Historical financial and operational information 2 February 2015

Transcription

1 Historical financial and operational information 2 February 2015

2 Summary Not subject to audit or legal review Following the transaction, we are aligning our operational and financial metrics across the Group: We are aligning calculation methodologies and definitions of our KPIs We are aligning accounting policies and treatments We are aligning accounting periods None of these alignments result in significant changes to historical information. A schedule of historical figures is contained within this document which reflects these changes. When consolidating the financials for the Group, we have used a constant exchange rate of 1.26: 1, being the average actual rate for the period 1 July to 31 December As we previously disclosed, we have made some changes to our external financial reporting. This is detailed in a presentation which can be found on our website and is appended to this document. 2

3 Disclosure & caveats Not subject to audit or legal review The historical information outlined in this presentation has been prepared in order to provide assistance in understanding historical financial and operating information for the enlarged Group. The information has not been subject to audit or legal review. In preparing the historical information we have relied on local Sky Italia and Deutschland management information to produce our high-level analysis. The information has been provided to assist in preparation ahead of our H1 results announcement and may be subject to future updates and revision. 3

4 Alignment of accounting policies Not subject to audit or legal review Historically, there were some differences in the ways in which each territory recognised revenue, costs and balance sheet items. Differences of accounting policy and treatments Differences of fact and circumstance We have reviewed the accounting policies and treatments in each territory to align with the accounting policies of the Sky Group. This will result in the accounting policies and treatments of Italy and Germany being aligned with those of UK for the purposes of our Sky Group accounts. The specific changes are detailed overleaf. Where there are local differences of fact and commercial circumstances, the accounting policies in each territory will reflect this diversity. For example: the UK treat the accounting for set-top box costs differently to Germany and Italy. This is because of differences of fact regarding who owns the set-top box in each territory (customer owns in the UK, Sky owns in Germany and Italy). Accordingly no changes have been made in our Group accounts for this difference in fact and circumstance. 4

5 Alignment of accounting policies - Germany We will be making certain changes in our Group accounts, to the accounting policies and treatments in Germany and Austria, none of which result in a material impact on a full year basis. These adjustments will mean that Sky Deutschland s own accounts and reported basis will differ from the figures consolidated and reported by Sky plc. Description P&L Stat Line Explanation of change Bundesliga and Champions League costs Programming Costs Within the Group accounts, cost is recognised on a straight-line basis across the months of the season. In Germany s own accounts the cost recognised during the football season is phased based on the number of match days per quarter. The difference in treatment results in different in-year phasing, but the difference between local and Group figures evens out over a 12 month license period. Not subject to audit or legal review Subscription discounts Subscription revenue The cost of discounts to revenue will be phased over the period of the offer. In Germany s own accounts, the cost of discounts is phased over the length of the customer contract. Exit fees SG&A/Other revenue (EBIT neutral) When customers are charged fees for cancelling before the end of their contract, the cash received is presented in revenue in the Group accounts. In Germany s own accounts, it is presented as a reduction in operating costs. The adjustment makes no difference at an earnings level. In addition, we have aligned the accounting period at H1 in the Group accounts so that Germany and Austria represent a 52 week year rather than a 365 day calendar year (e.g. from 1 July to 31 December 2014 in Sky Deutschland s local accounts, to 30 June to 28 December in the Group accounts). 5

6 Alignment of accounting policies - Italy Not subject to audit or legal review We will be making certain changes in our Group accounts, to the accounting policies and treatments in Italy, none of which result in material impact on a full year basis. Description P&L Stat Line Explanation of change Subscription discounts Subscription revenue The cost of discounts to revenue will be phased over the period of the offer. Previously, the cost of discounts is phased over the length of the customer contract. Advertising commissions Other income Advertising revenue/sg&a (EBIT neutral) Other revenue/sg&a (EBIT neutral) Advertising Commissions paid to media buying agencies have been presented as a reduction to revenue, whereas previously these were presented within operating costs. These changes make no difference at an earnings level. We have reclassified certain items, such as marketing contributions from suppliers, out of other revenue and into operating expenses. These changes make no difference at an earnings level. Amortisation of commissioned programming rights DNA Amortisation of commissioned programming rights has been presented within programming costs and excluded from depreciation and amortisation, in the Group accounts. In addition, we have aligned the accounting period at H1 in the Group accounts so that Italy represents a 52 week year rather than a 365 day calendar year (e.g. from 1 July to 31 December 2014 in Sky Italia s local accounts, to 30 June to 28 December in the Group accounts). 6

