pence since
its peak at 31 December 2002.
Entertainment and News costs increased by GBP22 million on the comparable period
to GBP155 million. This was mainly due to re-evaluation of entertainment
programme stock balances during the year which resulted in the acceleration of
certain amortisation charges totalling GBP17 million, in accordance with the
Group's policy in respect of programme stock accounting.
Other operating costs
Marketing costs for the year were GBP396 million, a decrease of GBP4 million on
the comparable period. This decrease was predominantly driven by a GBP22 million
reduction in acquisition marketing costs to GBP256 million, due to lower set-top
box unit prices and fewer installations. Retention marketing also decreased by
GBP2 million on the comparable period to GBP32 million. These decreases were
partly offset by increased above-the-line expenditure, up GBP10 million on the
comparable period to GBP49 million, and other marketing costs up GBP10 million
to GBP59 million, as a result of the Sky+ and programming campaigns which have
been run this year. Average subscriber acquisition costs ("SAC") remained around
GBP200 for the year.
Subscriber management costs, which include Customer Relationship Management
("CRM") costs, supply chain costs, and associated depreciation, increased by
GBP47 million on the comparable period to GBP371 million. Supply chain costs,
including the cost of goods sold in respect of Sky+ and Multiroom set-top boxes,
represent 70% of the increase, reflecting the strong growth in Sky+ customers
during the year. Also included within supply chain costs is the cost of stock
for SkyBuy, the Group's retail operation, which increased by GBP12 million in
the year. CRM costs represent 19% of the increase in subscriber management
costs, but the CRM cost per subscriber has declined by 3%. Depreciation costs
increased by GBP5 million on the comparable period, mainly due to increased
depreciation in respect of CRM assets.
Transmission and related costs increased by GBP3 million on the comparable
period to GBP146 million.
Administration costs before goodwill and exceptional items increased by GBP14
million on the comparable period to GBP257 million, due mainly to increased
technology and facilities costs and costs resulting from increased compliance
obligations.
Goodwill
Goodwill amortisation decreased by GBP2 million on the comparable period to
GBP119 million. This was principally due to the GBP5 million provision made in
the comparable period against goodwill which originally arose on the acquisition
of OPTA Index Limited.
Exceptional items
Total exceptional items for the year amounted to a net credit of GBP75 million.
This consists of a GBP49 million profit on disposal of the Group's 20%
shareholding in QVC (UK); a profit on disposal of GBP2 million and a provision
release of GBP33 million relating to the Group's sale of its 9.9% shareholding
in Manchester United plc; partly offset by a GBP9 million provision against the
Group's remaining football club investments, as disclosed in the second quarter.
Joint ventures and associates
The Group's share of the net operating losses of joint ventures and associates
before goodwill increased to GBP5 million in the year. This mainly reflects a
one-off write down of GBP11 million by attheraces ("ATR") in respect of
capitalised infrastructure costs and media rights prepayments.
On 30 April 2004, Sky and Arena Leisure plc acquired Channel 4's shares and loan
notes in ATR, increasing the Group's shareholding to 50%. At the same time, the
shareholder loans were capitalised, giving rise to negative goodwill of GBP11
million which was immediately released to the profit and loss account. The
remaining joint ventures' goodwill amortised during the year principally relates
to goodwill that arose from the purchase of a 50% stake in Artsworld in December
2003.
Interest
Total net interest payable for the year decreased by GBP33 million on the
comparable period to GBP81 million as a result of the lower level of
indebtedness. On 29 June 2004, a GBP200 million tranche of the Group's revolving
credit facility, which was undrawn at this date, matured in accordance with its
terms, leaving total available facilities going forward of GBP600 million. The
GBP600 million facility, which was also undrawn as at 30 June 2004, is due to
mature in March 2008.
Taxation
The total net tax charge for the period of GBP158 million includes a current tax
charge of GBP127 million and a deferred tax charge of GBP34 million, offset by a
GBP3 million net adjustment in respect of prior years. Excluding the effect of
goodwill, joint ventures and exceptional items, the Group's underlying effective
tax rate on ordinary activities was 30% during the period.
After removing the effect of deferred tax, the Group's share of joint ventures'
tax, and prior year adjustments, the mainstream corporation tax liability for
the period was GBP124 million. After utilising all the Group's remaining
Advanced Corporation Tax, this was reduced to GBP70 million. At 30 June 2004,
GBP35 million had been paid, with the balance of GBP35 million due for payment
by 31 December 2004.
Earnings
The profit after tax for the year was GBP322 million. Earnings per share before
goodwill and exceptional items was 18.3 pence compared to 10.2 pence (restated
for the application of UITF 38) for the comparable period. At 30 June 2004, the
total number of shares outstanding was 1,941,712,786.
Cashflow
Earnings before interest, tax, depreciation and amortisation ("EBITDA") before
exceptional items increased by 52% on the comparable period to GBP702 million.
