FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
For the month of February 2003
14 February 2003
BRITISH SKY BROADCASTING GROUP PLC
(Name of Registrant)
Grant Way, Isleworth, Middlesex, TW7 5OD England
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F
Form 20-F X Form 40-F
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934
Yes No X
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): Not Applicable
EXHIBIT INDEX
Exhibit
EXHIBIT NO.1 Press release of British Sky Broadcasting Group plc
announcing Interim Results released on
14 February 2003
14 February 2003
BRITISH SKY BROADCASTING GROUP PLC
Results for the six months ended 31 December 2002
Sky reports 126% growth in operating profit
- Net DTH subscriber growth in the quarter of 244,000 to 6.6 million
- Year to date churn falls to 9.4%
- DTH revenue increases by 23% to GBP1,112 million
- Advertising revenue increases by 13% to GBP133 million
- Operating profit before goodwill increases 126% to GBP158 million
- Operating cash inflow of GBP255 million
- Profit before tax and goodwill of GBP80 million
Tony Ball, Chief Executive of British Sky Broadcasting Group plc, said:
"Double digit revenue growth combined with tight control of costs has resulted
in strong margin expansion driving significant and rapidly growing free cash
flow. We are well on track to hit all of our targets and we look forward to the
rest of the year with confidence."
Enquiries:
Analysts/Investors:
Neil Chugani Tel: 020 7705 3837
Andrew Griffith Tel: 020 7705 3118
E-mail: investor-relations@bskyb.com
Press:
Julian Eccles Tel: 020 7705 3267
Robert Fraser Tel: 020 7705 3036
E-mail: corporate.communications@bskyb.com
Portland:
Tim Allan Tel: 020 7404 5344
There will be a presentation to analysts and investors at 9.30 a.m. today at the
King Edward Hall, 2 King Edward Street, London, EC1A 7AN and to the press at
11.00 a.m. at the same venue. A webcast of the presentation to analysts,
together with this press release will be available from 2.00 p.m. today on Sky's
corporate website (www.sky.com/corporate).
There will be a conference call for US analysts at 10.00 a.m. (EST) today.
Details of this call have been sent to US institutions and can be obtained from
Nikki Sheridan at Taylor Rafferty on +1 212 889 4350.
OVERVIEW
Sky continues to demonstrate significant operational gearing within its business
model and to deliver accelerating profit growth. Total revenues grew by 14% on
the comparable period, to GBP1,511 million, whilst operating expenditure rose by
just 8% on the comparable period to GBP1,353 million, generating a net operating
margin of 10.5%, up more than five percentage points on the comparable period.
Operating profit before goodwill for the period increased to GBP158 million, an
increase of 126% on the comparable period and the highest first half operating
profit since the launch of Sky digital in October 1998. EBITDA for the period
increased by 82% from GBP111 million to GBP203 million.
Sky continues to reduce net debt at each balance sheet date and at 31 December
2002, net debt had fallen to GBP1,386 million, the lowest level since June 2000.
OPERATIONAL REVIEW
At 31 December 2002, the total number of direct-to-home (DTH) digital satellite
subscribers in the UK and Ireland was 6,562,000, representing a net increase of
244,000 subscribers in the three months to 31 December 2002 (the quarter). This
sustained strong growth puts Sky comfortably on track to achieve its target of 7
million DTH subscribers by the end of the calendar year 2003. At 31 December
2002, the percentage of subscribers taking the top tier Sky World package was
55%.
The number of subscribers to the Extra Digibox increased by 42,000 to reach
117,000 and Sky+ subscribers increased by 27,000 to reach 65,000. Our success in
reducing the cost of set-top boxes means that Sky customers can now buy an Extra
Digibox for just GBP99.
Total subscribers in the UK and Ireland to one or more of Sky's channels
increased by 196,000 to 10.5 million in the quarter, with Sky's own DTH
subscriber growth being partially offset by another quarter of decline in the
number of households subscribing to a television service via cable. 100% of UK
digital cable subscribers now receive at least one Sky channel which means that
with every digital terrestrial home also receiving Sky channels, the Sky brand
and advertising proposition reaches every digital home in the UK.
DTH churn for the year to date (annualised) fell to 9.4% in the period. This
represents the lowest level of total churn recorded since the launch of Sky
digital and a full percentage point reduction on the six months ended 31
December 2001 (the comparable period). The reduction in churn reflects the
continued high level of customer satisfaction and ongoing improvements in
customer service as operational efficiencies from Sky's investment in new call
centre systems are realised.
The quarterly annualised average revenue per DTH subscriber (ARPU) in the
quarter was GBP351, an increase of 6% over the three months ended 31 December
2001 and GBP3 higher than ARPU for the quarter to 30 September 2002. The
changes in UK retail pricing, which took effect from 1 January 2003, will begin
to be reflected in ARPU from the third quarter of this financial year.
Programming
The main terrestrial channels, BBC1 and ITV1, continued their audience decline
in 2002 according to the year-end viewing figures from BARB. Multi-channel
viewing continues to grow year on year and for the first time ever the
multi-channel share of viewing exceeded ITV's share in the Christmas week of
December 2002. The number of programmes on digital channels with audiences of
over one million individuals doubled to 160 in 2002 compared to 2001, with
programmes on Sky channels, such as The Simpsons, Enterprise, Buffy, Dinotopia,
FA Cup, Worthington Cup and Premier League Football, contributing 14 of the top
20 audiences.
