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British Sky Broad. (SKY)

British Sky Broad.

Results for the twelve months ended 30 June 2014
RNS Number : 3172N
British Sky Broadcasting Group PLC
25 July 2014
 



 

 

 

BRITISH SKY BROADCASTING GROUP PLC

Results for the twelve months ended 30 June 2014


Adjusted results

Statutory results

Twelve months to 30 June

2013/14

2012/13

Variance

2013/14

2012/13

Variance

Revenue 1

£7,611m

£7,146m

+6.5%

£7,632m

£7,235m

+5.5%

EBITDA

£1,667m

£1,692m

(1.5%)

£1,597m

£1,669m

(4.3%)

Operating profit

£1,260m

£1,330m

(5.3%)

£1,161m

£1,291m

(10.1%)

Earnings per share (basic)

60.0p

60.0p

-

55.4p

60.7p

(8.7%)

 

VERY STRONG PERFORMANCE ACROSS THE BOARD

Good financial performance

·    Adjusted revenue1 up 7% to £7.6 billion

·    Strong finish to the year

·    Adjusted basic earnings per share flat at 60.0 pence, despite investment in connected TV services and one-off step-up in Premier League costs

·    7% increase in full year dividend to 32.0 pence per share

Core businesses growing well

·    Added 3.1 million new paid-for products, 23% more than prior year2

·    342,000 new customers, highest customer growth in 3 years2

·    TV growth of 264,000, double rate of prior year

·    Sky Sports share of viewing at highest level in seven years

·    New Sky+ homepage rolled out to 8.3 million homes

New areas of business accelerating

·    Over 50% TV customers now connected driving threefold increase in On Demand usage

·    19% increase in Sky Go customers

·    Sky Store revenues doubled year on year

·    Sky AdSmart attracted 180 advertisers in first six months, 68% new to Sky

·    One in five NOW TV customers take both Entertainment and Movies monthly passes

Creating a world-class multinational pay TV business

·    Acquiring 100% of Sky Italia and 57.4% of Sky Deutschland from 21st Century Fox

·    Expanded growth opportunity, benefits of scale and significant synergy potential

·    Combining complementary businesses with shared brand and market-leading capabilities

_____________

1 Adjusted revenue as presented here is from recurring activities.  It excludes revenues earned from the discontinued retailing of the ESPN channel of £6 million (2013: £89 million).  The current period includes the consolidation of revenues from the acquired O2 broadband customers. The adjusted figures presented here differ only in respect of ESPN from those included within Appendix 1.

2 Excluding the acquired O2 customer and product base.

Jeremy Darroch, Chief Executive, commented:

 

"We have delivered an excellent year of growth as customers responded in record numbers to the combination of high-quality TV and innovative new services. This has resulted in the addition of 23% more products than last year and the highest rate of customer growth for three years.

 

"Strong demand across the board has translated to a 7% increase in revenues. Combined with a continued focus on operating efficiency, this means we have matched last year's record level of earnings per share. This is an excellent result in a year in which we have had a one-off step up in Premier League costs and invested to accelerate take-up and usage of connected TV services. As we anticipated, we are starting to see the returns from our investment come through, leading us to increase the dividend for the tenth consecutive year.

 

"We saw a particularly good performance in TV, adding twice as many new customers as last year. This growth was underpinned by the increasing quality and range of content that we offer for the whole family, making Sky the number one destination for customers who want the best choice of TV. Our entertainment channels - Sky 1, Sky Atlantic and Sky Living - now account for three of the top four slots in customers' ranking of must-have pay TV channels while Sky Sports enjoyed its highest share of viewing in seven years.

 

"Our investment to increase take-up and usage of new connected TV services is delivering excellent results. After connecting 3 million boxes this year, more than half of TV customers now have access to our market-leading On Demand services and the benefits are coming through in increased viewing, satisfaction and loyalty. Our expanded Box Sets offering has been a particular hit among customers with Game of Thrones, 24 and Grey's Anatomy each achieving over 10 million downloads over the course of the year.

 

"We are also making good progress in developing new revenue streams. More than one million customers now take our premium mobile TV service, Sky Go Extra, and we've opened up the movie purchase market with our Buy & Keep service in Sky Store. In addition, Sky Bet grew strongly and we attracted new advertisers to Sky with our targeted advertising service AdSmart.

 

"Looking ahead, we see a broader opportunity for growth than ever before as we bring our core products to more customers, and open up new revenue opportunities. After a successful year of investment, we are well placed to exploit these opportunities and continue to deliver growth and returns for shareholders."

 

 

 

Results Highlights

 

Customer Metrics (unaudited)


As at
30-Jun-14

As at
30-Jun-13

Annual Growth

Quarterly Growth to 30-Jun-14






Total paid-for products ('000s)

34,775

31,634

3,141

704

     TV

10,686

10,422

264

76

     Sky+HD

5,242

4,786

456

129

     Multiscreen

2,559

2,489

70

19

     Sky Go Extra

1,177

166

1,011

250

     Broadband

5,247

4,906

341

50

     Telephony

4,982

4,501

481

87

     Line rental

4,882

4,364

518

93






Paid-for products per retail customer

3.0

2.8








New connected TV services ('000s)





     Internet-connected Sky+HD boxes

5,662

2,709

2,953

710

     Sky Go registered households

5,504

4,630

874

172






Total Customers ('000s)

15,536

14,830

706

514

      Retail Customers

11,495

11,153

342

75

      Wholesale Customers (1)

4,041

3,677

364

439






ARPU (2)

£576

£569

+£7

+£5

Triple play

37%

35%

+2%

-

Churn (3)

10.7%

10.9%

-0.2%

-0.2%






 

An additional KPI summary table containing further detailed disclosure can be found in Schedule 1.

 

  

_____________

1 Wholesale customers taking at least one paid-for Sky channel. The customer numbers are as reported to us at June 2014.

2 Quarterly annualised. Excluding revenues earned from retailing the ESPN channel.

3 Quarterly annualised.

OPERATIONAL PERFORMANCE

 

We have had an excellent year of performance delivering broad growth across both products and customers while successfully executing the investment plans we set out last July.

 

We saw strong top-line growth across the year with adjusted revenues up by 7%, driven by strong demand across the board. Combined with a continued focus on operating efficiency, this resulted in adjusted basic earnings per share being flat year on year. This is an excellent result in a year where the business absorbed a one-off step up in Premier League costs and invested to accelerate take-up and usage of new connected TV services. A 7% increase in the full year dividend to 32.0 pence per share is the tenth consecutive year of growth and reflects the underlying strength of the business.

 

We continued to reap the benefits of our broadly-based approach to growth, adding 3.1 million net new paid-for subscription products in the year, 23% more than the prior year on an organic basis. With the addition of 704,000 new products in the fourth quarter, customers now take an average of 3.0 paid-for products from Sky.

 

We closed the year with 11.5 million retail customers, an increase of 342,000 over the year and 75,000 in the quarter. Overall, we added a third1 more customers than in the previous year, our highest rate of growth in three years.

 

We had another strong quarter in TV, adding 76,000 net new products in Q4, more than double the same period last year. Total annual growth of 264,000 was the strongest growth in TV since hitting the 10-million mark in 2010 and contributed to total growth in the year of 1.8 million across our TV product set.

 

Our investment to accelerate take-up and usage of connected TV services was key to our strong performance in TV. Demand for our expanded Box Sets offering drove upgrades to the higher-tier HD packages while Sky Go Extra, our paid-for mobile TV service, grew by a million products over the 12 month-period.

