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 September 2005
14 September, 2005
BRITISH SKY BROADCASTING GROUP PLC
(Name of Registrant)
Grant Way, Isleworth, Middlesex, TW7 5QD 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 IFRS Statement released on
14 September 2005
14 September 2005
BRITISH SKY BROADCASTING GROUP PLC
Restated financial information for the year ended 30 June 2005
under International Financial Reporting Standards ("IFRS")
OVERVIEW
Following a Regulation issued by the Council of the European Union ("EU"), BSkyB
Group plc ("Sky" or "the Group"), along with all European Union listed groups,
is required to adopt International Financial Reporting Standards including
International Accounting Standards ("IAS") and Interpretations, as adopted by
the EU, together "IFRS", in the preparation of its consolidated financial
statements for periods beginning 1 July 2005.
The Group's first results published under IFRS will be for the quarter ending 30
September 2005, and its first Annual Report and Accounts under IFRS will be for
the year ending 30 June 2006. The Group's date of transition to IFRS is 1 July
2004. In advance of the release of its first quarter results under IFRS, the
Group has restated its results for the year ended 30 June 2005, which were
prepared under generally accepted accounting principles in the UK ("UK GAAP").
The most significant changes to Sky's results for the year ended 30 June 2005 as
a result of adopting IFRS were presented on 3 August 2005. These are summarised
below:
Share-based payments
* An increase of GBP19 million in administration costs as a result of the
requirements to:
- recognise in the Income Statement a charge for share options and awards
at fair value on the date of grant, rather than intrinsic value; and
- recognise an additional charge for the Executive Scheme options, which
have an intrinsic value of nil under UK GAAP, and for the Sharesave
scheme, which has a specific exemption under UK GAAP.
* The Group's liability arising from the award of share options is
reclassified to equity from accruals.
Financial instruments & hedge accounting
* A reduction of GBP12 million in programming costs and a reduction of GBP5
million in finance costs as a result of the requirements to:
- record all foreign currency transactions at spot exchange rates at the
transaction date and all foreign currency monetary assets and
liabilities at closing exchange rates at each Balance Sheet date;
- recognise derivative financial instruments on the Balance Sheet at fair
value from inception of the contract; and
- account separately for any derivatives embedded within other contracts
and recognise them on the Balance Sheet at fair value, with changes in
fair value recognised in the Income Statement.
Goodwill
* A write-back of GBP116 million of goodwill amortisation charged under UK
GAAP for subsidiary undertakings as goodwill is no longer amortised, and
instead is subject to annual impairment testing.
* Goodwill will remain on the Balance Sheet at its net carrying value under
UK GAAP as at 1 July 2004 unless any impairments are identified in the
future.
These adjustments, together with other less significant, recurring adjustments,
led to an increase in operating profit of GBP120 million and, together with the
one-off adjustment of GBP32 million relating to the disposal of Granada Sky
Broadcasting and recurring tax adjustments, led to an increase in profit after
tax of GBP153 million for the year ended 30 June 2005.
The IFRS Financial Information as set out in Part 1 has been audited by Deloitte
& Touche LLP. Their audit report to the Board of Directors, which contains an
unqualified opinion, has been modified to include an emphasis of matter
paragraph.
FINANCIAL INFORMATION
Part 1 (audited)
The IFRS Financial Information, comprising:
* Income Statement for the year ended 30 June 2005;
* Statement of Recognised Income and Expenditure for the year ended 30
June 2005;
* Balance Sheet at 1 July 2004 (the "Transition Balance Sheet");
* Balance Sheet at 30 June 2005;
* Cash Flow Statement for the year ended 30 June 2005; and
* Note 1: Basis of preparation, IFRS exemptions and basis of presentation.
Part 2
* Audit Report from Deloitte & Touche LLP on the IFRS Financial
Information.
Part 3 (unaudited)
* Quarterly IFRS Income Statements for the year ended 30 June 2005
Supporting materials are available for download from the Company's website,
www.sky.com/corporate.
