British Sky Broadcasting Group Plc Preliminary Results August 2003


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British Sky Broadcasting Group Plc

Preliminary Results - August 2003

British Sky Broadcasting Group plc

These presentations may include forward-looking statements relating to British Sky 

Broadcasting Group plc and its subsidiaries ("BSkyB") within the meaning of Section 27A of 

the US Securities Act of 1933 and Section 21E of the US Securities Exchange Act of 

1934. Such forward looking statements are subject to risks and uncertainties which could 

cause actual results to differ materially from those anticipated. A number of factors could 

affect BSkyB's ability to achieve its goals, including, but not limited to, the effects of 

government regulation upon its activities; BSkyB's ability to continue to obtain exclusive 

rights to movies, sports events and other programming content; the risks associated with

BSkyB's operation of digital television transmission in the UK and Ireland, as well as

BSkyB's US dollar/pound sterling and euro/pound sterling exchange rate exposure. These 

and other important factors that could cause actual results to differ materially from those 

disclosed in such forward-looking statements are described in BSkyB's Annual Report Form 

20-F for the year ended 30 June 2002 in the section entitled 'Certain Forward Looking 

Statements' and the other items of the Form 20-F referred to in such section. Copies of the 

Form 20-F are available on www.sky.com.



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

A year of positives

Preliminary results for the year to 30 June 2003

British Sky Broadcasting Group plc


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Tony Ball

Chief Executive



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Strong financial performance

Building financial strength

Revenue up 15% to £3.2bn

DTH revenue up 21%

Operating profit up 94% to £371m

Profit after tax: £190m

EPS: 10.5 pence


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Operating highlights

6.8 million subscribers

744,000 net additions in the year

ARPU up 5% to £366

Churn below 10%

On track to meet targets



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Martin Stewart

Chief Financial Officer



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Turnover

DTH


Wholesale

Advertising

Interactive

Other


June 02

1,929


279

251


186

131


Total

2,776


£m

June 03


2,341

202


284

218


141

3,186


Note: years ending 30 June 2002 and 30 June 2003

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Analysis of revenue

DTH


74%

Advertising 

9%

Wholesale 



6%

Interactive 

7%

Other 


4%

Total £3.2 billion

Subscription 

revenue 


80%

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

DTH Subscription revenue

June 03


+21% 

Doubled in 4 years

2001

2002


2003

£1,537m


£1,929m

£2,341m


£1,189m

2000


1999

£979m


Note: years ending 30 June

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Advertising revenue

1999


2000

2001


2002

2003


£217m

£242m


£271m

£251m


Advertising market growth 

(

Sky estimates)



11%

13%


-4%

-6%


6%

Sky advertising revenue

£284m

Note: years ending 30 June



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Wholesale revenue

11%


June 02

June 03


Cable revenue

June 02


£228m*

June 03


£202m

DTT revenue

Cable revenue

*excludes £52 million of non-recurring ITV Digital revenue



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Cable revenue decline

4.1m


3.5m

£68


June 01

June 02


June 03

3.9m


Closing UK and Ireland 

cable subscribers

Cable TV ARPU 

(annual revenues/average subscribers)

£51

£56


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Interactive revenue

June 02


June 03

June 03


+ 17%

Sky Bet


Sky Active

£218m


£186m

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Sky Active revenue

June 02


June 03

Third party betting 

commissions

Retail (inc. SkyBuy)

Advertising

Premium rate 

telephony via STB

Services


MCCo*

£101m


£91m

* Includes subsidy recovery  revenues



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

SkyBet

June 03


Betting revenue

£117 million

June 02


June 03

Internet


Interactive TV

Telephone

15.1m

5.0m


Number of bets 

placed by source



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Other revenue up 8%

Other


Third party services*

Installation revenue

£131m

£141m


June 02

June 03


New products

*Third party services include:  CA, 

EPG, SMS and marketing


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Programming costs

Sports


Movies

Third Party Channels

Entertainment and News

Total


Gross margin

£m

June 03



723

397


351

133


1,604

50%


June 02

663


360

297


119

1,439


48%

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Sports costs 2002/03

June 02


Contractual 

increases

Football 

League


(includes 

production)

Non-

annual 


events

Contracts

not 

renewed


June 03

£663m


£48m

£24m


£20m

(£32m)


£723m

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Movie costs

June 02


Increased

number of 

Megahits

Contractual 

increases

Subscriber 

volume

Foreign 


exchange 

benefit


June 03

£360m


£16m

£16m


£6m

(£6m)


£397m

Other


£5m

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Third party channel costs

June 02


Subscriber 

volume


Contractual 

rate 


increases

Channel 


line-up 

changes


Negotiated 

savings


June 03

£297m


£46m

£12m


£5m

(£9m)