 

In home communications, we added 341,000 net new broadband products in the year, 50,000 in the fourth quarter. This reflects our decision, in a highly promotional environment, to focus on growing TV products and responding to strong customer demand for our connected TV services. At the end of the year, 37% of customers took all three of TV, broadband and telephony from Sky, up 2 percentage points on the prior year.

 

ARPU increased by a further £7 on last year to reach £576 while annualised churn for the fourth quarter was 10.7%, down slightly on last year's figure of 10.9%.

_____________

1.Excluding the acquired O2 customer base.

Content

 

We have had another successful 12 months on screen. Sky's pay channels outperformed the market in share of viewing and now account for all of the top 5 'must-have' pay channels among customers, with Sky 1 rated top.

 

Our investment in original British production, and particularly drama, has continued to deliver good results. The stand-out success in Q4 was the critically-acclaimed Victorian thriller, Penny Dreadful. A co-production with Showtime, this has become the biggest-ever commissioned series on Sky Atlantic and will return for a second series to premiere in 2015. Meanwhile, in acquired content, the fourth series of HBO's epic Game of Thrones set new records to become the highest-rating show ever for Sky Atlantic with average viewing up 60% on series 3, supported by the availability of Box Sets of series 1-3 On Demand.

 

Our investment in content won external recognition in the last three months with BAFTA TV Awards for A League of Their Own, David Attenborough's Natural History Museum Alive in 3D and Sky Sports' coverage of last year's Ashes.

 

Sky Sports ended the year with its share of viewing at a seven-year high, boosted by the open race for the Premier League title. Sky Sports showed more games than ever before with 116 live fixtures including 49 of the 50 most watched Premier League matches. It also delivered its highest share in Sky homes on a single day for two years in the last weekend of May with a non-stop weekend of sports including the Championship Play-Off Final, the Heineken Cup Final and the Monaco Grand Prix.

 

Connected TV Services

 

Our focus in the last 12 months has been on driving take-up and usage of connected TV services to enable more customers to benefit from a much richer entertainment experience. The investment we have made to put Sky at the heart of the 'connected home' has delivered results. We connected 3 million Sky+HD boxes to broadband in the year, more than doubling our base of connected homes to 5.7 million, over 50% of all Sky TV customers.

 

This rapid roll-out drove a threefold increase in On Demand usage with our expanded Box Sets offering proving particularly popular. Box Set usage grew rapidly throughout the year to hit 86 million downloads in Q4, a fourfold increase year on year. With more than 250 Box Sets now available on Sky and more of the latest titles than anyone else in the market, titles like 24 and Grey's Anatomy achieved over 10 million downloads each.

 

The launch of a new home page for our electronic programming guide ('EPG') in March, showcasing the full range of On Demand content, helped fuel this growth. Now in 8.3 million homes, the EPG has delivered an uplift in On Demand usage. Overall, our connected customers are watching more TV and more pay TV. They are more satisfied with their service and more loyal to Sky.

 

It is a similar story with Sky Go.  The number of Sky Go customers increased by 19% over the year to 5.5 million with viewing up by a quarter to 16 million sessions a week by the end of the year. The addition of more content and on-demand functionality has driven an increase in viewing to entertainment and movies which accounted for 60% of all Sky Go views in Q4.

 

Our investment in connected services is opening up attractive new sources of revenue. Revenues to Sky Store, our movie transaction service, doubled year on year with top titles including Frozen and Captain Phillips. We also launched our 'Buy & Keep' movies service in Q4 enabling customers to buy, watch and keep the very latest and best movies on their TV. This has got off to a very strong start, achieving, for example, being the number one digital retailer for the Warner Bros.' blockbuster title The Lego Movie in its first week of sales.

 

Our targeted advertising service, Sky AdSmart, has also had a strong start. After just six months, we have run almost 600 separate campaigns from 180 different advertisers, of whom 68% are new to Sky. We are now increasing the proportion of our inventory available through AdSmart, extending the services to our third party channels and adding additional segments. A new partnership with Johnston Press further strengthens the offering by enabling local companies to create and deliver campaigns that combine Johnston's regional print titles with TV advertising focused on specific local markets.

 

We continue to see a very good opportunity in wholesale. In May, we signed a new long-term distribution agreement with Virgin Media for our premium and basic channels. This week, we also announced a new deal with TalkTalk for distribution of Sky Sports and Sky Movies to its YouView customers.

 

Service

 

We have continued to make good progress in service, extending our lead in the quality of service delivery whilst also increasing the efficiency of our operations.

 

Our most reliable Sky+HD box is now in 83% of homes versus 75% last year. At the same time, we have continued to develop our online help centre, providing more information and tools to enable customers to resolve themselves many of the common problems that arise. As a result, the number of online help visits has doubled over two years to more than 1 million visits per week. This summer, we took another important step with the launch of our dedicated customer service smartphone app.

 

The results are clear in our customer satisfaction scores. Our internal satisfaction scores are at an all-time high while our One Service model, which aims to join up different elements of the service experience more effectively and now covers around 20% of customer calls, is achieving even higher scores. We also retained our lead as number 1 for customer satisfaction in the triple play sector in Ofcom's latest Customer Service Satisfaction report.

 

Broader Contribution

 

In November, we made a step change in our contribution to the communities in which we operate with the launch of Sky Academy, a set of initiatives focused on helping young people to build skills and experience. We are pleased with the progress that we have made so far with Sky Academy reaching 105,000 young people in its first year. This includes initiatives such as Sky Academy Skills Studios which sees classes of school students visit our Osterley campus to make their own TV news report on a subject linked to the curriculum in a dedicated state-of-the-art facility. To help us reach even more schools across the country, we have started construction of a second Skills Studios in Livingston to open next year. We are also trialling a major new work experience initiative for 16-18 year-olds for launch in the autumn.

 

Beyond Sky Academy, we launched a new cycling brand campaign in May to sit alongside our Sky Ride programme of mass participation and local cycling events and highlight the positive impact of Sky's partnership with British Cycling, tapping into the excitement around the start of this year's Tour de France in Yorkshire.

 

FINANCIAL PERFORMACE

 

We delivered a good financial performance for the twelve months to 30 June 2014. Adjusted revenue growth was 7% and this, together with continued discipline on costs, allowed us to deliver adjusted EBITDA of £1,667 million, down only 1%, despite our connected services investment and the step up in Premier League amortisation. Adjusted basic earnings per share were 60.0 pence, flat on the prior year's record level.

 

Unless otherwise stated, all figures and growth rates below exclude adjusting items.

 

Revenue

 

Revenue increased by 7% to £7,611 million (2013: £7,146 million) excluding ESPN revenue in both periods, with continued strong growth in both our retail and commercial businesses.

 

Retail subscription revenue, after adjusting for £6 million of ESPN revenue (2013: £89 million), grew by 7% to £6,249 million (2013: £5,862 million) reflecting strong product and customer growth and price rises in the year. Our investments in connected services are paying back, driven by a strong performance from Sky Store which saw revenues more than double on last year.

 

Our commercial businesses also performed well. Advertising revenue was up 7% to £472 million (2013: £440 million) through a combination of market growth, share gains through our consolidation of two small sales houses in this financial year and a first time contribution from AdSmart. Wholesale revenue increased by 3% to £407 million (2013: £396 million) as renewed carriage agreements and price increases were partially offset by lower customer volumes on third party platforms.

