FORM 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a - 16 or 15d - 16 of
the Securities Exchange Act of 1934
For the month of February 2004
11 February 2004
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 NO. 1 Press release of British Sky Broadcasting Group plc announcing
Interim results released on 11 February 2004
11 February 2004
BRITISH SKY BROADCASTING GROUP PLC
Results for the six months ended 31 December 2003
* Net DTH subscriber growth in the quarter of 193,000 to 7.2 million
* Total revenue increases by 17% to GBP1,766 million
* Operating profit before goodwill and exceptional items increases by 84% to
GBP283 million
* Net operating cash inflow increases by 57% to GBP401 million
* Profit after tax increases to GBP130 million from GBP12 million
* Earnings per share before goodwill and exceptional items increase to 8.4
pence
* Restoration of dividend with interim payment of 2.75 pence per share
James Murdoch, Chief Executive of British Sky Broadcasting Group plc, said:
"These results show a business that continues to improve. We enter our second
half with good momentum, robust financial health and a full programme of work."
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
Finsbury:
Alice Macandrew Tel: 020 7251 3801
There will be a presentation to analysts and investors at 10:00 a.m. today at
the Gibson Hall, 13 Bishopsgate, London, EC2N 3BA and to the press at 11.30 a.m.
at the same venue.
A conference call for US analysts will be held at 09:30 a.m. (EST) today.
Details of this call have been sent to US institutions and can be obtained from
John Sutton at Taylor Rafferty on +1 212 889 4350.
A live webcast of the presentation to analysts, together with this press
release, will be available today on Sky's corporate website which may be found
at www.sky.com/corporate.
OVERVIEW
Sky has produced a strong financial performance in the six months to 31 December
2003 ("the period"), continuing to deliver double-digit revenue growth and
demonstrating strong operational gearing. Total revenue for the period was
GBP1,766 million, an increase of 17% over the six months to 31 December 2002
("the comparable period"), and total operating costs before goodwill and
exceptional items increased by 9% to GBP1,483 million. Operating profit before
goodwill and exceptional items increased to GBP283 million, which generated an
operating profit margin before goodwill and exceptional items of 16%, up from
10% for the comparable period.
Profit after tax increased by GBP118 million on the comparable period to GBP130
million. Earnings per share before goodwill and exceptional items increased to
8.4 pence from 5.1 pence in the comparable period. Net debt has been reduced by
GBP346 million in the period to GBP759 million representing a reduction of over
GBP1 billion since net borrowings peaked at GBP1.833 billion at 31 December
2001. The Company is today announcing an interim dividend payment of 2.75 pence
per share.
OPERATING REVIEW
At 31 December 2003, the total number of direct-to-home ("DTH") digital
satellite subscribers in the UK and Ireland was 7,208,000, representing a net
increase of 193,000 subscribers in the three months to 31 December 2003 ("the
quarter"). With this sustained growth, Sky remains on track to achieve its
target of eight million DTH subscribers by the end of the calendar year 2005.
Subscriber quality remains robust with 55% of all DTH subscribers taking the top
tier Sky World package at the end of the period.
The total number of households in the UK and Ireland taking one or more Sky
channels increased to over 13 million in the quarter, with a small increase in
the number of households subscribing to a television service via cable. For the
first time ever, over 50% of UK and Ireland television homes now have access to
one or more Sky channels, driven by further growth in the number of DTH
subscribers and an increase in the number of households receiving the
free-to-air digital service, Freeview.
DTH churn for the year to date (annualised) was 9.4%, the same level as that
achieved in the comparable period.
Annualised average revenue per DTH subscriber (ARPU) in the quarter was GBP369,
an increase of 5% over the three months to 31 December 2002 and GBP3 higher than
ARPU for the previous quarter. The changes in UK and Ireland retail pricing
which took effect from 1 January 2004 will be reflected in ARPU from the third
quarter of this financial year.
The number of Sky+ subscribers has more than doubled, since the launch of the
marketing campaign in October 2003, reaching 250,000 by 31 December 2003. A
total of 129,000 new Sky+ customers were added in the quarter, putting Sky
comfortably on track to hit its target of 315,000 subscribers by the end of June
2004. There is a strong propensity for Sky+ customers to subscribe to premium
packages, with over 75% of new subscribers to Sky+ taking Sky's top tier
package, Sky World. Satisfaction levels for Sky+ are very high with nine out of
ten customers saying that they are likely to recommend Sky+ to a friend. At 31
December 2003, there were 237,000 subscribers to the Extra Digibox, which
represents an increase of 103% on the comparable period.
Programming
The main terrestrial channels, BBC1 and ITV1, continued their audience decline
in 2003 with their combined share of viewing, according to the viewing figures
from BARB at 31 December 2003, falling below the 50% level for the first time.
Multichannel viewing continues to grow year on year and the multichannel share
of viewing overtook ITV1's share for the first time ever in the six months to 31
December 2003.
Sky News continues to pioneer innovative news coverage techniques as
demonstrated in its reporting of the Hutton Inquiry, with nightly
reconstructions allowing viewers to follow the presentation of evidence in full.
Sky News continues to be the rolling news channel of choice during major news
stories.
