Unaudited results for the six months ended
STRONG RESULTS, CONSISTENT EXECUTION OF STRATEGY
HIGHLIGHTS
Strong financial and operational results
· 5% increase in like-for-like revenue to
· 15% increase in Established Business EBITDA to
· 10% increase in EBITDA to
· 11% increase in earnings per share to
· 365,000 new customers to 22.9 million; 2 million products added to 61.7 million and 20 million pay as you go buys in six months, up 8%
· Interim dividend of
· Statutory results: 5% revenue growth, operating profit of
Consistent execution of our strategy
· On screen viewing of Sky brands up 6%, record viewing of Sky Originals, with future investment to increase every year
· Acquired significant new rights, including
· Sky Q launched in
· Launching our first Sky Q over IP service in
· Operating costs flat in absolute terms and down 600 basis points as a percentage of revenue over last five years to 34%
· Investing for future growth: Sky Mobile scaling well and successful launches of Sky in Spain and
· Ambitious set of plans for calendar 2018 and beyond
"We have delivered excellent results. Sector-leading 5% revenue growth, a 15% increase in Established Business EBITDA and, after investment in future growth, EPS grew by 11%. This performance reflects the investment choices we have made in recent years, allowing us to more than offset the pressure on consumer spending across
"Operationally we've seen good customer demand for our products and services. We now have almost 23 million customers taking 61.7 million paid-for-products and making 20 million pay-as-you-go buys in six months. In addition, we have made further strong progress on operational efficiency, keeping operating costs flat in absolute terms.
"As Europe's leading direct-to-consumer TV entertainment company, we are making good progress on our future growth plans. In content, our focus on high quality, differentiated local programming to complement what we acquire through our partners is working well. Viewing to Sky channels increased by 6% and, following both critical success and record audiences for Sky Original productions, we will be increasing our investment in original content each and every year.
"In innovation, we are constantly improving our customers' experience and making it easier for them to take Sky. In the
"Looking ahead, we expect the consumer environment to remain challenging, however we remain confident in our strategy and our ability to execute our plans."
Unless otherwise stated, results are presented throughout on an adjusted basis. For further details see page 6.
SUMMARY OF GROUP OPERATIONAL AND FINANCIAL PERFORMANCE
Our strategic priorities are clear and remain unchanged - to grow our revenues and profits while creating sustainable value for shareholders over the medium term by providing:
· The best and broadest range of content for every household;
· The best innovation in products and services;
· The best front-line service delivery from the number one brand; and
· Consistently improving our operational capability and efficiency; while
· Opening up new opportunities for growth by developing additional services and entering new geographic markets.
Despite households in all our territories facing continued pressure on discretionary spending, our customers and prospective customers value their on-screen entertainment highly, consuming more and getting more value from our content as successive waves of consumer technology innovation make the experience easier and better.
This is demonstrated by today's further 5% increase in revenues, well ahead of underlying growth in consumer spending and which maintains our historic record of consistent revenue growth achieved in a variety of economic and competitive circumstances.
The successful execution of our strategy is also reflected in the strong customer demand for our products and services. In the last six months we have attracted 365,000 new customers to 22.9 million, added a further 2 million new products to 61.7 million, and 8% more pay-as-you-go buys to 20 million. In addition, 70% of our customers are now receiving some or all their TV over-the-top and this is providing more value and enjoyment out of our service with viewing to Sky channels up 6% across our markets.
PLANS FOR 2018
In the year ahead we remain focused on executing against our strategic priorities in each market, exploiting our many opportunities for growth while giving more quality, choice and value to our customers. This in turn should help grow revenue and profits, while creating a more valuable business for our shareholders. Our plans range across content, innovation, and service, as well as efficiency savings and opening up new opportunities for growth.
The best and broadest range of content for every household
We will enhance our market-leading coverage of sports in each of our territories. In the
We're enhancing the Sky Cinema proposition, having agreed a new deal in the
In entertainment we'll continue to deliver the best of the US, showcasing great new series including the hotly-anticipated return of some of our most popular shows such as Billions, Westworld, Big Little Lies and Modern Family.
This US content complements our 'always on' Original content strategy. We will grow our investment in Sky Originals every year and we expect, overtime, to be spending less on second tier sports, linear only entertainment channels and niche movies. In 2018 we'll showcase over 50 Sky Original productions across eight key genres, including four dramas a quarter across our territories. We are differentiating our programming to other services, with a distinct focus on creating content that is local to our key markets. Growing our Sky Original content investment means we can offer our customers local content with very high production values, something our research shows our customers value more than acquired content in many cases. In addition it enables us to control the value chain for an increasing proportion of our standout content, while broadening our sources and reducing our dependence on individual content suppliers.
We aim to maximise the return on this content investment through broader distribution, as we seek to develop a relationship with every home in each of the markets in which we operate. In
The best innovation in products and services
We have significant plans to further develop and improve the customer viewing experience in each of our territories and make it easier for new consumers to join Sky.
We will launch Sky Q in
Having deployed over-the-top services in all of our markets, we have a strong set of plans for our streaming business, most notably migrating all of our territories onto a common OTT platform. This will provide a step-change in capability that will deliver many benefits, including the ability to roll out innovation across all of our markets at greater pace and more efficiently. The first example will be the Pan-European launch of our new Streaming Stick, which will significantly increase the reach of our services. We will also introduce a host of other improvements this year across all of our territories, including enhanced personalisation, download functionality and HD packages.
We will launch Sky without a satellite dish, with all its channels and on demand content streamed over IP. This is a major development for Sky that will open up headroom in existing markets, improve our cost to serve for some customer segments, and offer a future way to take Sky into new markets. We'll launch first in
The best front-line service delivery from the number one brand
Having successfully expanded our sports proposition in the
Consistently improving our operational capability and efficiency.
We will continue to focus on efficiency savings while making progress towards our
Opening up new opportunities for growth by developing additional services and entering new
geographic markets
In the
RESULTS HIGHLIGHTS
|
(£m) |
6 months to 31 Dec 17 |
6 months to 31 Dec 16 Constant currency |
Growth |
Foreign exchange impact |
6 months to 31 Dec 16 Actual exchange rates |
|
|
|
|
|
|
|
|
Revenue |
6,737 |
6,441 |
+5% |
83 |
6,358 |
|
UK and Ireland |
4,438 |
4,267 |
+4% |
- |
4,267 |
|
Germany and Austria |
1,015 |
943 |
+8% |
36 |
907 |
|
Italy 1 |
1,284 |
1,231 |
+4% |
47 |
1,184 |
|
|
|
|
|
|
|
|
EBITDA Established Business2 |
1,182 |
1,031 |
+15% |
8 |
1,023 |
|
UK and Ireland |
973 |
841 |
+16% |
- |
841 |
|
Germany and Austria |
34 |
40 |
-15% |
2 |
38 |
|
Italy |
175 |
150 |
+17% |
6 |
144 |
|
|
|
|
|
|
|
|
EBITDA Investment Business3 |
(63) |
(14) |
n.m. |
- |
(14) |
|
|
|
|
|
|
|
|
EBITDA |
1,119 |
1,017 |
+10% |
8 |
1,009 |
|
|
|
|
|
|
|
|
Statutory Results |
|
Actual exchange rates |
|
|
|
|
Revenue |
6,737 |
6,410 |
+5% |
|
|
|
Operating profit |
573 |
461 |
+24% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (basic) |
|
|
|
|
|
|
Adjusted (p) |
31.3 |
28.3 |
+11% |
|
|
|
Statutory (p) |
26.2 |
18.8 |
+39% |
|
|
|
|
|
|
|
|
|
Unless otherwise stated, results are presented throughout on an adjusted basis. The constant currency exchange rate used for translating the financial results of
Adjusted results exclude items which may distort comparability in order to provide a measure of underlying performance. Such items arise from events or transactions that fall within the ordinary activities of the Group but which management believes should be separately identified to help explain underlying performance. For a reconciliation of statutory to adjusted results see Appendix 2.