Sky One maintains its leading position in multi-channel homes increasing its
share of viewing to 3.7% for the calendar year 2002 and Sky One Mix, a multiplex
version, was successfully launched in December to offer our subscribers an
alternative chance to see their favourite shows. Coming up this month is the
return of the hit series 'Close Up' featuring Rio Ferdinand, Teddy Sheringham
and Freddie Ljungberg. Also launching this month is 'Mile High,' a new Sky
commissioned drama.
Sky Sports' popularity continues to grow with audiences increasing for most
major sports. Worthington Cup Football has made a record-breaking return to Sky
this season achieving average audiences of over one million viewers, up 35% on
the last season broadcast on Sky, and 14% higher than the best ever season.
During the quarter, Sky Sports broadcast all three of England's autumn Rugby
Union internationals. The back-to-back victories over New Zealand, Australia
and South Africa, offered with 8-screen interactivity, saw in-home audiences up
25% on last year's games. The Rugby Super League season ended with a record
audience for a Grand Final, whilst the season's audiences were up 35%
year-on-year, to record levels. Sky Sports News audiences are up 50%
year-on-year and the service was also launched on Freeview at the end of
October. Sky Bet became available through interactive football menus in
December. The new-look Sky Bet is now supported by a betting-based commentary,
providing a fourth audio option for interactive viewers.
The Cricket World Cup commenced this month and Sky Sports is showing all 54
matches exclusively live. Viewers will be able to select from a menu of
simultaneous matches using Sky Sports Active technology. This month Sky Box
Office is also showing Mike Tyson's comeback fight since his defeat by Lennox
Lewis.
Sky remains the home of the most comprehensive movie service in the UK. Over
the next few months, Sky Movies and Sky Box Office will be broadcasting some of
the most successful movies in history, including Harry Potter and the
Philosopher's Stone and The Lord of the Rings: The Fellowship of the Ring.
Sky Active continues to grow its offering to subscribers. Following the success
of games like Tetris, Battleships and Space Invaders, Sky Active added the
popular Tomb Raider game to Sky Gamestar in December and Sky also launched the
first ever dedicated digital TV games controller, Sky Gamepad.
FINANCIAL REVIEW
Revenue
Total revenues increased by 14% on the comparable period to GBP1,511 million,
driven by strong increases in DTH and advertising revenues, partially offset by
declining wholesale revenues. DTH revenues increased by 23% to GBP1,112 million
principally as a result of a 14% increase in the average number of DTH
subscribers. Core ARPU increased by 6% to GBP336.
The Group's advertising revenue increased by 13% on the comparable period to
GBP133 million. With the majority of the annual negotiations complete for
calendar 2003, the Group remains confident of delivering double digit
year-on-year growth in advertising revenues for the financial year.
As expected, wholesale revenues continued to decline, reducing by 34% on the
comparable period to GBP98 million. Excluding the one-off effect of the closure
of ITV Digital, the decline in wholesale revenues was 16%. This reduction is
the direct consequence of both the loss of subscribers by NTL and Telewest and
the lower penetration of premium channels amongst remaining cable subscribers.
The total number of cable subscribers to Sky channels has declined by over
300,000 in the last 12 months, despite the higher availability of Sky channels
in cable homes. Over the same period, the penetration of premium channels in
cable homes has also continued to fall, further affecting wholesale revenues.
Sky is in ongoing discussions with the cable companies in order to improve the
penetration of Sky premium channels amongst cable subscribers.
Total interactive revenues including both gross betting revenues and Sky Active
revenues, were flat at GBP91 million, though this conceals a significant
improvement in mix.
Sky Active revenues continue to grow and increased by 15% on the comparable
period to GBP48 million. This increase was mainly driven by interactive
advertising, the increased usage of games and revenues from third party channels
using interactive applications. In particular, the usage of interactive
advertising continues to rise with over 240 campaigns shown to date and Sky
Gamestar has increased in popularity with over 7.7 million paid-for games during
the period.
In contrast to the growth of Sky Active revenues, gross betting revenue reduced
to GBP43 million, reflecting Sky's strategy to discourage low margin
telephone-only customers and focus on the much higher margin interactive
television (iTV) betting business. iTV based bets grew strongly in the period
with the total volume of bets placed via the set-top box up 160% and revenue
from iTV betting up 104% on the comparable period. iTV remains the fastest
growing segment of betting revenues and now accounts for the majority of bets
placed by volume. Importantly, the iTV betting margin (calculated by
subtracting iTV betting costs, which includes payouts, tax and horse racing
levy, from gross iTV betting revenues) is high at over 11%.
The result of the growth in Sky Active revenues and improvement in betting
margins was that interactive ARPU (quarterly annualised) increased by 16% to
GBP15.
Programming costs
Programming costs for the period increased by GBP87 million to GBP744 million.
Sports costs increased by GBP40 million to GBP313 million as a result of
contractual increases, the timing of the Ryder Cup, which is a bi-annual event,
and the Nationwide Football League which returned to Sky this season. The
increase in Third Party Channel costs of GBP29 million to GBP173 million
principally reflects the 14% increase in the average number of subscribers on
the comparable period. Movie costs increased by GBP21 million to GBP201 million
mainly as a result of the increased number of "hit" movies shown.
Other operating costs
Despite the strong growth in subscribers, marketing costs decreased by GBP4
million to GBP216 million. This was principally the result of lower set-top box
costs, the increased use of direct sales channels and Internet ordering, offset
by an increase in above-the-line expenditure. Subscriber acquisition cost (SAC)
has fallen by GBP25 from GBP235 for the comparable period to GBP210 for the
period, achieving the target set for the end of the current financial year six
months early. As set-top box supply arrangements are generally negotiated on
an annual basis, Sky expects modest SAC savings for the remainder of the
financial year, mainly as a result of the ongoing trend towards direct
subscriber acquisition. Sky remains confident that SAC will fall below GBP200
in the financial year to June 2004.