£351m

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Entertainment & News costs

Acquired new 

programming

Conflict in Iraq

Entertainment &

News costs

£133m

£119m


June 02

June 03


Sky One Mix

Sky Music



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Reducing marketing costs

June 2003



£401m

4% reduction in 

marketing spend

June 02


June 03

£417m


£401m

Acquisition

Above the line

Retention

Other


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Reducing acquisition costs

13% 

reduction

in acquisition 

marketing

June 02

June 03


£318m

£278m


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Reducing subscriber acquisition costs

Beaten June 03



£210 

target


June 01

June 02


June 03

June 04 


(est)

£250


£234

£207


£200

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Subscriber management costs

CRM


June 03

Supply Chain

June 02

£324m


£291m

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Subscriber management costs: CRM

Cost per customer



-15%

June 03


£148m

June 02


£153m

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Subscriber management costs: Supply chain

June 03


June 02

£176m


£138m

New products 

hardware

Installation 

revenues

Depreciation 

& smartcards

Covered by Other 

Revenue


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Progression in operating profit margin

June 03


68% 

increase in 

operating margin

2003


2002

2001


2000

11.6%


6.9%

6.9%


4.6%

Note: years ending 30 June



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Strong operating profit growth

2003


2002

2001


2000

£85m


£160m

£192m


£371m

Note: years ending 30 June

Operating profit (before goodwill and exceptionals)


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Operating profit

Goodwill


Operating exceptional item

Operating profit

Share of operating results of joint ventures

Net amounts written off fixed asset investments

June 03

371


(122)

5

254



3

(15)


Non cash items

Profit before interest and taxation

£m

242


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Net interest

Net debt June 03



£1,105m

Net debt June 02

£1,528m

June 03


June 02

£137m


£115m

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Tax credit

Taxable profits

(£256m @ 31%)

Exceptional deferred tax

Other deferred tax

Effect of JV’s*

Tax on exceptionals 

Tax (charge) / credit

£m

June 03


(80)

148


(4)

(1)


63

*Some joint ventures are partnerships whose tax appears in the Group tax charge

Deferred

Tax


3

123


25

151


(86)

Current 


Tax

(83)


(2)

(1)


Share of 

JV’s tax


(2)

(2)


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Cash tax

Tax credit for the period

Less: Net movement in deferred tax

Share of JV’s tax

Tax liability

Less: ACT set-off

Mainstream corporation tax liability

Paid in 2002/03

Payable in 2003/04

£m

June 03



63

(151)


2

(86)


45

(41)


18

23


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Earnings

Profit after tax 

Add back:

Goodwill


Exceptionals

Earnings


Average shares outstanding (millions)

Earnings per share

£m

June 03


190

122


(111)

201


1,915

10.5p


Note: Shares outstanding at 30 June were 1,937,754,876

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Operating cash inflow

£m

473



191

664


179%

y/e 30 June 03

EBITDA

Working capital



Operating cashflow

Conversion of operating profit to cashflow



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Working capital management

£m

44



88

60

(1)



191

27

Reduction in stock



Reduction in debtors

Increase in creditors

Other

Working capital



Share based remuneration 

(included within creditors)



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Working capital and capex

(£98m)


£191m

June 04 (est.)

June 03

Capex


Working Capital

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Cashflow

EBITDA


Working 

capital


Operating 

cashflow


Capex

Net 


interest

Taxation


Debt 

repayment

£473m

£191m


£664m

(£98m)


(£125m)

(£18m)


£423m

Note: excludes offsetting flows from financing and joint ventures



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Improved credit ratios

June 03


June 02

June 01


1.7

2.0


2.4

6.9


5.6

4.1


Net debt/EBITDA

Net interest cover

(EBITDA/Interest)

Note: all figures are stated pre-exceptional items



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Conclusion

Sustained top-line growth

Margin and earnings momentum

Strong cashflow generation



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Tony Ball

Chief Executive



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

The first five years


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

5 years of achievement

Transformed growth prospects

Multichannel mass market 

Constant product innovation

Customer service revolution

Improved subscriber economics



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Transformed growth prospects

DTH subscribers 1996 - 2003

3.247m

1996


1997

1998


1999

2000


2001

2002


2003

Analogue


Digital

3.532m


3.547m 3.460m

4.513m


5.453m

6.101m


6.845m

Note: years ending 30 June



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

The world leader in digital TV 

UK

USA



Japan

44%


42%

13%


Source: Informa Media, Veronis Suhler, Nikko Citigroup

17%


Europe

Digital penetration (2002/03)



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Transformed growth prospects

1998


2003

£341m


£371m

Note: years ending 30 June

Operating profit (before goodwill and exceptionals)

