JAMES MURDOCH CHIEF EXECUTIVE OFFICER FORWARD-LOOKING STATEMENTS

Transcription

1 JAMES MURDOCH CHIEF EXECUTIVE OFFICER 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 regard to the potential for growth of free-to-air and pay-tv, advertising growth, DTH subscriber growth and Multiroom and Sky+ penetration, DTH revenue, profitability and margin growth, cash flow generation, subscriber acquisition costs and 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 government regulation upon the Group's activities, its reliance on technology, which is subject to risk, change and development, 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 Interim Report on Form 6-K for the period ended 31 December Copies of the Interim Report on Form 6-K 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. 1

2 HEADLINES Acceleration in the rate of subscriber growth Sky + households increased by 124% to 888,000 Multiroom households increased by 120% to 645,000 Exceptional financial performance 11% revenue growth to over 4 billion 20% operating profit margin (1) up from 16% 805m operating profit (1) up 34% Operating cashflow of almost 1 billion 58% growth in EPS to 29p (1)Before goodwill and exceptional items CORE DTH BUSINESS 2

3 HIGH QUALITY CUSTOMER BASE DTH SUBSCRIBERS (000) 7,787 OPERATING PROFIT (1) 805m 7, m 6, m Subscribers as at 30 June. (1)Operating profit before goodwill and exceptional items for 12 months to30 June STRONG DEMAND FOR PAY-TV SERVICES QUARTERLY GROSS SUBSCRIBER ADDITIONS (000) (1) Q Q Q Q (1)Four quarter rolling-average 3

4 LOYAL AND SATISFIED CUSTOMERS 15% 14% QUARTERLY ANNUALISED CHURN % 13% 12% 11% 10% 9% 8% 7% 6% 5% Q Q Q Q STRONG GROWTH IN ADDITIONAL SERVICES SKY + HOUSEHOLDS (000) MULTIROOM HOUSEHOLDS (000) Penetration (1) Penetration (1) 2% 5% 11% 2% 4% 8% As at 30 June (1)Percentage of total DTH subscriber base 4

5 INCREASED CHOICE, FLEXIBILITY AND SIMPLICITY FOR CUSTOMERS 5

6 CHANNELS 6

7 WHOLESALE BUSINESS 5,453 DTH AND CABLE SUBSCRIBERS (000) 7,355 6,845 6,101 7,787 3,486 4,091 3,871 3,895 3, Subscribers as at 30 June DTH subscribers Cable subscribers ADVERTISING SALES ABC1 ADULTS % Change ABC1 ADULTS viewing profile -3.5% -2.7% +3.5% +3.9% ITV1 ITV Sales Sky Media Sky One Source: BARB/Infosys 1 January 3 July 2005 (viewing in network homes) 7

8 SKY CONTINUES TO GROW COMMERCIAL IMPACTS AMONGST KEY DEMOGRAPHICS 10.5% 15.5% % change in impacts 6.4% -6.1% -8.4% -11.3% ABC1 Adults ABC1 Men Adults Sky Media ITV Sales Source: BARB/DDS 1 January 3 July 2005 SKYBET A HIGH GROWTH OPPORTUNITY Rapidly growing revenue stream 40% CAGR Exceed advertising revenue in 2006 SKY AIRTIME vs SKYBET REVENUES 329m 312m 284m 251m 261m 191m 159% increase in the volume of bets 95m 117m 13%+ gross margin in TV sportsbook Advertising revenue SkyBet revenue 12 months ended 30 June 8

9 SKYBET UNIQUE COMBINATION OF TV AND GAMBLING Fastest growing segments of the gaming market are interactive and entertainment gaming SkyBet an early leader Existing sportsbook betting business and management team Strong entertainment brand Well developed portfolio of products and channel distribution rights Ability to develop new programming opportunities (such as SkyBet Vegas) Unrivalled knowledge of and skills to exploit the interactive platform Sky Vegas Live 2 and new poker formats 9

10 BACKGROUND THE MARKETPLACE IS CHANGING % 60% Number of TV channels % 40% 30% 20% Penetration % % Multichannel Penetration No. of TV channels available Broadband penetration Source: Sky, BARB, OFCOM 10

11 NO. 1 ENTERTAINMENT CHOICE Key themes Quality Flexibility Connectivity Control Irrepressible innovation Empowering customers Setting the pace SETTING THE PACE NEW PROGRAMME GUIDE Better navigation Greater flexibility Greater control Enhanced favourites PARENTAL CONTROL Certification restrictions extended to FTA services Channel lock Adult channels removal Sky+ pin protection 11

12 SETTING THE PACE HDTV The ultimate TV experience Highest quality 4 x more detailed than digital Flexibility Enhanced PVR capability Connectivity Ethernet, 2 x USB National launch in early 2006 SETTING THE PACE SKY MOBILE Provider of premium content to UK mobile sector Sky Sports, Sky News, Sky Weather and SkyBet Mobile TV Sky + remote booking Build an installed base of applications Maximise Sky content and platform 12