Subscriber management costs increased by GBP15 million to GBP161 million.
Subscriber management costs comprise two main activities: customer relationship
management (CRM) costs associated with managing the existing subscriber base;
and supply chain costs relating to systems and infrastructure and the hardware
costs of new products purchased by subscribers such as Sky+ and Extra Digiboxes.
CRM costs per subscriber have fallen by 14%, leading to an overall reduction
of 2% over the prior year to GBP76 million, as a result of call centre
efficiencies and lower call volumes. Supply chain costs increased by 24% over
the comparable period to GBP85 million, as a result of installing a higher
number of new subscribers and the hardware costs of new products. The
corresponding revenue associated with the sale of hardware products is included
within Other revenues.
Goodwill amortisation included within operating profit increased by GBP4 million
on the comparable period to GBP64 million. The increase was mainly due to a
GBP5 million provision against goodwill which originally arose on the
acquisition of OPTA Index Limited (OPTA). The provision has reduced the
carrying value of this goodwill to nil. The provision has been made as a
result of the Group's announcement that it would close OPTA in May 2003 if
sufficient sponsorship revenue has not been generated by that date.
Joint ventures
The Group's share of the operating profits of joint ventures increased to GBP2
million in the period, an increase of GBP62 million over the comparable period,
reflecting the cessation of equity accounting for the Group's share of losses
incurred by KirchPayTV from 8 February 2002.
The Group has made a provision against some of its minority equity investments,
reflecting the accounting treatment of these investments required by UK GAAP.
This has led to a net non-cash exceptional charge of GBP19 million, which is
accounted for below operating profit.
Taxation
The tax charge for the period includes a current tax charge of GBP27 million and
a deferred tax charge of GBP4 million due to the Group moving into a profitable
position (based upon an effective tax rate of 31%). This was offset by a GBP33
million deferred tax credit principally arising from the recognition of a
deferred tax asset on certain trading losses, net of an adjustment arising from
the prior period. After tax on exceptional items (GBP2 million) and Sky's share
of joint ventures' tax (GBP1 million), the charge for the period was GBP1
million.
At 31 December 2002, the Group had GBP20 million of Advanced Corporation Tax
(ACT) expected to be recoverable in less than one year (principally to be
accounted for in 2002/3 financial year) and GBP58 million of ACT recoverable in
more than one year.
Earnings
The Group has marked its return to profitability by delivering a profit after
tax of GBP16 million for the period, resulting in earnings per share of 0.8
pence compared to a loss per share of 71.8 pence for the comparable period.
This is the first time the Group has delivered positive earnings per share since
the launch of the free set top box offer in May 1999, which resulted in a period
of heavy investment in subscriber acquisition.
Cashflow and interest
The Group's operating cash inflow was GBP255 million in the period. This
represented the conversion of 161% of operating profit before goodwill to cash
inflow.
Sky's net debt has fallen by GBP142 million since 30 June 2002. At 31 December
2002 the ratio of net debt to annualised EBITDA was 3.4, its lowest level since
1999. Interest cover (the ratio of EBITDA to net interest payable) was 3.3.
Sky expects these ratios to continue to improve to levels consistent with an
investment grade credit rating.
Corporate
On 11 November 2002, BSkyB issued a total of 43.2 million shares to BT, HSBC and
Matsushita as final consideration for the acquisition of their interests in
British Interactive Broadcasting Holdings Limited. Following this transaction
none of the Group's shares are the subject of any lock up or similar
arrangement. As measured by the FTSE Indices Committee, the Group's free float
is currently 64.6%, with a single stake of 35.4% held by BSkyB Holdco., Inc.
accounting for the balance.
The Group welcomed the announcement by the Office of Fair Trading on 17 December
2002 that it had not found BSkyB in breach of competition law. The investigation
covered the period between March 2000 and the end of 2001.
On 4 February 2003, Standard & Poor's Ratings Services revised its outlook on
its long-term corporate credit rating on BSkyB from stable to positive and
affirmed the Company's current 'BB+' rating.
On 13 February 2003, the Board of BSkyB appointed three new Non-Executive
Directors. Lord Wilson of Dinton (formerly Sir Richard Wilson), Master of
Emmanuel College, Cambridge University, joins the Board as an additional
independent Non-Executive Director. Lord Wilson was Secretary of the Cabinet
and Head of the Home Civil Service from 1998 to 2002.
As a result of this appointment, the new Articles of Association approved by
shareholders at the Company's Annual General Meeting in November 2002 have
become effective.
Furthermore, Leslie Hinton and Martin Pompadur have resigned from the Board of
Directors with immediate effect. Following these resignations, Chase Carey,
member of the Board of Directors of News Corporation and James Murdoch, member
of the Board of Directors of News Corporation and Chairman and Chief Executive
of STAR, News Corporation's Asian satellite television and multi-media service,
have been appointed as Non-Executive Directors.
Refinancing
Barclays Bank plc, Citigroup and Deutsche Bank AG London have recently provided
an underwritten commitment to the Group for a five year GBP600 million revolving
credit facility to replace the Group's existing GBP750 million facility, due to
mature in June 2004. The existing GBP300 million facility, currently undrawn,
will be reduced simultaneously to GBP200 million, and will remain in place to
mature in June 2004 as currently documented. Total available facilities will
therefore be GBP800 million to June 2004 and GBP600 million thereafter. The new
facilities, combined with existing public market debt, will provide the Group
with comfortable liquidity over the term of the facilities.
