BRITISH SKY BROADCASTING GROUP PLC Results for the year ended 30 June Record Growth Of Over One Million DTH Subscribers

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1 26 July BRITISH SKY BROADCASTING GROUP PLC Results for the year ended 30 June Record Growth Of Over One Million DTH Subscribers Record annual growth over one million new DTH subscribers in twelve months Almost 80% of DTH base now digital 3.6 million subscribers Digital sales as at 25 July of 3.8 million Digital transition expected to be completed in June 2001 Churn falls to 10.5% digital churn is 3.5% Revenue increases by 20% to 1,847 million Operating profit of 85 million before exceptional operating costs of 105 million Premier League and FA Cup and England Internationals for next four seasons WML-based internet browser to be introduced to existing set top box Increased investment in Open to 80.1% New customer relationship management centre in Manchester Tony Ball, Chief Executive of British Sky Broadcasting Group plc, said: It has been a year of delivery. A phenomenal digital take up rate has given Sky a substantial lead over its competitors and keeps us on target to deliver 5 million subscribers by the end of. Sky continues to extend its excellent service in interactive news, sports and entertainment. Sky will complement and enhance Open by introducing a WML-based internet browser into the existing digital set-top box which will allow Sky to offer e- commerce and information across all its television channels. Sky has built a digital platform on which many different revenue creating services can be delivered. Pay television is merely the first. Sky will continue to innovate and develop new services that drive new revenue streams and enhance customer loyalty.

2 Enquiries: Analysts/Investors: Martin Stewart Tel: Roger Blundell Tel: Press: Julian Eccles Tel: Andrew Sholl Tel: Bell Pottinger Financial: David Beck Tel: Wendy Timmons Tel: There will be a presentation to analysts and investors at 9:30 a.m. today at The Gibson Hall, 13 Bishopsgate, London, EC2 and to press at a.m. at the same venue. A conference call for analysts will be held at 3.00 p.m. (BST) / a.m. (EST) today. To register for this, please contact Emma Kent at Bell Pottinger Financial on (UK & Europe) or Noah Schwartz at Taylor Rafferty on (US & Asia). A webcast of the analyst presentation, together with this press release will be available from 2.00 p.m. today on Sky s corporate website which may be found at and, to subscribing institutions only, via the Raw Communications network. 2

3 BUSINESS REVIEW Distribution The total net subscribers to Sky s channels increased by 1.5 million to 9.0 million in the year to 30 June ( the year ) and by 365,000 in the quarter ended 30 June ( the quarter ). Direct to home subscribers ( DTH ) increased by a record 1,053,000 in the year with the previous highest annual net growth being 680,000 six years ago. Net DTH growth in the quarter was 357,000. Over 18% of UK homes now subscribe to Sky. At 30 June there were 3.6 million DTH subscribers to the digital service and 930,000 DTH subscribers to the analogue service. Almost 80% of Sky s DTH subscribers are now taking the digital service. As at 25 July DTH digital sales were 3.8 million. Total DTH churn fell to 10.5% (: 13.4%). This reflects the low rate of churn in digital at 3.5% (: 2.1%) and the fact that the majority of DTH subscribers are now on the digital platform. The Group is confident that its aim of reducing the long term DTH churn rate below 10% will be achieved. The average revenue per DTH subscriber (subscription and PPV) in the year was 287, an increase of 18 on last year. The total DTH pay to basic ratio was 282%, higher than expected given the growth in subscribers added in the period. It remained some 166 percentage points higher than that in cable (116%) and 175 percentage points higher than that estimated for ONdigital (107%). Almost 60% of Sky digital DTH subscribers continue to take all Sky s premium channels. Transition to digital expected to be completed by June 2001 The success of the transition of analogue DTH subscribers to digital has exceeded the Group s expectations. When Sky digital was launched in October 1998 it was envisaged that its analogue customers would be transitioned by, at the earliest, December 2002 and commitments were made accordingly. With almost 80% of DTH subscribers now receiving the digital service the Group has decided to cease offering its current analogue service in June 2001, realising significant cost savings and strategic benefits. All existing analogue subscribers remain entitled to the current free set top box promotion. A new priority for Customer Service During the first half of the year, the Group focused on handling the record volumes of new and existing customers requesting Sky digital. Investment made at that time in recruitment and training led to second half improvements with the average cost per call handled down by 17%, and the number of calls cut by half. The Group announced in February that it would invest in improving customer service, achieving greater efficiency and the ability to support a wider range of products and services, by investing in a new customer relationship management centre and 3