With an additional GBP180 million of cash inflow, principally from a GBP182
million movement in working capital due to the timing of payments to third party
channels and movie studios, the timing of DTH revenue collection, and the
unwinding of programming prepayments, the Group generated an operating cash
inflow of GBP882 million. This represents the conversion of 147% of operating
profit before goodwill and exceptional items to operating cash inflow. After
taking into account cash outflows, principally comprising capital expenditure of
GBP132 million; net interest payments of GBP82 million; tax paid of GBP58
million (which includes GBP20 million relating to the 2003 financial year and
GBP3 million consortium relief); dividends paid to shareholders in April 2004 of
GBP53 million; and one-off receipts from the sale of the Group's shareholding in
QVC (UK) (GBP49 million), Manchester United plc (GBP62 million) and Chelsea
Village plc (GBP6 million), the Group reduced net debt by GBP676 million, from
GBP1,105 million at 30 June 2003 to GBP429 million at 30 June 2004.
Dividend
In the light of the Group's continued strong cashflow generation, the Board
proposes a final dividend of 3.25 pence per share, payable on 19 November 2004
to shareholders on the register on 29 October 2004, subject to approval of
shareholders at the Annual General Meeting in November 2004.
CORPORATE
On 23 June 2004, British Sky Broadcasting Group plc (the "Company") announced
the appointment of Jeremy Darroch as its new Chief Financial Officer. Mr
Darroch, replacing Martin Stewart who leaves his post today, will take up his
post on 16 August 2004.
On 15 June 2004, the Company announced that Nicholas Ferguson, Chief Executive
Officer of SVG Capital, a publicly-quoted private equity group, had been
appointed as an independent non-executive Director of the Company with effect
from 15 June 2004, and that Andy Higginson, Finance and Strategy Director of
Tesco plc, will join the Board as an independent non-executive Director with
effect from 1 September 2004.
As a result of the recommendations made by the Corporate Governance Committee
chaired by Lord Wilson of Dinton, the Board announced a series of changes to the
composition of its committees on 15 June 2004. The Board also published a
revised Memorandum on Corporate Governance and revised terms of reference for
each of the Board's standing committees.
The Group anticipates issuing and serving a claim in the near future for a
material amount against an information and technology solutions provider, which
had provided services to the Group as part of the Group's investment in CRM
software and infrastructure. The amount that will be recovered by the Group will
not be finally determined until resolution of the claim.
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
television, advertising revenue growth, DTH subscriber growth and Multiroom and
Sky+ penetration, DTH revenue, profitability and margin growth, cashflow
generation, SAC and marketing expenditure, capital expenditure programmes and
proposals for rewarding 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 government
regulation upon the Group's activities, 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 UK and Ireland.
Information on some risks and uncertainties are described in the "Risk Factors"
section of Sky's Annual Report on Form 20-F for the year ended 30 June 2003.
Copies of the Annual Report on Form 20-F are available on request from British
Sky Broadcasting Group plc, Grant Way, Isleworth TW7 5QD. 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
Subscribers to Sky Channels
As at 30/06/03 As at 30/06/04
DTH digital homes1,2 6,845,000 7,355,000
Total TV homes in the UK and Ireland3,4 26,154,000 26,066,000
Total Sky digital homes as a percentage of 26% 28%
total UK and Ireland TV homes
Cable - UK 3,266,000 3,321,000
Cable - Ireland 605,000 574,000
Total Sky pay homes 10,716,000 11,250,000
DTT - UK 5 1,510,000 3,084,000
Total Sky homes 12,226,000 14,334,000
Total Sky homes as a percentage of total UK 47% 55%
and Ireland TV homes
Sky+ homes 105,000 397,000
Multiroom homes6 165,000 293,000
1: Includes DTH subscribers in Republic of Ireland (323,000 as at 30 June 2004).
2: DTH subscribers includes only primary subscriptions to Sky (no additional
units are counted for Sky+ or Multiroom subscriptions).
3: Total UK homes estimated by BARB and taken from the beginning of the month
following the period end (latest figures as at June 2004). Total Ireland
homes estimated by Nielsen Media Research, conducted on an annual basis in
July with results available in September 2004 (latest figures as at July
2003).
4: 2001 UK Census data was incorporated into the BARB data in January 2004,
resulting in a revised figure for total UK homes.
5: DTT homes estimated by BARB and taken from the beginning of the following
month (latest figures as at 1 July 2004). These figures may include Sky or
Cable homes that already take multichannel TV.
6: Multiroom includes households subscribing to more than one set-top box. (No
additional units are counted for the second or any subsequent multiroom
subscriptions.)