Appendix 1
Subscribers to Sky Channels
Prior Year Opening
Q2 2001/02 Q4 2001/02 Q1 2002/03 Q2 2002/03
As at 31/12/01 as at as at as at
30/06/02 30/09/02 31/12/02
DTH Digital 1,2 5,716,000 6,101,000 6,318,000 6,562,000
Cable - UK 3,676,000 3,486,000 3,405,000 3,355,000
Cable - Ireland 613,000 605,000 594,000 596,000
DTT3 1,218,000 - - -
Total 11,223,000 10,192,000 10,317,000 10,513,000
DTH Churn rate for year to date 10.4%4 10.5%4 9.6% 9.4%
(annualised)
Net DTH growth in quarter 218,000 214,000 217,000 244,000
1: Includes DTH subscribers in Ireland (272,000 as at 31 December 2002).
2: DTH subscribers includes only primary subscriptions to Sky (no additional
units are counted for Sky+ or Extra Digibox subscriptions).
3: On 30 April 2002, the joint administrators of ITV Digital announced their
decision to close the pay television operation of ITV Digital and, with
effect from that date, these subscribers ceased to receive any Sky
subscription channels.
4: Excludes analogue churn up to 27 September 2001 and the effect of the
termination of the analogue service on 27 September 2001.
Consolidated Profit and Loss Account for the half year ended 31 December 2002
2002/2003 2001/2002
Half year 2002/2003 Half year 2001/2002
Before Half year Before Half year
goodwill Goodwill goodwill Goodwill
and and 2002/2003 and and 2001/2002 2001/2002
exceptional exceptional Half year exceptional exceptional Half year Full year
items items Total items items Total Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Notes (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (audited)
Turnover: Group and share of joint 1,549.8 - 1,549.8 1,413.7 - 1,413.7 2,915.3
ventures' turnover
Less: share of joint ventures' (38.5) - (38.5) (93.1) - (93.1) (139.2)
turnover
Group turnover 2 1,511.3 - 1,511.3 1,320.6 - 1,320.6 2,776.1
Operating expenses, net 3 (1,353.0) (63.7) (1,416.7) (1,250.5) (59.8) (1,310.3) (2,721.1)
EBITDA 12 202.5 - 202.5 111.1 - 111.1 254.5
Depreciation (44.2) - (44.2) (41.0) - (41.0) (81.1)
Amortisation 8 - (63.7) (63.7) - (59.8) (59.8) (118.4)
Operating profit (loss) 158.3 (63.7) 94.6 70.1 (59.8) 10.3 55.0
Share of operating results of joint 4 1.7 - 1.7 (59.8) - (59.8) (76.7)
ventures
Joint ventures' goodwill 9 - - - - (1,083.4) (1,083.4) (1,069.9)
amortisation
Profit on sale of fixed asset 9 - - - - 2.3 2.3 2.3
investment
Amounts written off fixed asset 9 - (18.8) (18.8) - (60.0) (60.0) (60.0)
investments, net
Release of provision for loss on - - - - 10.0 10.0 10.0
disposal of subsidiary
Profit (loss) on ordinary 160.0 (82.5) 77.5 10.3 (1,190.9) (1,180.6) (1,139.3)
activities before interest and
taxation
Interest receivable and similar 2.0 - 2.0 8.5 - 8.5 11.1
income
Interest payable and similar (62.9) - (62.9) (80.3) - (80.3) (148.0)
charges
Profit (loss) on ordinary 99.1 (82.5) 16.6 (61.5) (1,190.9) (1,252.4) (1,276.2)
activities before taxation
Tax credit (charge) on profit 5 1.0 (1.5) (0.5) (5.5) (95.6) (101.1) (106.4)
(loss) on ordinary activities
Profit (loss) on ordinary 100.1 (84.0) 16.1 (67.0) (1,286.5) (1,353.5) (1,382.6)
activities after taxation
Equity dividends - paid and 6 - - -
proposed
Retained profit (loss) 10 16.1 (1,353.5) (1,382.6)
Earnings (loss) per share - basic 7 5.3p (4.5p) 0.8p (3.6p) (68.2p) (71.8p) (73.3p)
Earnings (loss) per share - diluted 7 5.2p (4.4p) 0.8p (3.6p) (68.2p) (71.8p) (73.3p)
The accompanying notes are an integral part of this consolidated Profit and Loss
Account.