4 upgrading the existing centres in Livingston and Dunfermline. The new centre with 500 seats will be located near Manchester and is expected to be operational in early Sky In Home Service ( SHS ), the domestic installation arm of Sky, is also being restructured, with sub-contractor Exel appointed to open a new national equipment distribution centre in Sheffield replacing 15 smaller distribution centres around the UK. The resulting distribution network will be more flexible, scalable and produce ongoing savings of 4 million per annum. Taken together these changes will provide Sky with the infrastructure to allow it to extend its current relationship, as supplier of TV services to 4.5 million DTH customers, into multiple services and products. Programming The year saw an increasing amount of original content shown on the movie and entertainment channels, the successful launch of Sky Sports Extra and Sky News Active and the renewal of a number of important sports rights. The renewed Premier League contract recognises the value of interactive services which can be built around the on-screen content such as impulse purchases, sales of merchandise and betting. Sky Sports has had a successful year with the launch last August of Sky Sports Extra and the rebranding of Sky Sports News as Sky Sports.comTV. Interactive coverage of football has proved to be hugely popular and this service was extended during the year to rugby for the Six Nations Championship and to cricket for the second test against Zimbabwe. Sky Sports also secured the rights to the next two Ryder Cup Matches, four more years of the European Golf Tour, and the Solheim Cup. Rights deals were signed with the Australian and West Indies Cricket Boards. In movies, the average share of viewing across our movie channels increased on prior year, driven by the popularity of the multiplexed versions of the channels in digital DTH homes. Sky Pictures launched successfully in November with 'Tube Tales'. Since then five films have been released. Some titles have been given their first exhibition on Sky whilst others have received UK theatrical releases. One film, 'Saving Grace' won the prestigious World Cinema Audience Award at the Sundance Film Festival. Sky One continues to be the highest rating non-terrestrial entertainment channel in satellite and cable homes. Throughout the year Sky One has consistently achieved a larger viewing share in cable and satellite homes than Channel 5. Sky News has continued to outperform competitors, winning various awards during the year, including 'The Royal Television Society's' News Event Award for the reporting of the Kosovo conflict. In June Sky News successfully launched the world's first digital enhanced news service. 4

5 Improvements to Sky s digital platform Sky has built a digital satellite platform on which many different revenue creating services can be delivered. Pay television is merely the first. Sky will continue to innovate and develop new services that drive new revenue streams and enhance customer loyalty. The next stage in the development of Sky digital will be the launch of a digital interactive text service, Sky Text, in October which will provide an array of information and entertainment services. This autumn Sky will pioneer the introduction of personal video recorders ( PVR ) both in partnership with TiVo and with the Group s integrated PVR set top box later in the year. Both devices will be marketed as premium products competing against high specification video and DVD recorders and the Group does not intend to subsidise the hardware. Demand for the TiVo service is expected from existing cable, DTT and satellite subscribers and non-subscribing households, representing a new opportunity for the Group to reach non-sky subscribers. New Media Sky s New Media strategy is to develop and distribute our content across multiple devices and platforms and monetise the traffic through e-commerce, advertising and subscription. The last six months have seen the foundations laid for this strategy through building infrastructure, investing in e-commerce opportunities and developing the breadth and depth of content both organically and through acquisition. Already Sky provides news, sports and entertainment services both via digital television as well as via our portals, Sky.com and Skysports.com on the PC, and from today Sky begins distribution of news and sports content on the Orange mobile portal. Combined, Skysports.com, Sky.com and Sports Internet have approximately 70 million monthly page impressions. Surrey Sports, acquired as part of Sports Internet Group, has provided Sky with an established betting infrastructure. This has been enhanced through the recent launch of online betting with TV and mobile internet betting applications being developed for launch later in the year. In the next 12 months this rapidly growing business is expected to generate over 100 million in revenues. In October Open was launched and in just nine months has become the largest television based e-commerce platform in the UK with over 900,000 registered users and access to over 9 million people through television sets in over 3.5 million homes. On 17 July Sky announced that it had reached agreement to increase its stake in Open from 32.5% to 80.1%, BT retain 19.9%. The agreement is subject to regulatory approval. Sky plans to include a WML (Wireless Markup Language) based internet browser into every existing digital set-top box giving all subscribers access to a secure environment containing internet content for example, chat, games, shopping, betting and services. No additional hardware is required. This browser will allow Sky 5