Consolidated Profit and Loss Account for the year ended 30 June 2004
Before
Before goodwill and
goodwill and Goodwill and exceptional Goodwill and 2003
exceptional exceptional 2004 items exceptional Total
items items Total as restated* items as restated*
GBPm GBPm GBPm GBPm GBPm GBPm
Notes (audited) (audited) (audited) (audited) (audited) (audited)
Group and share of
joint ventures'
turnover 3,738 - 3,738 3,263 - 3,263
Less: share of joint (82) - (82) (77) - (77)
ventures' turnover
Group turnover 1 3,656 - 3,656 3,186 - 3,186
----------------------------------------------------------------------------------------------------------------------
Operating expenses,
net 2 (3,056) (119) (3,175) (2,822) (116) (2,938)
----------------------------------------------------------------------------------------------------------------------
EBITDA 18 702 - 702 462 5 467
Depreciation (102) - (102) (98) - (98)
Amortisation - (119) (119) - (121) (121)
----------------------------------------------------------------------------------------------------------------------
Operating profit 600 (119) 481 364 (116) 248
----------------------------------------------------------------------------------------------------------------------
Share of joint
ventures' and
associates' operating
results 3 (5) 10 5 3 - 3
Profit on disposal of
fixed asset
investments 4 - 51 51 - - -
Amounts written back
to (written off)
fixed asset
investments, net 4 - 24 24 - (15) (15)
Profit on ordinary
activities before
interest and
taxation 595 (34) 561 367 (131) 236
----------------------------------------------------------------------------------------------------------------------
Interest receivable
and similar income 5 10 - 10 4 - 4
Interest payable and
similar charges 5 (91) - (91) (118) - (118)
Profit on ordinary
activities before
taxation 514 (34) 480 253 (131) 122
----------------------------------------------------------------------------------------------------------------------
Tax (charge) credit
on profit on ordinary
activities 6 (158) - (158) (59) 121 62
Profit on ordinary
activities after
taxation 356 (34) 322 194 (10) 184
----------------------------------------------------------------------------------------------------------------------
Equity dividends 7 (116) -
Retained profit for
the financial year 16 206 184
----------------------------------------------------------------------------------------------------------------------
Earnings per share -
basic 8 18.3p (1.7p) 16.6p 10.2p (0.6p) 9.6p
Earnings per share -
diluted 8 18.3p (1.7p) 16.6p 10.0p (0.5p) 9.5p
----------------------------------------------------------------------------------------------------------------------
*The full year results for 2003 have been restated following the adoption of
Urgent Issues Task Force abstract 38 "Accounting for ESOP trusts" ("UITF 38").
UITF 38 requires that the Company's shares held by the Group's Employee Share
Ownership Plan ("ESOP"), which were previously held within fixed asset
investments, be presented as a deduction from shareholders' funds. In addition,
the charge to the profit and loss account in relation to awards under the
Long-Term Incentive Plan ("LTIP"), the Key Contributor Plan ("KCP") and the
Equity Bonus Plan ("EBP"), which was previously based on the cost of shares held
by the ESOP, is now based on the difference between the market price on the date
of grant and the exercise price. The adoption of UITF 38 has been treated as a
prior year adjustment with comparative figures being restated accordingly.
There were no recognised gains or losses in either year other than those
included within the profit and loss account, with the exception of a prior
period adjustment in respect of adoption of UITF 38. The cumulative effect of
this adjustment was a GBP12 million reduction to the brought forward profit and
loss reserve at 1 July 2003.
Details of movements on reserves are shown in note 16.
The accompanying notes are an integral part of this consolidated profit and loss
account.
All results relate to continuing operations.
Consolidated Profit and Loss Account for the three months ended 30 June 2004
Three Three months
months Before ended 30
Before ended 30 goodwill and June
goodwill and Goodwill and June exceptional Goodwill and 2003
exceptional exceptional 2004 items exceptional Total
items items Total as restated* items as restated*
GBPm GBPm GBPm GBPm GBPm GBPm
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Group and share of joint
ventures' turnover 979 - 979 875 - 875
Less: share of joint
ventures' turnover (20) - (20) (20) - (20)
Group turnover 959 - 959 855 - 855
-----------------------------------------------------------------------------------------------------------------------
Operating expenses,
net (797) (32) (829) (740) (23) (763)
-----------------------------------------------------------------------------------------------------------------------
EBITDA 184 - 184 141 5 146
Depreciation (22) - (22) (26) - (26)
Amortisation - (32) (32) - (28) (28)
-----------------------------------------------------------------------------------------------------------------------
Operating profit 162 (32) 130 115 (23) 92
-----------------------------------------------------------------------------------------------------------------------
Share of joint ventures'
and associates'
operating results (1) 10 9 2 - 2
Amounts written back to
fixed asset
investments - - - - 3 3
Profit on ordinary
activities before
interest and taxation 161 (22) 139 117 (20) 97
-----------------------------------------------------------------------------------------------------------------------
Interest receivable and
similar income 5 - 5 1 - 1
Interest payable and
similar charges (23) - (23) (25) - (25)
Profit on ordinary
activities before
taxation 143 (22) 121 93 (20) 73
-----------------------------------------------------------------------------------------------------------------------
Tax (charge) credit on
profit on ordinary
activities (42) - (42) (38) 121 83
Profit on ordinary
activities after
taxation 101 (22) 79 55 101 156
-----------------------------------------------------------------------------------------------------------------------
Equity dividends (63) -
Retained profit for the
period 16 156
-----------------------------------------------------------------------------------------------------------------------
Earnings per share -
basic 5.2p (1.1p) 4.1p 2.9p 5.2p 8.1p
Earnings per share -
diluted 5.2p (1.1p) 4.1p 2.8p 5.2p 8.0p
-----------------------------------------------------------------------------------------------------------------------
*The results for the three months ended 30 June 2003 have been restated
following the adoption of UITF 38.