 

Other revenue increased by 10% to £398 million (2013: £361 million) with continued strong performance from Sky Bet which saw mobile users up 29%, driving revenues up 18% to £183 million.

 

Our statutory reported revenue grew 5%.

 

Costs

 

Excluding the one-off step up in the new Premier League deal of £217 million and the discontinuation of ESPN carriage, programming costs of £2,439 million (2013: £2,408 million) were up 1% in the year as we made disciplined choices across our diverse content portfolio. Sports accounted for the majority of the increase given our investment in a large number of renewed and new rights agreements. Movies costs increased from a broader grant of rights facilitating new propositions like NOW TV, Sky Go Extra and Sky Store, while payments to third party channel providers were lower than prior year as we negotiated more favourable terms on several renewed agreements.

 

Direct network costs of £819 million were up 15% (2013: £715 million) as we continued to grow our customer base and absorbed the acquired O2 customer base onto our network.

 

Marketing costs of £1,199 million (2013: £1,116 million) were driven by the increased growth of paid-for products compared to last year and promotions behind our drive to connect our base of set-top boxes. Above the line marketing was also higher as we maintained our share of voice in the market with targeted campaigns throughout the year.

 

Subscriber management and supply chain costs were up 6% at £688 million (2013: £647 million) as we continued to see strong growth in products and customers, invested in our connected services and integrated the acquired O2 customers into the Sky base.

 

Transmission, technology and fixed network costs increased by 11% to £447 million (2013: £401 million) largely due to the first time consolidation of the cost base associated with the acquired O2 broadband business. Administration costs of £542 million were broadly flat on last year (2013: £540 million).

 

Profits and earnings

 

Adjusted EBITDA of £1,667 million (2013: £1,692 million) and adjusted operating profit of £1,260 million (2013: £1,330 million) is an excellent result in a period where the business absorbed a one-off step up in Premier League costs and invested to accelerate take-up and usage of new connected TV services.

 

Depreciation and amortisation was up 12% at £407 million (2013: £362 million) due to the integration of the acquired O2 business, a higher base of depreciable assets with more unbundled exchanges, network upgrades carried out across the year and a higher fixed asset base as we begin to depreciate the development costs of products such as NOW TV and AdSmart.

 

Profit before tax was £1,186 million (2013: £1,264 million), which included the Group's share of joint ventures and associates' profits of £35 million (2013: £37 million) and a net interest charge of £109 million (2013: £103 million). Taxation for the period was £249 million (2013: £295 million), at an adjusted effective tax rate of 21% (2013: 23%) mainly as a result of the reduction in the rate of UK corporation tax.

 

Profit after tax for the year was £937 million (2013: £969 million), generating adjusted basic earnings per share of 60.0 pence (2013: 60.0 pence). Over the year the weighted average number of shares excluding those held by the Employee Share Ownership Plan ('ESOP') for the settlement of employee share awards was 1,562 million (2013: 1,614 million). The closing number of shares, excluding the ESOP shares, at 30 June 2014 was 1,546 million (2013: 1,573 million).

 

Adjusting items

 

Statutory operating profit of £1,161 million (2013: £1,291 million) includes a net exceptional cost of £99 million (2013: £39 million) which reflects integration costs of the acquired O2 business and the ongoing amortisation of acquired intangibles, the costs of a corporate efficiency programme undertaken through the year, offset in part by a net gain from the termination of an escrow agreement with a wholesale customer.

 

Statutory profit after tax of £865 million (2013: £979 million) also includes a net exceptional gain of £27 million, primarily due to a tax credit and the tax effect on all adjusting items. Full details of all of these items are set out in Appendix 1.

 

Cash flow and financial position

 

Adjusted free cash flow, excluding campus redevelopment investment, was 3% lower at £1,006 million (2013: £1,040 million) reflecting lower EBITDA and higher capital expenditure, offset by a positive working capital movement and lower cash tax.

 

Capital expenditure increased by £89 million to £543 million (2013: £454 million) due to the phasing of campus redevelopment investment, the integration and migration of acquired O2 customers and product development investment. Excluding the campus redevelopment, underlying capital expenditure was £481 million (2013: £442 million).

 

Net debt increased slightly to £1,212 million (2013: £1,183 million) as a result of the £750 million cash returned to shareholders via dividends and share buy-back in the year. Gross debt was £2,589 million, with £1,377 million of cash and cash equivalents and short-term deposits at 30 June 2014. The Group's liquidity and headroom remain comfortable.

 

We have once again increased our ordinary dividend. The Directors' proposed final dividend of 20.0 pence per share takes the total dividend payable in respect of the financial year to 32.0 pence per share, an increase of 7% on last year and double the level of seven years ago. Shareholders have now benefited from a decade of sustained dividend growth such that a holder of a single Sky share over that period would have received over 200 pence in dividends.

 

The ex-dividend date will be 13 November 2014 and, subject to shareholder approval at the 2014 Annual General Meeting, the final dividend of 20.0 pence will be paid on 5 December 2014 to shareholders appearing on the register at the close of business on 14 November 2014.

 

At the Company's AGM on 22 November 2013, we received shareholder approval to return up to £500 million of capital to shareholders via a share buy-back. We still have headroom to return up to £285 million to shareholders under the existing authority which runs until the 2014 AGM.



 

Corporate

 

ITV

 

On 17 July 2014 Sky placed a shareholding of approximately 6.4% in ITV which resulted in aggregate consideration of £481 million.

 

Creating the new Sky

 

Sky today announced it has entered into agreements with 21st Century Fox to acquire its 100% stake in Sky Italia and its 57.4% (on a fully diluted basis) interest in Sky Deutschland. The total consideration for the acquisition of Sky Italia is £2.45 billion with approximately £2.07 billion to be paid in cash and the balance to be satisfied through the transfer of Sky's 21% stake in National Geographic to 21st Century Fox at a value of £380 million.1

 

The acquisition of 21st Century Fox's shareholding in Sky Deutschland is for a consideration of £2.9 billion in cash, valuing Sky Deutschland at €6.75 a share. The transactions are subject to regulatory and independent shareholder approval.

 

The cash consideration will be funded through the market issuance of 156,132,213 new Ordinary Shares representing approximately 9.99% of the issued share capital and a combination of new debt facilities and cash resources.

 

Sky is also making a required offer to minority shareholders in Sky Deutschland at €6.75 a share.

 

  

 

_____________

1. The value of the stake in National Geographic is fixed in US$ and converted to sterling, based on the £ to US$ exchange rate as derived from Bloomberg on 23 July 2014.

Enquiries:

 

Analysts/Investors:




Edward Steel

Tel: 020 7032 2093

Lang Messer

Tel: 020 7032 2657



E-mail: investor-relations@bskyb.com




Press:




Alice Macandrew

Tel: 020 7032 4256

Eleanor Mills

Tel: 020 7032 6615

 

 

E-mail: BSkyBPress@bskyb.com

 

 

 

There will be a presentation for analysts and investors at 8.30 a.m (BST) at Allen & Overy, One Bishops Square, London, E1 6AD. CEO, Jeremy Darroch and CFO, Andrew Griffith, will present. Participants should register by contacting Felicity Marshall on +44 20 7251 3801 or at felicity.marshall@RLMFinsbury.com.

 

There will be a separate conference call for US analysts and investors at 10.00 a.m. (EDT).  To register for this please contact Dana Diver at Taylor Rafferty on +1 212 889 4350.  Alternatively you may register online by using the following link
http://invite.taylor-rafferty.com/_bskyb/2013Q2CC/Default.htm.