6 Text to offer e-commerce and information across all of its television channels. This will complement and enhance Open s services. These developments will increase the range of retailers and improve the look and feel of interactive services and will make e-commerce through the TV a mass-market reality. Sky have announced the creation of SkySportsStore.com, Sky s first end-to-end retail commerce venture which will launch in autumn. By developing the strengths of the Sky Sports brand, it will aim to become Britain s leading sports e-tailer carrying the most comprehensive inventory. The Group has also concluded strategic partnerships with and investments in e- commerce partners, including StreetsOnline, gameplay and MyKindaPlace.com. These deals allow Sky to share the benefit that these providers derive from their relationship with Sky and to build long term relationships. BOARD Dame Anne Mueller retired from the Board as a non executive director in April after 9 years of service. Dame Anne Mueller made an outstanding contribution to the Group over many years and the Board is saddened to report her death on 8 July. On 30 June, Elisabeth Murdoch, Managing Director of Sky Networks and an alternate director of BSkyB, left the Group to set up her own venture. Elisabeth Murdoch has been pivotal in the Group s creative development. The Board wishes her every success with her new venture. 6

7 FINANCIAL REVIEW The record growth in DTH subscribers over the past 12 months has meant that, whilst revenues continued to grow, significant subscriber acquisition costs have impacted operating profit before exceptional items, which was down 54% at 85 million. The loss before tax and exceptional items of 142 million was 215 million lower than last year, principally due to reduced operating profits, a 55 million increase in our share of the losses of British Interactive Broadcasting Limited ( BiB ) and, subsequent to the acquisition of 24% of KirchPayTV in April, our share of KirchPayTV s losses of 11 million. After exceptional charges of 120 million, the Group recorded a loss before tax of 263 million. Turnover Turnover grew by 20% to 1,847 million, with growth in all areas. Subscriber revenues, which account for 81% of total turnover, grew 21% year-onyear. DTH revenue, which accounts for 64% of total turnover, increased by 21% to 1,189 million, reflecting a 13% increase in the average number of subscribers and a 7% increase in average revenue per subscriber. The digital DTH pay to basic ratio at the year end of 285% was 14% points above the analogue DTH ratio of 271%. Wholesale revenue from cable and DTT subscribers rose 20% to 303 million mainly reflecting a full year s revenue from ONdigital. Advertising revenue increased by 12% to 242 million, driven by increased rates and greater penetration of Sky channels in UK homes, which stands at 34% (: 30%). Sky s share of viewing in multi-channel homes during the year was 13.4% (: 13.7%). Programming Costs Programming costs increased to 946 million, reflecting the growth in the number of subscribers, and the continued increase in programming, both original and acquired, which is now available on the digital platform. Sports costs, which represent 41% of total programming costs (40% in 1998/99), increased by 67 million to 385 million, driven by an increase of 46 million in football costs (mainly UEFA Cup rights and contractual increases in Premier League costs), together with the costs of the Ryder Cup and cricket rights. An increase in movie costs of 17% ( 40 million) to 278 million, reflected the increased number of movies offered and the higher average number of movie subscribers. Entertainment programming costs increased by 13% ( 8 million) to 66 million, reflecting increased investment in commissioned programming (which accounted for 32% of Sky One costs) and increased licensed programming costs due to more first run shows and higher rights costs for popular US series. 7

8 DTH distribution fees paid to third party channels rose by 27% ( 38 million) to 177 million, due to the increased number of total subscribers and the increased number of channels available to digital subscribers compared to analogue. Other Operating Costs Marketing costs increased by 166 million (77%) to 381 million, due mainly to the costs of the free set-top box promotion following the substantial increase in new subscribers. Subscriber-related costs (mainly subscriber handling and smartcard costs) increased by 29% to 200 million, driven by the increased number of staff required to handle greater call volumes and the costs of issuing smartcards to new subscribers. Transmission and related costs rose by 14 million to 105 million, as the result of the cost of leasing 8 new digital transponders to support the expanding service during the year, partly offset by savings from reduced analogue operations. Overheads increased by 17 million to 130 million due mainly to growth in staff to support a larger and more complex group and a full year s depreciation on digital assets. Exceptional Items Operating exceptional items of 105 million comprise a 41 million provision for early termination of the current analogue service, a 58 million increase in the transition provision and 6 million of costs for the reorganisation of SHS. In May, the Group had announced a marketing promotion under which it committed to transitioning its existing analogue subscribers onto its digital service. This did not include subsidy costs provided by BiB, 32.5% of whose funding was met by the Group. Following the acquisition by the Group of a further 47.6% shareholding in BiB and the consequent agreement for the Group to provide 100% of BiB s funding, it became appropriate to increase the provisions by 58 million, principally to provide for the costs of subsidising the set-top box for the remaining analogue subscribers. The Group s share of KirchPayTV s loss on sale of fixed asset investments of 14 million is also included as an exceptional item. Joint Ventures The Group s share of net operating losses from joint ventures increased from 58 million to 121 million, mainly due to its investments in BiB and KirchPayTV. The Group s share of BiB s operating loss increased by 55 million to 99 million, in line with the rapid growth in digital set-top box sales. The Group s share of KirchPayTV s operating loss, an amount of 11 million, was included for the first time following the acquisition of our 24% stake in April, as was related goodwill amortisation. The Group continues to invest in its programming joint ventures with losses reducing by 16% during the year to 11m. 8