(1) Like-for-like revenue growth in
(2)"Established Business" means those businesses that have been operating for many years. This includes our entertainment and fixed line communications businesses in the
(3)"Investment Business" means new businesses from the first year of launch through to their first year of profitability. Years prior to the year of launch are considered to be R&D and absorbed within Established Business EBITDA. Sky Mobile and
Established Business EBITDA and Investment Business EBITDA are presented on an adjusted basis and provide information on the performance of the Group's underlying businesses and the investment being made in future growth. The sum of Established Business EBITDA and Investment Business EBITDA is equal to the Group's total adjusted EBITDA.
GROUP FINANCIAL PERFORMANCE
Unless otherwise stated, all numbers are presented on an adjusted basis for the six months ended
Revenue
Group revenues grew by
We also delivered revenue growth in each category. Direct to Consumer revenue, our largest revenue category, grew by 3% or
Content revenue strongly increased by 16% or
Costs
We made excellent progress in operating efficiency, with operating costs as a percentage of revenue improving from 35% to 34%, helping to partly offset the success-based costs incurred in the
We continued to invest on screen for customers, with programming costs up 4% or
Direct network costs increased by 19% as we scale growth in Sky Mobile, grow the number of broadband customers and increase fibre penetration to 33% of the total broadband customer base.
Sales, general and administrative costs were flat reflecting the strong progress we have made driving operating efficiency through the business, as well as the benefit of capitalising rather than fully expensing Sky Q box costs.
We have continued to make good progress towards our
Profit and earnings
As a result of our strong revenue growth and excellent progress in operating efficiency, Established Business EBITDA was up 15% to
Adjusting for depreciation and amortisation of
Adjusting items
Statutory operating profit for the period of
Net debt and financial position
Net debt as at 31 December increased slightly to
The Group continues to maintain a strong financial position, including excellent liquidity with cash of
BIGGER PICTURE
We announced three new major commitments for our corporate campaign Sky Ocean Rescue; the removal of our own single-use plastics by 2020; an investment fund of
DIVIDENDS
The Directors have declared an interim dividend of
CORPORATE
On
DETAILED OPERATIONAL AND FINANCIAL PERFORMANCE BY MARKET
In the
In a challenging
We added 180,000 customers in the first half, including 110,000 in Q2, and grew our product base by 1.7 million. This included 157,000 new TV products and 30,000 new Broadband products. Fibre penetration increased to a third of the broadband base, up from 21% a year ago.
We reinforced our position as the leading content brand in the UK. We reached a cross supply agreement with BT commencing in early 2019. We will receive wholesale supply of the BT Sport channels, enabling our customers to access every single match of the
Customers have a good appetite to consume more of our content: our slate of Sky Original commissions performed well, with
We continue to improve the customer viewing experience. We have further enhanced Sky Q, launching voice control and Sky Soundbox in November. Sky Q is now in 2 million homes and is continuing to drive noticeable change in customer behaviour relative to Sky+. Customers that take Sky Q consume 45% more On Demand content, transact 30% more through
Our 12-month rolling churn was 11.2%. This has reduced by 40 basis points from 11.6% a year ago. This is a direct result of our action plans, including putting Sky Q into more of our customers' homes, taking a more disciplined and targeted approach to discounting, and launching our VIP loyalty programme, which already has 1.4 million customers enrolled and we are yet to market it to customers. ARPU declined from
We also continue to make good progress in broadening our revenue growth. In the half we have grown our Sky Mobile customer base to 335,000, including in Q2 adding 131,000 and increasing our share of handset market sales to 9%.
Against the backdrop of a weaker advertising market, we grew advertising revenue by 5% in the first half, an estimated 700 basis point outperformance to the TV advertising market. This was primarily driven by strong growth in advanced advertising, with Sky AdSmart revenues up 17% following actions we have taken to broaden the platform's scale.
We continue to invest behind service, helping Sky once again lead Ofcom's service league table for the seventh consecutive quarter across each of Pay-TV, Broadband and Phone. We continue to improve our digital-first service offering, and have seen a very strong response to our My Sky service app, which has been downloaded 4 million times since it launched in the second half of last year. We are progressing rapidly into robotics and automation, and our first service concierge bot is now live, built in partnership with IBM Watson.
We have made good progress pursuing the significant growth opportunity in Europe's largest TV market, adding 200,000 new customers in
Our content performance in the first half has been strong. We saw good growth in consumption, up more than 20%, with standout performances from our Original productions. Masterchef 2 had three times more viewers than its first season. Babylon
Our sports viewing continues to grow, with German Bundesliga up 7%. We also launched our new Sky Sports app with Bundesliga in-match videos, which has already been downloaded half a million times. In addition we won exclusive rights for Austrian Bundesliga from
We have made further good progress developing a range of products and services to suit the market. We have seen strong take up for Sky+ Pro, our next generation set top box, which is now in almost 900,000 homes. In the second half we will roll out Sky Q by deploying software on our Sky+ Pro boxes. This will represent a huge step-change in our customer experience, with a much more user friendly, intuitive and content rich user interface, as well as considerably enhanced navigation.
Sky Ticket has also had a strong half, with passes sold more than doubling, and we have now made it available on the new Apple TV app. We have had a good start in
ARPU declined €1 to €33 given the addition of customers at lower price points. This reflects our deliberate actions to broaden out our proposition in
We continue to work through the previous discount strategy as well as managing high volumes of expiring contracts, resulting in churn increasing to 14.2%. While this is higher than we would like, this is important ground work to prepare for a major set of initiatives that we will launch in the next six months. This will include the launch of Sky Q and we will implement a major new user interface update across all services, transforming the viewing experience for every single customer. We will enhance the content line up, including more Sky Originals and leveraging recent deals in movies and sports. We will launch a simpler pricing structure and begin rolling out our loyalty programme whilst also improving front line service delivery with an all new contact centre experience in
We also continue to improve the customer service experience. Our recently-launched Mein Sky service app has now been downloaded by more than 10% of our customer base and, alongside other operational improvements, helped our customer service metrics to improve despite a very busy Christmas period.
We delivered a strong performance in
Revenue increased by 4% to
Customer numbers declined by 15,000, impacted by an uncertain economic environment and a tick up in churn following the introduction of four-week billing. However at 9.6% churn remains very low.
We've had a good half on screen, including a strong performance for our Original programming. Viewing to X-Factor Italia was up 14% year on year, including up 22% for the Final show. The third series of our hit-show Gomorrah also performed very strongly, with it ranking number one at the box office when we released the first two episodes in cinemas prior to its premiere on Sky Atlantic. In sports, viewing was strong, up 9%, with bigger audiences for Serie A football, Formula 1 and Moto GP, and we secured exclusive rights for Formula 1 and
It has been an important quarter for new innovation, successfully launching Sky Q at the end of November, which has had a very promising start. We have innovated with the way we package Sky content, launching our "Try the Sky Experience" that allows customers to trial Sky TV with no strings attached, and which has driven significant levels of interest from customers. We have also made Box Sets standard for all entertainment customers, increasing on-demand viewing by 30%.
Our customer service experience continues to improve. Our focus on enhancing digital channels is working well, with 60% of customer service requests now being self-served, up 7%.