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14 SETTING THE PACE THE GNOME Around 100 digital radio channels 100% of national radio stations Compatible with all Sky boxes 100 ft+ wireless range Value Flexibility Fun Features: Stereo sound; Multi-information backlit LCD display; 10 channel pre-sets; Headphone socket; Stereo line out; Integral carry grip; Rechargeable batteries included with up to 8 hours battery life; AC Mains socket; Built in volume and channel control 14

15 POSITIONED TO GROW Core business is in robust health and performing well Market Marketplace more exciting than ever New products Enhanced Brand services Customers NO. 1 ENTERTAINMENT CHOICE Product Financial strength JEREMY DARROCH CHIEF FINANCIAL OFFICER 15

16 TURNOVER m Jun 05 Jun 04 %+/- DTH subscribers 2,968 2, % Cable subscribers % Advertising % Sky Bet % Sky Active % Other revenue % Total 4,048 3, % 12 months ended 30 June PROGRAMMING COSTS Gross margin up 7% points to 60% 1,711m ( 56m) ( 37m) 2m 16m 1,636m 12 months ended 30 June 2004 Sports Movies Third party channels Entertainment and News

17 INVESTMENT IN MARKETING m Jun 05 Jun 04 %+/- Digibox and multiroom 276 Sky % +146% New customers acquisition % Existing customer upgrades % Above-the-line % Retention % Other % Total % 12 months ended 30 June INVESTMENT IN MARKETING Investment in new customers Low end of the risk curve Short payback High ROI Investment in existing customers Lower churn Increased revenues Short payback High ROI months < 200 <10 % Premium packages Multiroom Advanced services months *All figures represent blended averages 17

18 INVESTMENT IN MARKETING m Jun 05 Jun 04 %+/- Digibox and multiroom 276 Sky % +146% New customers acquisition % Existing customer upgrades % Above-the-line % Retention % Other % Total % 12 months ended 30 June OTHER COSTS m Total Other costs (1) Sales volumes 19 ATC, Sky News Centre, increased production, infrastructure upgrade Efficiency and effectiveness review Depreciation/currency One-off items Other overheads Other costs (1) (5) (1)Other costs include: transmission and related costs, subscriber management and administration costs, 12 months ended 30 June, before exceptional items 18

19 OPERATING MARGIN PROGRESSION OPERATING PROFIT MARGIN (1) 20% 16% 11% 7% 2002 (2) 2003 (2) (1)Before goodwill and exceptional items. 12 months to 30 June. (2)After restatement following introduction of UITF 38 Accounting for ESOP trusts STRONG OPERATING PROFIT GROWTH OPERATING PROFIT (1) 805m CAGR 52% 600m 364m 152m 186m 2001 (2) 2002 (2) 2003 (2) (1)Before goodwill and exceptional items. 12 months to 30 June (2)After restatement following introduction of UITF 38 Accounting for ESOP trusts 19

20 STRONG EARNINGS GROWTH EARNINGS PER SHARE 1) 29.0p 18.3p 10.2p (3.0p) (13.3p) 2001 (2) 2002 (2) 2003 (2) (1)Before goodwill and exceptional items. 12 months to 30 June (2)After restatement following introduction of UITF 38 Accounting for ESOP trusts CASHFLOW 910m 68m 978m 22m ( 63m) ( 103m) ( 230m) 604m EBITDA Working capital & other flows Operating cash inflow JVs, ESOP, sale of GSB and investments Interest Tax Capex Net cash inflow before distributions Cashflow for 12 months ending 30 June

21 PROGRESS ON INFRASTRUCTURE PROGRAMME Total capital expenditure of 230m in 2005 Advanced Technology Centre completed CRM investment programme Sky News Centre fully operational by calendar year end HDTV infrastructure on track MOVEMENT IN NET DEBT 604m ( 138m) ( 416m) 50m Net cash inflow before distributions Dividend Buy-back Reduction in net debt Cashflow for 12 months ending 30 June

22 TRANSITION TO IFRS TRANSITION TO IFRS Today 2005 full year results under UK GAAP Headline 2005 results under IFRS Update on key changes to accounting policies under IFRS September 2005 Full 2005 comparative information under IFRS November 2005 Q results under IFRS 22

23 TRANSITION TO IFRS SIGNIFICANT CHANGES IN SKY S ACCOUNTING IFRS 2 IFRS 2 Share-based Payments Fair value of options & awards Charge for all schemes IAS IFRS 21 2 IAS 39 Foreign exchange, financial instruments & hedge accounting Non-GBP transactions at spot rates Fair value of financial instruments IFRS 2 IFRS 3 Goodwill Reversal of UK GAAP amortisation TRANSITION TO IFRS NON-SIGNIFICANT CHANGES TIMING DIFFERENCES IAS 10 OTHER IAS 38 IAS 28 IAS 3 IAS 12 Dividends Development costs Equity accounting Disposal of investments Deferred tax Recognition on approval Reliably measurable development costs capitalised as intangibles JVs/associates losses in excess of commitments not recognised Goodwill in equity not recycled Tax effect of IFRS adjustments 23