ENQUIRIES
Analysts/Investors:
Andrew Griffith Tel: 020 7705 3118
Robert Kingston Tel: 020 7705 3726
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
Finsbury:
Alice Macandrew Tel: 020 7251 3801
PART 1
Consolidated IFRS Income Statement for the year ended 30 June 2005
As Financial Goodwill Other adjustments
reported Share- instruments
under based & hedge
UK payments accounting IFRS
GAAP* IFRS 2 IAS 21 IAS 39 IFRS 3 IAS 38 IAS 28/31 IAS 18 adjustments IFRS
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Notes (i) (ii) (iii) (iv) (v) (vi) (vii)
Revenue 4,048 23 23 4,071
Operating
expenses (3,346) (19) (22) 34 116 11 (23) 97 (3,249)
_________________________________________________________________________________________________________
EBITDA 910 (19) (22) 34 11 4 914
Depreciation
and
amortisation (208) 116 116 (92)
_________________________________________________________________________________________________________
Operating
profit 702 (19) (22) 34 116 11 120 822
Share of
results of
joint ventures
and associates 14 - 14
Investment
income 30 (1) (1) 29
Finance
costs (92) (26) 31 5 (87)
Profit on
disposal of
joint venture (23) 32 32 9
Profit before
tax 631 (19) (48) 65 148 11 (1) 156 787
_________________________________________________________________________________________________________
Taxation (206) 6 14 (20) (3) (3) (209)
Profit for the
year
attributable
to equity
holders of the
parent 425 (13) (34) 45 148 8 (1) 153 578
_________________________________________________________________________________________________________
Earnings per
share (in
pence)
Basic and
diluted 22.2p (0.6p) (1.8p) 2.4p 7.7p 0.4p (0.1p) 8.0p 30.2p
_________________________________________________________________________________________________________
*Presented in IFRS format
Share-based payments
(i) IFRS 2 -"Share-based Payment"
Under UK GAAP, the Group recognised a charge in the Profit and Loss Account for
its long-term incentive plans, based on the difference between the exercise
price of the award and the price of a Sky share on the date of grant (the
"intrinsic value"). No charge was recognised in respect of the Executive Share
scheme, as the awards had an intrinsic value of nil, nor in respect of the
Sharesave scheme due to a specific exemption under UK GAAP for such schemes.
Under IFRS 2, the Group is required to recognise a charge in the Income
Statement for all share options and awards, based on the fair value of the
awards as calculated at the grant date using an option-pricing model. This IFRS
method of valuations is applied in assessing the Income Statement charge for all
share option schemes, including the Executive and Sharesave schemes. The Group
recognises a corresponding increase in shareholders' equity in respect of this
charge. The effects of these two changes result in an additional charge to
administration costs of GBP19 million and a reduction in taxation for the year
of GBP6 million under IFRS compared to the charge under UK GAAP.
Financial instruments & hedge accounting
Financial instruments and hedge accounting under IFRS resulted in an increase in
profit before tax of GBP17 million and an additional tax charge of GBP6 million.
The breakdown of these adjustments is detailed below:
(ii) IAS 21 - "The Effects of Changes in Foreign Exchange Rates"
Under UK GAAP, where the Group has taken out financial instruments to hedge
foreign currency exposures, the rates inherent in the hedging contracts have
been used to translate the hedged items. IAS 21 requires the Group to record all
foreign currency transactions at spot exchange rates at the transaction date,
and to state all foreign currency monetary assets and liabilities at closing
exchange rates each Balance Sheet date. The restatement of foreign currency
creditors, programming additions and amortisation in the period resulted in a
net charge of GBP22 million to programming costs. The restatement of US$ debt
and accrued interest in the period resulted in an additional charge to finance
costs of GBP26 million. Together, these adjustments resulted in a GBP14 million
reduction in the taxation charge for the year.
(iii) IAS 39 "Financial Instruments - Recognition and Measurement"
Under UK GAAP, the Group has recognised gains or losses on financial instruments
on maturity. Under IAS 39, the Group is required to recognise its derivative
financial instruments on the Balance Sheet at fair value from inception of the
contract, with changes in fair value being recognised in the Income Statement.
Where hedge accounting of cash flows is achieved, the portion of the gain or
loss on the hedging instrument (i.e. the change in fair value) that is
determined to be an effective hedge is initially recognised in equity in a
hedging reserve, and is transferred to the Income Statement over the same period
as the underlying hedged exposure affects the Income statement. This resulted in
a reduction in programming costs of GBP34 million, and a reduction in finance
costs of GBP31 million in respect of forward contracts and cross currency and
interest rate swaps which achieved hedge accounting and an additional charge to
taxation for the year of GBP20 million.
Goodwill
(iv) IFRS 3 - "Business Combinations"
Under UK GAAP, the Group amortised goodwill on a straight-line basis over
periods no longer than twenty years. Under IFRS 3, the Group's goodwill balances
which existed at the date of transition to IFRS are no longer amortised and
instead are subject to annual impairment testing. Therefore, the amortisation
charge under UK GAAP for 2005 of GBP116 million has been reversed under IFRS.
Under UK GAAP, goodwill arising on acquisitions which had been written off to
reserves is recycled to the Profit and Loss Account on disposal of the
investment. Under IFRS 3, such goodwill is not included in the gain or loss on
disposal. This results in a different gain or loss on disposal of investments
under IFRS. During the year, this difference gave rise to an adjustment of GBP32
million to reverse out goodwill recycled to the Profit and Loss Account on the
disposal of Granada Sky Broadcasting Limited ("GSB"), so that the GBP23 million
loss on disposal under UK GAAP became a gain on disposal of GBP9 million under
IFRS.