Group KPI Summary (unaudited)
|
All figures (000) |
H1 13 |
H1 14 |
H1 15 |
H1 16 |
H1 17 |
H1 18 |
Growth |
|
unless stated |
|
|
|
|
|
|
(6 months) |
|
|
|
|
|
|
|
|
|
|
UK and Ireland |
4.4% |
7.1% |
5.6% |
6.3% |
4.8% |
4.0% |
4.0% |
|
Germany and Austria |
15.2% |
17.1% |
9.3% |
10.3% |
9.6% |
7.6% |
7.6% |
|
Italy |
4.0% |
-3.7% |
- |
-2.6% |
4.2% |
4.3% |
4.3% |
|
Revenue growth |
5.4% |
5.7% |
4.9% |
5.0% |
5.3% |
4.6% |
4.6% |
|
|
|
|
|
|
|
|
|
|
UK and Ireland |
29,513 |
33,307 |
36,555 |
39,573 |
41,528 |
43,614 |
1,656 |
|
Germany and Austria |
5,223 |
5,895 |
6,794 |
7,714 |
8,528 |
8,994 |
220 |
|
Italy |
7,259 |
8,179 |
8,603 |
8,579 |
8,981 |
9,060 |
82 |
|
Total products |
41,995 |
47,381 |
51,952 |
55,866 |
59,037 |
61,668 |
1,958 |
|
|
|
|
|
|
|
|
|
|
UK and Ireland |
10,742 |
11,330 |
11,750 |
12,283 |
12,651 |
12,906 |
180 |
|
Germany and Austria |
3,363 |
3,667 |
4,123 |
4,494 |
4,857 |
5,191 |
200 |
|
Italy |
4,833 |
4,760 |
4,734 |
4,700 |
4,809 |
4,768 |
-15 |
|
Retail customers |
18,938 |
19,757 |
20,607 |
21,477 |
22,317 |
22,865 |
365 |
|
|
|
|
|
|
|
|
|
|
UK and Ireland |
3,751 |
3,624 |
4,080 |
4,063 |
3,759 |
3,421 |
-71 |
|
Germany and Austria |
125 |
268 |
155 |
145 |
135 |
119 |
-10 |
|
Italy |
- |
- |
- |
- |
- |
- |
- |
|
Wholesale customers |
3,876 |
3,892 |
4,235 |
4,208 |
3,894 |
3,540 |
-81 |
|
|
|
|
|
|
|
|
|
|
Total customers |
22,814 |
23,649 |
24,842 |
25,685 |
26,211 |
26,405 |
284 |
|
|
|
|
|
|
|
|
|
|
ARPU |
|
|
|
|
|
|
|
|
UK and Ireland (£) |
£45 |
£46 |
£47 |
£47 |
£47 |
£46 |
-£1 |
|
Germany and Austria (€) |
€34 |
€36 |
€35 |
€35 |
€35 |
€33 |
-€1 |
|
Italy (€) |
€43 |
€43 |
€43 |
€42 |
€42 |
€44 |
€2 |
|
|
|
|
|
|
|
|
|
|
Churn |
|
|
|
|
|
|
|
|
UK and Ireland |
10.4% |
10.9% |
10.5% |
10.2% |
11.6% |
11.2% |
-0.3% |
|
Germany and Austria |
12.1% |
11.4% |
8.3% |
9.8% |
10.6% |
14.2% |
1.6% |
|
Italy |
14.9% |
13.1% |
10.0% |
9.9% |
9.5% |
9.6% |
0.5% |
- Revenue growth is based on local currency revenues for
- Wholesale customers are defined as customers taking at least one paid-for Sky channel. The customer numbers are as reported to us at the end of
- In the
- In
- In
- ARPU is quarterly annualised, residential and presented as a monthly amount.
- Churn is 12 month rolling and includes residential customers only, unless otherwise stated.
-
- FY13 to FY15 Revenue growth numbers for
Content highlights coming up on Sky over the next six months
|
Sky Uno, Sky Living, Sky One |
|
|||
|
Hawaii 5-O |
Macgyver (series 2) |
Face Off: Game Face |
|
|
|
Bruno Barbieri 4 Hotel |
Elementary
|
NCIS: Los Angeles (series 9) |
|
|
|
Sky Atlantic |
||||
|
Mosaic |
The Affair (series 4) |
SMILF |
||
|
Billions (series 3) |
Silicon Valley (series 5) |
Barry |
||
|
Sky Sports |
||
|
Football: Serie A and Serie B Football: Bundesliga Football: UEFA Champions League & Europa League |
Handball: Bundesliga Golf: US PGA Tour Golf: US Open Golf: European Tour Golf: The Masters |
Cricket: Test Matches Darts: Premier League Rugby: Super League XXIII Basketball: NBA
|
|
Sky Cinema |
||
|
Spiderman: Homecoming Thor: Ragnorok |
Diary of a Wimpy Kid: The Long Haul |
Alien: Covenant Split |
|
Blade Runner 2049 |
I Deliitti Del Barlume |
Life |
|
The Lego Ninjago Movie Baywatch The Dark Tower |
Despicable Me 3 Snatched Captain Underpants The Mummy Cars 3 |
The Emoji Movie Fast and Furious 8 John Wick: Chapter 2 La La Land
|
|
Sky Original Productions Sky Uno, Sky Living, Sky One |
||
|
Jamestown (series 2) |
Harry Hill's Tea Time |
Celebrity Masterchef 2 |
|
Bulletproof |
Bliss |
Eine Liga fur sich (series 2) |
|
Strike Back (series 6) Ristoranti |
In the Long Run |
Married at First Sight Italia (series 3) |
|
Sky Atlantic |
|||
|
Britannia |
Gomorrah (series 3) |
Patrick Melrose |
|
|
The Tunnel (series 3) |
Sui Generi |
Save Me |
|
|
|
|
|
|
|
Sky Arts |
|||
|
Hansa Studios: By the Wall 1976-1990 Master of Photography Portrait Artist of the Year 2018 |
Urban Myths (series 2) Mystery of the Lost Paintings Mix up Art Caravaggio 4K
|
Retromania Sette Meravigille Muro De.Sign
|
|
Enquiries:
|
Analysts/Investors: |
|
|
Robert Kingston |
Tel: 020 7032 3726 |
|
Andrew Gillian |
Tel: 020 7032 1762 |
|
E-mail: investor-relations@sky.uk |
|
|
|
|
|
Media: |
|
|
Gavin Davis |
Tel: 020 7032 7115 |
|
Andrew Swailes |
|
|
Press office: SkyPress@sky.uk |
|
|
|
|
There will be a presentation conference call for
There will be a separate conference call for US analysts and investors at
Forward looking statements
This document contains certain forward looking statements with respect to the Group's financial condition, results of operations and business, and our strategy, plans and objectives for the Group. These statements include, without limitation, those that express forecasts, expectations and projections, such as forecasts, expectations and projections in relation to new products and services, the potential for growth of free-to-air and pay television, fixed line telephony, broadband and bandwidth requirements, advertising growth, DTH and OTT customer growth, On Demand, NOW TV, Sky Ticket, Sky Go, Sky Go Extra, Sky+ HD,
Although the Company believes that the expectations reflected in such forward looking statements are reasonable, these statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond our control, are difficult to predict and could cause actual results to differ materially from those expressed or implied or forecast in the forward looking statements. These factors include, but are not limited to, those risks that are highlighted in the document in Appendix 3 - "Principal risks and uncertainties".
All forward looking statements in this document are based on information known to the Group on the date hereof. The Group undertakes no obligation publicly to update or revise any forward looking statements, whether as a result of new information, future events or otherwise.
Related Party Transactions
Details of transactions with related parties during the six month period to
Principal risks and uncertainties
A summary of the Group's principal risks and uncertainties is provided in Appendix 3.
Responsibility statement
The Directors confirm that to the best of their knowledge:
· The unaudited condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the EU.
·The interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules.
The names and functions of the Directors of
By order of the Board
Group Chief Executive Officer
Use of measures not defined under IFRS
This press release contains certain information on the Group's financial position, results and cash flows that have been derived from measures calculated in accordance with IFRS. This information should not be read in isolation from the related IFRS measures.