9 Interest Net interest costs of 92 million increased by 32 million compared to the prior year, due to an increase in average borrowings, and an increase in average interest rates. Taxation As the result of losses in the year, the Group has no liability to UK taxation. The tax benefit of these losses amounting to 76 million has not been recognised in the accounts. The 9 million tax charge arises from the effect of paying for tax losses of joint ventures without being able to benefit from losses acquired until future years. Estimated tax losses carried forward of 551 million are available to shelter future taxable profits. Cash flow Significant growth in the number of digital subscribers following the free set-top box promotion impacted operating cash flows, which decreased by 471 million creating an outflow of 233 million. Combined with investment in new media ( 27 million), purchase of stakes in football clubs ( 21 million), net interest paid ( 65 million) and capex ( 58 million), this resulted in a 480 million increase in net debt during the year, to 1,145 million at 30 June. The capital expenditure of 58 million related to continued investment in digital technology and enhanced/interactive services, subscriber management and advertising systems. The acquisition of a 24% interest in KirchPayTV was funded by the proceeds of a share placing and the issue of 78 million shares in the Company to KirchPayTV. Outlook During the next 12 months we will complete the transition to digital, create our next generation customer relationship management centre and enhance our customer proposition by creating new multi-platform services, all of which will drive subscriber growth and revenue per subscriber. 9

10 Appendix 1 Subscribers to Sky Channels Opening as at 30/6/99 Q1 As at 30/9/99 Q2 As at 31/12/99 Q3 As at 31/3/00 Q4 As at 30/6/00 Digital 753,000 1,279,000 2,065,000 2,751,000 3,583,000 Analogue 2,707,000 2,303,000 1,901,000 1,405, ,000 DTH 3,460,000 3,582,000 3,966,000 4,156,000 4,513,000 Cable 3,189,000 3,325,000 3,306,000 3,211,000 3,122,000 ONdigital 204, , , , ,000 Eire 589, , , , ,000 Total 7,442,000 7,861,000 8,404,000 8,623,000 8,988,000 ONdigital figures as per public announcement Sky DTH Subscribers / Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year 3 m to 30/9/99 3 m to 31/12/99 3 m to 31/3/00 3 m to 30/6/00 12 m to 30/6/00 Opening 3,460,000 3,582,000 3,966,000 4,156,000 3,460,000 Net additions 122, , , ,000 1,053,000 Closing 3,582,000 3,966,000 4,156,000 4,513,000 4,513,000 Churn (YTD) 14.2% 11.9% 12.7% 10.5% 10.5% Sky digital additions / Quarter 1 Quarter 2 Quarter 3 Quarter 4 Year 3 m to 30/9/99 3 m to 31/12/99 3 m to 31/3/00 3 m to 30/6/00 12 m to 30/6/00 New 244, , , ,000 1,403,000 Transitions 287, , , ,000 1,503,000 New as % of gross additions 46% 57 % 44% 45% 48% 10