Other adjustments
(v) IAS 38 - "Intangible Assets"
IAS 38 requires development expenditure to be recognised in the Balance Sheet if
it is probable it will provide future economic benefits to the Group and its
cost can be measured reliably. Under IFRS, certain smartcard development
expenditure arising in the year that was expensed under UK GAAP must be
capitalised under these criteria. This has resulted in an GBP11 million
reduction in operating expenses and an additional charge to taxation for the
year of GBP3 million.
(vi) IAS 28 - "Investments in Associates" and IAS 31 - "Investments in Joint
Ventures"
Under UK GAAP, the Group accounted for its share of joint ventures and
associates using equity accounting. Under IFRS, the Group continues to apply
equity accounting. However, under IFRS, the Group is required to cease
recognising losses in equity accounted investments where our share of the loss
exceeds our investment in the venture, unless it has incurred legal or
constructive obligations or made payments on behalf of the joint venture or
associate. In addition, the Group's share of joint ventures' interest and
taxation are reported through the share of joint ventures line. Lastly, goodwill
amortisation relating to joint ventures and associates has been reversed out
under IFRS. The net impact of these adjustments was a reduction in 'Investment
income' of GBP1 million.
(vii) IAS 18 - "Revenue"
Under UK GAAP, revenues derived from the sale of surplus programming rights and
magazine advertising were recognised net against operating expenses. Under IFRS,
this revenue has been recognised on a gross basis, resulting in a GBP23 million
increase in revenue, offset by a GBP23 million increase in operating costs. This
treatment is consistent with the Group's US GAAP accounting policy for revenue.
Consolidated statement of recognised income and expenses for the year ended 30
June 2005
2005
GBPm
Profit for the year attributable to equity holders of the
parent 578
_____________________________________________________________________________
Net income recognised directly in equity
Gains or losses on cash flow hedges (i) 22
Tax on cash flow hedges taken directly to equity (i) (6)
16
_____________________________________________________________________________
Transfers to the Income Statement
Gains or losses on cash flow hedges (i) (4)
Tax on cash flow hedges transferred from equity (i) 1
(3)
_____________________________________________________________________________
Net gains not recognised in the Income Statement 13
_____________________________________________________________________________
Total recognised income for the year attributable to equity
holders of the parent 591
_____________________________________________________________________________
Financial instruments & hedge accounting
(i) IAS 39 "Financial Instruments - Recognition and Measurement"
Under UK GAAP, there are no gains or losses for the year, other than those
recognised in the Profit and Loss account. Under IFRS, where hedge accounting of
cash flows is achieved, the portion of the gain or loss on the hedging
instrument (i.e. the change in fair value) that is determined to be an effective
hedge is initially recognised in equity in a hedging reserve, and is transferred
to the Income Statement over the same period as the underlying hedged exposure
affects the Income statement. The statement of recognised income and expense
therefore includes gains or losses on cash flow hedges and their related tax
effects.
Consolidated IFRS Balance Sheet at 1 July 2004
As Financial Other adjustments
reported Share- instruments
under based & hedge
UK payments accounting IFRS
GAAP* IFRS 2 IAS 21 IAS 39 IAS 38 IAS 10 IAS 7 IAS 28/31 adjustments IFRS
Notes (i) (ii) (iii) (iv) (v) (vi) (vii)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Non-current
assets
Goodwill 417 - 417
Intangible
assets - 155 155 155
Property, plant
and equipment 376 (155) (155) 221
Investments in
joint ventures
and associates 33 - 33
Available for
sale
investments 2 - 2
Derivative
financial
assets - 9 9 9
Deferred tax
assets (viii) 151 1 (37) 42 6 157
979 1 (37) 51 15 994
_____________________________________________________________________________________________________________
Current assets
Inventories 375 (26) (26) 349
Trade and other
receivables 363 - 363
Derivative
financial
assets - 3 3 3
Short-term
deposits 173 (39) (39) 134
Cash and cash
equivalents 474 39 39 513
1,385 (26) 3 (23) 1,362
_____________________________________________________________________________________________________________
Total assets 2,364 1 (63) 54 (8) 2,356
_____________________________________________________________________________________________________________
Current
liabilities
Trade and
other
payables 1,122 (23) (31) (63) (3) (120) 1,002
Derivative
financial
liabilities - 43 43 43
Current tax
liabilities 48 - 48
1,170 (23) (31) 43 (63) (3) (77) 1,093
_____________________________________________________________________________________________________________
Non-current
liabilities
Borrowings 1,076 (118) (118) 958
Other
payables 28 - 28
Derivative
financial
liabilities - 111 111 111
1,104 (118) 111 (7) 1,097
_____________________________________________________________________________________________________________
Total
liabilities 2,274 (23) (149) 154 (63) (3) (84) 2,190
_____________________________________________________________________________________________________________
Share capital 971 - 971
Share premium 1,437 - 1,437
Other reserves 206 (1) (1) 205
Retained
earnings (2,524) 24 86 (99) 63 3 77 (2,447)
Shareholders'
equity 90 24 86 (100) 63 3 76 166
_____________________________________________________________________________________________________________
Total
liabilities
and
shareholders'
equity 2,364 1 (63) 54 (8) 2,356
_____________________________________________________________________________________________________________
*Presented in IFRS format
Share-based payments
(i) IFRS 2 - "Share-based Payment"
Under UK GAAP, certain amounts charged through the Profit and Loss Account for
share-based payments were shown within accruals in the Balance Sheet. Under
IFRS, they are required to be recorded within reserves. This resulted in a
reclassification between accruals and reserves of GBP23 million in the Group's
transitional Balance Sheet. In addition, the requirements of IAS 12 - "Income
Taxes" led to the recognition of GBP1 million of additional deferred tax assets
relating to share-based payments.