 

A live webcast of the UK and US call will be available to analysts and investors via the BSkyB website at http://www.sky.com/corporate. Replays will be subsequently available.

 



 

Schedule 1 - KPI Summary

 

All figures (000)

FY11/12

FY12/13

FY13/14

unless stated

Q4

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4











Total paid-for subscription products

28,365

28,898

29,513

30,228

31,634

32,434

33,307

34,071

34,775











   TV

10,288

10,308

10,358

10,388

10,422

10,459

10,536

10,610

10,686

   Sky+ HD

4,343

4,468

4,561

4,669

4,786

4,893

5,005

5,113

5,242

   Multiscreen

2,402

2,423

2,467

2,476

2,489

2,503

2,528

2,540

2,559

   Sky Go Extra

-

-

-

44

166

385

643

927

1,177

   Broadband

4,001

4,103

4,235

4,387

4,906

5,017

5,127

5,197

5,247

   Telephony

3,768

3,888

4,022

4,208

4,501

4,652

4,792

4,895

4,982

   Line rental

3,563

3,708

3,870

4,056

4,364

4,525

4,676

4,789

4,882











New connected TV services

4,479

5,004

5,777

6,673

7,339

8,194

9,402

10,284

11,166

  Connected HD boxes

995

1,255

1,715

2,284

2,709

3,351

4,352

4,952

5,662

  Sky Go registered households

3,484

3,749

4,062

4,389

4,630

4,843

5,050

5,332

5,504











Total products and services

32,844

33,902

35,290

36,901

38,973

40,628

42,709

44,355

45,941











Other metrics:










   Retail customers

10,606

10,654

10,742

10,812

11,153

11,224

11,330

11,420

11,495

   Wholesale customers

3,672

3,714

3,751

3,801

3,677

3,617

3,624

3,602

4,041

Total customers

14,278

14,368

14,493

14,613

14,830

14,841

14,954

15,022

15,536











ARPU (£)1

£541

£542

£558

£567

£569

£559

£570

£571

£576

Triple-play %

32%

33%

33%

34%

35%

36%

36%

37%

37%

Churn

9.9%

10.9%

10.3%

10.8%

10.9%

11.0%

10.8%

10.9%

10.7%











Fixed Network Metrics










On-net base

3,778

3,882

4,031

4,190

4,696

 

4,826

4,921

4,992

5,033

   MPF base

2,588

2,762

2,926

3,159

3,359

3,504

3,659

3,831

4,185

   SMPF base

1,190

1,120

1,105

1,031

1,337

1,322

1,262

1,161

848











   MPF %

69%

71%

73%

75%

72%

73%

74%

77%

83%

   SMPF %

31%

29%

27%

25%

28%

27%

26%

23%

17%

Off-net base

223

221

204

197

210

191

206

205

214











Total Broadband

4,001

4,103

4,235

4,387

4,906

5,017

5,127

5,197

5,247











On-net %

94%

95%

95%

96%

96%

96%

96%

96%

96%











Total no. of LLU exchanges

1,965

2,036

2,108

2,202

2,323

2,354

2,355

2,355

2,367

 

1 Calculations have been restated to exclude revenue earned from retailing the ESPN channel.



 

Use of measures not defined under IFRS

 

This press release contains certain information on the Group's financial position, results and cash flows that have been derived from measures calculated in accordance with IFRS. This information should not be read in isolation from the related IFRS measures.

 

Forward looking statements

 

This document contains certain forward looking statements with respect to the Group's financial condition, results of operations and business, and our strategy, plans and objectives for the Group. These statements include, without limitation, those that express forecasts, expectations and projections, such as forecasts, expectations and projections in relation to new products and services, the potential for growth of free-to-air and pay television, fixed line telephony, broadband and bandwidth requirements, advertising growth, DTH and OTT customer growth, Multiscreen, On Demand, NOW TV, Sky Go, Sky Go Extra, Sky+, Sky+HD and other services penetration, revenue, administration costs and other costs, advertising growth, churn, profit, cash flow, products and our broadband network footprint, content, wholesale, marketing and capital expenditure and proposals for returning capital to shareholders. Other factors which may cause future outcomes  to  differ  from  those  foreseen  in  forward-looking statements include, but are not limited to: general economic and business conditions; demand for the Company's products and services; competitive factors in the industries in  which the Company operates; exchange rate fluctuations; legislative, fiscal and regulatory developments; political risks; terrorism, acts of war and pandemics; changes in law and legal interpretations affecting  the Company's intellectual property rights and internet communications; and the impact of technological change.

 

Although the Company believes that the expectations reflected in such forward looking statements are reasonable, these statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our 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. Information on the significant risks and uncertainties are described in the "Principal risks and uncertainties" section of Sky's Annual Report for the full year ended 30 June 2013 (as updated in Sky's results for the six months ended 31 December 2013). Copies of the Annual Report and 31 December 2013 results are available from the British Sky Broadcasting Group plc web page at www.sky.com/corporate.

 

All forward looking statements in this document are based on information known to the Group on the date hereof. The Group undertakes no obligation publicly to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.

 

Glossary of Terms

 

A glossary of terms is included within the Annual Report and on our corporate investor relations web page at http://corporate.sky.com/investors/glossary. Copies of the Annual Report are available from the British Sky Broadcasting Group plc web page at www.sky.com/corporate and in hard copy from the Company Secretary, British Sky Broadcasting Group plc, Grant Way, Isleworth, Middlesex TW7 5QD.



 

     Appendix 1 - Consolidated Financial Information

 

       Consolidated Income Statement - reconciliation of statutory and adjusted numbers 




          2014




        2013




Statutory

Adjusting Items

Adjusted


Statutory

Adjusting Items

Adjusted

 


Notes

£m

£m

£m


£m

£m

£m

 

Revenue









 

Retail subscription


6,255

-

6,255


5,951

-

5,951

 

Wholesale subscription

A

422

(15)

407


396

-

396

 

Advertising


472

-

472


440

-

440

 

Installation, hardware and service


85

-

85


87

-

87

 

Other


398

-

398


361

-

361

 



7,632

(15)

7,617


7,235

-

7,235

 

Operating expense









 

Programming

B

(2,662)

-

(2,662)


(2,487)

1

(2,486)

 

Direct networks

C

(850)

31

(819)


(686)

(29)

(715)

 

Marketing

D

(1,215)

16

(1,199)


(1,117)

1

(1,116)

 

Subscriber management and supply chain

E

(694)

6

(688)


(673)

26

(647)

 

Transmission, technology and fixed networks

F

(460)

13

(447)


(405)

4

(401)

 

Administration

G

(590)

48

(542)


(576)

36

(540)

 



(6,471)

114

(6,357)


(5,944)

39

(5,905)

 










 

EBITDA


1,597

70

1,667


1,669

23

1,692

 










 

Operating profit


1,161

99

1,260


1,291

39

1,330

 

Share of results of joint ventures

and associates

H

35

-

35


46

(9)

37

 

Investment income


26

-

26


28

-

28

 

Finance costs

I

(140)

5

(135)


(108)

(23)

(131)

 

Profit before tax


1,082

104

1,186


1,257

7

1,264

 

Taxation

J

(217)

(32)

(249)


(278)

(17)

(295)

 

Profit for the year


865

72

937


979

(10)

969

 










 

Earnings per share (basic)


55.4p

4.6p

60.0p


60.7p

(0.7)p

60.0p

 

 

Notes: explanation of adjusting items for the year ended 30 June 2014

 

 

A.     Revenue of £15 million relating to termination of an escrow agreement with a current wholesale operator.

C.    Costs of £31 million relating to the acquisition and integration of the O2 consumer broadband and fixed-line telephony business.