Consolidated Balance Sheet at 30 June 2004
2003
2004 as restated*
GBPm GBPm
Notes (audited) (audited)
Fixed assets
Intangible fixed assets 9 417 536
Tangible fixed assets 10 376 346
Investments:
Investments in
associates 1 -
Investments : Share of
in joint gross
ventures assets 72 87
: Share of
gross
liabilities (45) (59)
: Transfer to
creditors 5 2
Total investments in
joint ventures and
associates 11 33 30
--------------------------------------------------------------------------------
Other fixed asset
investments 11 2 44
Total investments 35 74
--------------------------------------------------------------------------------
828 956
--------------------------------------------------------------------------------
Current assets
Stocks 12 375 370
Debtors: Amounts falling
due within one year 13
- deferred tax asset 49 31
- other 321 363
370 394
--------------------------------------------------------------------------------
Debtors: Amounts falling
due after more than one
year 13
- deferred tax asset 102 159
- other 42 64
144 223
--------------------------------------------------------------------------------
Cash and liquid
resources:
- current asset
investments 173 -
- cash at bank and in
hand 474 47
647 47
--------------------------------------------------------------------------------
1,536 1,034
--------------------------------------------------------------------------------
Creditors: Amounts
falling due within one
year 14 (1,170) (967)
Net current assets 366 67
--------------------------------------------------------------------------------
Total assets less current
liabilities 1,194 1,023
--------------------------------------------------------------------------------
Creditors: Amounts
falling due after more
than one year
- long-term borrowings 15 (1,076) (1,152)
- accruals and deferred
income 15 (28) (20)
(1,104) (1,172)
--------------------------------------------------------------------------------
Provisions for
liabilities and charges - (3)
90 (152)
--------------------------------------------------------------------------------
Capital and reserves -
equity
Called-up share capital 16 971 969
Share premium 16 1,437 2,536
Shares to be issued 16 - 3
ESOP reserve 16 (30) (35)
Merger reserve 16 222 299
Special reserve 16 14 -
Profit and loss account 16 (2,524) (3,924)
Shareholders' funds 16 90 (152)
(deficit)
--------------------------------------------------------------------------------
*The balance sheet as at 30 June 2003 has been restated following the adoption
of UITF 38.
The accompanying notes are an integral part of this consolidated balance sheet.
Consolidated Cash Flow Statement for the year ended 30 June 2004
2004 2003
GBPm GBPm
Notes (audited) (audited)
Net cash inflow from operating activities 17a 882 664
------------------------------------------------------------------------------
Dividends received from joint ventures 4 4
------------------------------------------------------------------------------
Returns on investments and servicing of
finance
Interest received and similar income 7 3
Interest paid and similar charges (89) (127)
Interest element of finance lease payments - (1)
Net cash outflow from returns on investments
and servicing of finance (82) (125)
------------------------------------------------------------------------------
Taxation
UK corporation tax paid (55) (18)
Consortium relief paid (3) -
Net cash outflow from taxation (58) (18)
------------------------------------------------------------------------------
Capital expenditure and financial
investment
Payments to acquire tangible fixed assets (132) (98)
Receipts from sales of fixed asset
investments 116 1
Net cash outflow from capital expenditure and
financial investment (16) (97)
------------------------------------------------------------------------------
Acquisitions and disposals
Funding to joint ventures and associates (5) (15)
Repayments of funding from joint ventures and
associates 6 5
Net cash inflow (outflow) from acquisitions
and disposals 1 (10)
------------------------------------------------------------------------------
Equity dividends paid (53) -
Net cash inflow before management of liquid
resources and financing 678 418
------------------------------------------------------------------------------
Management of liquid resources 17c (511) 1
------------------------------------------------------------------------------
Financing
Proceeds from issue of Ordinary Shares 20 5
Purchase of own shares for ESOP (22) -
Capital element of finance lease payments 17b (1) (2)
Net decrease in debt due after more than one 17b (75) (425)
year
Net cash outflow from financing (78) (422)
------------------------------------------------------------------------------
Increase (decrease) in cash 17c 89 (3)
------------------------------------------------------------------------------
Decrease in net debt 17c 676 423
------------------------------------------------------------------------------
The accompanying notes are an integral part of this consolidated cash flow
statement.
1. Turnover
2004 2003
GBPm GBPm
(audited) (audited)
Direct-to-home subscribers 2,660 2,341
Cable subscribers 215 202
Advertising 312 284
Interactive 307 218
Other 162 141
3,656 3,186
------------------------------------------------------------------------------
2. Operating expenses, net
Before
Before goodwill and
goodwill and Goodwill and exceptional Goodwill and 2003
exceptional exceptional 2004 items exceptional Total
items items Total as restated items as restated
GBPm GBPm GBPm GBPm GBPm GBPm
(audited) (audited) (audited) (audited) (audited) (audited)
Programming (i) 1,711 - 1,711 1,604 - 1,604
Transmission and
related functions
(i) 146 - 146 143 - 143
Marketing 396 - 396 400 - 400
Subscriber
management 371 - 371 324 - 324
Administration 257 119 376 243 116 359
Betting 175 - 175 108 - 108
3,056 119 3,175 2,822 116 2,938
------------------------------------------------------------------------------------------------------------
(i) The amounts shown are net of GBP11 million (2003: GBP12 million) receivable
from the disposal of programming rights not acquired for use by the Group, and
GBP28 million (2003: GBP26 million) in respect of the provision to third party
broadcasters of spare transponder capacity.