Sky One continues to enhance its schedule and announced in December 2003 that it
had acquired exclusive UK and Ireland broadcasting rights to the third season of
the successful drama series, '24'. The new year has also seen the launch of
Nip/Tuck, which has already achieved high acclaim in the US and has made a
successful debut on Sky. Sky One and Sky One Mix continue to deliver strong
audiences among 16-34 year-olds.
The Sky Sports channels broadcast more hours of sport than ever before in the
year to 31 December 2003, driving Sky Sports' share of viewing in multichannel
homes to 3.8% in the period. Sky is well placed to benefit from the higher
profile of Rugby Union in the UK and Ireland, following England's Rugby World
Cup victory in November 2003, having started a three-year contract for Rugby
Union's European competition, the Heineken Cup, in December 2003. Sky Sports has
the rights to broadcast five matches exclusively live from each of the opening
six rounds, adding to its existing coverage of the domestic Zurich Premiership
competition, England's autumn internationals and southern hemisphere Rugby.
Rugby League audiences increased to record levels for the Super League Play-Offs
in the quarter, and Sky Sports has since announced that it has secured exclusive
live rights to Super League and international Rugby League games for the next
five years.
England's international cricket tours to Sri Lanka and Bangladesh, which were
shown exclusively live, were also highlights on Sky Sports in the quarter and,
with these tours, international cricket was broadcast exclusively on Sky in
every month of the 2003 calendar year. Sky Sports will also show England's Test
and One-Day cricket matches in the West Indies exclusively live in March 2004.
Sky Sports is attracting strong audiences for its debut coverage of this
season's UEFA Champions League, with an average of 1.8 million in-home viewers
recorded on Wednesday nights across all games, boosted by Sky's unique
interactive service which offers viewers a choice between up to eight live
matches broadcast simultaneously. All three qualifying English clubs: Arsenal,
Chelsea and Manchester United, have made it to the knockout stage which begins
this month.
On 8 August 2003, it was announced that Sky had successfully bid for all four
packages of exclusive live UK rights to FA Premier League ("FAPL") football from
the 2004/05 to the 2006/07 seasons. As part of its ongoing investigation into
the sale of rights by the FAPL, the European Commission conducted inquiries into
this most recent auction. On 16 December 2003, the European Commission announced
a provisional agreement with the FAPL and with Sky under which, among other
things, Sky has agreed to offer to sublicense up to eight live games each season
from 2004/05 to 2006/07 to another broadcaster.
Sky Movies introduced major enhancements to its service on 1 November 2003,
including the independently-sourced star-rating on EPG movie listings, with a
view to providing greater clarity and enabling greater ease of navigation around
the wide choice of movies available on the eleven movie channels. During the
quarter a number of films attracted audiences of greater than one million on the
first night's screening including Star Wars: Episode II - Attack of the Clones
and Bend it Like Beckham.
FINANCIAL REVIEW
Revenue
Total revenues increased by 17% on the comparable period to GBP1,766 million,
reflecting growth of 11% in the average number of DTH subscribers, another
above-market performance in advertising, and higher interactive revenues.
Sky's advertising revenue increased by 11% to GBP147 million, significantly
outperforming a broadly flat advertising market in the period. With the majority
of annual share deal negotiations now complete, Sky remains confident of
continuing to outperform the rate of overall advertising market growth for the
remainder of this financial year.
Excluding the one-off receipt of revenue in the first quarter, resulting from an
audit of NTL's reporting systems, wholesale revenue was broadly in line with the
comparable period at GBP99 million.
Total interactive revenues, which includes both Sky Active revenues and gross
betting revenues, increased by 62% to GBP147 million, with increases in revenues
from both Sky Active and SkyBet.
Sky Active revenues increased by 17% on the comparable period to GBP56 million.
This was due to a combination of increases in retail revenues through SkyBuy,
third party betting, revenues from interactive advertising and subsidy recovery
revenues.
SkyBet revenue increased by GBP48 million on the comparable period to GBP91
million, driven mainly by growth in the total number of bets placed across all
platforms, which more than doubled on the comparable period, and by a first time
contribution from SkyBetVegas, launched in March 2003.
Other revenue for the period increased by 9% to GBP84 million, primarily due to
the sale of a greater volume of Sky+ boxes and increased Sky+ installation
revenues.
Programming costs
Programming costs for the period increased by 5% to GBP783 million. Sports
costs, which accounted for 69% of the total increase, rose by GBP27 million to
GBP340 million, driven mainly by the additions of both UEFA Champions League
Football and the Rugby Union's Heineken Cup this season. An increase in the
number of movie channel subscribers and contractual rate increases in movie
costs were offset by a favourable movement in the average rate at which the
Group was able to purchase dollars against the average rolling hedge rate
achieved in the comparable period, leaving costs flat year on year at GBP202
million. Third party costs increased by GBP3 million to GBP176 million, with
growth in the average number of subscribers offset by a further reduction in the
aggregate cost per subscriber due to the commencement of revised agreements with
MTV, Paramount Comedy, Nickelodeon and Music Choice Europe. Costs relating to
Sky's wholly-owned Entertainment and News channels, increased by GBP8 million on
the comparable period, reflecting ongoing investment in Sky's own programming.