7 Not subject to audit or legal review Historical financial information 7

8 Historical financial information Not subject to audit or legal review We have provided historical revenues and costs for the past nine quarters overleaf. This information reflects the accounting policies and treatments which have been aligned to those of Sky in the UK & Ireland. It also reflects a number of presentational adjustments made to prior periods, including exclusion of discontinued activities, so as to present the Group on a like-for-like basis. Numbers are presented on an adjusted basis in order to exclude items which distort comparability When consolidating the financials for the Group, we have used a constant exchange rate of 1.26: 1, being the average actual rate for the period 1 July to 31 December Germany and Austria results will be aligned at the Group level but Sky Deutschland will continue to report under their existing basis locally. 8

9 Group Not subject to audit or legal review GROUP Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 FY 13 FY 14 m Subscription 2,167 2,243 2,287 2,297 2,294 2,328 2,383 2,391 2,388 8,994 9,396 Transactional Wholesale and Syndication Advertising revenue Other revenue Total Revenue 2,484 2,611 2,643 2,652 2,621 2,727 2,772 2,802 2,736 10,390 10,922 M EM O: Revenue Ex ESPN 2,463 2,586 2,620 2,631 2,615 2,727 2,772 2,802 2,736 10,300 10,916 Total Programming (1,020) (1,162) (1,132) (1,103) (1,037) (1,234) (1,281) (1,195) (1,142) (4,417) (4,747) Direct Network Costs (173) (177) (180) (181) (202) (199) (207) (208) (211) (711) (816) SG&A (965) (1,016) (992) (1,013) (1,051) (1,044) (1,018) (1,063) (1,036) (3,986) (4,176) Total Costs (2,158) (2,355) (2,304) (2,297) (2,290) (2,477) (2,506) (2,466) (2,389) (9,114) (9,739) EBIT ,276 1,183 Depreciation & Amortisation (142) (147) (155) (168) (170) (174) (161) (168) (160) (612) (673) EBITDA ,888 1,856 Material intra-group trading has been eliminated. Accounting policy and treatment alignment adjustments have been made to consolidate the Group. 9 Results of Germany & Austria and Italy translated at constant currency rate of 1.26: 1

10 UK and Ireland Not subject to audit or legal review UK AND IRELAND Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 FY 13 FY 14 m Subscription 1,439 1,499 1,526 1,537 1,537 1,560 1,586 1,595 1,600 6,001 6,278 Transactional Wholesale and Syndication Advertising revenue Other revenue Total Revenue 1,686 1,782 1,803 1,811 1,809 1,865 1,872 1,889 1,876 7,082 7,435 M EM O: Revenue Ex ESPN & SKIT 1,649 1,740 1,764 1,778 1,783 1,845 1,863 1,881 1,871 6,931 7,372 Total Programming (588) (631) (632) (624) (619) (690) (687) (660) (679) (2,475) (2,656) Direct Network Costs (173) (177) (180) (181) (202) (199) (207) (208) (211) (711) (816) SG&A (623) (646) (658) (686) (707) (682) (672) (699) (687) (2,613) (2,760) Total Costs (1,384) (1,454) (1,470) (1,491) (1,528) (1,571) (1,566) (1,567) (1,577) (5,799) (6,232) EBIT ,283 1,203 Depreciation & Amortisation (82) (83) (92) (102) (106) (110) (94) (93) (100) (359) (403) EBITDA ,642 1,606 We have made the following changes to our adjusted results: Sky Bet - we have treated this as a discontinued operation and removed the historical revenue and costs. ESPN the historic revenues and costs remain in the UK. However, as we no longer retail the channel, we have shown the historical revenue excluding ESPN as a memo line. Sky Italia box sales following the acquisition of Sky Italia, these transactions are now intra-group. The revenue and cost remain in the UK but have been eliminated in the Group on consolidation. We have shown historic revenue excluding SKIT as a memo line. 10