11 BRITISH SKY BROADCASTING GROUP PLC Consolidated results for the year ended 30 June (except for per share data) Before exceptional items (audited) Year ended 30 June Year ended 30 June Exceptional Before Exceptional items exceptional items (Note 3) Total items (Note 3) (audited) (audited) (audited) (audited) Total (audited) Notes Turnover: Group and share of joint ventures 1, , , ,583.0 Less: share of joint ventures turnover (66.9) - (66.9) (38.0) - (38.0) Turnover 1 1, , , ,545.0 Operating expenses, net 2 (1,761.7) (105.0) (1,866.7) (1,359.7) (456.3) (1,816.0) Operating profit (loss) 85.3 (105.0) (19.7) (456.3) (271.0) Share of operating results of joint ventures 4 (121.3) - (121.3) (57.7) - (57.7) Joint ventures goodwill amortisation (14.4) - (14.4) Loss on sale of fixed asset investments 3 - (1.4) (1.4) Share of joint venture s loss on sale of fixed asset investment 3 - (14.0) (14.0) (Loss) profit on ordinary activities before interest and taxation (50.4) (120.4) (170.8) (456.3) (328.7) Interest receivable and similar income Interest payable and similar charges 5 (102.6) - (102.6) (59.0) (5.2) (64.2) (Loss) profit on ordinary activities before taxation (142.3) (120.4) (262.7) 72.8 (461.5) (388.7) Taxation 6 (8.8) - (8.8) (27.9) (Loss) profit on ordinary activities after taxation (151.1) (120.4) (271.5) 44.9 (330.0) (285.1) Equity dividends paid - (47.3) Retained loss (271.5) (332.4) (Loss) earnings per share basic and diluted basis 7 (8.7p) (6.9p) (15.6p) 2.6p (19.1p) (16.5p) Dividends per share - interim p p Consolidated statement of total recognised gains and losses for the year ended 30 June Loss for the financial year (271.5) (285.1) Translation differences on foreign currency net investments Total recognised gains and losses relating to the year (267.4) (285.1) 11

12 BRITISH SKY BROADCASTING GROUP PLC Consolidated results for the three months ended 30 June (except for per share data) Before exceptional items (unaudited) 3 months ended 30 June Exceptional items (unaudited) Total (unaudited) Before exceptional items (unaudited) 3 months ended 30 June Exceptional items (unaudited) Total (unaudited) Turnover Operating expenses, net (495.9) (105.0) (600.9) (368.7) (456.3) (825.0) Operating profit (loss) 34.2 (105.0) (70.8) 32.2 (456.3) (424.1) Share of operating results of joint ventures (38.8) - (38.8) (14.8) - (14.8) Joint ventures goodwill amortisation (14.4) - (14.4) Share of joint venture s loss on sale of fixed asset investment - (14.0) (14.0) (Loss) profit on ordinary activities before interest and taxation (19.0) (119.0) (138.0) 17.4 (456.3) (438.9) Interest receivable and similar income Interest payable and similar charges (36.8) - (36.8) (16.0) (5.2) (21.2) (Loss) profit on ordinary activities before taxation (53.8) (119.0) (172.8) 3.6 (461.5) (457.9) Taxation (27.7) - (27.7) (9.2) Loss on ordinary activities after taxation (81.5) (119.0) (200.5) (5.6) (330.0) (335.6) Loss per share basic and diluted basis (4.5p) (6.6p) (11.1p) (0.3p) (19.1p) (19.4p) 12

13 BRITISH SKY BROADCASTING GROUP PLC Consolidated balance sheet as at 30 June Notes 30 June (audited) 30 June (audited) Fixed assets Tangible assets Fixed asset investments 9 1, , Current assets Stocks Debtors: Amounts falling due within one year Debtors: Amounts falling due after more than one year Cash at bank and in hand , Creditors : Amounts falling due within one year - short-term borrowings 12 (13.8) (0.1) - other creditors 12 (808.9) (583.6) (822.7) (583.7) Net current assets Total assets less current liabilities 2, Creditors: Amounts falling due after more than one year - long-term borrowings 13 (1,412.4) (715.0) - other creditors 13 (22.0) (31.1) (1,434.4) (746.1) Provisions for liabilities and charges (225.5) (405.4) (624.9) Capital and reserves equity Called-up share capital Share premium 14 2, Profit and loss account 14 (2,476.4) (2,190.9) (624.9) 13

14 BRITISH SKY BROADCASTING GROUP PLC Consolidated cash flow statement for the year ended 30 June Notes Year ended 30 June (audited) Year ended 30 June (audited) Net cash (outflow) inflow from operating activities 15a (232.5) Returns on investments and servicing of finance Interest received and similar income Interest paid and similar charges on external financing (73.9) (54.8) Interest element of finance lease payments (0.8) (0.5) Net cash outflow from returns on investments and servicing of finance (64.9) (51.1) Taxation ACT paid - (25.8) Consortium relief paid (23.6) (2.5) Net cash outflow from taxation (23.6) (28.3) Capital expenditure and financial investment Payments to acquire tangible fixed assets (57.9) (76.2) Payments to acquire fixed asset investments (48.0) (66.9) Receipts from the sale of fixed asset investments Receipt of government grants Net cash outflow from capital expenditure and financial investment (100.0) (142.0) Acquisitions and disposals Funding to joint ventures (78.2) (22.9) Payments made in the acquisition of joint ventures (333.0) (45.4) Net cash outflow from acquisitions and disposals (411.2) (68.3) Equity dividends paid - (103.2) Net cash outflow before management of liquid resources and financing (832.2) (154.6) Management of liquid resources Increase in short term deposits 15b (155.0) - Financing Net proceeds from issue of ordinary shares Increase in total debt 15b Net cash inflow from financing 1, Increase (decrease) in cash 15c 62.3 (14.5) Net cash outflow before management of liquid resources and financing (832.2) (154.6) Net proceeds from issue of ordinary shares Increase in net debt 15b (480.1) (146.6) 14