Financial instruments & hedge accounting
Financial instruments and hedge accounting under IFRS resulted in a decrease in
total assets of GBP9 million, an increase in total liabilities of GBP5 million
and a decrease in shareholders equity of GBP14 million. The breakdown of these
adjustments is detailed below:
(ii) IAS 21 - "The Effects of Changes in Foreign Exchange Rates"
Under UK GAAP, where the Group has taken out financial instruments to hedge
foreign currency exposures economically, the rates inherent in the hedging
contracts have been used to translate the hedged items into GBP. IAS 21 requires
the Group to record all foreign currency transactions at spot exchange rates at
the transaction date, and to state all foreign currency monetary assets and
liabilities at closing exchange rates each Balance Sheet date. The restatement
of foreign currency balances led to a decrease in programming creditors of GBP31
million, a decrease in programming inventory of GBP26 million, and a decrease in
borrowings of GBP118 million. These adjustments also led to a GBP37 million
decrease in deferred tax assets.
(iii) IAS 39 - "Financial Instruments: Recognition and Measurement"
Under IAS 39, the Group is required to recognise its derivative financial
instruments on the Balance Sheet at fair value from inception of the contract,
with changes in fair value being initially recognised in the hedging reserve or
the Income Statement. In the transitional Balance Sheet, this resulted in the
recognition of additional assets of GBP2 million and additional liabilities of
GBP43 million in respect of financial instruments used to hedge programming
foreign currency exposures. Additional assets of GBP9 million and liabilities of
GBP111 million were recognised in respect of financial instruments used to hedge
the Group's foreign currency debt exposure, and GBP1 million of additional
assets relating to embedded derivatives. These adjustments increased deferred
tax assets by GBP42 million.
Other adjustments
(iv) IAS 38 - "Intangible Assets"
IAS 38 requires certain expenditure, which was capitalised as tangible fixed
assets under UK GAAP, to be capitalised as intangible assets under IFRS. These
assets include software that is not integral to a related item of hardware and
software development. The assets have been reclassified on transition to IFRS,
and have continued to be amortised over their useful economic lives, which have
not changed as a result of the reclassification. This resulted in a
reclassification between 'Property, plant and equipment' and 'Intangible assets'
of GBP155 million in the Group's transitional Balance Sheet.
(v) IAS 10 - "Events after the Balance Sheet Date"
Under UK GAAP, dividends declared after the Balance Sheet date, but before the
date of signing the financial statements, are treated as adjusting post-Balance
Sheet events, and the associated dividend payable has been recorded as a
liability within the year-end Balance Sheet. Under IAS 10 such a dividend is
recorded as a liability in the accounting period in which it is approved. This
resulted in the removal of the final dividend of GBP63 million declared in
August 2004 in respect of the year ended 30 June 2004 from the Group's
transitional Balance Sheet.
(vi) IAS 7 - "Cash Flow Statements"
Under IAS 7, the definition of cash and cash equivalents normally includes
investments with a short maturity (less than three months) from the date of
acquisition, which are readily convertible to a known amount of cash with an
insignificant risk of changes in value. The definition of short-term deposits
includes commercial paper and other term deposits with a maturity of more than
three months from the date of acquisition. This resulted in an IFRS
reclassification in the transitional Balance Sheet from 'Short-term deposits' to
'Cash and cash equivalents' of GBP39 million for items with a maturity of less
than three months at the date of acquisition.