24 TRANSITION TO IFRS NON-SIGNIFICANT CHANGES PRESENTATIONAL EFFECT ONLY IFRS 2 IAS 7 Cash & cash equivalents Deposits < 3 months at inception IAS 38 Intangible assets Software & development costs IAS 28 Results of JVs/associates Net of finance charges & taxation IAS 12 Deferred tax assets Non-current assets INDICATIVE IMPACT INCOME STATEMENT Share-based payments 19 million increase in administration costs All share options and awards measured at fair value Financial instruments & hedge accounting 12 million reduction in programming costs and reduction of 5 million in finance costs All foreign currency transactions at spot exchange rates Foreign exchange forward contracts and debt related swaps at fair value Intangible assets 11 million reduction in subscriber management costs Development expenditure must be capitalised if certain criteria are met Goodwill 116 million reduction from cessation of goodwill amortisation Profit on disposal 32 million increase as goodwill held in equity is not included in profit calculation 24

25 SUMMARY Transition to reporting under IFRS on schedule Key changes share-based payments, financial instruments & goodwill Changes consistent with expectations Detailed information will be published on 14 September 2005 Information required by IFRS1 Audited reconciliations of Income Statement, Balance Sheet and Cash Flow showing impact of each accounting change IFRS Balance Sheets Quarterly 2004/05 Income Statement information to provide comparatives for 2005/06 POSITIONED TO GROW Core business is in robust health and performing well Financial strength Marketplace more exciting than ever New products Enhanced services 25

26 QUESTIONS AND ANSWERS APPENDIX TRANSITION TO IFRS 26

27 COMMON IFRS DIFFERENCES WHICH WILL NOT AFFECT SKY IAS 39 Financial Instruments carve-outs Sky does not hold the type of liability covered by the carve-out Sky does not employ the type of hedging methodology covered by the carve-out Sky therefore expects to comply with IASB and EU endorsed standards simultaneously IAS 19 Employee Benefits No changes for Sky s defined contribution plan IAS 14 Segmental Reporting No change as no reportable segments INDICATIVE IMPACT INCOME STATEMENT m Revenue Programming costs Other operating costs Operating profit before goodwill Amortisation of goodwill Operating profit after goodwill (Loss)/profit on disposal of joint venture Profit before tax Profit after tax Earnings per share UK GAAP June ,048 (1,636) (1,594) 818 (116) 702 (23) p IFRS Adjustments - 12 (8) p IFRS June ,048 (1,624) (1,602) p Note: Only significant changes are highlighted. This information is unaudited and indicative only. 27

28 INDICATIVE IMPACT BALANCE SHEET Reclassifications Software and development costs reclassified from tangible to intangible assets Deposits >3 months reclassified from cash to short-term deposits All deferred tax assets reclassified to non-current assets Provisions reclassified to current liabilities Reliably measurable development costs capitalised as intangibles Goodwill amortisation reversed Foreign currency balances translated at spot exchange rates Recognition of foreign exchange forward contracts and debt related swaps at fair value Share options accounted for through equity Final dividend liability only recognised when approved Net debt adjusted for foreign exchange, financial instruments and hedge accounting INDICATIVE IMPACT BALANCE SHEET m UK GAAP June 2005 IFRS Adjustments IFRS June 2005 Non-current assets Goodwill and intangibles Tangibles 526 (191) 335 Other Current assets Short-term deposits Cash & cash equivalents 643 (140) 503 Other 671 (5) 666 Current liabilities (1,253) 103 (1,150) Non-current liabilities (1,101) (18) (1,119) Net assets/(liabilities) (34) Net debt (379) (9) (388) Note: Only significant changes are highlighted. This information is unaudited and indicative only. 28

29 INDICATIVE IMPACT CASHFLOW No impact on Sky s underlying cashflows Capitalised development expenditure reclassified from operating activities to investing activities Reclassification of short term deposits Deposits > 3 months reclassified from cash & cash equivalents to short term deposits Presentational effect on cash flow statement INDICATIVE IMPACT CASHFLOW m UK GAAP June 2005 Operating activities Cash from operations 978 Interest received 28 Taxation paid (103) Decrease/(increase) in short-term deposits 164 Net cash from operating activities 1,067 Net cash used in investing activities (199) Net cash used in financing activities (655) Net increase/(decrease) in cash and cash equivalents (1) 213 Net increase in cash, cash equivalents and shortterm deposits (1) 49 IFRS Adjustments (224) (213) (11) - (224) - IFRS June (103) (60) 854 (210) (655) (11) 49 Note: Only significant changes are highlighted. This information is unaudited and indicative only. (1) Excludes 1 million foreign exchange movement 29