11 Germany and Austria Not subject to audit or legal review GERMANY AND AUSTRIA Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 FY 13 FY 14 m Subscription ,323 1,501 Transactional Wholesale and Syndication Advertising revenue Other revenue Total Revenue ,433 1,657 Total Programming (155) (239) (208) (202) (201) (262) (288) (213) (223) (804) (964) Direct Network Costs SG&A (166) (191) (172) (170) (182) (204) (184) (198) (191) (699) (768) Total Costs (321) (430) (380) (372) (383) (466) (472) (411) (414) (1,503) (1,732) EBIT 9 (77) (8) 6 7 (56) (45) (70) (75) Depreciation & Amortisation (18) (22) (21) (22) (23) (23) (25) (27) (26) (83) (98) EBITDA 27 (55) (33) (20) The figures in the table above will differ from the figures reported by Sky Deutschland its own accounts, due to the consolidation and accounting policy/treatment adjustments discussed earlier, which have been made at a Sky Group consolidated level but not in Sky Deutschland s own accounts. 11

12 Italy Not subject to audit or legal review ITALY Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 FY 13 FY 14 m Subscription ,448 2,428 Transactional Wholesale and Syndication Advertising revenue Other revenue Total Revenue ,817 2,809 Total Programming (391) (430) (423) (399) (325) (424) (462) (458) (360) (1,643) (1,669) Direct Network Costs SG&A (285) (297) (268) (259) (278) (276) (263) (274) (256) (1,109) (1,091) Total Costs (676) (727) (691) (658) (603) (700) (725) (732) (616) (2,752) (2,760) EBIT 21 (13) (7) Depreciation & Amortisation (58) (58) (58) (61) (58) (58) (59) (67) (51) (235) (242) EBITDA Presentational In order to provide a measure of underlying performance, we have stripped out the impact of a 55 million loss in 12/13 on the resale of 2016 Rio Olympics and historical payments to Fox for use of the Sky Brand (12/13: 38m, 13/14: 37m, 14/15: 9m). We have also netted media partner payments to Fox in 12/13 against advertising revenue, which were previously recognised gross in costs, in order to provide comparability with the new contractual basis in place in 13/14. 12

13 Not subject to audit or legal review Historical operational information 13

14 Historical operating metrics Not subject to audit or legal review We ve provided operating metrics for the past nine quarters overleaf. We propose to calculate churn using a 12 month rolling method. Additionally: Sky Deutschland has historically reported churn including all customers. To ensure consistency across the Group, we will report residential churn for Germany and Austria. For ARPU, we will display ARPU as a monthly amount. Additionally: Sky Deutschland and Sky Italia have historically included all customers in their computation of ARPU. To ensure consistency across the Group, we will compute ARPU based on residential customers and revenues only. 14

15 Historical operating information All figures (000) unless stated FY12/13 FY13/14 FY14/15 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Not subject to audit or legal review UK and Ireland 28,898 29,513 30,228 31,634 32,434 33,307 34,071 34,775 35,535 Germany and Austria 4,842 5,223 5,393 5,543 5,691 5,895 6,025 6,164 6,373 Italy 7,209 7,331 7,358 7,393 8,141 8,259 8,298 8,311 8,637 Total Products 40,949 42,067 42,979 44,570 46, ,461 48,394 49, ,545 UK and Ireland 10,654 10,742 10,812 11,153 11,224 11,330 11,420 11,495 11,546 Germany and Austria 3,212 3,363 3,405 3,453 3,529 3,667 3,731 3,813 3,908 Italy 4,862 4,833 4,782 4,756 4,757 4,760 4,751 4,725 4,704 Retail customers 18, ,938 18,999 19,362 19,510 19,757 19, , ,158 UK and Ireland 3,714 3,751 3,801 3,677 3,617 3,624 3,602 4,041 4,035 Germany and Austria Italy Wholesale customers 3,840 3,876 3,92 6 3,801 3,897 3,892 3,860 4,2 54 4,190 Total Customers 2 2, , , , , , , , ,348 Churn UK and Ireland 10.2% 10.4% 10.5% 10.7% 10.7% 10.9% 11.0% 10.9% 10.9% Germany and Austria 12.0% 12.1% 12.2% 12.3% 12.0% 11.4% 10.9% 10.4% 9.4% Italy 13.5% 14.9% 13.7% 13.9% 13.3% 13.1% 10.9% 10.3% 10.0% ARPU UK and Ireland ( ) Germany and Austria ( ) Italy ( )