(vii) IAS 28 - "Investments in Associates" and IAS 31 "Investments in Joint
Ventures"
In accordance with the equity accounting requirements of IAS 28, the Group's
accumulated share of losses in certain joint ventures that exceed its interest
in those entities and its obligations to provide further funding are not
recognised. This resulted in an adjustment of GBP3 million in the transitional
Balance Sheet for losses recognised under UK GAAP.
(viii) IAS 1 - "Presentation of Financial Statements"
Under IAS 1, all deferred tax balances must be classified as non-current assets
or liabilities, which has led to a reclassification of deferred tax assets
previously classified within current assets under UK GAAP.
Consolidated IFRS Balance Sheet at 30 June 2005
As Financial Goodwill Other adjustments
reported Share- instruments
under based & hedge
UK payments accounting IFRS
GAAP* IFRS 2 IAS 21 IAS 39 IFRS 3 IAS 38 IAS 10 IAS 7 adjustments IFRS
Notes (i) (ii) (iii) (iv) (v) (vi) (vii)
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Non-current
assets
Goodwill 301 116 116 417
Intangible
assets - 202 202 202
Property,
plant and
equipment 526 (191) (191) 335
Investments
in joint
ventures and
associates 23 - 23
Available for
sale
investments 2 - 2
Derivative
financial
assets - 9 9 9
Deferred tax
assets (viii) 100 2 (23) 29 (3) 5 105
952 2 (23) 38 116 8 141 1,093
_________________________________________________________________________________________________________
Current
assets
Inventories 340 (19) (19) 321
Trade and
other
receivables 331 - 331
Derivative
financial
assets - 14 14 14
Short-term
deposits 54 140 140 194
Cash and cash
equivalents 643 (140) (140) 503
1,368 (19) 14 (5) 1,363
_________________________________________________________________________________________________________
Total assets 2,320 2 (42) 52 116 8 136 2,456
_________________________________________________________________________________________________________
Current
liabilities
Trade and
other
payables 1,140 (14) (2) (93) (109) 1,031
Derivative
financial
liabilities - 6 6 6
Current tax
liabilities 100 - 100
Provisions
(viii) 13 - 13
1,253 (14) (2) 6 (93) (103) 1,150
_________________________________________________________________________________________________________
Non-current
liabilities
Borrowings 1,076 (94) (94) 982
Other
payables 25 - 25
Derivative
financial
liabilities - 112 112 112
1,101 (94) 112 18 1,119
_________________________________________________________________________________________________________
Total
liabilities 2,354 (14) (96) 118 (93) (85) 2,269
_________________________________________________________________________________________________________
Share
capital 934 - 934
Share
premium 1,437 - 1,437
Capital
redemption
reserve 37 - 37
Other
reserves 131 (14) 73 59 190
Retained
earnings (2,573) 16 54 (52) 43 8 93 162 (2,411)
Shareholders'
equity (34) 16 54 (66) 116 8 93 221 187
_________________________________________________________________________________________________________
Total
liabilities
and
shareholders'
equity 2,320 2 (42) 52 116 8 136 2,456
_________________________________________________________________________________________________________
*Presented in IFRS format
Share-based payments
(i) IFRS 2 - "Share-based Payment"
Under UK GAAP, certain amounts charged through the Profit and Loss Account for
share-based payments are shown within accruals in the Balance Sheet. Under IFRS,
they are required to be recorded within reserves. This resulted in a
reclassification between accruals and reserves of GBP14 million at 30 June 2005.
In addition, the requirements of IAS 12 - "Income Taxes" led to the recognition
of GBP2 million of additional deferred tax assets relating to share-based
payments.
Financial instruments & hedge accounting
Financial instruments and hedge accounting under IFRS resulted in an increase in
total assets of GBP10 million, an increase in total liabilities of GBP22 million
and a decrease in shareholders equity of GBP12 million. The breakdown of these
adjustments is detailed below:
(ii) IAS 21 - "The Effects of Changes in Foreign Exchange Rates"
Under UK GAAP, where the Group has taken out financial instruments to hedge
foreign currency exposures economically, the rates inherent in the hedging
contracts have been used to translate the hedged items into GBP. IAS 21 requires
the Group to record all foreign currency transactions at spot exchange rates at
the transaction date, and to state all foreign currency monetary assets and
liabilities at closing exchange rates each Balance Sheet date. The restatement
of foreign currency balances led to a decrease in programming creditors of GBP2
million, a decrease in programming inventory of GBP19 million, and a decrease in
borrowings of GBP94 million. These adjustments also led to a GBP23 million
decrease in deferred tax assets.