3. Share of joint ventures' and associates' operating results
Goodwill
A credit of GBP11 million arose on the write back of negative goodwill which had
arisen on the acquisition of an additional 16.7% stake in Attheraces Holdings
Limited in April 2004, taking the Group's stake in Attheraces to 50%. The
remaining net GBP1 million charge relates to amortisation of goodwill arising on
the acquisition of certain joint ventures and associates.
4. Exceptional items
Credit Taxation Credit Taxation
before (charge) 2004 (charge) (charge) 2003
taxation credit Total taxation credit Total
GBPm GBPm GBPm GBPm GBPm GBPm
(audited) (audited) (audited) (audited) (audited) (audited)
Release of provision
against ITV Digital
programming debtors (iii) - - - 5 (2) 3
Exceptional operating
items - - - 5 (2) 3
---------------------------------------------------------------------------------------------------------
Profit on disposal of
fixed asset investments
(i) 51 - 51 - - -
Amounts written back to
(written off) fixed asset
investments, net (ii),
(iv) 24 - 24 (15) - (15)
Recognition of deferred
tax asset (v) - - - - 123 123
Total exceptional items 75 - 75 (10) 121 111
---------------------------------------------------------------------------------------------------------
2004
Other exceptional items
(i) Profit on disposal of fixed asset investments
On 1 March 2004, the Group sold its 20% shareholding in QVC (UK), operator of
QVC - The Shopping Channel, for GBP49 million in cash, realising a profit on
disposal of GBP49 million.
On 7 October 2003, the Group disposed of its listed investment in Manchester
United plc, realising a profit on disposal of GBP2 million.
(ii) Amounts written back to (written off) fixed asset investments, net
The Group reduced its provision against its minority equity investments in
football clubs by GBP33 million, due to the disposal of its investment in
Manchester United plc in October 2003 for GBP62 million in cash. The Group also
increased its provision against its remaining minority equity investments in
football clubs by a further GBP9 million.
2003
Exceptional operating items
(iii) ITV Digital
The Group provided in full against all unprovided balances owed by ITV Digital,
following the announcement by the joint administrators of ITV Digital on 30
April 2002 of the closure of pay television services on the platform and their
intention to close the administration. During 2003, the Group received GBP5
million from ITV Digital's administrators and released GBP5 million of its
exceptional operating provision accordingly.
Other exceptional items
(iv) Amounts written off fixed asset investments, net
At 31 December 2002, the Group made a further provision against its minority
investments in football clubs, leading to a non-cash exceptional charge of GBP21
million. Subsequently, the Group reduced its provision against its investment in
Chelsea Village plc at 30 June 2003 by GBP3 million, following the agreement to
sell its minority investment in July 2003.
At 31 December 2002, the Group reduced its deferred revenue balance relating to
minority investments in new media companies by GBP5 million, and reduced both
its investment and its provision against the investment in these companies
accordingly.
At 31 December 2002, the Group made a provision against its investment in Open
TV shares, leading to a non-cash exceptional charge of GBP3 million, bringing
the carrying value of the Group's investment in Open TV to nil. During February
and March 2003, the Group disposed of its entire investment in Open TV shares,
leading to a nil profit or loss on disposal.
(v) Recognition of deferred tax asset
At 30 June 2003, following a review of the forecast utilisation of tax losses
within the Group, and as a consequence of a planned reorganisation of certain
assets within the Group, there was sufficient evidence to support the
recognition of a deferred tax asset arising on losses incurred in the Company.
Accordingly, a deferred tax credit of GBP123 million was recognised as an
exceptional item.
5. Interest
(a) Interest receivable and similar income
2004 2003
GBPm GBPm
(audited) (audited)
Group
Interest receivable on cash and liquid resources 8 2
Other interest receivable and similar income 1 1
9 3
------------------------------------------------------------------------------
Joint ventures and associates
Share of joint ventures' and associates' interest
receivable 1 1
------------------------------------------------------------------------------
Total interest receivable and similar income 10 4
------------------------------------------------------------------------------
(b) Interest payable and similar charges
2004 2003
GBPm GBPm
(audited) (audited)
Group
On bank loans, overdrafts and other loans repayable
within five years, not by instalments:
- GBP200 million revolving credit facility
("RCF") (i) 2 2
- GBP750 million RCF (ii) - 27
- GBP600 million RCF (ii) 6 4
US$650 million of 8.200% Guaranteed Notes,
repayable in 2009 30 31
GBP100 million of 7.750% Guaranteed Notes,
repayable in 2009 8 8
US$600 million of 6.875% Guaranteed Notes,
repayable in 2009 30 30
US$300 million of 7.300% Guaranteed Notes,
repayable in 2006 14 14
Finance lease interest - 1
Other interest payable and similar
charges - 1
90 118
------------------------------------------------------------------------------
Joint ventures and associates
Share of joint ventures' and associates' 1 -
interest payable
------------------------------------------------------------------------------
Total interest payable and similar
charges 91 118
------------------------------------------------------------------------------
(i) In March 2003, the Group voluntarily cancelled GBP100 million of its GBP300
million RCF. The remaining GBP200 million RCF expired without being renewed on
29 June 2004.
(ii) In March 2003, the Group entered into a GBP600 million RCF. This facility
was used to cancel the previous GBP750 million RCF, which was entered into in
July 1999. The facility is available for general corporate purposes, but was
undrawn at 30 June 2004. It is due to expire in March 2008.