16 We re here to help Not subject to audit or legal review Edward Steel Lang Messer Robert Hope

17 APPENDIX Financial reporting of Sky Group 19 December 2014 Sky News Jeff Randall

18 Disclosure DRAFT - Subject to audit and legal opinion The changes outlined in this presentation are draft proposals. They have not yet been subject to audit and legal opinion, nor have they been approved by the Board. There is therefore the potential for further changes to our disclosure before we report H1 results on February 4 th, Any KPIs or financials are illustrative only. 18

19 Introduction DRAFT - Subject to audit and legal opinion Sky has created Europe's leading entertainment company after completing the acquisition of Sky Italia and a majority interest in Sky Deutschland. Our expectation is that this will lead to some changes to our external financial reporting. Our objective is to better align our external reporting with our strategy, to enable the investment community to better understand the key drivers and results of our business and to align external and internal management reporting. In order to proactively help investors and analysts, this presentation outlines some of the potential key changes to our external reporting. 19

20 Contents DRAFT - Subject to audit and legal opinion Operating segments 1 2 Operating metrics and disclosure 3 Changes to how we display our financials Primary financial statements 4 5 Adjusted profit 6 Deferred tax external reporting calendar 20

21 DRAFT - Subject to audit and legal opinion 1 Operating segments 21

22 1 Operating segments DRAFT - Subject to audit and legal opinion Historically, the BSkyB Group has disclosed a single reportable segment comprising the whole of the UK and Ireland business. We propose to present three segments for the enlarged Sky Group. This is to reflect the different: - competitive set in each market - economic and regulatory environment in each market - stages of maturity of the businesses The three segments are: - UK and Ireland - Italy - Germany and Austria The results for Germany may continue to be published additionally by Sky Deutschland for so long as the business remains listed. 22

23 1 Operating segments DRAFT - Subject to audit and legal opinion We will have an eliminations column which will include any inter-segment trading for example, the sale of set-top boxes and programming between businesses. We will not be presenting a segmental split of assets and liabilities. The Sky Group has one Balance Sheet and Cash Flow Statement As well as presenting statutory financials in sterling, we may provide narrative commentary using a constant currency method to show the underlying performance of the business. As well as presenting statutory financials, we may provide pro-forma financials for the Group to show the underlying performance of the business. 23

24 1 Operating segments Illustrative proposed extract from Note 2 of the press release Segmental income statement for the half year end 31 December 2014 DRAFT - Subject to audit and legal opinion UK and Ireland Including six months of revenue and costs 2014/15 Half Year 2013/14 Half Year UK & Ireland Italy Germany & Austria Eliminations Group Total Group Total m m m m m m Subscription [X] [X] [X] [X] [X] 3,096 Transactional [X] [X] [X] [X] [X] 119 Wholesale and syndication [X] [X] [X] [X] [X] 208 Advertising revenue [X] [X] [X] [X] [X] 237 Other revenue [X] [X] [X] [X] [X] 97 Revenue [X] [X] [X] [X] [X] 3,757 Inter-segment revenue [X] [X] [X] [X] [X] - Revenue from external customers [X] [X] [X] [X] [X] 3,757 Germany & Austria/Italy Including revenue and costs since acquisition date (13 th November 14) Old comparatives as reported last year for the UK and ROI Programming [X] [X] [X] [X] [X] (1,311) Direct network costs (i) [X] [X] [X] [X] [X] (414) Sales, general and administration [X] [X] [X] [X] [X] (1,467) Operating expense [X] [X] [X] [X] [X] (3,192) EBITDA [X] [X] [X] [X] [X] 794 Depreciation and amortisation [X] [X] [X] [X] [X] (229) Operating profit [X] [X] [X] [X] [X] 565 Share of results of joint ventures and associates [X] 21 Investment income [X] 6 Finance costs [X] (65) Profit on disposal of available-for-sale investments [X] - Profit on disposal of associate [X] - Profit before tax [X]