15 Notes 1 Turnover Direct-to-home subscribers 1, Cable and DTT subscribers Advertising Other , , Operating expenses, net Programming* Transmission and related functions* Marketing Subscriber management Administration , ,359.7 Exceptional operating items (see note 3) , ,816.0 * The amounts shown above are net of 51.3 million (: 48.2 million) receivable from the disposal of programming rights not acquired for use by the Group, and 61.3 million (: 50.6 million) in respect of the provision to third party broadcasters of spare transponder capacity. 3. Exceptional items Estimated cost of termination of analogue operations Estimated cost of transitioning analogue customers to digital service Estimated cost of Sky In Home Service Limited reorganisation Cost of aborted Manchester United PLC bid Exceptional operating items Loss on sale of fixed asset investments (see note 9) Share of joint venture s loss on sale of fixed asset investment Finance charges Tax credit - (131.5) In May, the Group committed to terminating its analogue operations in June 2001, earlier than the previously announced date of 31 December The costs of the termination are estimated at 41.0 million and principally comprise the cost of early termination of analogue transponder leases and related costs. Of these costs, 30.7 million are included within provisions at the year end, with the remaining costs being allocated against prepayments and stock balances. 15

16 On 5 May, the Group had announced a marketing promotion under which it committed to transitioning its existing analogue subscribers onto its digital service. The net costs associated with this process were estimated at 450 million, before taking account of tax relief of 135 million. This did not include subsidy costs provided by British Interactive Broadcasting Holdings Limited ( BiB ), 32.5% of whose funding was met by the Group. Following the acquisition by the Group of a further 47.6% shareholding in BiB and the consequent agreement for the Group to provide 100% of BiB s funding, it became appropriate to increase the provisions by 58.3 million, principally to provide for the costs of subsidising the set-top box for the remaining analogue subscribers. The total amount included within provisions of million is net of million utilised in the year and 44.6 million utilised in the prior year. In May, the Group announced the reorganisation of the Sky In Home Service Limited distribution network, at a cost of 5.7 million. These costs principally comprise the costs of staff redundancies, termination of building leases and fixed asset write downs. Of these costs, 1.9 million are included within provisions, 0.7 million was spent during the year, and the remaining costs are allocated against fixed assets. On 13 June, KirchPayTV GmbH & Co KGaA ( KirchPayTV ) sold 20 million of its holding of BSkyB shares. The Group s share of the loss on disposal was 14.0 million. The loss is calculated as 24% of the difference between the balance sheet value of the 20 million shares at per share (based on the value of the shares at the date of acquisition of 24% of KirchPayTV by BSkyB) and the net proceeds realised by KirchPayTV of per share. 4. Share of operating results of joint ventures KirchPayTV (see note 9) British Interactive Broadcasting Programming joint ventures In the absence to date of results for KirchPayTV for the period from investment on 14 April to 30 June, the results for a similar period to 31 March, adjusted for one-off transactions in the period to 30 June, have been used. 5. Interest payable and similar charges 750 million revolving credit facility ,000 million revolving credit facility US$650 million 8.200% Guaranteed Notes due million 7.750% Guaranteed Notes due US$600 Million 6.875% Guaranteed Notes due US$300 million 7.300% Guaranteed Notes due Finance lease interest Share of interest payable from joint ventures Other interest payable and similar charges Exceptional finance charges (see note 3)