Appendix 1 - Condensed Consolidated Interim Financial Statements
|
|
|||
|
Condensed Consolidated Income Statement for the half year ended 31 December 2017 |
|||
|
|
|
|
|
|
|
|
2017/18 |
2016/17 |
|
|
Half year |
Half year |
|
|
Notes |
£m |
£m |
|
|
|
|
|
|
|
Revenue |
2 |
6,737 |
6,410 |
|
Operating expense |
2 |
(6,164) |
(5,949) |
|
|
|
|
|
|
EBITDA |
|
1,072 |
934 |
|
Depreciation and amortisation |
|
(499) |
(473) |
|
|
|
|
|
|
Operating profit |
|
573 |
461 |
|
|
|
|
|
|
Share of results of joint ventures and associates |
|
47 |
8 |
|
Investment income |
|
5 |
8 |
|
Finance costs |
|
(142) |
(100) |
|
Profit before tax |
|
483 |
377 |
|
|
|
|
|
|
Taxation |
|
(35) |
(56) |
|
Profit for the period |
|
448 |
321 |
|
Profit (loss) for the period attributable to: |
|
|
|
|
Equity shareholders of the parent company |
|
449 |
321 |
|
Non-controlling interests |
|
(1) |
- |
|
|
|
448 |
321 |
|
|
|
|
|
|
|
|
|
|
|
Adjusted earnings per share from adjusted profit for the period (in pence)
|
|||
|
Basic |
3 |
31.3p |
28.3p |
|
Diluted |
3 |
31.1p |
28.1p |
|
|
|
|
|
|
Earnings per share from profit for the period (in pence)
|
|
|
|
|
Basic |
3 |
26.2p |
18.8p |
|
Diluted |
3 |
26.0p |
18.7p |
|
|
|
|
|
Condensed Consolidated Statement of Comprehensive Income for the half year ended
|
|
|
2017/18 |
2016/17 |
|
|
|
Half year |
Half year |
|
|
|
£m |
£m |
|
|
|
|
|
|
Profit for the period |
|
448 |
321 |
|
|
|
|
|
|
Other comprehensive income |
|
|
|
|
Amounts recognised directly in equity that may subsequently be recycled to the income statement |
|||
|
Gain on revaluation of available-for-sale investments |
|
91 |
- |
|
(Loss) gain on cash flow hedges |
|
(225) |
298 |
|
Tax on cash flow hedges |
|
42 |
(63) |
|
Loss on net investment hedges |
|
(66) |
(177) |
|
Exchange differences on translation of foreign operations |
|
31 |
213 |
|
|
|
(127) |
271 |
|
|
|
|
|
|
Amounts reclassified and reported in the income statement |
|
|
|
|
Loss (gain) on cash flow hedges |
|
87 |
(199) |
|
Tax on cash flow hedges |
|
(16) |
39 |
|
Amounts reclassified and reported in non-financial assets (basis adjustment) |
|
|
|
|
Gain on cash flow hedges |
|
(47) |
(91) |
|
Tax on cash flow hedges |
|
8 |
19 |
|
|
|
32 |
(232) |
|
Other comprehensive (loss) income for the period (net of tax) |
(95) |
39 |
|
|
Total comprehensive income for the period |
353 |
360 |
|
|
|
|
|
|
|
Total comprehensive income (loss) for the period attributable to: |
|
|
|
|
Equity shareholders of the parent company |
354 |
360 |
|
|
Non-controlling interests |
(1) |
- |
|
|
|
353 |
360 |
|
Condensed Consolidated Balance Sheet as at
|
|
31 December |
31 December |
30 June |
|
|
2017 |
2016 |
2017 |
|
|
£m |
£m |
£m |
|
|
|
|
|
|
Non-current assets |
|
|
|
|
Goodwill |
4,977 |
4,811 |
4,930 |
|
Intangible assets |
4,538 |
4,519 |
4,626 |
|
Property, plant and equipment |
2,427 |
2,115 |
2,273 |
|
Investments in joint ventures and associates |
40 |
121 |
116 |
|
Available-for-sale investments |
216 |
88 |
110 |
|
Deferred tax assets |
339 |
275 |
302 |
|
Programme distribution rights |
78 |
63 |
63 |
|
Trade and other receivables |
55 |
99 |
41 |
|
Derivative financial assets |
410 |
1,118 |
643 |
|
|
13,080 |
13,209 |
13,104 |
|
|
|
|
|
|
Current assets |
|
|
|
|
Inventories |
2,658 |
2,398 |
1,113 |
|
Trade and other receivables |
1,757 |
1,433 |
1,475 |
|
Current tax assets |
8 |
15 |
12 |
|
Short-term deposits |
- |
150 |
300 |
|
Cash and cash equivalents |
1,015 |
1,151 |
2,200 |
|
Derivative financial assets |
230 |
137 |
234 |
|
|
5,668 |
5,284 |
5,334 |
|
|
|
|
|
|
Total assets |
18,748 |
18,493 |
18,438 |
|
|
|
|
|
|
Current liabilities |
|
|
|
|
Borrowings |
978 |
416 |
974 |
|
Trade and other payables |
4,840 |
4,492 |
4,303 |
|
Current tax liabilities |
121 |
190 |
146 |
|
Provisions |
103 |
145 |
107 |
|
Derivative financial liabilities |
56 |
16 |
20 |
|
|
6,098 |
5,259 |
5,550 |
|
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Borrowings |
7,712 |
8,860 |
8,207 |
|
Trade and other payables |
97 |
117 |
87 |
|
Provisions |
72 |
91 |
83 |
|
Derivative financial liabilities |
462 |
343 |
384 |
|
Deferred tax liabilities |
257 |
311 |
280 |
|
|
8,600 |
9,722 |
9,041 |
|
|
|
|
|
|
Total liabilities |
14,698 |
14,981 |
14,591 |
|
|
|
|
|
|
Share capital |
860 |
860 |
860 |
|
Share premium |
2,704 |
2,704 |
2,704 |
|
Reserves |
479 |
(53) |
274 |
|
Total equity attributable to equity shareholders of the parent company |
4,043 |
3,511 |
3,838 |
|
Total equity attributable to non-controlling interests |
7 |
1 |
9 |
|
Total liabilities and equity |
18,748 |
18,493 |
18,438 |
Condensed Consolidated Cash Flow Statement for the half year ended
|
|
|
2017/18 |
2016/17 |
|
|
|
Half year |
Half year |
|
|
Notes |
£m |
£m |
|
|
|
|
|
|
Cash flows from operating activities |
|
|
|
|
Cash (used in) generated from operations |
5 |
(162) |
364 |
|
Interest received |
|
7 |
4 |
|
Taxation paid |
|
(80) |
(54) |
|
Net cash (used in) from operating activities |
|
(235) |
314 |
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Dividends received from joint ventures and associates |
|
122 |
10 |
|
Funding to joint ventures and associates |
|
(4) |
(8) |
|
Proceeds on disposal of investment in joint venture |
|
- |
4 |
|
Purchase of property, plant and equipment |
|
(349) |
(347) |
|
Proceeds on disposal of property, plant and equipment |
|
- |
2 |
|
Purchase of intangible assets |
|
(246) |
(275) |
|
Purchase of subsidiaries (net of cash and cash equivalents purchased) |
|
(1) |
- |
|
Purchase of available-for-sale investments |
|
(17) |
(17) |
|
Proceeds on disposal of available-for-sale investments |
|
8 |
- |
|
Decrease (increase) in short-term deposits |
|
300 |
(150) |
|
Net cash used in investing activities |
|
(187) |
(781) |
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Repayment of borrowings |