+94%


-9%

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Multichannel mass market

Source: BARB, Share of viewing in total TV homes, July-June 1999/2003

1999


2003

+9.5%


22.9%

13.4%


23.8%

9.7%


6.3%

10.3%


31.4%

4.9%


28.8%

26.1%


Multichannel is becoming  the first destination for audiences

Multi-channel



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Sky Entertainment

+

Sky One remains the 



leading non-terrestrial 

channel in the UK

+

Sky One Mix 



contributing significantly 

to viewing share

+

Three new interactive music 



channels launched 

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Sky Sports

+

The home of live sport



+

Viewing share in UK 

homes up 13%

+

Sky Sports News now on 



digital terrestrial

+

Premier League 



audiences up 17%

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Sky News

+

UK’s leading 24 hour 



news channel

+

Second BAFTA award



+

RTS News Channel 

of the Year

+

Weekly reach of around 5 



million UK homes

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Sky Movies

+

Most comprehensive 



service in the world

+

All channels now 



widescreen

+

Relaunch of movie 



service before 

Christmas



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Constant product innovation


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Customer service revolution

Note: years ending 30 June



15.1%

13.4%

10.5%

10.0%

10.5%

9.4%

1998


1999

2000


2001

2002


2003

Continuous 

innovation

Investment in 

CRM

DTH churn (%)

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Improved subscriber economics

2001


2002

2003


SAC

ARPU


ARPU / 

SAC ratio

£207

£366


£234

£250


£313

£347


2000

£261


£290

Note: years ending 30 June

1.1

1.3


1.5

1.8


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Investment cycle

Over £700 million 

of free cashflow in 

18 months

Net debt (£m)

Jun 99 Dec 99 Jun 00 Dec 00 Jun 01 Dec 01 Jun 02 Dec 02 Jun 03

665


832

1,145


1,440

1,547


1,833

1,528


1,386

1,105


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Five years of Sky digital

Revolutionised Sky’s business

Positioned for future growth


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Looking forward


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Continued top line growth

million



6.845 

million


Jun 03

Dec 03


155,000

DTH subscribers



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Continued top line growth

million



million


6.845 

million


Jun 03

Dec 03


Dec 05

155,000


DTH subscribers

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

New medium term target

December 2005

8 million 

subscribers

£400 ARPU


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

New medium term target

December 2005

+

8 million



subscribers

+

£400 ARPU



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Target subscriber groups

0

0.2



0.4

0.6


0.8

1.0


1.2

1.4


1.6

1.8


2.0

Young, no

children

Young


families

Mature


families

Empty


nesters

Retired


seniors

Most affluent

Mid/high

Low/mid


Least affluent

Households

(millions)

Source: Claritas / Sky marketing strategy



17 million

non-Sky

homes

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Segmentation strategy

Young, no

children

Young


families

Mature


families

Empty


nesters

Retired


seniors

Most affluent

Mid/high

Low/mid


Least affluent

0

0.2



0.4

0.6


0.8

1.0


1.2

1.4


1.6

1.8


2.0

Households

(millions)

Source: Claritas / Sky marketing strategy



Top priority:

3 million +

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Segmentation strategy

Young, no

children

Young


families

Mature


families

Empty


nesters

Retired


seniors

Most affluent

Mid/high

Low/mid


Least affluent

0

0.2



0.4

0.6


0.8

1.0


1.2

1.4


1.6

1.8


2.0

Households

(millions)

Source: Claritas / Sky marketing strategy



Other targets:

3 million

Total: 6+

million

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Growth of new products

Second set top box

+

165,000 subscribers



+

105,000 subscribers

Sky

+


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Sky

+

: positioned for growth



“The convenience is jaw

dropping.  Sky

+

 is a perfect



mix of set top box and

digital recording”

Jan 03

“The sweetest, simplest



and most satisfying piece

of technology I have ever

owned.  It’s called Sky

+



Jun 03

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Margin progression

4.6%


6.9%

6.9%


11.6%

2001


2000

2002


2003

Operating profit margin

+

Revenue growth

+

Cost control

+

Third Parties

+

Movies

+

Sports

30%


margins

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Savings on third party channels

Nov


02

Oct


02

Aug


03

Jan


02

Jun 04


Jan

03


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Savings on third party channels

£/subscriber/month

Jun 02

Sep 02


Dec 02

Mar 03


Jun 03

£4.37


£4.51

£4.60


£4.47

£4.40


Source: Third party channel costs divided by average subscribers in the quarter

20 pence per

subscriber

saving


Increase driven by

new channels and

RPI


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Movies

+

Reduce number of titles



+

Reduce cost per title

+

Rebase definition of ‘megahit’



+

Long term savings

+

3 major deals by Dec 2005



British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Savings on sports rights

105


24

115


75

01-02


03-07

Nationwide League

01-04

04-08


FA

£m/year


BBC

Sky


Not to scale

+

Real



deflation

+

Selective



approach

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

New Premier League deal

Current


(average p.a.)

New


+

Rights secured until 2007

+

138 live games per season



+

Cost per game back to

1996 levels

404


341

£m/year


Note: current deal costs include live pay-TV games, pay-per-view games and interactive rights

British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Ever stronger line-up


British Sky Broadcasting Group Plc

Preliminary Results - August 2003

Conclusion

+

Growth



+

To 8 million subscribers by

December 2005

+

Beyond 8 million subscribers



+

Cost control



+

30% margins



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