D.    Costs of £15 million in relation to a corporate restructuring and efficiency programme and costs of £1 million relating to the acquisition and integration of the O2 consumer broadband and fixed-line telephony business.

E.    Costs of £3 million relating to the acquisition and integration of the O2 consumer broadband and fixed-line telephony business and costs of £3 million in relation to a corporate restructuring and efficiency programme (principally an impairment of £2 million in relation to associated intangible and tangible assets).

F.    Costs of £13 million relating to the acquisition and integration of the O2 consumer broadband and fixed-line telephony business (including amortisation of £4 million in relation to associated intangible assets).

G.    Costs of £24 million relating to the acquisition and integration of the O2 consumer broadband and fixed-line telephony business (including amortisation of £23 million in relation to associated intangible assets), costs of £22 million relating to a corporate restructuring and efficiency programme and costs of £2 million relating to an expense as a result of the termination of an escrow agreement with a current wholesale operator.

I.     Remeasurement of all derivative financial instruments not qualifying for hedge accounting and hedge ineffectiveness.

J.     Tax adjusting items and the tax effect of above items.

 

Notes: explanation of adjusting items for the year ended 30 June 2013

 

B.    Costs of £1 million relating to a corporate efficiency programme.

C.    Credit of £32 million relating to a credit note received following an Ofcom determination and costs of £3 million relating to the acquisition and integration of the O2 consumer broadband and fixed-line telephony business.

D.    Costs of £1 million relating to a corporate efficiency programme.

 

E.     Credit of £33 million relating to the final settlement of disputes with a former manufacturer of set-top boxes (net of associated costs and including an impairment of £6 million in relation to associated intangible assets), costs of £31 million relating to one-off upgrade of set-top boxes, costs of £25 million relating to a programme to offer wireless connectors to selected Sky Movies customers, costs of £2 million relating to the acquisition and integration of the O2 consumer broadband and fixed-line telephony business and costs of £1 million relating to a corporate efficiency programme.

F.    Costs of £1 million relating to a corporate efficiency programme, significantly an impairment of associated intangible and tangible assets, and £3 million relating to the acquisition and integration of the O2 consumer broadband and fixed-line telephony business.

G.    Costs of £29 million relating to a corporate efficiency programme, primarily redundancy costs and including an impairment of £5 million in relation to associated intangible and tangible assets, and £7 million relating to the acquisition and integration of the O2 consumer broadband and fixed-line telephony business, including amortisation of £4 million in relation to associated intangible assets.

H.    Profit on disposal of the Group's interest in MUTV Limited.

I.     Remeasurement of all derivative financial instruments not qualifying for hedge accounting and hedge ineffectiveness.

J.     Tax adjusting items and the tax effect of above items.

 

 

Consolidated Income Statement for the year ended 30 June 2014

 



2014

2013


Notes

£m

£m

Revenue

2

7,632

7,235

Operating expense

3

(6,471)

(5,944)





EBITDA


1,597

1,669

Depreciation and amortisation


(436)

(378)





Operating profit


1,161

1,291





Share of results of joint ventures and associates

11

35

46

Investment income

4

26

28

Finance costs

4

(140)

(108)

Profit before tax


1,082

1,257





Taxation

5

(217)

(278)

Profit for the year attributable to equity shareholders of the parent company


865

979





Earnings per share from profit for the year (in pence)




Basic

6

55.4p

60.7p

Diluted

6

54.9p

59.7p





Adjusted earnings per share from adjusted profit for the year (in pence)



Basic

6

60.0p

60.0p

Diluted

6

59.5p

59.1p

 

 

 

 

 

 

 

Consolidated Statement of Comprehensive Income for the year ended 30 June 2014

 



2014

2013



£m

£m





Profit for the year attributable to equity shareholders of the parent company


865

979





Other comprehensive income




Amounts recognised directly in equity that may subsequently be recycled to the income statement




Gain on revaluation of available-for-sale investments


104

186

Loss on cash flow hedges


(176)

(27)

Tax on cash flow hedges


39

7



(33)

166





Amounts reclassified and reported in the income statement




Gain (loss) on cash flow hedges


137

(48)

Tax on cash flow hedges


(31)

11



106

(37)




Other comprehensive income for the year (net of tax)

73

129




Total comprehensive income for the year attributable to equity shareholders of the parent company

938

1,108

 



 Consolidated Balance Sheet as at 30 June 2014

 



2014

2013


Notes

£m

£m





Non-current assets




Goodwill

8

1,019

999

Intangible assets

9

810

718

Property, plant and equipment

10

1,088

1,041

Investments in joint ventures and associates

11

173

164

Available-for-sale investments

12

533

422

Deferred tax assets

13

31

38

Programme distribution rights

14

20

17

Trade and other receivables

15

7

17

Derivative financial assets


195

360



3,876

3,776





Current assets




Inventories

14

546

548

Trade and other receivables

15

635

591

Short-term deposits


295

595

Cash and cash equivalents


1,082

815

Derivative financial assets


15

20



2,573

2,569





Total assets


6,449

6,345





Current liabilities




Borrowings

18

11

11

Trade and other payables

16

2,286

2,023

Current tax liabilities


128

176

Provisions

17

48

94

Derivative financial liabilities


46

13



2,519

2,317





Non-current liabilities




Borrowings

18

2,658

2,909

Trade and other payables

16

56

63

Provisions

17

14

14

Derivative financial liabilities


129

29

Deferred tax liabilities

13

1

1



2,858

3,016





Total liabilities


5,377

5,333





Share capital

20

781

797

Share premium


1,437

1,437

Reserves


(1,146)

(1,222)




Total equity attributable to equity shareholders of the parent company

1,072

1,012





Total liabilities and shareholders' equity


6,449

6,345

 



Consolidated Cash Flow Statement for the year ended 30 June 2014

 



2014

2013


Notes

£m

£m





Cash flows from operating activities




Cash generated from operations

22

1,769

1,877

Interest received and dividends from available-for-sale investments


27

29

Taxation paid


(240)

(300)

Net cash from operating activities


1,556

1,606




 

Cash flows from investing activities



 

Dividends received from joint ventures and associates


32

43

Net funding to joint ventures and associates


(6)

(4)

Proceeds on disposal of an investment


-

4

Purchase of property, plant and equipment


(241)

(203)

Purchase of intangible assets


(302)

(251)

Purchase of subsidiaries (net of cash and cash equivalents purchased)


(20)

(197)

Purchase of available-for-sale investments


(7)

(9)

Decrease in short-term deposits


300

115

Net cash used in investing activities


(244)

(502)




 

Cash flows from financing activities



 

Net proceeds from borrowings


-

498

Repayment of obligations under finance leases


(4)

(1)

Proceeds from disposal of shares in Employee Share Ownership Plan ("ESOP")


11

15

Purchase of own shares for ESOP


(164)

(69)

Purchase of own shares for cancellation


(266)

(627)

Interest paid


(137)

(128)

Dividends paid to shareholders


(485)

(441)

Net cash used in financing activities


(1,045)

(753)




 

Net increase in cash and cash equivalents


267

351




 

Cash and cash equivalents at the beginning of the year


815

464

Cash and cash equivalents at the end of the year


1,082

815

 



Consolidated Statement of Changes in Equity for the year ended 30 June 2014

 