25 DRAFT - Subject to audit and legal opinion 2 Operating metrics and disclosure 25

26 2 Operating metrics and disclosure DRAFT - Subject to audit and legal opinion Our previous disclosure was a legacy of the period in which we were a standalone DTH business. Our focus today is fundamentally on growth based on multiple products and routes to market. To reflect the increased breadth of the business and to align the metrics across the Group, we propose to formally report on four headline non-financial KPIs for each territory: Customers Products Churn Local currency ARPU These are not exclusive and in addition, we will provide narrative commentary by territory and this will include more granular information, for example growth of broadband in the UK and ROI 26

27 2 Operating metrics and disclosure DRAFT - Subject to audit and legal opinion Where applicable, we expect to align calculation methodologies and definitions to ensure consistency across the Group Where we do this, we will provide historic comparatives on a restated basis For example, the three Skys currently calculate churn differently: UK and ROI use a quarterly annualised method Italy use a 52 week rolling method Germany report both In this case we expect to adopt rolling 52 week for all territories and to provide, if material, comparatives on each basis. 27

28 2 Operating metrics and disclosure DRAFT - Subject to audit and legal opinion Proposed quarterly table as included as Schedule 2 of the press release All figures (000) unless stated FY12/13 FY13/14 FY14/15 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 UK and Ireland 10,654 10,742 10,812 11,153 11,224 11,330 11,420 11,495 11,546 Germany and Austria Italy Retail customers UK and Ireland 28,898 29,513 30,228 31,634 32,434 33,307 34,071 34,775 35,535 Germany and Austria Italy Total Products UK and Ireland 3,714 3,751 3,801 3,677 3,617 3,624 3,602 4,041 4,035 Germany and Austria Italy Wholesale customers Churn UK and Ireland 10.9% 10.3% 10.8% 10.9% 11.0% 10.8% 10.9% 10.7% 11.0% Germany and Austria Italy UK and Ireland Customers and products as reported at Q1 these will not change. Churn and ARPU may have some small changes as we align methodologies. Germany & Austria/Italy We will disclose historical KPIs prior to H1 results. ARPU UK and Ireland ( ) Germany and Austria ( ) Italy ( ) 28 GBP/ (average)

29 DRAFT - Subject to audit and legal opinion 3 Changes to how we display our financials 29

30 3 Changes to how we display our financials: Revenue DRAFT - Subject to audit and legal opinion We expect to make small changes to the way we display our revenue. The main reason to do this is to reflect the increasing breadth of our business. We currently report transactional revenue across different revenue lines in our P&L. We intend to introduce a new revenue line item, Transactional revenue, which will combine all the transactional revenue we receive. Examples of this include: a customer buying a Sky Store movie NOW TV sports day pass (NB that a monthly subscription is reported in Subscription revenue) We propose to consolidate the revenue we derive from monetising our channels and programmes across other platforms (Wholesale, Sky Vision, sublicensing) into a new single Wholesale and syndication line. To simplify our income statement we are combining the relatively immaterial amount of revenue that we receive from Hardware, Installation and Service into the Subscription revenue line. These changes are summarised in the reconciliation on slide

31 3 DRAFT - Subject to audit and legal opinion Reconciliation from old disclosure to new: UK & ROI revenues in FY14 FY 14 Old Movement of HIS to Subscription revenue Movement of Sky Store and Sports PPV revs (inc NOW TV transactional revs) from Subs to Transactional revs Movement from Other to Subs revs New Movement of SkyIQ and Search revs from Other to Wholesale and Syndication or Advertising revs Movement of Wholesale PPV to Transactional revs Movement of Sports syndication and Sky Vision revs from Other to Wholesale and Syndication revs Subscription 6, (82) 6,278 Subscription HIS 85 (85) - HIS Transactional Wholesale (3) 433 Wholesale and Syndication Advertising Advertising Other (20) (17) (27) 334 Other Total Revenue 7, ,617 Total Revenue 1 Currently includes Sky Bet 31