(iii) IAS 39 - "Financial Instruments - Recognition and Measurement"
Under IAS 39, the Group is required to recognise its derivative financial
instruments on the Balance Sheet at fair value from inception of the contract,
with changes in fair value being recognised in the Income Statement. In the
Balance Sheet at 30 June 2005 this resulted in the recognition of additional
assets of GBP13 million and additional liabilities of GBP6 million in respect of
financial instruments used to hedge the Group's programming foreign currency
exposures. Additional assets of GBP9 million and liabilities of GBP112 million
were recognised in respect of financial instruments used to hedge the Group's
foreign currency debt exposure, and GBP1 million of additional assets relating
to embedded derivatives. These adjustments increased deferred tax assets by
GBP29 million.
Goodwill
(iv) IFRS 3 - "Business Combinations"
The adjustment of GBP116 million reinstates the goodwill amortisation charged
under UK GAAP in the period, and is partly offset by an adjustment of GBP73
million in reserves, which reverses a release from the merger reserve to the
Profit and Loss reserve made under UK GAAP in relation to the acquisitions on
which the goodwill arose.
Other adjustments
(v) IAS 38 - "Intangible Assets"
IAS 38 requires certain expenditure, which was capitalised as tangible fixed
assets under UK GAAP, to be capitalised as intangible assets under IFRS. These
assets include software that is not integral to a related item of hardware and
software development. The assets have been reclassified on transition to IFRS,
and have continued to be amortised over their useful economic lives, which have
not changed as a result of the reclassification. This resulted in a
reclassification between 'Property, plant and equipment' and 'Intangible assets'
of GBP191 million in the Balance Sheet.
IAS 38 requires development expenditure to be recognised in the Balance Sheet if
it is probable that it will provide future economic benefits to the Group and
its cost can be measured reliably. Under IFRS, certain development expenditure
arising in the year meets these criteria and has therefore been capitalised.
Under UK GAAP the Group has elected to expense all such expenditure as incurred.
This results in an increase of GBP11 million in intangible assets in the Balance
Sheet at 30 June 2005. This adjustment decreases deferred tax assets by GBP3
million.
(vi) IAS 10 - "Events after the Balance Sheet Date"
Under UK GAAP, dividends declared after the Balance Sheet date, but before the
date of signing the financial statements, are treated as adjusting post-Balance
Sheet events, and the associated dividend payable has been recorded as a
liability within the year-end Balance Sheet. Under IAS 10 such a dividend is
recorded as a liability in the accounting period in which it is approved. This
resulted in the removal of the final dividend of GBP93 million declared in
August 2005 in respect of the year ended 30 June 2005 from the Group's Balance
Sheet.
(vii) IAS 7 - "Cash Flow Statements"
Under IAS 7, the definition of cash and cash equivalents normally includes
investments with a short maturity (less than three months) from the date of
acquisition, which are readily convertible to a known amount of cash with an
insignificant risk of changes in value. The definition of short-term deposits
includes commercial paper and other term deposits with a maturity of more than
three months from the date of acquisition. This resulted in an IFRS
reclassification in the Balance Sheet from 'Cash and cash equivalents' to
'Short-term deposits' of GBP140 million for items with a maturity of more than
three months at the date of acquisition.
(viii) IAS 1 - "Presentation of Financial Statements"
Under IAS 1, all deferred tax balances must be classified as non-current assets
or liabilities, which has led to a reclassification of deferred tax assets
previously classified within current assets under UK GAAP.
In addition, GBP13 million of provisions, disclosed separately under UK GAAP,
have been reclassified to current liabilities.
Consolidated IFRS cash flow statement for the year ended 30 June 2005
As reported Cash flow Intangible IFRS IFRS
under statements assets adjustments
UK GAAP* IAS 7 IAS 38
Notes (i) (ii)
GBPm GBPm GBPm GBPm GBPm
Cash flows from operating
activities
Cash generated from
operations 978 11 11 989
Interest received 28 - 28
Taxation paid (103) - (103)
Decrease (increase) in
short-term deposits 164 (224) (224) (60)
Net cash from
operating activities 1,067 (224) 11 (213) 854
____________________________________________________________________________________
Cash flows from investing
activities
Funding to joint ventures
and associates (4) - (4)
Repayments of funding from
joint ventures and associates 8 - 8
Dividends received from
joint ventures and associates 12 - 12
Proceeds from the sale of a
joint venture 14 - 14
Purchase of property,
plant and equipment (230) 81 81 (149)
Purchase of intangible
assets - (92) (92) (92)
Proceeds from the sale of
equity investments 1 - 1
Net cash used in investing
activities (199) (11) (11) (210)
____________________________________________________________________________________
Cash flows from financing
activities
Proceeds from issue of
shares held in
Employee Share
Ownership Plan
("ESOP") 4 - 4
Purchase of own shares for
ESOP (14) - (14)
Share buy-back (416) - (416)
Interest paid (91) - (91)
Dividends paid to
shareholders (138) - (138)
Net cash used in financing
activities (655) - (655)
____________________________________________________________________________________
Effect of
foreign
exchange rate
changes - 1 1 1
Net increase
(decrease) in
cash and cash
equivalents 213 (223) - (223) (10)
____________________________________________________________________________________
*Presented in IFRS format
(i) IAS 7 - "Cash Flow Statements"
Under IAS 7, only deposits maturing within three months of deposit are normally
classified as 'Cash and cash equivalents'. Investments with maturities of over
three months have therefore been reclassified to 'Short-term deposits',
resulting in a GBP224 million reduction in the effect of short-term deposits on
the movement in cash and cash equivalents.