6. Taxation
Tax charge
Tax charge (credit) on
(credit) on profit before
profit before Exceptional exceptional Exceptional 2003
exceptional tax charge 2004 items as tax charge Total
items (credit) Total restated (credit) as restated
GBPm GBPm GBPm GBPm GBPm GBPm
(audited) (audited) (audited) (audited) (audited) (audited)
Current tax
UK corporation tax 127 - 127 85 2 87
Adjustment in respect
of prior years (8) - (8) - - -
Total current tax
charge 119 - 119 85 2 87
--------------------------------------------------------------------------------------------------------------
Deferred tax
Origination and
reversal of timing
differences 34 - 34 (26) (123) (149)
Increase (decrease) in
estimate of recoverable
deferred tax asset in
respect of prior
years 5 - 5 (2) - (2)
Total deferred tax
charge (credit) 39 - 39 (28) (123) (151)
--------------------------------------------------------------------------------------------------------------
Share of joint
ventures' and
associates' tax
charge - - - 2 - 2
--------------------------------------------------------------------------------------------------------------
158 - 158 59 (121) (62)
--------------------------------------------------------------------------------------------------------------
All taxation relates to UK corporation tax.
7. Equity dividends
2004 2003
(audited) (audited)
GBPm GBPm
Interim dividend paid of 2.75p (2003: nil) per
Ordinary Share 53 -
Final dividend proposed of 3.25p (2003: nil) per
Ordinary Share 63 -
116 -
------------------------------------------------------------------------------
The ESOP has waived its rights to dividends.
8. Earnings per share
2003
After
2004 Before goodwill and
Before After goodwill and exceptional
goodwill and goodwill and exceptional items
exceptional Exceptional exceptional items Exceptional as
items Goodwill items items as restated Goodwill items restated
(audited) (audited) (audited) (audited) (audited) (audited) (audited) (audited)
Profit on
ordinary
activities
after
taxation GBP356m (GBP109m) GBP75m GBP322m GBP194m (GBP121m) GBP111m GBP184m
Earnings
per share
- basic 18.3p (5.6p) 3.9p 16.6p 10.2p (6.4p) 5.8p 9.6p
Earnings
per share -
diluted 18.3p (5.6p) 3.9p 16.6p 10.0p (6.2p) 5.7p 9.5p
---------------------------------------------------------------------------------------------------------------------
Earnings per share is shown calculated by reference to profits both before and
after goodwill and exceptional items and related tax, since the Directors
consider that this gives a useful additional indication of underlying
performance.
9. Intangible fixed assets
The movement in the year was as follows:
Goodwill
GBPm
(audited)
Net book value at 1 July 2003 (i) 536
Amortisation charge (ii) (119)
Net book value at 30 June 2004 417
------------------------------------------------------------------------------
(i) Goodwill of GBP272 million, GBP543 million and GBP5 million, arising on the
acquisitions of Sports Internet Group ("SIG"), British Interactive Broadcasting
("BiB") and WAPTV respectively, is being amortised over periods of seven years
on a straight-line basis.
In accordance with FRS 11, impairment reviews were performed on the carrying
values of BiB and SIG goodwill balances at the end of the first full financial
year after acquisition, at 30 June 2002, which did not indicate impairment.
Consistent with Group strategy, the business plans on which these reviews were
based reflect significant projected increases in betting and other interactive
revenues over the subsequent five years. The Group continues to monitor the
performance of these businesses and is satisfied that no impairment of goodwill
has occurred.
(ii) At 30 June 2004, the Group made a provision of GBP3 million, included
within amortisation, against goodwill which arose on the acquisition of
Planetfootball.com Limited (a company which provides website services to the
sports industry), reducing the carrying value to nil. The provision was made as
a result of an impairment review which showed that the expected future cash
flows of the business would not support a carrying value for the goodwill.
10. Tangible fixed assets
The movement in the year was as follows:
Equipment, Assets in
Freehold land Short leasehold fixtures course of
and buildings improvements and fittings construction Total
GBPm GBPm GBPm GBPm GBPm
(audited) (audited) (audited) (audited) (audited)
Net book value as
at 1 July 2003 36 35 246 29 346
Additions - - 61 72 133
Disposals - - (1) - (1)
Depreciation (1) (3) (98) - (102)
Net book value as
at 30 June 2004 35 32 208 101 376
-----------------------------------------------------------------------------------------------
11. Fixed asset investments
2003
2004 as restated
GBPm GBPm
(audited) (audited)
Investments in joint ventures and associates 33 30
Other investments 2 44
Total fixed asset investments 35 74
------------------------------------------------------------------------------
12. Stocks
2004 2003
GBPm GBPm
(audited) (audited)
Television programme rights 322 337
Set-top boxes and related equipment 49 29
Raw materials and consumables 2 2
Other goods held for resale 2 2
375 370
------------------------------------------------------------------------------
At least 87% (2003: 79%) of the existing television programme rights at 30 June
2004 will be amortised within one year.