Other operating costs
Marketing costs continued to decrease with a GBP1 million reduction on the
comparable period to GBP215 million, despite further robust growth in the
subscriber base. The reduction was driven principally by fewer installations and
lower unit prices for the set-top box.
Subscriber acquisition cost ("SAC") fell to around GBP200 in the quarter, with
savings being achieved in the unit prices of the set-top box.
The marketing campaign for Sky+, which was launched in October 2003, contributed
to growth of GBP3 million in above-the-line expenditure to GBP25 million and of
GBP7 million in other marketing costs to GBP33 million.
Subscriber management costs, which include Customer Relationship Management
("CRM"), supply chain and infrastructure costs and associated depreciation,
increased by GBP30 million on the comparable period to GBP191 million. An
increase in CRM costs of GBP3 million reflected the costs associated with the
rapidly growing subscriber base offset by continued efficiencies achieved in the
call centres. These savings have led to a further reduction in the CRM cost per
subscriber which has fallen by 6% on the comparable period. Supply chain and
infrastructure costs increased by GBP13 million on the comparable period to
GBP86 million primarily as a result of the significant uplift in the number of
Sky+ and Extra Digiboxes sold. Depreciation in respect of CRM assets developed
and capitalised over the past three years increased by GBP14 million in the
period, which also contributed to the increase in subscriber management costs.
Administration costs before goodwill and exceptional items increased by GBP9
million on the comparable period to GBP131 million due mainly to increased
technology and facilities costs and costs resulting from increased compliance
obligations.
Goodwill amortisation decreased by GBP6 million on the comparable period to
GBP58 million. This is principally due to the GBP5 million provision made in the
comparable period against goodwill which originally arose on the acquisition of
Opta Index Limited ("Opta") as the Group announced that it was to close Opta.
The sale of the Group's 9.9% shareholding in Manchester United plc on 7 October
2003 gave rise to an exceptional profit on disposal of GBP2 million in the
period. In accordance with the accounting treatment required by UK GAAP, the
GBP33 million provision held against the Group's investment in Manchester United
plc was released at 30 September 2003. This was partly offset by a further GBP9
million provision against the Group's remaining football club investments.
After deducting the Group's share of the operating results of joint ventures, a
loss of GBP5 million in the period, and net interest payable of GBP42 million,
the Group made a profit before tax, goodwill and exceptional items of GBP236
million.
Taxation
The total net tax charge recorded for the period was GBP74 million, principally
comprising a current tax charge of GBP69 million and a deferred tax charge of
GBP8 million. These charges were offset by a net adjustment in respect of prior
years of GBP3 million. Excluding the effect of goodwill, joint ventures and
exceptional items, this results in an underlying effective tax rate on ordinary
activities of 30%.
After removing the effect of deferred tax, the Group's share of joint ventures'
tax (which includes consortium relief) and prior year adjustments, the
mainstream corporation tax liability for the period was GBP66 million. This has
been reduced by GBP44 million, which is the maximum utilisation of advance
corporation tax ("ACT") allowable, to GBP22 million. The remaining GBP10 million
of ACT on the Group's balance sheet is expected to be fully utilised against the
Group's tax liability for the second half of this financial year.
Earnings
The profit after tax for the period was GBP130 million. The weighted average
number of shares outstanding in the period (excluding those shares held in the
ESOP trust) was approximately 1,936 million. Earnings per share before goodwill
and exceptional items in the period were 8.4 pence compared to 5.1 pence in the
comparable period. At 31 December 2003 the total number of shares outstanding
was 1,940,085,139.
Cashflow and interest
Earnings before interest, tax and depreciation and amortisation ("EBITDA")
before exceptional items increased by 72% in the period to GBP341 million. With
an additional GBP60 million of cash inflow principally from movements in working
capital, the Group generated an operating cash inflow of GBP401 million,
representing the conversion of 142% of operating profit before goodwill and
exceptional items.
After the one-off receipt from the sale of the Group's shareholding in
Manchester United plc of GBP62 million, capital expenditure of GBP65 million,
net interest payments of GBP48 million, taxation of GBP24 million and other net
inflows of GBP20 million, net debt decreased by GBP346 million in the period to
GBP759 million at 31 December 2003.
Dividend
The Group has continued to generate strong cashflows during the period. In light
of the Group's financial strength and the approval of the High Court on 10
December 2003 to eliminate the deficit in the Company's distributable reserves,
the Directors are declaring an interim dividend of 2.75 pence per Ordinary
Share. The ex-dividend date will be 31 March 2004 and the dividend will be paid
on 23 April 2004 to shareholders of record on 2 April 2004. The Directors
currently expect to propose a final dividend in respect of the year to 30 June
2004 when the Company reports preliminary results on 4 August 2004. The Board
intends to keep the Group's capital structure under review and will set future
dividends taking into account the outlook for future earnings growth, free
cashflow generation and the investment requirements of the business.