17 6 Taxation Tax charge (credit) on profits before exceptional items: UK corporation tax Consortium relief payable ACT written off Prior year adjustment 10.4 (3.9) Share of joint ventures tax credit (27.3) (9.8) Tax charge (credit) on exceptional items: Deferred tax asset - (88.8) Carry back against prior year - (10.4) Current year UK corporation tax - (39.3) ACT written off (131.5) 8.8 (103.6) There is no mainstream corporation tax charge for the year due to losses. Estimated losses carried forward of 551 million are available to shelter future taxable profits. The taxation charge for the year (including the prior year adjustment) primarily relates to payments made to BiB for consortium relief, offset by the Group s share of BiB s net tax credit. 7 (Loss) earnings per share Before Exceptional items and goodwill Exceptional items After exceptional items and goodwill Goodwill (Loss) profit on ordinary activities after taxation ( 136.7m) ( 14.4m) ( 120.4m) ( 271.5m) Weighted average number of ordinary shares 1,744,379,069 (Loss) earnings per share basic and diluted basis (7.9p) (0.8p) (6.9p) (15.6p) Before exceptional items and goodwill Exceptional items After exceptional items and goodwill Goodwill (Loss) profit on ordinary activities after taxation 44.9m - ( 330.0m) ( 285.1m) Weighted average number of ordinary shares 1,719,952,745 (Loss) earnings per share basic and diluted basis 2.6p - (19.1p) (16.5p) Basic (loss) earnings per share represents the (loss) profit attributable to the equity shareholders in each year divided by the weighted average number of ordinary shares in issue during the year. (Loss) earnings per share is shown calculated by reference to (losses) earnings both before and after exceptional items, goodwill and related tax, since the Directors consider that this gives a useful additional indication of underlying performance. 17

18 8 Tangible fixed assets Net book value Beginning of year Additions, net Depreciation (52.0) (32.5) End of year Fixed asset investments Joint ventures - KirchPayTV 1, Other Own shares Other investments , KirchPayTV On 14 April a 24% interest in KirchPayTV was acquired for an aggregate consideration of 1,519.9 million. Provisional goodwill of 1,368.5 million has arisen on acquisition, which has been capitalised on the Group s balance sheet within fixed asset investments. Other investments During the year the Group purchased listed investments in Leeds Sporting plc, Manchester City PLC, Sunderland PLC and gameplay.com plc. The Group also purchased unlisted investments in Toyzone.co.uk Limited, Static 2358 Limited, Sportal Investment Limited, Streets OnLine Limited, Letsbuyit.com N.V. and mykindaplace Limited. In addition, during the year the Group reduced its holding in Manchester United PLC from 11.12% to 9.99% and its holding in Manchester City PLC from 10.36% to 9.91%, so as to bring the holdings below the 10% holding limited stipulated by the rules of the Premier League. This resulted in a total loss on disposal of 1.4 million (see note 3). In, other investments consisted of 28,884,374 shares (11.12%) in Manchester United PLC at a cost of 66.9 million. 10 Stocks Television programme rights Digital set-top boxes Raw materials and consumables At least 77 per cent (: 82 per cent) of the existing television programme rights at 30 June will be amortised within one year. 18

19 11 Debtors Amounts falling due within one year Trade debtors Amounts owed by joint ventures Amounts owed by related parties Other debtors Prepaid programme rights Prepaid transponder rentals Deferred tax Other prepayments and accrued income Amounts falling due after more than one year Amounts owed by joint ventures Prepaid programme rights Prepaid transponder rentals ACT Deferred tax Other prepayments and accrued income Included within prepaid programme rights falling due after one year at 30 June is a prepayment under the renewed Premier League contract commencing in August Creditors: Amounts falling due within one year Short-term borrowings Bank overdrafts Obligations under finance leases Other Trade creditors Amounts due to joint ventures Amounts due to related parties UK corporation tax VAT Social security and PAYE Other creditors Accruals and deferred income Government grants Included within trade creditors are million (: million) of US dollar-denominated programme creditors. At least 90 per cent (: 90 per cent) of these were covered by forward rate currency contracts. 19

20 13 Creditors: Amounts falling due after more than one year Long-term borrowings 750 million revolving credit facility ,000 million revolving credit facility AUS$1 million facility US$650 million 8.200% Guaranteed Notes repayable in million 7.750% Guaranteed Notes repayable in US$600 million 6.875% Guaranteed Notes repayable in US$300 million 7.300% Guaranteed Notes repayable in Obligations under finance leases , Other Accruals and deferred income Government grants , At the beginning of the financial year, the 1,000 million RCF was cancelled and replaced by a new 750 million RCF repayable in full on 29 June 2004 and bearing interest at rates between 0.50% and 1.40% per annum above LIBOR, depending on the Group s credit rating. In July, the Group issued US $650 million and 100 million of 10-year Guaranteed Notes. The proceeds of the dollar Notes have been swapped into sterling at a fixed rate of 7.653% per annum payable semi-annually. The 100 million Notes carry a fixed coupon of 7.750% payable annually. 14 Reconciliation of movements in shareholders funds Movements in shareholders funds include all movements in reserves. Share capital Share premium Profit and loss account Total shareholders funds Group As at 1 July (1,852.8) (300.5) Issue of share capital (5.7) 8.0 Loss for the financial year - - (285.1) (285.1) Dividends - - (47.3) (47.3) As at 1 July (2,190.9) (624.9) Issue of share capital ,514.6 (18.1) 1,546.4 Share issue costs - (7.7) - (7.7) Loss for the financial year - - (271.5) (271.5) Exchange adjustments As at 30 June ,209.9 (2,476.4) At 30 June the cumulative goodwill written off directly to reserves amounted to million (: million). 20