(ii) IAS 38 - "Intangible Assets"
The Group's GBP81 million expenditure on software and development during the
year has been reclassified from purchase of property, plant and equipment to
purchase of intangible assets. In addition, certain cash flows relating to
smartcard development of GBP11 million have been reclassified from cash
generated from operations to the purchase of intangible assets.
NOTE 1
Basis of preparation
The attached financial information has been prepared in accordance with the
accounting standards and interpretations that the Group expects to be in effect
at 30 June 2006, the date of the Group's first full financial statements
prepared on an IFRS basis. However, there remains some uncertainty as to whether
the International Accounting Standards Board ("IASB") and other related bodies
will issue new or revised standards, which, subject to their endorsement by the
European Commission, may or may not be mandatory for the Group's 30 June 2006
financial statements, and which the Group may or may not adopt early on a
voluntary basis. It is possible that the restated information for 2005 presented
in this document may be subject to change before its inclusion in the 2006
Annual Report and Accounts, which will contain the Group's first full financial
statements prepared in accordance with IFRS.
IFRS 1 exemptions
IFRS 1 "First-Time Adoption of International Financial Reporting Standards"
requires full retrospective application of IFRS, with certain limited exemptions
and exceptions. The Group has taken the following exemptions:
* IFRS 2 "Share-based Payment" - The Group has not applied IFRS 2 to any
share options and share awards granted before 7 November 2002, and has
instead applied it to all share options and awards granted after 7 November
2002 which had not vested by 1 January 2005.
* IFRS 3 "Business Combinations" - The Group has not applied IFRS 3 to
business combinations prior to its transition date of 1 July 2004.
In addition, the Group has elected not to take the following available
exemptions:
* IAS 32 "Financial Instruments: Disclosure and Presentation" and IAS 39
"Financial Instruments: Recognition and Measurement" - The Group has
applied these standards in its comparative IFRS results for the year ended
30 June 2005 rather than applying the standards from 1 July 2005.
* IAS 16 "Property, Plant and Equipment" - The Group has not used fair
value as deemed cost for items of property, plant and equipment. Instead,
the group has retrospectively accounted for property, plant and equipment
under IAS 16.
The other exemptions available within IFRS 1 are not applicable to the
circumstances of the Group.
Basis of presentation
The Group has presented its Income Statement, Balance Sheets, Statement of
Recognised Income and Expenditure and Cash Flow Statement in accordance with IAS
1 "Presentation of Financial Statements" and IAS 7 "Cash Flow Statements".
IAS 1 does not provide definitive guidance on the format of the Income
Statement, but stipulates that certain line items must be disclosed as a
minimum. Additional line items, headings and subtotals are presented on the face
of the Group's Income Statement where such presentation is relevant to the
understanding of the Group's financial performance.
IAS 1 requires that the Balance Sheet includes separate classifications of
current and non-current assets, and current and non-current liabilities, with
certain stipulated line items presented therein. As required by IAS 1, deferred
tax balances are classified as non-current items. Additional line items,
headings and subtotals are presented on the face of the Balance Sheet where such
presentation is relevant to the understanding of the Group's financial position.
The Group has accounted for its joint ventures under the equity accounting
requirements set out in IAS 28 "Investments in Associates" for both associates
and joint ventures, as permitted by IAS 31 "Interests in Joint Ventures". Under
IAS 28, where an investor's share of losses equals or exceeds its interest in a
joint venture or associate, the investor discontinues recognising its share of
further losses, unless the investor has incurred legal or constructive
obligations to fund the joint venture or associate further.
IAS 7 requires that cash flows be classified under the headings of operating,
investing and financing activities. This has led to changes in the presentation
of the Group's Cash Flow Statement under IFRS.