  Share  capital

Share

 premium

ESOP

reserve

Hedging

reserve

Available- for-sale reserve

Other reserves

  Retained  earnings

Total

 shareholders'

equity


£m

£m

£m

£m

£m

£m

£m

£m










At 1 July 2012

837

1,437

(112)

68

165

399

(1,850)

944

Profit for the year

-

-

-

-

-

-

979

979

Revaluation of available-for-sale investments

-

-

-

-

186

-

-

186

Recognition and transfer of cash flow hedges

-

-

-

(75)

-

-

-

(75)

Tax on items taken directly to equity

-

-

-

18

-

-

-

18

Total comprehensive income for the year

-

-

-

(57)

186

-

979

1,108










Share-based payment

-

-

(35)

-

-

-

61

26

Tax on items taken directly to equity

-

-

-

-

-

-

8

8

Share buy-back programme (see note 21):









- Purchase of own shares for cancellation

(40)

-

-

-

-

40

(617)

(617)

- Financial liability for close period purchases

-

-

-

-

-

-

(16)

(16)

Dividends

-

-

-

-

-

-

(441)

(441)

At 30 June 2013

797

1,437

(147)

11

351

439

(1,876)

1,012










Profit for the year

-

-

-

-

-

-

865

865

Revaluation of available-for-sale investments

-

-

-

-

104

-

-

104

Recognition and transfer of cash flow hedges

-

-

-

(39)

-

-

-

(39)

Tax on items taken directly to equity

-

-

-

8

-

-

-

8

Total comprehensive income for the year

-

-

-

(31)

104

-

865

938










Share-based payment

-

-

2

-

-

-

(95)

(93)

Tax on items taken directly to equity

-

-

-

-

-

-

9

9

Share buy-back programme (see note 21):









- Purchase of own shares for cancellation

(16)

-

-

-

-

16

(250)

(250)

- Financial liability for close period purchases

-

-

-

-

-

-

(59)

(59)

Dividends

-

-

-

-

-

-

(485)

(485)

At 30 June 2014

781

1,437

(145)

(20)

455

455

(1,891)

1,072

 

 

 

 

Notes to the consolidated financial statements

 

1          Basis of Preparation

 

The financial information set out in this preliminary announcement does not constitute statutory financial statements for the years ended 30 June 2014 or 2013, for the purpose of the Companies Act 2006, but is derived from those financial statements. Statutory financial statements for 2014, on which the Group's auditors have given an unqualified report which does not contain statements under s. 498(2) or (3) of the Companies Act 2006, will be filed with the Registrar of Companies by 31 December 2014. Statutory financial statements for 2013 have been filed with the Registrar of Companies. The Group's auditors have reported on those accounts; their reports were unqualified and did not contain statements under s. 498(2) or (3) of the Companies Act 2006.

Whilst the financial information included in this press release has been prepared in accordance with International Financial Reporting Standards ("IFRS") as adopted for use in the European Union and as issued by the International Accounting Standards Board, this announcement does not itself contain sufficient information to comply with IFRS. The accounting policies applied in preparing this financial information are consistent with the Group's financial statements for the year ended 30 June 2013 except in relation to the mandatory adoption of new accounting standards and revisions and amendments to existing accounting standards, none of which had any significant impact on the Group's results or financial position.

The Group maintains a 52 or 53 week fiscal year ending on the Sunday nearest to 30 June in each year. In fiscal year 2014, this date was 29 June 2014, this being a 52 week year (fiscal year 2013: 30 June 2013, 52 week year). For convenience purposes, the Group continues to date its consolidated financial statements as at 30 June and to refer to the accounting period as a "year" for reporting purposes.

 

2          Revenue

           


2014

2013


£m

£m




Retail subscription

6,255

5,951

Wholesale subscription

422

396

Advertising

472

440

Installation, hardware and service

85

87

Other

398

361


7,632

7,235

           

3          Operating expense

 


2014

2013


£m

£m




Programming

2,662

2,487

Direct networks

850

686

Marketing

1,215

1,117

Subscriber management and supply chain

694

673

Transmission, technology and fixed networks

460

405

Administration

590

576


6,471

5,944

 

4            Investment income and finance costs

 


2014

2013


£m

£m

Investment income



Interest on cash, cash equivalents and short-term deposits

4

9

Dividends received from available-for-sale investments

22

19


26

28

 


2014

2013


£m

£m

Finance costs



- Interest payable and similar charges



£743 million Revolving Credit Facility ("RCF")

(2)

(2)

Guaranteed Notes

(126)

(122)

Finance lease interest

(7)

(7)


(135)

(131)




- Other finance income (expense) 



Remeasurement of borrowings and borrowings-related derivative financial instruments(i)

(2)

22

Remeasurement of other derivative financial instruments (i)

(4)

(1)

Loss arising on derivatives in a designated fair value hedge accounting relationship

(31)

(34)

Gain arising on adjustment for hedged item in a designated fair value hedge accounting relationship

32

36


(5)

23


(140)

(108)

 

(i)          Not qualifying for hedge accounting.

 

 

 

5            Taxation

 

Taxation recognised in the income statement

 


2014

2013


£m

£m

Current tax expense



Current year

232

332

Adjustment in respect of prior years

(31)

(44)

Total current tax charge

201

288

Deferred tax expense



Origination and reversal of temporary differences

5

(20)

Adjustment in respect of prior years

11

10

Total deferred tax charge (credit)

16

(10)

Taxation

217

278

 

Taxation relates to a £215 million UK corporation tax charge (2013: £275 million) and £2 million overseas corporation tax charge (2013: £3 million).

 

 

6            Earnings per share

 

The weighted average number of shares for the year was:


2014

2013


Millions of shares

Millions of shares




Ordinary shares

1,581

1,633

ESOP trust ordinary shares

(19)

(19)

Basic shares

1,562

1,614




Dilutive ordinary shares from share options

14

26

Diluted shares

1,576

1,640

 

Basic and diluted earnings per share are calculated by dividing the profit for the year into the weighted average number of shares for the year. In order to provide a measure of underlying performance, management have chosen to present an adjusted profit for the year which excludes items that may distort comparability. Such items arise from events or transactions that fall within the ordinary activities of the Group but which management believes should be separately identified to help explain underlying performance.

 


2014

2013


£m

£m




Reconciliation from profit for the year to adjusted profit for the year



Profit for the year

865

979

Costs relating to the acquisition and integration of the O2 consumer broadband and fixed-line telephony business

72

15

Costs relating to corporate restructuring and efficiency programmes

40

33

Net credit received following termination of an escrow agreement with a current wholesale operator

(13)

-

Credit received following an Ofcom determination

-

(32)

Costs relating to programme to offer wireless connectors to selected Sky Movies customers

-

25

Net credit received following final settlement of disputes with a former manufacturer of set-top boxes and costs relating to one-off upgrade of set-top boxes

-

(2)

Remeasurement of all derivative financial instruments not qualifying for hedge accounting and hedge ineffectiveness (see note 4)

5

(23)

Profit on disposal of joint venture

-

(9)

Tax adjusting items and the tax effect of above items

(32)

(17)

Adjusted profit for the year

937

969

 

 

7            Dividends

 


2014

2013


£m

£m




Dividends declared and paid during the year



2012 Final dividend paid: 16.20p per ordinary share

-

265

2013 Interim dividend paid: 11.00p per ordinary share

-

176

2013 Final dividend paid: 19.00p per ordinary share

298

-

2014 Interim dividend paid: 12.00p per ordinary share

187

-


485

441

 

The 2014 final dividend proposed is 20.0 pence per ordinary share being £309 million. The dividend was not declared at the balance sheet date and is therefore not recognised as a liability as at 30 June 2014.                    