|
(400) |
(7) |
|
Repayment of obligations under finance leases |
|
(2) |
(8) |
|
Proceeds from disposal of shares in Employee Share Ownership Plan ("ESOP") |
|
1 |
1 |
|
Purchase of own shares for ESOP |
|
(200) |
- |
|
Interest paid |
|
(156) |
(153) |
|
Capital contribution from non-controlling interests |
|
- |
3 |
|
Dividends paid to shareholders of the parent |
|
- |
(358) |
|
Dividends paid to holders of non-controlling interests |
|
(1) |
- |
|
Net cash used in financing activities |
|
(758) |
(522) |
|
Net decrease in cash and cash equivalents |
|
(1,180) |
(989) |
|
Cash and cash equivalents at the beginning of the period |
|
2,200 |
2,137 |
|
Effect of foreign exchange rate movements |
|
(5) |
3 |
|
Cash and cash equivalents at the end of the period |
|
1,015 |
1,151 |
Condensed Consolidated Statement of Changes in Equity for the half year ended
|
|
|
|
||||||||
|
|
Attributable to equity shareholders of the parent company |
|
|
|||||||
|
|
Share capital |
Share premium |
ESOP reserve |
Hedging reserve |
Other reserves |
Retained (deficit) earnings |
Total share-holders' equity |
Non-controlling interests |
Total equity |
|
|
|
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2016 |
860 |
2,704 |
(125) |
257 |
302 |
(551) |
3,447 |
(6) |
3,441 |
|
|
Profit for the period |
- |
- |
- |
- |
- |
321 |
321 |
- |
321 |
|
|
Net investment hedges |
- |
- |
- |
- |
(177) |
- |
(177) |
- |
(177) |
|
|
Exchange differences on translation of foreign operations |
- |
- |
- |
- |
213 |
- |
213 |
- |
213 |
|
|
Recognition and transfer of cash flow hedges |
- |
- |
- |
8 |
- |
- |
8 |
- |
8 |
|
|
Tax on items taken directly to equity |
- |
- |
- |
(5) |
- |
- |
(5) |
- |
(5) |
|
|
Total comprehensive income for the period |
- |
- |
- |
3 |
36 |
321 |
360 |
- |
360 |
|
|
Share-based payment |
- |
- |
18 |
- |
- |
38 |
56 |
- |
56 |
|
|
Non-controlling interests arising during the period |
- |
- |
- |
- |
- |
- |
- |
7 |
7 |
|
|
Tax on items taken directly to equity |
- |
- |
- |
- |
- |
6 |
6 |
- |
6 |
|
|
Dividends |
- |
- |
- |
- |
- |
(358) |
(358) |
- |
(358) |
|
|
At 31 December 2016 |
860 |
2,704 |
(107) |
260 |
338 |
(544) |
3,511 |
1 |
3,512 |
|
|
Profit (loss) for the period |
- |
- |
- |
- |
- |
374 |
374 |
(4) |
370 |
|
|
Net investment hedges |
- |
- |
- |
- |
(158) |
- |
(158) |
- |
(158) |
|
|
Exchange differences on translation of foreign operations |
- |
- |
- |
- |
183 |
- |
183 |
- |
183 |
|
|
Recognition and transfer of cash flow hedges |
- |
- |
- |
(227) |
- |
- |
(227) |
- |
(227) |
|
|
Tax on items taken directly to equity |
- |
- |
- |
53 |
- |
- |
53 |
- |
53 |
|
|
Actuarial movements on employee benefit obligations |
- |
- |
- |
- |
1 |
- |
1 |
- |
1 |
|
|
Total comprehensive income (loss) for the period |
- |
- |
- |
(174) |
26 |
374 |
226 |
(4) |
222 |
|
|
Share-based payment |
- |
- |
29 |
- |
- |
71 |
100 |
- |
100 |
|
|
Non-controlling interests arising during the period |
- |
- |
- |
- |
- |
- |
- |
16 |
16 |
|
|
Tax on items taken directly to equity |
- |
- |
- |
- |
- |
1 |
1 |
- |
1 |
|
|
Dividends |
- |
- |
- |
- |
- |
- |
- |
(4) |
(4) |
|
|
At 30 June 2017 |
860 |
2,704 |
(78) |
86 |
364 |
(98) |
3,838 |
9 |
3,847 |
|
|
Profit (loss) for the period |
- |
- |
- |
- |
- |
449 |
449 |
(1) |
448 |
|
|
Net investment hedges |
- |
- |
- |
- |
(66) |
- |
(66) |
- |
(66) |
|
|
Exchange differences on translation of foreign operations |
- |
- |
- |
- |
31 |
- |
31 |
- |
31 |
|
|
Revaluation of available-for-sale investment |
- |
- |
- |
- |
91 |
- |
91 |
- |
91 |
|
|
Recognition and transfer of cash flow hedges |
- |
- |
- |
(185) |
- |
- |
(185) |
- |
(185) |
|
|
Tax on items taken directly to equity |
- |
- |
- |
34 |
- |
- |
34 |
- |
34 |
|
|
Total comprehensive income (loss) for the period |
- |
- |
- |
(151) |
56 |
449 |
354 |
(1) |
353 |
|
|
Share-based payment |
- |
- |
41 |
- |
- |
(190) |
(149) |
- |
(149) |
|
|
Dividends |
- |
- |
- |
- |
- |
- |
- |
(1) |
(1) |
|
|
At 31 December 2017 |
860 |
2,704 |
(37) |
(65) |
420 |
161 |
4,043 |
7 |
4,050 |
|
Notes to the Condensed Consolidated Interim Financial Statements
1 Basis of preparation
The unaudited condensed consolidated interim financial statements for the half year ended
The condensed consolidated interim financial statements are presented on a condensed basis as permitted by IAS 34 and therefore do not include all disclosures that would otherwise be required in a full set of financial statements and should be read in conjunction with the 2017 Annual Report. The condensed consolidated interim financial statements do not constitute statutory accounts as defined in Section 434 of the Companies Act 2006 and are unaudited for all periods presented. The financial information for the full year ended
The condensed consolidated interim financial statements are based on the 26 weeks ended
Going Concern
The Group has updated the analysis which supported its assessment of going concern set out on page 31 of the 2017 Annual Report, and continues to believe that its existing external financing, together with internally generated cash inflows, will continue to provide sufficient sources of liquidity to fund its current operations, including its contractual obligations and commercial commitments, its approved capital expenditure requirements and any dividends proposed for the foreseeable future. Accordingly, the Directors continue to adopt the going concern basis in preparing the condensed consolidated interim financial statements.
2 Operating Segments
The Group has three reportable segments that are defined by geographic area to reflect how the Group's operations are monitored and managed. The reportable segments presented reflect the Group's management and reporting structure as viewed by the Board of Directors, which is considered to be the Group's chief operating decision maker.