Consolidated Profit and Loss Account for the three months ended 31 December 2002
Before Goodwill Three Before Goodwill Three
goodwill and months goodwill and months
and exceptional ended 31 and exceptional ended 31
exceptional items December exceptional items December
items 2002 items 2001
Total Total
GBPm GBPm GBPm GBPm GBPm GBPm
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Turnover: Group and share of joint 805.7 - 805.7 725.5 - 725.5
ventures' turnover
Less: share of joint ventures' turnover (20.6) - (20.6) (47.6) - (47.6)
Group turnover 785.1 - 785.1 677.9 - 677.9
Operating expenses, net (702.0) (34.4) (736.4) (652.4) (30.1) (682.5)
EBITDA 105.1 - 105.1 46.6 - 46.6
Depreciation (22.0) - (22.0) (21.1) - (21.1)
Amortisation - (34.4) (34.4) - (30.1) (30.1)
Operating profit (loss) 83.1 (34.4) 48.7 25.5 (30.1) (4.6)
Share of operating results of joint 2.6 - 2.6 (28.9) - (28.9)
ventures
Joint ventures' goodwill amortisation - - - - (1,034.2) (1,034.2)
Amounts written off fixed asset - (18.8) (18.8) - (60.0) (60.0)
investments, net
Profit (loss) on ordinary activities 85.7 (53.2) 32.5 (3.4) (1,124.3) (1,127.7)
before interest and taxation
Interest receivable and similar income 1.1 - 1.1 4.4 - 4.4
Interest payable and similar charges (30.9) - (30.9) (39.9) - (39.9)
Profit (loss) on ordinary activities 55.9 (53.2) 2.7 (38.9) (1,124.3) (1,163.2)
before taxation
Tax credit (charge) on profit (loss) on 14.8 (1.5) 13.3 0.1 (95.6) (95.5)
ordinary activities
Profit (loss) on ordinary activities after 70.7 (54.7) 16.0 (38.8) (1,219.9) (1,258.7)
taxation
Equity dividends - paid and proposed - -
Retained profit (loss) 16.0 (1,258.7)
Earnings (loss) per share - basic 3.7p (2.9p) 0.8p (2.1p) (64.6p) (66.7p)
Earnings (loss) per share - diluted 3.6p (2.8p) 0.8p (2.1p) (64.6p) (66.7p)
Consolidated Balance Sheet as at 31 December 2002
31 December 31 December 30 June
2002 2001 2002
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
Fixed assets
Intangible assets 8 593.7 714.5 657.4
Tangible assets 336.5 314.4 343.0
Investments 9 108.0 109.2 128.9
1,038.2 1,138.1 1,129.3
Current assets
Stocks 627.3 648.9 414.2
Debtors: Amounts falling due within one year 432.7 521.4 400.9
Debtors: Amounts falling due after more than one year 203.8 216.9 207.0
Cash at bank and in hand 51.1 86.5 50.3
1,314.9 1,473.7 1,072.4
Creditors: Amounts falling due within one year
- short-term borrowings (0.5) (2.6) (1.5)
- other creditors (1,179.6) (938.5) (903.9)
(1,180.1) (941.1) (905.4)
Net current assets 134.8 532.6 167.0
Total assets less current liabilities 1,173.0 1,670.7 1,296.3
Creditors: Amounts falling due after more than one year
- long-term borrowings (1,436.7) (1,917.1) (1,576.9)
- other creditors (17.0) (12.1) (16.0)
(1,453.7) (1,929.2) (1,592.9)
Provisions for liabilities and charges (3.5) (15.6) (4.1)
(284.2) (274.1) (300.7)
Capital and reserves - equity
Called-up share capital 10 968.4 946.3 946.7
Share premium 10 2,530.2 2,404.8 2,409.8
Shares to be issued 10 2.7 256.9 255.8
Merger reserve 10 335.7 304.2 266.7
Profit and loss account 10 (4,121.2) (4,186.3) (4,179.7)
10 (284.2) (274.1) (300.7)
The accompanying notes are an integral part of this consolidated Balance Sheet.
Consolidated Cash Flow Statement for the half year ended 31 December 2002
2002/2003 2001/2002 2001/2002
Half year Half year Full year
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
Net cash inflow (outflow) from operating activities 11a 254.5 (177.9) 249.7
Returns on investments and servicing of finance
Interest received and similar income 1.7 6.7 8.8
Interest paid and similar charges on external financing (67.5) (68.9) (141.0)
Interest element of finance lease payments (0.3) (0.2) (0.6)
Net cash outflow from returns on investments and servicing of (66.1) (62.4) (132.8)
finance
Taxation
Consortium relief received - - 22.5
Net cash inflow from taxation - - 22.5
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (43.9) (49.3) (100.8)
Receipts from sales of fixed asset investments - 0.4 0.4
Receipts from sales of intangible assets - 0.6 0.6
Purchase of own shares (ESOP) - (6.7) (26.9)
Net cash outflow from capital expenditure and financial (43.9) (55.0) (126.7)
investment
Acquisitions and disposals
Funding to joint ventures (5.3) (3.3) (11.6)
Repayments of funding from joint ventures 2.4 1.9 4.8
Net cash outflow from acquisitions and disposals (2.9) (1.4) (6.8)
Net cash inflow (outflow) before management of liquid 141.6 (296.7) 5.9
resources and financing
Management of liquid resources
Decrease in short-term deposits 11b 0.5 55.3 69.5
Financing
Proceeds from issue of ordinary shares 0.5 11.8 14.3
Payments made on the issue of ordinary shares (0.1) (1.8) (1.8)
Capital element of finance lease payments 11b (1.2) (0.4) (1.7)
Net (decrease) increase in total debt 11b (140.0) 150.0 (190.0)
Net cash (outflow) inflow from financing (140.8) 159.6 (179.2)
Increase (decrease) in cash 11b 1.3 (81.8) (103.8)
Decrease (increase) in net debt 11b 142.0 (286.7) 18.4
The accompanying notes are an integral part of this consolidated Cash Flow
Statement.
Consolidated Statement of Total Recognised Gains and Losses for the half year
ended 31 December 2002
2002/2003 2001/2002 2001/2002
Half year Half year Full year
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
Profit (loss) for the period 10 16.1 (1,353.5) (1,382.6)
Translation differences on foreign currency net - 1.4 1.4
investment
Total gains and losses relating to the period 16.1 (1,352.1) (1,381.2)
Included within the profit (loss) for the period is a GBP0.8 million profit
(2001/2002: half year GBP63.1 million loss; full year: GBP80.9 million loss)
in respect of the Group's share of the results of joint ventures.