CORPORATE
As a result of two rating upgrades in the quarter, the Group's debt has moved to
investment grade. On 8 December 2003 Standard & Poor's increased the Group's
credit rating to BBB- and on 9 December 2003 Moody's Investor Service increased
its credit rating to Baa3 with the outlook on both ratings 'stable'.
Following the AGM on 3 November 2003, Lord Rothschild was appointed as Director
of the Board and non-executive Deputy Chairman. Lord Rothschild took up this
post on 17 November 2003. The Board has established a new Corporate Governance
Committee to be chaired by Lord Wilson of Dinton, and the members of which
comprise Lord Rothschild and Arthur Siskind. Furthermore, the Board plans to
appoint a new independent non-executive Director and is in the process of
compiling a shortlist and considering candidates for that position.
Following a decision of the Board during the period, Gail Rebuck has been
appointed to the role of overseeing the Group's Corporate Responsibility
activities.
Appendix 1
Subscribers to Sky Channels
Prior Year Opening Prior Quarter
Q2 2002/03 Q4 2002/03 Q1 2003/04 Q2 2003/04
as at as at as at as at
31/12/02 30/06/03 30/09/03 31/12/03
DTH digital homes 1,2 6,562,000 6,845,000 7,015,000 7,208,000
Total TV homes in the UK and Ireland 3 26,025,000 26,154,000 26,200,000 25,955,000 4
Total Sky digital homes as a percentage of total UK and 25% 26% 27% 28%
Ireland TV homes
Cable - UK 3,355,000 3,266,000 3,267,000 3,282,000
Cable - Ireland 596,000 605,000 584,000 580,000
Total Sky pay homes 10,513,000 10,716,000 10,866,000 11,070,000
DTT - UK 3, 5 873,000 1,510,000 1,710,000 2,075,000
Total Sky homes 11,386,000 12,226,000 12,576,000 13,145,000
Total Sky homes as a percentage of total UK and Ireland TV 44% 47% 48% 51%
homes
1: Includes DTH subscribers in Ireland (315,000 as at 31 December 2003,
297,000 as at 30 September 2003, 286,000 at 30 June 2003 and 272,000 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: Total UK homes estimated by BARB and taken from the beginning of the month
following the period end (latest figures as at January 2004). Total Ireland
homes estimated by Nielsen Media Research, conducted on an annual basis in
July (latest figures as at July 2003).
4: 2001 UK Census data was incorporated into the BARB data in January 2004,
resulting in a revised figure for total UK homes.
5: DTT homes estimated by BARB and taken from the beginning of the following
month (latest figures as at January 2004). These figures may include Sky or
Cable homes that already take multichannel TV.
Consolidated Profit and Loss Account for the half year ended 31 December 2003
Before Goodwill 2003/2004 Before Goodwill 2002/2003 2002/2003
goodwill and Half year goodwill and Half year Full year
and exceptional Total and exceptional Total Total
exceptional items exceptional items as as
items items as restated* restated*
as restated*
restated*
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Notes (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (audited)
Turnover: 1,809 - 1,809 1,550 - 1,550 3,263
Group and
share of
joint
ventures'
turnover
Less: share (43) - (43) (39) - (39) (77)
of joint
ventures'
turnover
Group 2 1,766 - 1,766 1,511 - 1,511 3,186
turnover
Operating 3 (1,483) (58) (1,541) (1,357) (64) (1,421) (2,938)
expenses,
net
EBITDA 12 341 - 341 198 - 198 467
Depreciation (58) - (58) (44) - (44) (98)
Amortisation 8 - (58) (58) - (64) (64) (121)
Operating 283 (58) 225 154 (64) 90 248
profit
(loss)
Share of (5) - (5) 2 - 2 3
joint
ventures'
operating
results
Profit on 4 - 2 2 - - - -
disposal of
fixed asset
investments
Amounts 4,9 - 24 24 - (19) (19) (15)
written
back to
(written
off) fixed
asset
investments,
net
Profit 278 (32) 246 156 (83) 73 236
(loss) on
ordinary
activities
before
interest
and
taxation
Interest 3 - 3 2 - 2 4
receivable
and similar
income
Interest (45) - (45) (62) - (62) (118)
payable and
similar
charges
Profit 236 (32) 204 96 (83) 13 122
(loss) on
ordinary
activities
before
taxation
Tax 5 (74) - (74) 1 (2) (1) 62
(charge)
credit on
profit
(loss) on
ordinary
activities
Profit 162 (32) 130 97 (85) 12 184
(loss) on
ordinary
activities
after
taxation
Equity 6 (53) - -
dividends
Retained 10 77 12 184
profit
Earnings 7 8.4p (1.7p) 6.7p 5.1p (4.5p) 0.6p 9.6p
(loss) per
share -
basic
Earnings 7 8.3p (1.6p) 6.7p 5.0p (4.4p) 0.6p 9.5p
(loss) per
share -
diluted
*The half year and full year results for 2002/03 have been restated following
the adoption of UITF abstract 38 "Accounting for ESOP trusts".
There were no recognised gains or losses in either period other than those
included within the profit and loss account, with the exception of a prior
period adjustment in respect of the adoption of UITF abstract 38. The cumulative
effect of this adjustment was a GBP12 million reduction to the brought forward
profit and loss reserve at 1 July 2003.