13. Debtors
2004 2003
GBPm GBPm
(audited) (audited)
Amounts falling due within one year
Trade debtors 165 171
Amounts owed by joint ventures and associates 8 16
Amounts owed by other related parties 2 -
Other debtors 3 6
Prepaid programme rights 35 54
Prepaid transponder rentals 15 17
Advance corporation tax - 40
Deferred tax asset 49 31
Other prepayments and accrued income 93 59
370 394
------------------------------------------------------------------------------
Amounts falling due after more than one year
Prepaid programme rights 6 3
Prepaid transponder rentals 30 49
Deferred tax asset 102 159
Other prepayments and accrued income 6 12
144 223
------------------------------------------------------------------------------
14. Creditors: Amounts falling due within one year
2004 2003
GBPm GBPm
(audited) (audited)
Trade creditors 390 323
Amounts due to joint ventures and associates 8 1
Amounts due to related parties 40 25
UK corporation tax 48 28
VAT 92 62
Social security and PAYE 8 -
Proposed dividend 63 -
Defined contribution pension scheme creditor 1 1
Other creditors 60 54
Accruals and deferred income 460 473
1,170 967
------------------------------------------------------------------------------
Included within trade creditors are GBP250 million (2002: GBP226 million) of US
dollar-denominated programme creditors. At least 80% (2003: 90%) of these were
covered by forward rate currency contracts.
15. Creditors: Amounts falling due after more than one year
2004 2003
GBPm GBPm
(audited) (audited)
Long-term borrowings
GBP600 million RCF - 75
US$650 million of 8.200% Guaranteed Notes, repayable
in 2009 413 413
GBP100 million of 7.750% Guaranteed Notes, repayable in
2009 100 100
US$600 million of 6.875% Guaranteed Notes, repayable
in 2009 367 367
US$300 million of 7.300% Guaranteed Notes, repayable
in 2006 189 189
Obligations under finance leases 7 8
1,076 1,152
------------------------------------------------------------------------------
Other
Accruals and deferred income 28 20
------------------------------------------------------------------------------
1,104 1,172
------------------------------------------------------------------------------
In March 2003, the Group entered into a GBP600 million RCF. This facility was
used to cancel a GBP750 million RCF, which had been agreed in July 1999, and can
be used for general corporate purposes. The GBP600 million facility has a
maturity date of March 2008, and interest accrues at a margin of between 0.600%
and 1.125% above the London Inter-Bank Offer Rate ("LIBOR"), dependent on the
Group's Net debt:EBITDA leverage ratio (as defined in the loan agreement). Until
June 2004, the margin was fixed at 1.125%, and shall not fall below 0.700% per
annum above LIBOR prior to March 2006.
Also in March 2003, the Group voluntarily cancelled GBP100 million of the GBP300
million March 2001 RCF. The remaining GBP200 million RCF expired without being
renewed on 29 June 2004.
16. Reconciliation of movement in shareholders' funds
Movement in shareholders' funds includes all movements in reserves.
Profit Total equity
and shareholders'
Share Share Shares to ESOP Merger Special loss funds
capital premium be issued reserve reserve reserve account (deficit)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
(audited) (audited) (audited) (audited) (audited) (audited) (audited) (audited)
At 1 July 2003 -
as previously
stated 969 2,536 3 - 299 - (3,912) (105)
Prior year
adjustment - - - (35) - - (12) (47)
At 1 July 2003
as restated 969 2,536 3 (35) 299 - (3,924) (152)
----------------------------------------------------------------------------------------------------------------------
Issue of share
capital 2 21 (3) - - - - 20
ESOP shares
utilised - - - 27 - - 11 38
ESOP shares
purchased - - - (22) - - - (22)
Profit for the
financial year - - - - - - 322 322
Dividends - - - - - - (116) (116)
Share premium
reduction (1,120) - - - 14 1,106 -
Transfer from
merger reserve - - - - (77) - 77 -
At 30 June
2004 971 1,437 - (30) 222 14 (2,524) 90
----------------------------------------------------------------------------------------------------------------------
Share premium reduction
On 10 December 2003, the High Court approved a reduction in the Company's share
premium account of GBP1,120 million, as approved by the Company's shareholders
at the Annual General Meeting held on 14 November 2003. The reduction had the
effect of eliminating the Company's deficit on its profit and loss account as at
30 September 2003 of GBP1,106 million, and creating a non-distributable special
reserve of GBP14 million, which represents the excess of the share premium
reduction over the deficit.
Share option schemes
During the period the Company issued shares with a market value of GBP26 million
(2003: GBP6 million) in respect of the exercise of options awarded under various
share option schemes, with GBP20 million (2003: GBP5 million) received from
employees.
At 30 June 2004, the Group's ESOP held 4,747,515 Ordinary Shares in the Company
at an average value of GBP6.25 per share. The 4,339,497 shares utilised during
the period relate to the exercise of LTIP, KCP and Executive Share Option Scheme
awards. As a result of the adoption of UITF 38, the Group's ESOP shares, which
were previously held within investments, are now presented as a deduction from
shareholders' funds. In addition, the brought forward profit and loss reserve at
1 July 2003 was reduced by GBP12 million. The impact of adopting UITF 38 was
accordingly to reduce net assets at 1 July 2003 by GBP47 million, and to reduce
profit for the year to 30 June 2003 by GBP6 million.