The accompanying notes are an integral part of this consolidated Statement of
Total Recognised Gains and Losses.
Notes to Accounts
1 Basis of preparation
The interim accounts for the half year ended 31 December 2002 have been prepared
in accordance with accounting policies consistent with those applied in the
accounts for the year ended 30 June 2002, which were approved by the Directors
on 30 July 2002. The interim accounts for the six months ended 31 December 2002
do not constitute statutory accounts and are unaudited, but have been formally
reviewed by Deloitte & Touche. Deloitte & Touche's report is not qualified in
any respect. The interim accounts were approved by the Board of Directors on 13
February 2003.
The financial information for the 2001/2002 full year is extracted from the
accounts for that year which have been filed with the Registrar of Companies.
The auditors' report on those accounts was unqualified and did not contain any
statement under section 237(2) or (3) of the Companies Act 1985.
At 31 December 2002, the Group's balance sheet showed net liabilities of
GBP284.2 million. The Directors consider that the operating cash flows of the
Group, together with its own bank facilities, will be sufficient to cover the
Group's projected operating requirements and to settle or refinance the Group's
other liabilities as they fall due. Accordingly the interim accounts are
prepared on a going concern basis.
2 Turnover
The Group's turnover, whilst deriving from one class of business, has been
analysed as follows:
2002/2003 2001/2002 2001/2002
Half year Half year Full year
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Direct-to-home subscribers 1,112.0 904.9 1,929.2
Cable and DTT subscribers 98.0 147.5 279.4
Advertising 133.0 118.1 250.7
Interactive 90.8 91.0 186.0
Other 77.5 59.1 130.8
1,511.3 1,320.6 2,776.1
3 Operating expenses, net
2002/2003 2002/2003 2001/2002 2001/2002
Half year Half year Half year Half year
Before Goodwill 2002/2003 Before Goodwill 2001/2002 2001/2002
goodwill goodwill
and and Half year and and Half year Full year
exceptional exceptional exceptional exceptional
items items Total items items Total Total
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (audited)
Programming (i) 744.2 - 744.2 657.4 - 657.4 1,439.3
Transmission and related 73.5 - 73.5 71.9 - 71.9 142.5
functions (i) (ii)
Marketing 215.6 - 215.6 220.2 - 220.2 416.6
Subscriber management 161.2 - 161.2 146.5 - 146.5 291.1
Administration (ii) 118.6 63.7 182.3 107.8 59.8 167.6 343.8
Betting 39.9 - 39.9 46.7 - 46.7 87.8
1,353.0 63.7 1,416.7 1,250.5 59.8 1,310.3 2,721.1
(i) The amounts shown are net of GBP7.3 million (2001/2002: half year GBP5.0
million; full year GBP15.3 million) receivable from the disposal of programming
rights not acquired for use by the Group, and GBP12.0 million (2001/2002: half
year GBP11.9 million; full year GBP23.7 million) in respect of the provision to
third party broadcasters of spare transponder capacity.
(ii) Transmission and related functions costs for the 2001/2002 full year
include an exceptional credit of GBP4.1 million. Administration costs for the
2001/2002 full year include goodwill and exceptional items of GBP140.6 million.
4 Share of operating results of joint ventures
2002/2003 2001/2002 2001/2002
Half year Half year Full year
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
KirchPayTV GmbH & Co KGaA ("KirchPayTV") operating loss - (57.1) (70.0)
Programming joint ventures' operating profit (loss), net 1.7 (2.7) (6.7)
1.7 (59.8) (76.7)
This relates to the Group's equity share of the operating results of the Group's
joint ventures.
By 8 February 2002, the Group considered that its relationship with KirchPayTV
had irrevocably changed and that the Group has not exercised significant
influence since that date. Therefore the Group considered that from 8 February
2002 it was no longer appropriate to account for its interest in KirchPayTV as a
joint venture, and ceased accounting for KirchPayTV's losses using the gross
equity method from that date.
5 Tax on profit (loss) on ordinary activities
Analysis of charge (credit) in period:
2002/2003 2001/2002 2001/2002
Half year Half year Full year
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Tax charge (credit) on profit before exceptional
items:
Current tax 26.7 - -
Deferred tax (35.9) 4.9 27.3
Adjustment in respect of prior year - deferred tax 7.2 - -
Share of joint ventures' tax charge 1.0 0.6 1.3
(1.0) 5.5 28.6
Exceptional tax charge (credit):
Current tax 1.5 - -
Deferred tax credit on operating exceptional items - - (5.5)
Exceptional deferred tax charge (i) - 95.6 83.3
1.5 95.6 77.8
0.5 101.1 106.4
During the period the Group recognised a deferred tax asset of GBP37.1 million
in respect of tax losses carried forward and GBP3.3 million in respect of fixed
asset timing differences. The Directors consider that there is now sufficient
evidence to support the recognition of these deferred tax assets on the basis
that there will be suitable taxable profits against which these assets can be
utilised.
At 31 December 2002, a deferred tax asset of GBP134.4 million (2001/2002: half
year GBP203.2 million; full year GBP167.6 million), arising principally from
losses in the Group, has not been recognised. These losses can be offset only
against taxable profits generated in the entities concerned. Although the
Directors ultimately expect sufficient profits to arise, there is currently
insufficient evidence to support recognition of a deferred tax asset relating
to these losses.