All results relate to continuing operations.
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 2003
Before Goodwill and Three months Before Goodwill and Three months
goodwill and exceptional ended 31 goodwill and exceptional ended 31
exceptional items December 2003 exceptional items December 2002
items Total items Total
as restated* as restated* as restated*
GBPm GBPm GBPm GBPm GBPm GBPm
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
Turnover: Group 938 - 938 806 - 806
and share of
joint ventures'
turnover
Less: share of (22) - (22) (21) - (21)
joint ventures'
turnover
Group turnover 916 - 916 785 - 785
Operating (784) (29) (813) (705) (34) (739)
expenses, net
EBITDA 166 - 166 102 - 102
Depreciation (34) - (34) (22) - (22)
Amortisation - (29) (29) - (34) (34)
Operating 132 (29) 103 80 (34) 46
profit (loss)
Share of (8) - (8) 3 - 3
operating
results of
joint ventures
Profit on - 2 2 - - -
disposal of
fixed asset
investments
Amounts written - (1) (1) - (19) (19)
off fixed asset
investments,
net
Profit (loss) 124 (28) 96 83 (53) 30
on ordinary
activities
before interest
and taxation
Interest 2 - 2 1 - 1
receivable and
similar income
Interest (21) - (21) (31) - (31)
payable and
similar charges
Profit (loss) 105 (28) 77 53 (53) -
on ordinary
activities
before taxation
Tax (charge) (37) - (37) 15 (2) 13
credit on
profit (loss)
on ordinary
activities
Profit (loss) 68 (28) 40 68 (55) 13
on ordinary
activities
after taxation
Equity (53) -
dividends
Retained (loss) (13) 13
profit
Earnings (loss) 3.6p (1.5p) 2.1p 3.6p (2.9p) 0.7p
per share -
basic
Earnings (loss) 3.6p (1.5p) 2.1p 3.5p (2.8p) 0.7p
per share -
diluted
*The results for the three months ended 31 December 2002 have been restated
following the adoption of UITF abstract 38 "Accounting for ESOP trusts".
Consolidated Balance Sheet at 31 December 2003
31 December 31 December 30 June
2003 2002 2003
as restated* as restated*
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
Fixed assets
Intangible assets 8 478 594 536
Tangible assets 346 336 346
Investments 9 37 69 74
861 999 956
Current assets
Stocks 662 627 370
Debtors: Amounts falling due within one year
- deferred tax assets 50 - 31
- other 393 433 363
443 433 394
Debtors: Amounts falling due after more than one year
- deferred tax assets 128 68 159
- other 61 136 64
189 204 223
Cash at bank and in hand 318 51 47
1,612 1,315 1,034
Creditors: Amounts falling due within one year
- other creditors (1,399) (1,192) (967)
Net current assets 213 123 67
Total assets less current liabilities 1,074 1,122 1,023
Creditors: Amounts falling due after more than one year
- long-term borrowings (1,077) (1,437) (1,152)
- other creditors (24) (17) (20)
(1,101) (1,454) (1,172)
Provisions for liabilities and charges - (3) (3)
(27) (335) (152)
Capital and reserves - equity
Called-up share capital 10 970 968 969
Share premium 10 1,428 2,530 2,536
Shares to be issued 10 - 3 3
ESOP reserve 10 (9) (39) (35)
Merger reserve 10 262 336 299
Special reserve 10 14 - -
Profit and loss account 10 (2,692) (4,133) (3,924)
10 (27) (335) (152)
The accompanying notes are an integral part of this consolidated balance sheet.
*The balance sheets as at 31 December 2002 and 30 June 2003 have been restated
following the adoption of UITF abstract 38 "Accounting for ESOP trusts".
Consolidated Cash Flow Statement for the half year ended 31 December 2003
2003/2004 2002/2003 2002/2003
Half year Half year Full year
GBPm GBPm GBPm
Notes (unaudited) (unaudited) (audited)
Net cash inflow from operating activities 11a 401 255 664
Dividends received from joint ventures 3 - 4
Returns on investments and servicing of finance
Interest received and similar income 3 2 3
Interest paid and similar charges on external financing (51) (68) (127)
Interest element of finance lease payments - - (1)
Net cash outflow from returns on investments and servicing of (48) (66) (125)
finance
Taxation
UK corporation tax paid (21) - (18)
Consortium relief paid (3) - -
Net cash outflow from taxation (24) - (18)
Capital expenditure and financial investment
Payments to acquire tangible fixed assets (65) (44) (98)
Receipts from sales of fixed asset investments 68 - 1
Net cash inflow (outflow) from capital expenditure and 3 (44) (97)
financial investment
Acquisitions and disposals
Funding to joint ventures (2) (5) (15)
Repayments of funding from joint ventures 3 2 5
Net cash inflow (outflow) from acquisitions and disposals 1 (3) (10)
Net cash inflow before management of liquid resources and 336 142 418
financing
Management of liquid resources
(Increase) decrease in short-term deposits (175) - 1
Financing
Proceeds from issue of Ordinary Shares 10 - 5
Capital element of finance lease payments 11b - (1) (2)
Net decrease in total debt 11b (75) (140) (425)
Net cash outflow from financing (65) (141) (422)
Increase (decrease) in cash 11b 96 1 (3)
Decrease in net debt 11b 346 142 423
The accompanying notes are an integral part of this consolidated cash flow
statement.