PART 2
INDEPENDENT AUDITORS' REPORT TO THE BOARD OF DIRECTORS OF BRITISH SKY
BROADCASTING GROUP PLC ON THE PRELIMINARY IFRS FINANCIAL INFORMATION
We have audited the accompanying preliminary International Financial Reporting
Standards ("IFRS") consolidated opening balance sheet as at 1 July 2004 and the
preliminary IFRS consolidated financial information of British Sky Broadcasting
Group plc ("the Company") and its subsidiaries (together "the Group") for the
year ended 30 June 2005 which comprises the consolidated balance sheet,
consolidated income statement, consolidated cash flow statement, the
consolidated statement of recognised income and expense and the related Note 1
(hereinafter referred to collectively as "the IFRS Financial Information").
This report is made solely to the Board of Directors in accordance with our
related engagement letter and solely for the purpose of assisting them with
complying with the requirements of IFRS 1. Our audit work has been undertaken so
that we might state to the company's Board of Directors, those matters we are
required to state to them in an auditors' report and for no other purpose. To
the fullest extent permitted by law, we will not accept or assume responsibility
to anyone other than the company for our audit work, for our report, or for the
opinions we have formed.
Respective responsibilities of directors and auditors
The Company's directors are responsible for ensuring that the Company and the
Group maintains proper accounting records and for the preparation of the IFRS
Financial Information on the basis set out in Note 1, which describes how IFRS
will be applied under IFRS 1, including the assumptions the directors have made
about the standards and interpretations expected to be effective, and the
policies expected to be adopted, when the Company prepares its first complete
set of IFRS financial statements as at 30 June 2006. Our responsibility is to
audit the IFRS Financial Information in accordance with relevant United Kingdom
legal and regulatory requirements and auditing standards and report to you our
opinion as to whether the IFRS Financial Information is prepared, in all
material respects, on the basis set out in Note 1.
Basis of audit opinion
We conducted our audit in accordance with United Kingdom auditing standards
issued by the Auditing Practices Board. An audit includes examination, on a test
basis, of evidence relevant to the amounts and disclosures in the IFRS Financial
Information. It also includes an assessment of the significant estimates and
judgements made by the directors in the preparation of the IFRS Financial
Information, and of whether the accounting policies are appropriate to the
circumstances of the Group, consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we consider necessary in order to provide us with sufficient
evidence to give reasonable assurance that the IFRS Financial Information is
free from material misstatement, whether caused by fraud or other irregularity
or error. In forming our opinion, we also evaluated the overall adequacy of the
presentation of information in the IFRS Financial Information.
Emphasis of matter
Without qualifying our opinion, we draw attention to the fact that Note 1
explains why there is a possibility that the accompanying IFRS Financial
Information may require adjustment before constituting the final comparative
IFRS financial information. Moreover, we draw attention to the fact that, under
IFRS, only a complete set of financial statements comprising a balance sheet,
income statement, statement of recognised income and expense, cash flow
statement, together with comparative financial information and explanatory
notes, can provide a fair presentation of the Group's financial position,
results of operations and cash flows in accordance with IFRS.
Opinion
In our opinion the IFRS Financial Information is prepared, in all material
respects, in accordance with the basis set out in Note 1, which describes how
IFRS will be applied under IFRS 1, including the assumptions the directors have
made about the standards and interpretations expected to be effective, and the
policies expected to be adopted, when the Company prepares its first complete
set of IFRS financial statements as at 30 June 2006.
Deloitte & Touche LLP
Chartered Accountants
London
13 September 2005
PART 3
Quarterly IFRS Income Statements for the year ended 30 June 2005 (unaudited)
Q1 Q2 Q3 Q4 Total
GBPm GBPm GBPm GBPm GBPm
Revenue 948 1,009 1,019 1,095 4,071
Operating expenses (759) (842) (802) (846) (3,249)
______________________________________________________________________________
EBITDA 213 191 239 271 914
Depreciation and amortisation (24) (24) (22) (22) (92)
______________________________________________________________________________
Operating profit 189 167 217 249 822
______________________________________________________________________________
Share of results from joint ventures
and associates 1 7 3 3 14
Investment income 7 8 7 7 29
Finance costs (21) (24) (24) (18) (87)
Profit on disposal of joint venture - 9 - - 9
Profit before tax 176 167 203 241 787
______________________________________________________________________________
Taxation (54) (44) (63) (48) (209)
Profit for the quarter attributable
to equity holders of the parent 122 123 140 193 578
______________________________________________________________________________
Earnings per share (in pence) from
profit for the quarter
attributable to equity holders of the
parent
Basic and diluted 6.3p 6.4p 7.3p 10.3p 30.2p
______________________________________________________________________________
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 September 2005 By: /s/ Dave Gormley
Dave Gormley
Company Secretary