32 3 Changes to how we display our financials: Costs We may also make some small changes to our cost lines. DRAFT - Subject to audit and legal opinion We ll continue to report programming costs for each segment. We expect to combine the sub-categories of our other operating costs for statutory purposes within a single Selling, General and Administration cost line. We ll provide a split of this by territory and continue with additional narrative commentary, particularly around marketing costs within SG&A. We will continue to report Direct Network costs for our UK and ROI business. However, this line is not relevant for Germany or Italy due to the nature of their operations. For information, Direct Network costs include, amongst other things: LLU rental Broadband and WLR connection costs New Line Provision Customer migrations Content delivery network costs 32

33 3 Alignment of accounting policies DRAFT - Subject to audit and legal opinion There are currently some differences in the ways in which each territory recognises revenue and costs. Differences of accounting policy Differences of fact We are reviewing the accounting policies in each territory to align with the accounting policies of the Sky Group. This will result in the accounting policies of Italy and Germany being aligned with those of UK and ROI for the purposes of our Sky Group accounts. Generic examples of this could be asset lines and programming amortisation. Where there are differences of fact and commercial circumstances, the accounting policies in each territory will reflect this. For example: the UK and ROI treat the accounting for set-top box costs differently to Germany and Italy. This is because of differences of fact regarding who owns the set-top box in each territory and accordingly we do not expect this to change. 33

34 DRAFT - Subject to audit and legal opinion 4 Primary financial statements 34

35 4 Primary financial statements: Income Statement Condensed Consolidated Income Statement for the half year ended 31 December 2014 DRAFT - Subject to audit and legal opinion 2014/ /14 Half year Half year m m Revenue 3,757 Operating expense (3,192) EBITDA 794 Depreciation and amortisation (229) Operating profit 565 Share of results of joint ventures and associates 21 We expect minimal change to our primary financial statements (income statement, balance sheet and cash flow statement). The consolidated income statement is extended in order to apportion the result of Sky Deutschland to Sky Deutschland s minority German shareholders. Investment income 6 Finance costs (65) Profit on disposal of available-for-sale investment - Profit on disposal of associate - Profit before tax 527 Taxation (116) Earnings per share is calculated after deducting the portion of the Germany result attributed to minority shareholders. Profit for the period 411 Profit for the period attributable to: Equity shareholders of the parent company 411 Non controlling interests Numbers are illustrative.

36 4 Primary financial statements: Balance Sheet Condensed Consolidated Balance Sheet as at 31 December 2014 DRAFT - Subject to audit and legal opinion 31 December 31 December 30 June m m m Non-current assets Goodwill 1,028 1,019 Intangible assets Property, plant and equipment 1,035 1,088 Investments in joint ventures and associates Available-for-sale investments Deferred tax assets Trade and other receivables Programme distribution rights 19 7 Derivative financial assets ,844 3,876 Current assets Inventories 1, Trade and other receivables Short-term deposits Cash and cash equivalents 765 1,082 Derivative financial assets ,794 2,573 Total assets 6,638 6,449 The balance sheet will consolidate all the assets and liabilities of the Sky Group. The opening acquisition balance sheet will include new intangible assets relating to the existing customer contracts in the acquired businesses. The difference between the assets acquired and consideration paid will increase the Sky Group s goodwill balance. Similar to the income statement, the balance sheet will also apportion the net assets of the German territory between the Group s shareholders and the minority shareholders of Sky Deutschland. 36 Numbers are illustrative

37 4 Primary financial statements: Cash flow statement Condensed Consolidated Cash Flow Statement for the half year ended 31 December 2014 DRAFT - Subject to audit and legal opinion 2014/ /14 Half year Half year m m Cash flows from operating activities Cash generated from operations 774 Interest received 6 Taxation paid (135) Net cash from operating activities 645 Cash flows from investing activities Dividends received from joint ventures and associates 17 Net funding to joint ventures and associates (2) Proceeds on disposal of investments - Purchase of property, plant and equipment (122) Purchase of intangible assets (123) Purchase of subsidiaries (net of cash and cash equivalents purchased) (20) Purchase of available-for-sale investments (2) Decrease in short-term deposits 200 Net cash (used in) from investing activities (52) Cash flows from financing activities Net proceeds from borrowing - Repayment of obligations under finance leases (1) Proceeds from disposal of shares in Employee Share Ownership Plan ( ESOP ) 4 Purchase of own shares for ESOP (164) Purchase of own shares for cancellation (115) Interest paid (69) Dividends paid to shareholders of the parent (298) Net cash used in financing activities (643) We expect the changes to the Group cash flow statement to be minimal. Cash flows from operating and investing activities will include payments and receipts of the Italian and German territories. Cash outflow for Purchase of subsidiaries will include the cash element of consideration paid. Cash raised in debt and equity markets to finance the transaction will be shown as inflows in the financing section of the statement. Net (decrease) increase in cash and cash equivalents (50) Cash and cash equivalents at the beginning of the period 815 Cash and cash equivalents at the end of the period 765 Numbers are illustrative 37