Notes to Financial Statements
1 Basis of preparation
The interim accounts for the half year ended 31 December 2003 have been prepared
in accordance with accounting policies consistent with those applied in the
accounts for the year ended 30 June 2003, which were approved by the Directors
on 11 August 2003, with the exception of the change in accounting policy
following the adoption of UITF abstract 38 "Accounting for ESOP trusts", for
which the half year and full year results for 2002/03 have been restated (see
note 10 (iv)). The interim accounts for the six months ended 31 December 2003 do
not constitute statutory accounts and are unaudited, but have been formally
reviewed by Deloitte & Touche LLP. Their report is not modified in any respect.
The interim accounts were approved by the board on 10 February 2004.
The financial information for the 2002/2003 full year is extracted from the
financial statements for that year, with the exception of the restatement
arising from the change in accounting policy described above, which have been
filed with the Registrar of Companies. The auditors' report on those financial
statements was unqualified and did not contain any statement under section
237(2) or (3) of the Companies Act 1985.
2 Turnover
The Group's turnover, whilst deriving from one class of business, has been
analysed as follows:
2003/2004 2002/2003 2002/2003
Half year Half year Full year
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
DTH subscribers 1,285 1,112 2,341
Cable subscribers 103 98 202
Advertising 147 133 284
Interactive 147 91 218
Other 84 77 141
1,766 1,511 3,186
3 Operating expenses, net
Before Before
goodwill Goodwill goodwill Goodwill
and and 2003/2004 and and 2002/2003 2002/2003
exceptional exceptional Half year exceptional exceptional Half year Full year
items items Total items items Total Total
as restated as restated as restated as restated
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (audited)
Programming (i) 783 - 783 744 - 744 1,604
Transmission 77 - 77 74 - 74 143
and related
functions (i)
Marketing 215 - 215 216 - 216 400
Subscriber 191 - 191 161 - 161 324
management
Administration (ii) 131 58 189 122 64 186 359
Betting 86 - 86 40 - 40 108
1,483 58 1,541 1,357 64 1,421 2,938
(i) The amounts shown are net of GBP8 million (2002/2003: half year GBP7
million; full year GBP12 million) receivable from the disposal of
programming rights not acquired for use by the Group, and GBP13 million
(2002/2003: half year GBP12 million; full year GBP26 million) in respect of
the provision to third party broadcasters of spare transponder capacity.
(ii) Administration costs for the 2002/03 full year include goodwill and
exceptional items of GBP117 million.
4 Exceptional items, net of tax
2003/2004 2002/2003 2002/2003
Half year Half year Full year
credit charge credit (charge)
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Release of provision against ITV Digital programming debtors (iii) - - 3
Exceptional operating items - - 3
Profit on disposal of fixed asset investments (i) 2 - -
Amounts written back to (written off) fixed asset investments, net (ii) 24 (21) (15)
Recognition of deferred tax asset (iv) - - 123
Total exceptional items* 26 (21) 111
*Total exceptional items for the half year ended 31 December 2003 are net of a
tax charge of nil (2002/2003 half year: GBP2 million tax charge; 2002/2003 full
year: GBP121 million net tax credit).
(i) Profit on disposal of fixed asset investments
On 7 October 2003, the Group disposed of its listed investment in Manchester
United plc, realising a profit on disposal of GBP2 million (see note 9).
(ii) Amounts (written back to) written off fixed asset investments, net
2003
The Group reduced its provision against its minority equity investments in
football clubs by GBP33 million, following the disposal of its investment in
Manchester United plc in October 2003 for GBP62 million in cash. The Group also
increased its provision against its remaining minority equity investments in
football clubs by a further GBP9 million.
2002
At 31 December 2002, the Group made a provision against its minority investments
in football clubs, leading to a non-cash exceptional charge of GBP21 million.
At 31 December 2002, the Group reduced its deferred revenue balance relating to
minority investments in new media companies by GBP5 million, and reduced both
its investment and its provision against the investment in these companies
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 GBP3 million, bringing
the carrying value of the Group's investment in Open TV to nil.
In addition to the items noted above, the Group reduced its provision against
its investment in Chelsea Village plc at 30 June 2003 by GBP3 million, following
the agreement to sell its minority investment in July 2003.
(iii) Release of provision against ITV Digital programming debtors
The Group had provided in full against all unprovided balances owed by ITV
Digital, following the announcement by the administrators of ITV Digital on 30
April 2002 to close the pay television services on the ITV Digital platform and
close the administration. During 2003, the Group received GBP5 million from ITV
Digital's administrators and released GBP5 million of its exceptional operating
provision accordingly (GBP3 million net of tax charge).