21 During the year the Company issued shares with a market value of 29.9 million in respect of the exercise of options awarded under various share option plans, with 11.8 million received from employees. In March the Company made a share placing of 19,062,000 shares with a market value of million, million of which, together with a further 78,019,778 shares (market value 1,186.7 million) was used as consideration in respect of the acquisition of a 24% interest in KirchPayTV (see note 9). The issue costs of the share placing of 7.7 million have been written off against the share premium account. 15a) Reconciliation of operating profit to operating cash flows Before exceptional items Before Exceptional exceptional items Total items Exceptional items Operating profit (loss) 85.3 (105.0) (19.7) (456.3) (271.0) Depreciation (Increase) decrease in working capital (91.7) 10.3 (81.4) Provision (utilised) provided, net - (179.9) (179.9) Other movements (3.5) - (3.5) (0.1) - (0.1) Net cash inflow (outflow) from operating activities 39.0 (271.5) (232.5) (50.9) Total b) Analysis of changes in net debt As at 1 July Cashflow As at 30 June Cash at bank and in hand Overnight deposits Bank overdrafts - (13.7) (13.7) Short term deposits Debt due within one year Debt due after one year (706.8) (697.5) (1,404.3) Finance leases (8.3) 0.1 (8.2) Total debt (715.1) (697.4) (1,412.5) Total net debt (664.9) (480.1) (1,145.0) c) Reconciliation of net cash flow to movement in net debt Notes Increase (decrease) in cash 62.3 (14.5) Increase in short term deposits Cash inflow resulting from increase in debt and lease financing (697.4) (132.1) Increase in net debt (480.1) (146.6) Net debt at beginning of year (664.9) (518.3) Net debt at end of year 15b (1,145.0) (664.9) 21

22 16 Post balance sheet events a) British Interactive Broadcasting Holdings Limited On 17 July, the Group announced the agreement with British Telecommunications plc ( BT ), HSBC Bank plc ( HSBC ) and Matsushita Electric Europe (Headquarters) Limited ( Matsushita ) to increase its holding in British Interactive Broadcasting Holdings Limited ( BiB ) from 32.5% to 80.1%. Under the agreement, the Group will acquire 35% of the share capital of BiB from HSBC and Matsushita for 394 million in new BSkyB shares. Under certain conditions an additional 131 million will be payable to HSBC and Matsushita. Following BSkyB s agreement to meet BiB s future funding requirements, BT s holding is to be diluted from 32.5% to 19.9%. BT has been granted a one-off option to exit, on the same pro-rata terms (including deferred and contingent consideration) as those given to HSBC and Matsushita, at any time between 1 January 2001 and 31 March Completion of the transaction is subject to regulatory approval. b) Sports Internet Group On 7 June, the Group made an offer for the Sports Internet Group ( SI ) which was declared wholly unconditional on 12 July and on that date the offer valued the issued, and to be issued, share capital of SI at approximately 250 million. c) Chelsea Village plc On 3 March, the group entered into arrangements with the Chelsea Village Plc Group ( Chelsea Village ) to subscribe for ordinary and preference shares in Chelsea Village and to become their exclusive media agent, for a total consideration of 40 million. Shares acquired in Chelsea Village Plc represent 9.9% of its enlarged share capital. The transaction completed on 14 July. This financial information does not constitute statutory accounts for the purpose of Section 240 of the Companies Act The preliminary profits statements for the year ended 30 June have been extracted from the statutory accounts of British Sky Broadcasting Group plc for the year ended 30 June, which have not yet been filed with the Registrar of Companies, but on which the auditors gave an unqualified report on 25 July. The preliminary announcement was approved by the Board of Directors on 25 July. The profit statements for the three months ended 30 June and 30 June are unaudited. The profit statement for the year ended 30 June has been extracted from the statutory accounts of the British Sky Broadcasting Group plc for the year ended 30 June, which have been filed with the Registrar of Companies, on which the auditors gave an unqualified report. 22