(i) An exceptional deferred tax charge of GBP95.6 million was made at 31
December 2001, against which GBP12.3 million was written back at 30 June 2002
as a result of the utilisation of tax losses.
6 Dividends
The Directors do not propose a dividend for the period (2001/2002: half year
nil; full year nil).
7 Earnings (loss) per share
Basic earnings (loss) per share represents the profit (loss) attributable to the
equity shareholders in each period divided by the weighted average number of
Ordinary Shares in issue during the period less the weighted average number of
shares held in the Group's ESOP trust of 1,898,715,178 (2001/2002: half year
1,886,064,965; full year: 1,887,375,018).
Diluted earnings (loss) per share represents the profit (loss) attributable to
the equity shareholders divided by the weighted average number of Ordinary
Shares in issue during the period, as adjusted for the weighted average number
of Ordinary Shares that would be issued on the conversion of all dilutive
potential Ordinary Shares into Ordinary Shares and the weighted average number
of shares held in the Group's ESOP trust of 1,898,715,178 (2001/2002: half year
1,886,064,965; full year: 1,887,375,018). Options over 39,236,701 shares in
2002/2003 half year (2001/2002 half year: 43,210,763 shares and 42,845,578
shares in the 2001/2002 full year) were excluded from the calculation of the
total diluted number of shares in those periods, as they were antidilutive.
Deferred and contingently issuable shares, valued at GBP255.8 million, were
excluded in the 2001/2002 full year and 2001/2002 half year (2002/2003 half year
nil) as they were antidilutive.
8 Intangible assets
The movement in the period was as follows:
Goodwill Other Total
(i)
GBPm GBPm GBPm
(unaudited) (unaudited) (unaudited)
Net book value at 1 July 2002 657.2 0.2 657.4
Amortisation (ii) (63.7) - (63.7)
Net book value at 31 December 2002 593.5 0.2 593.7
(i) Goodwill of GBP272.4 million, GBP542.0 million and GBP5.2 million, arising
on the acquisitions of Sports Internet Group ("SIG"), British Interactive
Broadcasting ("BIB") and WAP TV respectively, is being amortised over periods
of seven years on a straight-line basis.
(ii) At 31 December 2002, the Group has made a provision of GBP5.2 million,
included within amortisation, against goodwill which arose on the acquisition of
Opta Index Limited ("Opta") (a sports media and information company, a
subsidiary of SIG, which provides statistics on the sports industry), reducing
the carrying value of the goodwill to nil. The provision has been made as a
result of the Group's announcement to close Opta in May 2003 if sufficient
sponsorship revenue has not been generated by that date.
9 Fixed asset investments
31 December 31 December 30 June
2002 2001 2002
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Programming joint ventures 27.8 22.3 21.8
Investment in own shares 39.2 22.0 42.2
Other investments 41.0 64.9 64.9
Total investments 108.0 109.2 128.9
Investment in own shares
At 31 December 2002, the Group's employee ownership trust ("ESOP") held 6.2
million Ordinary Shares in the Company at an average value of GBP6.36 per share.
The 0.4 million shares utilised during the period relate to the grants of shares
under the Long Term Incentive Plan ("LTIP") and Key Contributor Plan ("KCP").
During May 2002, the Trustees of the ESOP, as authorised by the Board, purchased
3.0 million of the Company's Ordinary Shares in the open market, funded by a
loan from the Company. These shares will be utilised, together with shares
already held by the ESOP, to satisfy the exercise of employee share options and
share awards under the Group's LTIP and KCP.
Other investments
2002
At 31 December 2002, the Group has made a further provision against its minority
equity investments in football clubs leading to a non-cash exceptional charge of
GBP21.0 million.
At 31 December 2002, the Group reduced its deferred revenue balance by GBP5.1
million relating to minority investments in new media companies, and reduced
both its investment and provision against the investment in these companies by
GBP5.1 million accordingly.
At 31 December 2002, the Group made a provision against its investment in Open
TV shares, leading to a non-cash exceptional charge of GBP2.9 million. This
brought the carrying value of the Group's investment in Open TV to GBP0.3
million.
2001
On 2 July 2001, the Group disposed of its unlisted investment in Static 2358
Limited, realising a profit on disposal of GBP2.3 million.
At 31 December 2001, the Group made a provision against its minority equity
investments in football clubs, leading to a non-cash exceptional charge of
GBP60.0 million.
At 31 December 2001, the carrying value of the Group's investment in its
KirchPayTV joint venture was written down to nil, following an exceptional
charge to joint ventures' goodwill amortisation of GBP984.9 million. Joint
ventures' goodwill amortisation also included goodwill amortisation of GBP98.5
million for the six months ended 31 December 2001. The Group's investment in
KirchPayTV was treated as a joint venture until 8 February 2002, after which
date the Group considered that it was no longer able to exercise significant
influence over KirchPayTV. Accordingly, on 8 February 2002, the investment was
transferred within fixed asset investments to "Other investments" at a net book
value of nil. On 11 August 2002, formal insolvency proceedings were opened for
KirchPayTV. The Group does not expect to receive any funds from these
proceedings.