(iv) Recognition of deferred tax asset
Following a review of the forecast utilisation of tax losses within the Group,
and as a consequence of a planned reorganisation of certain assets within the
Group, there was sufficient evidence at 30 June 2003 to support the recognition
of a deferred tax asset arising on losses incurred in the Company. Accordingly,
a deferred tax credit of GBP123 million was recognised as an exceptional item.
5 Tax on profit on ordinary activities
Analysis of charge (credit) in period:
2003/2004 2002/2003 2002/2003
Half year Half year Full year
charge (credit) charge (credit) charge (credit)
as restated as restated
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Current tax (i)
UK corporation tax 69 29 87
Adjustment in respect of prior years (8) - -
61 29 87
Deferred tax:
Origination and reversal of timing differences (i) 8 (36) (149)
Increase (decrease) in estimate of recoverable deferred 5 7 (2)
tax asset in respect of prior years
Total deferred tax 13 (29) (151)
Share of joint ventures' tax charge - 1 2
74 1 (62)
(i) The current tax charge for the half year to 31 December 2003 includes an
exceptional charge of nil (2002/2003 half year: GBP2 million; 2002/2003
full year: GBP2 million). The deferred tax charge for the half year to 31
December 2003 includes an exceptional charge of nil (2002/2003 half year:
nil; 2002/2003 full year: credit of GBP123 million).
(ii) At 31 December 2003, a deferred tax asset of GBP18 million (2002/2003: half
year GBP134 million; full year GBP17 million) principally arising from UK
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. The losses are available to be carried
forward indefinitely under current law.
6 Equity dividends
2003/2004 2002/2003 2002/2003
Half year Half year Full year
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Equity dividends
- interim dividend of 2.75p (2002/2003 half year: nil; 2002/2003 full 53 - -
year: nil) per Ordinary Share
7 Earnings (loss) per share
Basic earnings (loss) per share represents the profit (loss) on ordinary
activities after taxation attributable to the equity shareholders, 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 employee Share
Ownership Plan ("ESOP") trust during the period.
Diluted earnings (loss) per share represents the profit (loss) on ordinary
activities after taxation attributable to the equity shareholders, 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 during the
period plus the weighted average number of dilutive shares resulting from share
options and other potential shares outstanding during the period (see below).
The weighted average number of shares in the period was:
2003/2004 2002/2003 2002/2003
Half year Half year Full year
millions millions millions
of shares of shares of shares
(unaudited) (unaudited) (audited)
Ordinary Shares 1,938 1,905 1,921
ESOP trust shares (2) (6) (6)
Basic shares 1,936 1,899 1,915
Dilutive Ordinary Shares from share options and other potential Ordinary 6 42 27
Shares outstanding
Diluted shares 1,942 1,941 1,942
8 Intangible assets
The movement in the period was as follows:
Goodwill
GBPm
(unaudited)
Net book value at 1 July 2003 536
Amortisation (58)
Net book value at 31 December 2003 478
Goodwill of GBP272 million, GBP542 million and GBP5 million, arising on the
acquisitions of Sports Internet Group ("SIG"), British Interactive Broadcasting
("BiB") and WAPTV Limited respectively, is being amortised over periods of seven
years on a straight-line basis.
In accordance with FRS 11, impairment reviews were performed on the carrying
values of BiB and SIG goodwill balances at the end of the first full financial
year after acquisition, at 30 June 2002. These reviews showed that no impairment
was identified in either case. Consistent with the Group strategy, the business
plans on which these reviews were based reflected significant projected
increases in betting and other interactive revenues over the subsequent five
years and the carrying value of the goodwill is therefore heavily dependent on
the forecast performance of and projections for these businesses.
9 Fixed asset investments
31 December 31 December 30 June
2003 2002 2003
as restated as restated
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Investments in joint ventures 34 28 30
Other investments 3 41 44
Total investments 37 69 74
Other investments
2003
On 7 October 2003, the Group announced that it had sold its entire holding in
Manchester United plc for GBP62 million, recognising a profit on disposal of
GBP2 million following the release of GBP33 million provision previously held
against the investment, effective as at 30 September 2003.
The Group has increased its provision against its remaining minority equity
investments in football clubs by a further GBP9 million.
2002
At 31 December 2002, the Group made a further provision against its minority
equity investments in football clubs leading to a non-cash exceptional charge of
GBP21 million.
At 31 December 2002, the Group reduced its deferred revenue balance relating to
minority investments in new media companies by GBP5 million, and reduced both
its investment and provision against the investment in these companies
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 GBP3 million. This
reduced the carrying value of the Group's investment in Open TV to nil.
In addition to the items noted above, the Group reduced its provision against
its investment in Chelsea Village plc at 30 June 2003 by GBP3 million, following
the agreement to sell its minority investment in July 2003.