|
Reportable segment |
Description |
|
UK & Ireland |
The activities and operations of the pay TV, home communications, mobile and adjacent businesses in the UK and Ireland |
|
Italy |
The activities and operations of the pay TV and adjacent businesses in Italy |
|
Germany & Austria |
The activities and operations of the pay TV and adjacent businesses in Germany and Austria |
Segmental income statement for the half year ended
|
|
|
UK & Ireland |
Italy |
Germany & Austria |
Adjusting Items & Eliminations |
Statutory Group Total |
|
||||||
|
|
|
£m |
£m |
£m |
£m |
£m |
|
||||||
|
|
|
|
|
|
|
|
|
||||||
|
Direct to consumer |
|
3,789 |
1,141 |
951 |
- |
5,881 |
|
||||||
|
Content |
|
390 |
9 |
15 |
(2) |
412 |
|||||||
|
Advertising |
|
261 |
134 |
49 |
- |
444 |
|||||||
|
Revenue |
|
4,440 |
1,284 |
1,015 |
(2) |
6,737 |
|||||||
|
|
|
|
|
|
|
|
|||||||
|
Inter-segment revenue |
|
(2) |
- |
- |
2 |
- |
|||||||
|
Revenue from external customers |
|
4,438 |
1,284 |
1,015 |
- |
6,737 |
|||||||
|
|
|
|
|
|
|
|
|||||||
|
Programming |
|
(1,819) |
(716) |
(626) |
(1) |
(3,162) |
|||||||
|
Direct network costs |
|
(565) |
- |
- |
9 |
(556) |
|||||||
|
Sales, general and administration |
|
(1,379) |
(467) |
(411) |
(189) |
(2,446) |
|||||||
|
Operating expense |
|
(3,763) |
(1,183) |
(1,037) |
(181) |
(6,164) |
|||||||
|
|
|
|
|
|
|
|
|||||||
|
EBITDA |
|
910 |
175 |
34 |
(47) |
1,072 |
|||||||
|
Depreciation and amortisation |
|
(233) |
(74) |
(56) |
(136) |
(499) |
|||||||
|
|
|
|
|
|
|
|
|||||||
|
Operating profit (loss) |
|
677 |
101 |
(22) |
(183) |
573 |
|||||||
|
|
|
|
|
|
|
|
|||||||
|
Share of results of joint ventures and associates |
|
|
|
47 |
|||||||||
|
Investment income |
|
|
|
|
|
5 |
|||||||
|
Finance costs |
|
|
|
|
|
(142) |
|||||||
|
Profit before tax |
|
|
|
|
|
483 |
|||||||
|
|
|
|
|
|
|
|
|||||||
Segmental income statement for the half year ended
|
|
|
|
|
|||
|
|
UK & Ireland |
Italy |
Germany & Austria |
Adjusting Items & Eliminations |
Statutory Group Total |
|
|
|
£m |
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
|
|
|
Direct to consumer |
3,680 |
1,069 |
860 |
- |
5,609 |
|
|
Content |
338 |
58 |
9 |
- |
405 |
|
|
Advertising |
249 |
109 |
38 |
- |
396 |
|
|
Revenue |
4,267 |
1,236 |
907 |
- |
6,410 |
|
|
|
|
|
|
|
|
|
|
Programming |
(1,784) |
(743) |
(509) |
(11) |
(3,047) |
|
|
Direct network costs |
(474) |
- |
- |
- |
(474) |
|
|
Sales, general and administration |
(1,389) |
(423) |
(409) |
(207) |
(2,428) |
|
|
Operating expense |
(3,647) |
(1,166) |
(918) |
(218) |
(5,949) |
|
|
|
|
|
|
|
|
|
|
EBITDA |
830 |
142 |
37 |
(75) |
934 |
|
|
Depreciation and amortisation |
(210) |
(72) |
(48) |
(143) |
(473) |
|
|
|
|
|
|
|
|
|
|
Operating profit (loss) |
620 |
70 |
(11) |
(218) |
461 |
|
|
|
|
|
|
|
|
|
|
Share of results of joint ventures and associates |
|
|
|
|
8 |
|
|
Investment income |
|
|
|
|
8 |
|
|
Finance costs |
|
|
|
|
(100) |
|
|
Profit before tax |
|
|
|
|
377 |
|
|
|
|
|
|
|
|
|
Results for each segment are presented on an adjusted basis. A reconciliation of statutory to adjusted results is shown in note 3 which also includes a description of the adjusting items.
To provide a more relevant presentation, management has chosen to reanalyse the revenue categories from those previously reported. Revenues previously included in Subscription, Transactional, and Other have been aggregated into Direct to consumer revenue. Revenue previously labelled Programme and Channel sales is now labelled Content.
During the period, the Group's pay TV business in the
3 Earnings per share
The weighted average number of ordinary shares for the period was:
|
|
2017/18 |
2016/17 Half year Millions of shares |
|
|
|
|
|
Ordinary shares |
1,719 |
1,719 |
|
ESOP trust ordinary shares |
(5) |
(10) |
|
Basic shares |
1,714 |
1,709 |
|
|
|
|
|
Dilutive ordinary shares from share options |
10 |
12 |
|
Diluted shares |
1,724 |
1,721 |
Basic and diluted earnings per share are calculated by dividing profit for the period attributable to equity shareholders of the parent company by the weighted average number of shares for the period.
In order to provide a measure of underlying performance, management has chosen to present an adjusted profit for the period which excludes items that may distort comparability. Such items arise from events or transactions that fall within the ordinary activities of the Group but which management believes should be separately identified to help explain underlying performance.
|
|
2017/18 |
2016/17 Half year £m |
|
|
|
|
|
Reconciliation from profit for the period attributable to equity shareholders of the parent company to adjusted profit for the period attributable to equity shareholders of the parent company |
|
|
|
Profit for the period attributable to equity shareholders of the parent company |
449 |
321 |
|
Costs relating to corporate restructuring and efficiency programmes |
47 |
51 |
|
Costs relating to the integration of Sky Italia and Sky Deutschland in the enlarged Group |
27 |
28 |
|
Regulatory-related credits and proceeds of settlements |
(24) |
- |
|
Costs in relation to 21st Century Fox offer |
7 |
9 |
|
Amortisation of acquired intangible assets |
129 |
137 |
|
Distribution received from associate |
(40) |
- |
|
Remeasurement of all derivative financial instruments not qualifying for hedge accounting and hedge ineffectiveness |
19 |
(24) |
|
Tax effect of above items and tax adjusting items |
(77) |
(39) |
|
Adjusted profit for the period attributable to equity shareholders of the parent company |
537 |
483 |
4 Dividends
|
|
2017/18 Half year £m |
2016/17 Half year £m |
2016/17 Full year £m |
|
|
|
|
|
|
Dividends declared and paid during the period |
|
|
|
|
2016 Final dividend paid: 20.95p per ordinary share |
- |
358 |
358 |
|
|
- |
358 |
358 |
As the 21st Century Fox offer had not become effective at
The 2018 interim dividend is
5 Notes to the Condensed Consolidated Cash Flow Statement
Reconciliation of profit before taxation to cash (used in) generated from operations
|
|
2017/18 |
2016/17 |
|
|
Half year |
Half year |
|
|
£m |
£m |
|
|
|
|
|
Profit before taxation |
483 |
377 |
|
Depreciation, impairment and losses (profits) on disposal of property, plant and equipment |
186 |
188 |
|
Amortisation, impairment and losses (profits) on disposal of intangible assets |
313 |
285 |
|
Share-based payment expense |
50 |
61 |
|
Investment income |
(5) |
(8) |
|
Finance costs |
142 |
100 |
|
Share of results of joint ventures and associates |
(47) |
(8) |
|
|
1,122 |
995 |
|
Increase in trade and other receivables |
(307) |
(110) |
|
Increase in inventories |
(1,540) |
(1,449) |
|
Increase in trade and other payables |
627 |
709 |
|
Decrease in provisions |
(12) |
(41) |
|
(Decrease) increase in derivative financial instruments |
(52) |
260 |
|
Cash (used in) generated from operations |
(162) |
364 |
6 Other matters
a) Guarantees
Certain subsidiaries of the Company have agreed to provide additional funding to several of their investments in limited and unlimited companies and partnerships, in accordance with funding agreements. Payment of this additional funding would be required if requested by the investees in accordance with the funding agreements. The maximum potential amount of future payments which may be required to be made by the subsidiaries of the Company to their investments, in both limited and unlimited companies and partnerships under the undertakings and additional funding agreements, is
b) Sky Bet distribution
The Group received a cash distribution of
c) Handset financing
During the period, the Group entered into a securitisation facility with a third party for the sale of mobile handset receivables, where the Group acts as servicer to the third party for the receivables. The Group does not have control over the securitisation vehicle, and has transferred substantially all the risks and rewards of the receivables. As a result, the receivables have been derecognised and the securitisation vehicle is not consolidated within the Group's financial statements, such that the transfer of handset receivables is treated as a sale in the Group's financial statements. Sales of mobile handset receivables resulted in proceeds of
d) Redemption of Guaranteed Notes
The Group repaid in full
7 Transactions with related parties and major shareholders
a) Entities with joint control or significant influence
The Group conducts business transactions with companies that are part of the
Transactions with related parties and amounts outstanding in relation to those transactions and with related parties at 31 December are as follows:
|
|
2017/18 Half year £m |
2016/17 Half year £m |
2016/17 Full year £m |
|
Supply of goods or services by the Group |
24 |
29 |
41 |
|
Purchases of goods or services by the Group |
(200) |
(198) |
(413) |
|
Amounts owed to the Group |
25 |
26 |
24 |
|
Amounts owed by the Group |
(197) |
(246) |
(193) |
At
7 Transactions with related parties and major shareholders (continued)
a) Entities with joint control or significant influence (continued)
Goods and services supplied to 21st Century Fox
During the current period, the Group supplied programming, airtime, transmission and marketing services to 21st Century Fox.