 

  

8            Goodwill

 


2014

2013


£m

£m




Carrying value

1,019

999

 

 

9            Intangible assets

 

 

 

 

 

 

 

 

Internally generated intangible assets

Software development (external) and software licences

Customer contracts and related customer relationships

Other intangible assets

Internally generated intangible assets not yet available for use

 Acquired intangible assets not yet available for use

Total


£m

£m

£m

£m

£m

£m

£m









Cost

                       



                       


                       

                       

At 1 July 2013

386

525

197

292

30

57

1,487

Additions from business combinations

-

-

6

2

-

-

8

Additions

87

36

-

64

84

41

312

Disposals

(18)

(14)

-

(3)

-

-

(35)

Transfers

43

11

-

1

(43)

(12)

-

At 30 June 2014

498

558

203

356

71

86

1,772









Amortisation

                       



                       


                       

                       

At 1 July 2013

181

357

16

215

-

-

769

Amortisation

76

53

26

71

-

-

226

Disposals

(18)

(14)

-

(3)

-

-

(35)

Impairments

-

1

-

1

-

-

2

At 30 June 2014

239

397

42

284

-

-

962









Carrying amounts








At 1 July 2013

205

168

181

77

30

57

718

At 30 June 2014

259

161

161

72

71

86

810

 

 

 

10       Property, plant and equipment

 


Freehold land and buildings

Leasehold improvements

Equipment, furniture and fixtures

Assets not

yet available

for use

Total


£m

£m

£m

£m

£m







Cost


                


                          

          

At 1 July 2013

334

58

1,387

53

1,832

Additions

4

-

131

119

254

Disposals

-

(1)

(74)

-

(75)

Transfers

31

-

34

(65)

-

At 30 June 2014

369

57

1,478

107

2,011







Depreciation


                      


                      

          

At 1 July 2013

46

34

711

-

791

Foreign exchange movements

-

-

(1)

-

(1)

Depreciation

8

7

193

-

208

Disposals

-

(1)

(74)

-

(75)

At 30 June 2014

54

40

829

-

923

Carrying amounts






At 1 July 2013

288

24

676

53

1,041

At 30 June 2014

315

17

649

107

1,088

 

 

11         Investments in joint ventures and associates

 

The movement in joint ventures and associates during the year was as follows:

 


2014

2013


£m

£m




Share of net assets



At 1 July

164

156

Movement in net assets



-  Funding, net of repayments

6

4

-  Dividends received

(32)

(43)

-  Share of profits

35

46

-  Disposal of joint venture

-

(1)

-  Exchange differences on translation of foreign joint ventures and associates

-

2




At 30 June

173

164

 

12         Available-for-sale investments

 


2014

2013


£m

£m




ITV investment

514

409

Other investments

19

13


533

422

 

At 30 June 2014 the Group held 7.23% of the shares in ITV plc. On 17 July 2014, the Group sold a shareholding of approximately 6.4% in ITV consisting of 259,820,065 ITV shares. For further details refer to note 23.

 

13         Deferred tax

 

Recognised deferred tax assets (liabilities)









 

 

   Total









£m










At 1 July 2013








37

Charge to income








(14)

Credit to equity








10

Acquisition of subsidiaries








1

Effect of change in tax rate









- Income








(2)

- Equity








(2)

At 30 June 2014








30

 

 

14         Inventories

 


2014

2013


£m

£m




Television programme rights

488

470

Set-top boxes and related equipment

50

70

Other inventories

8

8

Current inventory

546

548

Non-current programme distribution rights

20

17

Total inventory

566

565

 


 

15         Trade and other receivables

 


2014

2013


£m

£m




Net trade receivables

140

74

Amounts receivable from joint ventures and associates

7

8

Amounts receivable from other related parties

5

7

Prepayments

279

309

Accrued income

179

162

VAT

2

1

Other

23

30

Current trade and other receivables

635

591

Prepayments

4

6

Other receivables

3

11

Non-current trade and other receivables

7

17

Total trade and other receivables

642

608

 

16                   Trade and other payables

 


2014

2013


£m

£m




Trade payables

802

712

Amounts owed to joint ventures and associates

11

9

Amounts owed to other related parties

124

102

VAT

169

143

Accruals

747

685

Deferred income

318

295

Other

115

77

Current trade and other payables

2,286

2,023

Trade payables

23

18

Amounts owed to other related parties

10

-

Deferred income

5

9

Other

18

36

Non-current trade and other payables

56

63

Total trade and other payables

2,342

2,086

 

 

17         Provisions

 

 

 


At

1 July

2013

Provided

during

the year

Utilised

during

the year

At

30 June

2014



£m

£m

£m

£m


Current liabilities






Restructuring provision


16

14

(8)

22

Customer-related provisions


41

-

(39)

2

Other provisions


37

6

(19)

24



94

20

(66)

48







Non-current liabilities






Other provisions


14

10

(10)

14

 

 

 


18         Borrowings

 


2014

2013


£m

£m




Current borrowings



Obligations under finance leases

11

11




Non-current borrowings



Guaranteed Notes

2,593

2,843

Obligations under finance leases

65

66


2,658

2,909

 

19                   Financial instruments

 

The following table categorises the Group's financial instruments which are held at fair value into one of three levels to reflect the degree to which observable inputs are used in determining their fair values:

 


Level 1


Level 2


Level 3


30 June 2014

30 June 2013


30 June 2014

30 June 2013


30 June 2014

30 June 2013


£m

£m


£m

£m


£m

£m

Financial assets









Available-for-sale financial assets









ITV investment

514

409


-

-


-

-

Other investments

4

-


-

-


15

13

Financial assets at fair value through profit or loss









Interest rate swaps

-

-


82

109


-

-

Cross-currency swaps

-

-


94

233


-

-

Forward foreign exchange contracts

-

-


34

38


-

-

Total

518

409


210

380


15

13

Financial liabilities









Financial liabilities at fair value through profit or loss









Cross-currency swaps

-

-


(95)

(15)


-

-

Forward foreign exchange contracts

-

-


(80)

(27)


-

-

Total

-

-


(175)

(42)


-

-

 

Level 1 fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities.

 

Level 2 fair values measured using inputs, other than quoted prices included within Level 1, that are observable for the asset or liability either directly or indirectly. Derivative financial instrument fair values are present values determined from future cash flows discounted at rates derived from market source data.

 

Level 3 fair values measured using inputs for the asset or liability that are not based on observable market data.  Certain of the Group's available-for-sale financial assets are held at fair value and are categorised as Level 3 in the fair value hierarchy.

 

 

 

20         Share capital

 


2014

2013


£m

£m




Allotted, called-up and fully paid shares of 50p



1,562,885,017 (2013: 1,593,905,182)

781

797

 

 

 


21         Shareholders' equity

 

Purchase of own equity shares for cancellation

 

On 1 November 2012, at the Company's AGM, the Company was granted the authority to return £500 million of capital to shareholders via a share buy-back programme. This authority was subject to an agreement between the Company and Twenty-First Century Fox, Inc. (formerly known as News Corporation) (and others) dated 28 July 2012 whereby following any market purchases of shares by the Company, Twenty-First Century Fox, Inc. would sell to the Company sufficient shares to maintain its percentage shareholding at the same level as applied prior to those market purchases. The price payable to Twenty-First Century Fox, Inc. would be the price payable by the Company in respect of the relevant market purchases (the "2012 Share Buy-back Agreement").