10 Reconciliation of movement in shareholders' deficit
Total
Share Share Shares to Merger Profit and loss shareholders'
capital premium be issued reserve account deficit
GBPm GBPm GBPm GBPm GBPm GBPm
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
As at 1 July 2002 946.7 2,409.8 255.8 266.7 (4,179.7) (300.7)
Issue of share capital 21.7 120.5 (253.1) 111.5 (0.1) 0.5
Share issue costs - (0.1) - - - (0.1)
Profit for the period - - - - 16.1 16.1
Transfer from merger reserve - - - (42.5) 42.5 -
As at 31 December 2002 968.4 2,530.2 2.7 335.7 (4,121.2) (284.2)
During the period the Company issued shares with a market value of GBP0.6
million (2001/2002: half year GBP30.9 million; full year GBP35.2 million) in
respect of the exercise of options awarded under various share option schemes,
with GBP0.5 million (2001/2002: half year GBP11.8 million; full year GBP14.3
million) received from employees.
On 11 November 2002, the Company issued 43.2 million shares with a fair value of
GBP253.1 million to HSBC, Matsushita and BT in respect of deferred consideration
for the acquisition of the remaining 67.5% of BiB in May and June 2001.
11a Reconciliation of operating profit to operating cash flows
2002/2003 2001/2002 2001/2002
Half year Half year Full year
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Operating profit 94.6 10.3 55.0
Depreciation 44.2 41.0 81.1
Amortisation of goodwill and other intangible assets 63.7 59.8 118.4
Decrease (increase) in working capital 52.6 (261.6) 29.6
Provisions utilised, net (0.6) (27.4) (34.4)
Net cash inflow (outflow) from operating activities 254.5 (177.9) 249.7
11b Analysis of changes in net debt
As at 31
As at 1 July December
2002 Cash flow 2002
GBPm GBPm GBPm
(audited) (unaudited) (unaudited)
Overnight deposits 38.7 (38.7) -
Other cash 11.1 40.0 51.1
49.8 1.3 51.1
Short-term deposits 0.5 (0.5) -
Cash at bank and in hand 50.3 0.8 51.1
Debt due after more than one year (1,569.1) 140.0 (1,429.1)
Finance leases (9.3) 1.2 (8.1)
Total debt (1,578.4) 141.2 (1,437.2)
Total net debt (1,528.1) 142.0 (1,386.1)
12 EBITDA
EBITDA (Earnings before interest, tax, depreciation and amortisation) is
calculated as operating profit before depreciation and amortisation of goodwill
and intangible assets.
13 Regulatory update
Office of Fair Trading ("OFT")
The OFT announced an investigation of the Group on 11 January 2000. The
investigation initially commenced under the Fair Trading Act 1973.
On 5 December 2000, the OFT indicated that it wished to continue its inquiry
under the Competition Act, and on 17 December 2001, the OFT announced that it
had issued a Rule 14 Notice to the Group and proposed to make a decision that
the Group had behaved anti-competitively, infringing UK competition law. The
Group maintained that it had not infringed the Competition Act and welcomed the
opportunity to put its case to the OFT. On 17 December 2002, following the
submission by the Group of written and oral representations on the Rule 14
Notice, the OFT announced that the Group had not been found in breach of
competition law.
EC Investigation - Football Association Premier League Limited ("FAPL")
The EC Commission has commenced investigations into a number of agreements,
decisions or practices leading to the acquisition of broadcast rights to
football events within the European Union, including the sale of exclusive
broadcast rights to Premier League football by the FAPL. On 21 June 2002, the
Group and the FAPL notified the Group's current agreements for FAPL rights to
the EC Commission seeking either a clearance or an exemption from Article 81 of
the EC Treaty. The FAPL also notified the rules of the FAPL to the EC
Commission. On 20 December 2002, the EC Commission issued a Statement of
Objections to the FAPL outlining certain concerns in respect of the FAPL's joint
selling of broadcast rights to Premier League football. It is too early to
assess whether this will have a material effect on the Group.(1)
EC Investigation - Movie Contracts
The European Commission is investigating the terms on which movies produced by
major US movie studios are supplied to distributors, including pay TV operators,
throughout the European Union. The Group has co-operated with this
investigation. At this stage, the Group is unable to determine whether it will
have a material effect on the Group.
Ireland
The Group is currently not regulated by the Irish national communications
regulatory authority, the Commission for Communications Regulation ("ComReg",
which replaced the former telecommunications regulator, the Office of the
Director of Telecommunications Regulation on 1 December 2002). The services
offered by the Group fall under the jurisdiction of Oftel and the ITC in the UK.
The Irish Government is undertaking a consultation exercise concerning the
implementation of the package of EC electronic communications directives. The
Irish Government has announced that it intends to implement these directives by
25 July 2003, the deadline set in the directives. It is possible, depending on
how the directives are implemented, that ComReg will seek to regulate the
Group's Irish operations.
In addition, the Government of Ireland has indicated that it intends to
introduce a list of designated events (pursuant to the Broadcasting (Major
Events Television Coverage) Act 1999) in respect of television coverage in
Ireland of certain events of major importance to Irish society. The Irish
Cabinet adopted such a list of events on 15 October 2002, and the list has been
found unobjectionable by the EU Contact Committee. The Group anticipates that
the list will be presented to the Irish Parliament for approval, in the near
future. It is too early to say what impact this legislation (following the
introduction of the list) may have on the Group's business in Ireland.
--------------------------
(1) If a company infringes Article 81 of the EC Treaty, it may be fined up to
10% of total annual group worldwide turnover. In addition, third parties may be
entitled to seek damages where they have suffered loss as a result of an
infringement of EC competition law.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
BRITISH SKY BROADCASTING GROUP PLC
Date: 14 February 2003 By: /s/ Dave Gormley
Dave Gormley
Company Secretary