Purchases of goods and services and certain other relationships with 21st Century Fox
During the current period, the Group purchased programming and technical and marketing services from 21st Century Fox companies.
There is an agreement between 21st Century Fox and the Group, pursuant to which it was agreed that, for so long as 21st Century Fox directly or indirectly holds an interest of 30% or more in the Group, 21st Century Fox will not engage in the business of satellite broadcasting in the
The sale and purchase agreements for the acquisitions of
On
b) Joint ventures and associates
Transactions between the Company and its subsidiaries, which are related parties, have been eliminated on consolidation and are not disclosed in this note. Transactions between the Group and its joint ventures and associates are disclosed below.
|
|
2017/18 Half year £m |
2016/17 Half year £m |
2016/17 Full year £m |
|
Supply of services by the Group |
25 |
24 |
47 |
|
Purchases of goods or services by the Group |
(25) |
(26) |
(52) |
|
Amounts owed by joint ventures and associates to the Group |
30 |
124 |
29 |
|
Amounts owed to joint ventures and associates by the Group |
(15) |
(22) |
(9) |
Services supplied are primarily the provision of transponder capacity, marketing, airtime sales and support services. Purchases principally represent fees payable for channel carriage.
Amounts owed by joint ventures and associates include £17 million (2017: half year:
The Group took out a number of forward foreign exchange contracts with counterparty banks during the prior period on behalf of the joint venture AETN UK. On the same dates as these forward foreign exchange contracts were entered into, the Group entered into equal and opposite contracts with AETN UK in respect of these forward foreign exchange contracts. Consequently, the Group was not exposed to any of the net gains or losses on these forward foreign exchange contracts.
The face value of forward foreign exchange contracts with AETN UK that had not matured as at
During the current period, less than US
During the current period,
During the current period, €1 million (2017: half year: €4 million; full year: €8 million) was received from AETN UK upon maturity of forward foreign exchange contracts and nil (2017: half year and full year: nil) was paid to AETN UK upon maturity of forward foreign exchange contracts.
At
c) Other transactions with related parties
The Group has engaged in a number of transactions with companies of which some of the Company's Directors are also directors. These do not meet the definition of related party transactions.
7 Transactions with related parties and major shareholders (continued)
d) Key management
The Group has a related party relationship with the Directors of the Company. At
|
|
2017/18 Half year £m |
2016/17 Half year £m |
2016/17 Full year £m |
|
Short-term employee benefits |
4 |
4 |
6 |
|
Share-based payments |
5 |
4 |
11 |
|
|
9 |
8 |
17 |
Post-employment benefits were less than
8 Financial instruments
The following table categorises the Group's financial instruments which are held at fair value into one of three levels to reflect the degree to which observable inputs are used in determining their fair values:
|
|
Level 1 |
|
Level 2 |
|
Level 3 |
|||
|
|
31 December 2017 |
30 June 2017 |
|
31 December 2017 |
30 June 2017 |
|
31 December 2017 |
30 June 2017 |
|
|
£m |
£m |
|
£m |
£m |
|
£m |
£m |
|
Financial assets |
|
|
|
|
|
|
|
|
|
Available-for-sale financial assets |
|
|
|
|
|
|
|
|
|
Other investments |
100 |
- |
|
- |
- |
|
116 |
110 |
|
Financial assets at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
Interest rate swaps |
- |
- |
|
22 |
44 |
|
- |
- |
|
Cross-currency swaps |
- |
- |
|
611 |
783 |
|
- |
- |
|
Forward foreign exchange contracts |
- |
- |
|
7 |
50 |
|
- |
- |
|
Total |
100 |
- |
|
640 |
877 |
|
116 |
110 |
|
Financial liabilities |
|
|
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or loss |
|
|
|
|
|
|
|
|
|
Interest rate swaps |
- |
- |
|
(2) |
(4) |
|
- |
- |
|
Cross-currency swaps |
- |
- |
|
(390) |
(353) |
|
- |
- |
|
Forward foreign exchange contracts |
- |
- |
|
(122) |
(40) |
|
- |
- |
|
Embedded Derivative |
- |
- |
|
(4) |
(7) |
|
- |
- |
|
Total |
- |
- |
|
(518) |
(404) |
|
- |
- |
Level 1 fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities, including shares in listed entities. The
Level 2 fair values measured using inputs, other than quoted prices included within Level 1 that are observable for the asset or liability either directly or indirectly. Derivative financial instrument fair values are present values determined from future cash flows discounted at rates derived from market source data.
Level 3 fair values measured using inputs for the asset or liability that are not based on observable market data. Certain of the Group's unlisted available-for-sale financial assets are held at fair value and are categorised as Level 3 in the fair value hierarchy.
INDEPENDENT REVIEW REPORT TO SKY PLC
We have been engaged by the company to review the condensed set of financial statements in the half-yearly financial report for the six months ended
This report is made solely to the company in accordance with International Standard on Review Engagements (
Directors' responsibilities
The half-yearly financial report is the responsibility of, and has been approved by, the directors. The directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with IFRSs as adopted by the
Our responsibility
Our responsibility is to express to the Company a conclusion on the condensed set of financial statements in the half-yearly financial report based on our review.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the half-yearly financial report for the six months ended
Statutory Auditor
Appendix 2 - Non-GAAP measures
Reconciliation of cash (used in) generated from operations to adjusted free cash flow
for the half year ended
|
|
2017/18 Half year |
2016/17 Half year |
|
|
£m |
£m |
|
Cash (used in) generated from operations |
(162) |
364 |
|
Adjusting items: |
|
|
|
Cash paid relating to corporate restructuring and efficiency programmes |
62 |
55 |
|
Cash paid relating to the integration of Sky Italia and Sky Deutschland in the enlarged Group |
6 |
18 |
|
Cash received relating to regulatory-related credits and proceeds of settlements |
(20) |
- |
|
Cash paid in relation to 21st Century Fox offer |
3 |
1 |
|
|
|
|
|
Adjusted cash (used in) generated from operations |
(111) |
438 |
|
|
|
|
|
Interest received |
7 |
4 |
|
Taxation paid |
(80) |
(54) |
|
Dividends received from joint ventures and associates |
122 |
10 |
|
Funding to joint ventures and associates |
(4) |
(8) |
|
Purchase of property, plant and equipment |
(349) |
(347) |
|
Purchase of intangible assets |
(246) |
(275) |
|
Interest paid |
(156) |
(153) |
|
|
|
|
|
Tax effect of adjusting items |
(20) |
(32) |
|
|
|
|
|
Adjusted free cash flow |
(837) |
(417) |
Analysis of movements in net debt
|
|
As at 1 July 2017 |
Cash movements |
Non-cash movements |
As at 31 December 2017 |
|
|
£m |
£m |
£m |
£m |
|
|
|
|
|
|
|
Current borrowings |
974 |
(402) |
406 |
978 |
|
Non-current borrowings |
8,207 |
- |
(495) |
7,712 |
|
Borrowings-related derivative financial instruments |
(470) |
- |
229 |
(241) |
|
Gross debt |
8,711 |
(402) |
140 |
8,449 |
|
|
|
|
|
|
|
Cash and cash equivalents |
(2,200) |
1,185 |
- |
(1,015) |
|
Short-term deposits |
(300) |
300 |
- |
- |
|
Net debt |
6,211 |
1,083 |
140 |
7,434 |
Consolidated income statement - reconciliation of statutory and adjusted numbers
|
|
|
2017/18 |
|
||||
|
|
|
Statutory |
Adjusting Items |
Adjusted |
|
|
|
|
|
Notes |
£m |
£m |
£m |
|
|
|
|
Revenue |
|
|
|
|
|
|
|
|
Direct to consumer |
|
5,881 |
- |
5,881 |
|
|
|
|
Content |
|
412 |
- |
412 |
|
|
|
|
Advertising |
|
444 |
- |
444 |
|
|
|
|
|
|
6,737 |
- |
6,737 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expense |
|
|
|
|
|
|
|
|
Programming |
A |
(3,162) |
3 |
(3,159) |
|
|
|
|
Direct network costs |
B |
(556) |
(9) |
(565) |
|
|
|
|
Sales, general and administration |
C |
(2,446) |
189 |
(2,257) |
|
|
|
|
|
|
(6,164) |
183 |
(5,981) |
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA |
|
1,072 |
47 |
1,119 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit |
|
573 |
183 |
756 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Share of results of joint ventures and associates |
D |
47 |
(34) |
13 |
|
|
|
|
Investment income |
E |
5 |
(3) |
2 |
|
|
|
|
Finance costs |
F |
(142) |
19 |
(123) |
|
|
|
|
Profit before tax |
|
483 |
165 |
648 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxation |
G |
(35) |
(77) |
(112) |
|
|
|
|
Profit for the period |
|
448 |
88 |
536 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Loss for the period attributable to non-controlling interests |