38 DRAFT - Subject to audit and legal opinion 5 Adjusted profit 38

39 5 Adjusted profit DRAFT - Subject to audit and legal opinion In common with most FTSE companies, we present our financials on an adjusted basis to allow you to understand the underlying performance of the business. We ll continue to provide statutory financials and provide a reconciliation between statutory and adjusted. This is not a change. For example, following our previous acquisition of O2 s consumer broadband and fixed-line telephony business in April 2013, we adjusted for the costs of the integration. 39

40 5 Adjusted profit DRAFT - Subject to audit and legal opinion The transaction will add new items to our reconciliation from statutory to adjusted measures. As communicated as part of the transaction, there will be a number of substantial one-off items this year including: Profit arising on the disposal of part of our investment in ITV Profit on disposal of our stake in National Geographic Fees and costs associated with the transaction and financing One-time costs of achieving synergies (likely to be some this year and more in the following few periods) There will also be a number of new, recurring adjusting items including: Amortisation of acquired intangible assets (principally the value of customer contracts arising from the acquisition accounting process), in line with the practice adopted for the acquisition of the O2 broadband business The deferred tax charge (see section 6) that arises in each period as the acquired tax losses in Germany are utilised. This will align our results more closely to cash tax paid, after taking relief for the losses 40

41 5 Adjusted profit Extract from Note 5 of the press release DRAFT - Subject to audit and legal opinion 2014/15 Half year m Reconciliation from profit for the period to adjusted profit for the period Profit for the period Profit on disposal of available-for-sale investment Profit on disposal of associate Advisory and transaction fees and finance costs incurred on the purchase of Sky Italia and Sky Deutschland One-time costs of achieving synergies Amortisation of acquired intangible assets Remeasurement of all derivative financial instruments not qualifying for hedge accounting and hedge ineffectiveness Tax effect of above items Reversal of deferred tax charge relating to acquired German tax losses Adjusted profit for the period xxx xxx xxx xxx xxx xxx xxx xxx xxx xxx 41

42 DRAFT - Subject to audit and legal opinion 6 Deferred tax 42

43 6 Deferred tax DRAFT - Subject to audit and legal opinion We expect to be able to utilise Sky Deutschland s historical losses of 2.6 billion to reduce our current tax payments. The value of these losses will be recognised in full as a deferred tax asset in our opening acquisition balance sheet. Our current estimate is that the deferred tax asset is worth in the region of 700 million. The deferred tax asset will be unwound through the income statement as the acquired losses are utilised. There is no time limit on their utilisation. We will exclude this deferred tax charge from our adjusted earnings measures in order to align our results more closely to cash tax paid after taking relief for the losses. 43

44 DRAFT - Subject to audit and legal opinion external reporting calendar 44

45 external reporting calendar DRAFT - Subject to audit and legal opinion 2014/15 Q2 2014/15 Q3 2014/15 Q4 Proposed reporting date: Enlarged group Wednesday 4 February Wednesday 6 May Wednesday 5 August Historically BSkyB has been one of the fastest reporting companies in the UK. Sky Deutschland s own external reporting is later and our enlarged group will become more complex to account for and audit. We will therefore align reporting dates for our quarterly earnings releases making them later by around a week 2015/16 Q1 Wednesday 4 November We expect Sky Deutschland to report the same day so long as they remain listed. 45

46 We re here to help DRAFT - Subject to audit and legal opinion Edward Steel ed.steel@sky.uk Lang Messer Lang.messer@bskyb.com Robert Hope Robert.hope@bskyb.com