17. Notes to consolidated cash flow statement
(a) Reconciliation of operating profit to operating cash flows
Before
Before goodwill and
goodwill and Goodwill and exceptional Goodwill and 2003
exceptional exceptional 2004 items exceptional Total
items items Total as restated items as restated
GBPm GBPm GBPm GBPm GBPm GBPm
(audited) (audited) (audited) (audited) (audited) (audited)
Operating profit 600 (119) 481 364 (116) 248
Depreciation 102 - 102 98 - 98
Amortisation of
goodwill and other
intangible fixed
assets - 119 119 - 121 121
Loss on disposal of
fixed assets 1 - 1 - - -
(Increase) decrease in
stock (5) - (5) 44 - 44
Decrease in debtors 17 - 17 88 - 88
Increase in
creditors 170 - 170 66 - 66
Decrease in
provision (3) - (3) (1) - (1)
Net cash inflow from
operating activities 882 - 882 659 5 664
-------------------------------------------------------------------------------------------------------------------
(b) Analysis of changes in net debt
At At
1 July 30 June
2003 Cash flow 2004
GBPm GBPm GBPm
(audited) (audited) (audited)
Overnight deposits 33 40 73
Other cash 14 49 63
47 89 136
------------------------------------------------------------------------------
Short-term deposits - 338 338
Commercial paper - 173 173
Cash and liquid resources 47 600 647
------------------------------------------------------------------------------
Debt due after more than one year (1,144) 75 (1,069)
Capital element of finance leases (8) 1 (7)
Total debt and capital element of finance
leases (1,152) 76 (1,076)
------------------------------------------------------------------------------
Total net debt (1,105) 676 (429)
------------------------------------------------------------------------------
(c) Reconciliation of net cash flow to movement in net debt
2004 2003
GBPm GBPm
(audited) (audited)
Increase (decrease) in cash 89 (3)
Increase (decrease) in short-term deposits 338 (1)
Increase in commercial paper 173 -
Cash outflow resulting from decrease in debt and lease
financing 76 427
Decrease in net debt 676 423
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Net debt at beginning of year (1,105) (1,528)
Net debt at end of year (429) (1,105)
------------------------------------------------------------------------------
17. Notes to consolidated cash flow statement (continued)
(d) Major non-cash transactions
2004
Share premium reduction
On 10 December 2003, the High Court approved a reduction in the Company's share
premium account of GBP1,120 million, as approved by the Company's shareholders
at the Annual General Meeting held on 14 November 2003. The reduction had the
effect of eliminating the Company's deficit on its profit and loss account as at
30 September 2003 of GBP1,106 million, and creating a non-distributable special
reserve of GBP14 million, which represents the excess of the share premium
reduction over the deficit.
WAPTV
On 30 September 2003, the Company issued 338,755 (2003: 169,375) Ordinary Shares
to satisfy the remaining contingent consideration in respect of the acquisition
of the remaining 5% interest in WAPTV Limited which occurred in May 2001.
2003
Issue of shares - deferred consideration for BiB
On 11 November 2002, the Company issued 43.2 million shares with a fair value of
GBP253 million to HSBC, Matsushita and BT in respect of deferred consideration
for the acquisition of the remaining 67.5% of BiB in May and June 2001.
18. EBITDA
EBITDA (Earnings before interest, taxation, depreciation and amortisation) is
calculated as operating profit before depreciation and amortisation or
impairment of goodwill and intangible fixed assets.
19. Post balance sheet events
Potential legal claim
The Group anticipates issuing and serving a claim in the near future for a
material amount against an information and technology solutions provider, which
had provided services to the Group as part of the Group's investment in Customer
Relationship Management ("CRM") software and infrastructure. The amount that
will be recovered by the Group will not be finally determined until resolution
of the claim.
Capital investment programme
The Group intends to invest an additional approximately GBP450 million on
capital expenditure over the four years to 30 June 2008, in order to support
its long-term growth. This is in addition to ongoing core maintenance capital
expenditure which is expected to remain at about GBP100 million per annum over
the same period. The additional expenditure will principally relate to
enhancement of Sky's Osterley campus, a new call centre and training facility,
and continuation of the current CRM and Advanced Technology Centre projects.
--------------------------
This financial information does not constitute statutory accounts for the
purpose of section 240 of the Companies Act 1985. The financial information for
the year ended 30 June 2004 has been extracted from the statutory accounts of
British Sky Broadcasting Group plc for the year ended 30 June 2004, which have
not yet been filed with the Registrar of Companies, but on which the auditors
gave an unqualified report, and which did not contain a statement under section
237 (2) or (3) of the Companies Act 1985, on 3 August 2004. The preliminary
announcement was approved by the Board of Directors on 3 August 2004.
The financial information for the three months ended 30 June 2004 and 30 June
2003 is unaudited.
The financial information for the year ended 30 June 2003 has been extracted
from the statutory accounts of British Sky Broadcasting Group plc for the year
ended 30 June 2003, with the exception of the restatement arising from the
change in accounting policy described above. The statutory accounts on which the
auditors gave an unqualified report and which did not contain a statement under
section 237 (2) or (3) of the Companies Act 1985, have been filed with the
registrar of Companies.
BRITISH SKY BROADCASTING GROUP PLC
Date: 4 August 2004 By: /s/ Dave Gormley
Dave Gormley
Company Secretary