|
1 |
- |
1 |
|
|
|
|
Loss for the period attributable to equity shareholders of the parent company |
|
449 |
88 |
537 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (basic) |
26.2p |
5.1p |
31.3p |
|
|
||
Notes: explanation of adjusting items for the period ended
A. Costs of
B. Income of
C. Costs of
D. Income of
E. Interest income of
F. Finance costs of
G. Tax effect of above adjusting items and tax adjusting items.
Corporate restructuring and efficiency programmes include costs associated with specific programmes that the Group has established in order to achieve reductions in ongoing operating expense. Costs of these programmes include redundancy and relocation costs, consultancy costs, contract exit costs and the impairment or accelerated depreciation of assets that the Group no longer expects to use for their original estimated useful economic life.
Consolidated income statement - reconciliation of statutory and adjusted numbers
|
|
|
2016/17 |
|
||||
|
|
|
Statutory |
Adjusting Items |
Adjusted |
|
||
|
|
Notes |
£m |
£m |
£m |
|
||
|
Revenue |
|
|
|
|
|
||
|
Direct to consumer |
|
5,609 |
- |
5,609 |
|
||
|
Content |
|
405 |
- |
405 |
|
||
|
Advertising |
|
396 |
- |
396 |
|
||
|
|
|
6,410 |
- |
6,410 |
|
||
|
|
|
|
|
|
|
||
|
Operating expense |
|
|
|
|
|
||
|
Programming |
A |
(3,047) |
11 |
(3,036) |
|
||
|
Direct network costs |
|
(474) |
- |
(474) |
|
||
|
Sales, general and administration |
B |
(2,428) |
207 |
(2,221) |
|
||
|
|
|
(5,949) |
218 |
(5,731) |
|
||
|
|
|
|
|
|
|
||
|
EBITDA |
|
934 |
75 |
1,009 |
|
||
|
|
|
|
|
|
|
||
|
Operating profit |
|
461 |
218 |
679 |
|
||
|
|
|
|
|
|
|
|
|
|
Share of results of joint ventures and associates |
C |
8 |
7 |
15 |
|
|
|
|
Investment income |
|
8 |
- |
8 |
|
|
|
|
Finance costs |
D |
(100) |
(24) |
(124) |
|
|
|
|
Profit before tax |
|
377 |
201 |
578 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Taxation |
E |
(56) |
(39) |
(95) |
|
|
|
|
Profit for the period |
|
321 |
162 |
483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit for the period attributable to non-controlling interests |
|
- |
- |
- |
|
|
|
|
Profit for the period attributable to equity shareholders of the parent company |
|
321 |
162 |
483 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share (basic) |
18.8p |
9.5p |
28.3p |
|
|
||
Notes: explanation of adjusting items for the period ended
A. Costs of
B. Costs of
C. Amortisation of acquired intangible assets of
D. Finance income of
E. Tax effect of above adjusting items and tax adjusting items.
Appendix 3 - Principal risks and uncertainties
The Board continually assesses and monitors the key risks of the business. The key risks that could affect the Group's long-term performance, and the factors which mitigate these risks, are set out in more detail on pages 28-31 of the 2017 Annual Report. Other than where indicated below, the Board does not consider that the following principal risks and uncertainties have changed. Additional risks and uncertainties of which we are not aware or which we currently believe are immaterial may also adversely affect our business, financial condition, prospects, liquidity or results of operations.
· Market and competition: The Group operates in a highly competitive environment and faces competition from a broad range of organisations. Technological developments also have the ability to create new forms of quickly evolving competition. A failure to develop the Group's product proposition in line with changing market dynamics and expectations could erode the Group's competitive position. Great content is central to Sky's product proposition and increased competition could impact the Group's ability to acquire content that its customers want on commercially attractive terms. Economic conditions have been challenging in recent years across the territories in which the Group operates and the outcome of the
· Regulatory breach and change: The Group's ability to operate or compete effectively could be adversely affected by the outcome of investigations or by the introduction of new laws, policies or regulations, changes in the interpretation or application of existing laws, policies and regulations, or failure to obtain required regulatory approvals or licences. The Group is subject to regulation primarily under Austrian, German, Irish, Italian,
· Ofcom investigation into Sky's compliance with rules about cancellation and termination arrangements: On
· Competition law investigation into 2014 Serie A auction: On
·
· Secretary of State Review of the 21st Century Fox offer on public interest grounds: The 21st Century Fox Offer is subject to the satisfaction or waiver of certain pre-conditions, principally being regulatory clearances. On
· Customer service: A significant part of the Group's business is based on a subscription model and its future success relies on building long-term relationships with its customers. A failure to meet its customers' expectations with regards to service could negatively impact the Group's brand and competitive position.
· Technology and business interruption: The products and services that the Group provides to its customers are reliant on complex technical infrastructure. A failure in the operation of the Group's key systems or infrastructure, such as the broadcast platforms, customer management systems, OTT platforms or the telecommunications networks on which the Group relies could cause a failure of service to our customers and negatively impact our brand.
· Suppliers: The Group relies on a number of third parties and outsourced suppliers operating across the globe to support its business. A significant failure of a supplier or a discontinuation of supply could adversely affect the Group's ability to deliver operationally.
· Financial: The effective management of its financial exposures is central to preserving the Group's profitability. The Group is exposed to financial market risks and may be impacted negatively by fluctuations in foreign exchange and interest rates, which create volatility in the Group's results to the extent that they are not effectively hedged. Any increase in the financial leverage of the Group may limit the Group's financial flexibility. The Group may also be affected adversely by liquidity and counterparty risks.
Appendix 3 - Principal risks and uncertainties (continued)
· Security: The Group must protect its customer and corporate data and the safety of its people and infrastructure as well as needing to have in place fraud prevention and detection measures. The Group is responsible to third party intellectual property owners for the security of the content that it distributes on various platforms (Sky's own and third party platforms). A significant breach of security could impact the Group's ability to operate and deliver against its business objectives.
· Projects: The Group invests in, and delivers, significant capital expenditure projects in order continually to drive the business forward. The level of the Group's capital expenditure has increased as a result of the increased size of the Group's business following completion of the acquisitions of Sky Deutschland and Sky Italia. The failure to deliver key projects effectively and efficiently could result in significantly increased project costs and impede our ability to execute our strategic plans.
· Intellectual property protection: The Group in common with other service providers relies on intellectual property and other proprietary rights, including in respect of programming content, which may not be adequately protected under current laws or which may be subject to unauthorised use.
· People: People at Sky are critical to the Group's ability to meet the needs of its customers and achieve its goals as a business. Failure to attract or retain suitable employees across the business could limit the Group's ability to deliver its business plan commitments.
This information is provided by RNS