 

At the Company's AGM on 22 November 2013, the Company was granted the authority to return a further £500 million of capital to shareholders via a share buy-back programme.  This authority was subject to an agreement between the Company and Twenty-First Century Fox, Inc. (and others) dated 25 July 2013 on substantially the same terms as the 2012 Share Buy-back Agreement.

 

During the year, the Company purchased, and subsequently cancelled, 31,020,165 ordinary shares at an average price of £8.53 per share, with a nominal value of £16 million, for a consideration of £266 million. Consideration included stamp duty and commission of £1 million. This represents 2% of called-up share capital at the beginning of the period. Of these purchases, the Company purchased, and subsequently cancelled, 12,140,586 ordinary shares from Twenty-First Century Fox, Inc at an average price of £8.53 per share, with a nominal value of £6 million, for a consideration of £104 million.  Consideration included stamp duty of £1 million.

 

During the prior year, the Company purchased, and subsequently cancelled, 80,549,699 ordinary shares at an average price of £7.75 per share, with a nominal value of £40 million, for a consideration of £627 million. Consideration included stamp duty and commission of £3 million. This represents 5% of called-up share capital at the beginning of the period. Of these purchases, the Company purchased, and subsequently cancelled, 31,525,314 ordinary shares from Twenty-First Century Fox, Inc. at an average price of £7.75 per share, with a nominal value of £16 million, for a consideration of £245 million. Consideration included stamp duty of £1 million.

 

 

22         Notes to the Consolidated Cash Flow Statement

 

Reconciliation of profit before tax to cash generated from operations

 


2014

2013


£m

£m




Profit before tax

1,082

1,257

Depreciation and impairment of property, plant and equipment

208

176

Amortisation and impairment of intangible assets

228

202

Share-based payment expense

60

80

Net finance costs

114

80

Share of results of joint ventures and associates

(35)

(46)


1,657

1,749

(Increase) decrease in trade and other receivables

(28)

35

Increase in inventories

-

(93)

Increase in trade and other payables

183

136

(Decrease) increase in provisions

(47)

52

Increase (decrease) in derivative financial instruments

4

(2)

Cash generated from operations

1,769

1,877

 

 

 

23         Events after the reporting period

 

On 17 July 2014, the Group sold a shareholding of approximately 6.4% in ITV consisting of 259,820,065 ITV shares for an aggregate consideration of approximately £481 million.

 

The Company announced on 25 July 2014 that it has conditionally entered into share purchase agreements (the "Acquisition Agreements") with Twenty First Century Fox, Inc. (and its relevant subsidiaries) to acquire its 100% stake in Sky Italia Srl and its 57.4% stake in Sky Deutschland A.G. The Company further announced its intention to make a voluntary cash offer (" the Offer") to the minority shareholders of Sky Deutschland A.G.  The Acquisition Agreements and the Offer together the "Transactions") are conditional on, amongst other things, their approval by the Company's independent shareholders and regulatory clearances.  

 

The total consideration for the acquisition of Sky Italia is £2.45 billion with approximately £2.07 billion to be paid in cash and the balance to be satisfied through the transfer of the Group's 21% stake in National Geographic Channel to Twenty First Century Fox, Inc ("21CF"). The acquisition of 21CF's shareholding in Sky Deutschland A.G is for a consideration of £2.9 billion in cash, valuing Sky Deutschland at €6.75 a share.  Subject to the number of Sky Deutschland A.G minority shareholders that accept the Offer, the total consideration for the transaction will range from £2.9 billion to £5 billion.

 

The total consideration payable for the Transactions will be funded in part by the proceeds of a placing of 156,132,213 new Ordinary Shares, representing approximately 9.99% of the existing issued share capital of the Company, to both existing and new institutional investors, which was also announced on 25 July 2014. 21CF, which has a 39.14% shareholding in the Company, has undertaken to subscribe for 61,106,496 of the shares being placed so as to maintain its existing percentage shareholding in the Company following completion of the placing.  The remaining consideration will come from a combination of new debt facilities (as described below) and cash resources.

 

On 25 July 2014, the Company entered into a facilities agreement (the "Facilities Agreement") documenting a committed bridge loan facility €4.00 billion ("Term Loan A"), a term loan facility of £450 million and €2.5 billion ("Term Loan B") and a revolving loan facility of £1 billion (the "RCF"). The Facilities Agreement is unsecured but is guaranteed by various of the Company's subsidiaries.

 

Term Loan A matures 12 months after the date of the Facilities Agreement subject to an option, at the Company's discretion, to extend for a further one year period. Term Loan B matures 36 months after the date of the Facilities Agreement with a one year extension period available at the discretion of the lenders. The RCF matures on 30 November 2019, subject to two one year extension options at the discretion of the lenders.

 

The Group is subject to two financial covenants under the Facilities Agreement, a maximum leverage ratio and a minimum interest cover ratio which are tested at the end of each six monthly period beginning on 30 June 2015. The key financial covenants are the ratio of Net Debt to EBITDA (each as defined in the Facilities Agreement) and EBITDA to Consolidated Interest Charges (as defined in the Facilities Agreement). Net Debt to EBITDA must be no more than 4.00:1 until 30 June 2016 and thereafter no more than 3.50:1. EBITDA to Consolidated Interest Charges must be at least 3.50:1.

 

Term Loan A and Term Loan B are available to be used to fund, among other things, the consideration payable under the Acquisition Agreements and the consideration payable to the minority shareholders of Sky Deutschland A.G. pursuant to the Offer.

 

 

Appendix 2 - Non-GAAP measures

 

Reconciliation of cash generated from operations to adjusted free cash flow

for the year ended 30 June 2014

 



2014

2013


Note

£m

£m





Cash generated from operations

22

1,769

1,877





Interest received


27

29

Taxation paid


(240)

(300)

Dividends received from joint ventures and associates


32

43

Net funding to joint ventures and associates


(6)

(4)

Purchase of property, plant and equipment


(241)

(203)

Purchase of intangible assets


(302)

(251)

Interest paid


(137)

(128)





Free cash flow


902

1,063





Receipt following termination of an escrow agreement with a current wholesale operator


(19)

-

Receipt following final settlement of disputes with a former manufacturer of set-top boxes(i)


(9)

(10)

Cash paid relating to a corporate restructuring and efficiency programme


12

4

Cash paid (receipt) following an Ofcom determination(i)


4

(28)

Cash paid relating to one-off upgrade of set-top boxes(i)


16

7

Cash paid relating to programme to offer wireless connectors to selected Sky Movies customers(i)


16

1

Cash paid relating to the acquisition and integration of the O2 consumer broadband and fixed-line telephony business


22

4

Receipt on disposal of joint venture(i)


-

(13)





Adjusted free cash flow


944

1,028

 

(i)        Net of applicable corporation tax.

 

 

 

 

Net debt

 



2014

2013



£m

£m





Current borrowings          


11

11

Non-current borrowings


2,658

2,909

Borrowings-related derivative financial instruments


(80)

(327)

Gross debt


2,589

2,593





Cash and cash equivalents


(1,082)

(815)

Short-term deposits


(295)

(595)

Net debt


1,212

1,183

 

 

 


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
FR GDGDRUXDBGSU
Data provided by FE. Care has been taken to ensure that the information is correct, but FE neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.

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