10 Reconciliation of movement in shareholders' deficit
Total equity
Share Share Shares to Merger Special ESOP Profit and shareholders'
capital premium be issued reserve reserve reserve loss deficit
(i) (ii) (iii) (ii) (iii) (iv) account
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
(unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited) (unaudited)
At 1 969 2,536 3 299 - (35) (3,924) (152)
July
2003 -
as
restated
Issue of 1 12 (3) - - - - 10
share
capital
ESOP - - - - - 26 12 38
shares
utilised
Profit - - - - - - 77 77
for the
financial
period
Share - (1,120) - - 14 - 1,106 -
premium
reduction
Transfer - - - (37) - - 37 -
from
merger
reserve
At 31 970 1,428 - 262 14 (9) (2,692) (27)
December
2003
(i) During the period the Company issued shares with a market value of GBP14
million (2002/2003: half year GBP1 million; full year GBP6 million) in
respect of the exercise of options awarded under various share option
schemes, with GBP10 million (2002/2003: half year nil; full year GBP5
million) received from employees.
(ii) On 30 September 2003, the Company issued 338,755 Ordinary Shares to satisfy
the remaining contingent consideration in respect of the acquisition of the
remaining 5% interest in WAPTV Limited which occurred in May 2001.
(iii)On 10 December 2003, the High Court approved a reduction in the Company's
share premium account of GBP1,120 million, as approved by the Company's
shareholders at the Annual General Meeting held on 14 November 2003. The
reduction had the effect of eliminating the Company's deficit on its profit
and loss account at 30 September 2003 of GBP1,106 million, and creating a
non-distributable special reserve of GBP14 million, which represents the
excess of the share premium reduction over the deficit. The Company's
balance sheet and profit and loss account are not presented within this
interim statement.
(iv) At 31 December 2003, the Group's ESOP held 1,280,337 Ordinary Shares in the
Company at an average value of GBP6.72 per share. The 4,176,675 shares
utilised during the period relate to the exercise of Long Term Incentive
Plan ("LTIP") and Key Contributor Plan ("KCP") awards. As a result of the
adoption of UITF abstract 38, the Group's ESOP shares, which were
previously held within investments, are now presented as a deduction from
shareholders' funds. In addition the brought forward profit and loss
reserve at 1 July 2003 was reduced by GBP12 million. The impact of adopting
UITF abstract 38 was accordingly to reduce net assets at 1 July 2003 by
GBP47 million, and to reduce profit for the year to 30 June 2003 by GBP6
million (profit for the 6 months to 31 December 2002: GBP4 million
decrease).
11 Notes to consolidated cash flow statement
a) Reconciliation of operating profit to operating cash flows
2003/2004 2002/2003 2002/2003
Half year Half year Full year
as restated as restated
GBPm GBPm GBPm
(unaudited) (unaudited) (audited)
Operating profit 225 90 248
Depreciation 58 44 98
Amortisation of goodwill and other intangible assets 58 64 121
Loss on disposal of fixed assets 1 - -
Decrease in working capital 62 57 198
Provisions utilised, net (3) - (1)
Net cash inflow from operating activities 401 255 664
b) Analysis of changes in net debt
At 31
At 1 July December
2003 Cash flow 2003
GBPm GBPm GBPm
(audited) (unaudited) (unaudited)
Overnight deposits 33 68 101
Other cash 14 28 42
47 96 143
Short-term deposits - 175 175
Cash at bank and in hand 47 271 318
Debt due after more than one year (1,144) 75 (1,069)
Finance leases (8) - (8)
Total debt (1,152) 75 (1,077)
Total net debt (1,105) 346 (759)
12 EBITDA
EBITDA (earnings before interest, tax, depreciation and amortisation) is
calculated as operating profit before depreciation and amortisation or
impairment of goodwill and intangible fixed assets.
13 Regulatory update
EC Investigation - FAPL
The European Commission has undertaken investigations into a number of
agreements, decisions or practices leading to the acquisition of broadcast
rights to football events within the EEA, including the sale of exclusive
broadcast rights to Premier League football by the Football Association Premier
League Limited ("FAPL"). On 21 June 2002, BSkyB Limited and the FAPL notified
BSkyB Limited's current agreements for the broadcast of FAPL football matches to
the European Commission seeking either a clearance or an exemption from Article
81 of the EC Treaty. The FAPL has also notified the rules of the FAPL to the
European Commission. On 20 December 2002, the European 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. Since June
2003, the Group has received several requests for information from the European
Commission concerning the bidding process undertaken by the FAPL in relation to
the sale of Premier League football rights in respect of the three year period
2004-2007. In August and October 2003, the FAPL announced that the Group has
been awarded (subject to contract) all four packages of exclusive live UK rights
to FAPL football and two "near live" packages of UK rights to FAPL football
(both on a delayed basis), four of the five packages of live rights in Ireland
and two "near live" packages of rights in Ireland from the beginning of the
2004/2005 season to the end of the 2006/07 season. On 16 December 2003 the
European Commission announced that a provisional agreement had been reached with
the FAPL regarding the joint selling of the media rights to Premier League
matches and that a provisional agreement had been reached with BSkyB regarding
its recent acquisition of TV rights to those matches. Under the provisional
agreement with BSkyB, BSkyB has agreed to offer to sublicense a set of up to
eight premier league matches each season to another broadcaster. These
provisional agreements will be submitted for third party comments as the
European Commission formalises its position.
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 is co-operating with this
investigation. At this stage, the Group is unable to determine whether it will
have a material effect on the Group and its financial results.
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: 11 February 2004 By: /s/ Dave Gormley
Dave Gormley
Company Secretary