Annual Report Covers the Period from 1 July 2017 to 30 June 2018, and Was Completed and Signed Off by the Board and Our Auditors on 25 July 2018
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CEO statement Dear Reader, This annual report covers the period from 1 July 2017 to 30 June 2018, and was completed and signed off by the Board and our auditors on 25 July 2018. At this time, both Twenty First Century Fox (“21CF”) and Comcast had made firm offers for the company and the offer process was ongoing. Following an auction process led by the Takeover Panel, on 22 September 2018 the Independent Directors recommended Comcast’s superior offer of £17.28 per Sky share to shareholders. This valued Sky at £29.7 billion and demonstrated the strength of our business and its position across Europe. Subsequently, on 9 October 2018 Comcast announced they had acquired over 75% of the voting rights of Sky and their offer had therefore become wholly unconditional, meaning our business had become part of a global and world-class entertainment organisation. We expect Sky shares to cease trading on the London Stock Exchange on 7 November 2018. It was nearly 30 years ago that Rupert Murdoch took a risk to launch our company and revolutionise the way people watch TV. The support of 21CF over that time, including James’ Chairmanship of our business, has enabled Sky to grow in to one of Europe’s leading direct-to- consumer media and entertainment companies. I would personally like to thank Rupert, James and 21CF for their consistent support as shareholders, board members and friends. I’d additionally like to thank those Board members - Chase Carey, Tracy Clarke, Martin Gilbert, Adine Grate, John Nallen, Matthieu Pigasse, Andy Sukawaty and Katrin Wehr-Seiter – who have or will shortly join James in stepping down from the Board. They have all made a significant contribution to the success of Sky and have continually looked after the interests of all shareholders. This is the beginning of the next exciting chapter for Sky and I look forward to bringing our business together with Comcast for the benefit of customers, colleagues and the communities in which we operate. As part of a broader organisation our momentum will only increase and our aim is to make the next 30 years equally as successful as the last. I’m very proud by what we’ve achieved at Sky and I’m equally excited about the opportunities that still lie ahead. Yours faithfully Jeremy Darroch 31 October 2018 Sky plc, Grant Way, Isleworth, Middlesex TW7 5QD Call 0333 100 0333 Fax 0333 100 0444 Visit sky.com Registered in England No. 2247735 VAT registered No. 440 6274 67 2018 Annual ReportAnnual Sky plc Annual Report 2018 Bringing better content and innovation to all of our customers, better connecting them to more of what they love. At Sky we believe in providing our customers with the very best TV experience. That means offering them the best entertainment from major live sporting events, gripping drama, great US and Sky original programmes, and blockbuster movies across a range of brilliant platforms and services. We also continually improve our product set across TV, home communications, and mobile, attracting more customers to Sky. We know that everyone deserves exceptional service and we strive to improve what we do every day for our customers. At the same time we believe in being a fair and responsible business, doing the right thing for our people, communities, customers and shareholders. Contents Strategic report Our journey 2 Chairman’s statement 4 Group Chief Executive’s statement 5 Our approach 8 Our performance 10 The Bigger Picture 12 Operational review – UK and Ireland 16 – Germany and Austria 18 – Italy 20 Financial review 22 Sky Q Principal risks and uncertainties 24 Now launched across Regulatory matters 28 all our main territories Governance Board of Directors 32 Corporate governance report 34 Directors’ remuneration report 46 Directors’ report and statutory 61 disclosures Financial statements Statement of Directors’ 70 responsibilities Independent Auditor’s report 71 Consolidated financial statements 77 Notes to the consolidated 81 financial statements Group financial record 133 Non-GAAP measures 135 Patrick Melrose Nominated for five Emmy® Awards Shareholder information Shareholder information 140 To find out more about Sky go to skygroup.sky/corporate To find out about our products and Digital service services go to sky.com My Sky app downloaded For more about our wider contribution go to 11 million times skygroup.sky/corporate/bigger-picture Annual Report 2018 1 Our journey Since our launch in 1989 we’ve grown from being the UK’s first satellite TV service to Europe’s leading direct-to-consumer media and entertainment company, serving 23 million customers with multiple products across seven markets. Here are some of our highlights: Revolutionising the Putting customers way people watch TV in control Sky+ introduced, letting customers record, pause Sky Sports starts broadcasting and instantly rewind live TV 1989 1991 1998 2001 Launched as the UK’s first satellite launched, allowing TV service with four channels customers to watch over 140 live including Sky News, Europe’s TV channels first 24 hour news channel Establishing our presence across Europe Streaming service brought to market Acquisition of Sky Italia and Sky Deutschland 2012 2014 Broadened Pay-per-view movie our content service Sky Store launches strategy is introduced Building the next generation of products Sky Q – Europe’s best home NOW TV rolls entertainment service – out in Italy brought to market in the UK 2015 2016 Fortitude becomes our first original programme to launch across the Group Sky Kids app created to NOW TV adds unlimited NOW give a bespoke and safe Broadband, the UK’s first destination for kids content contract-free broadband service 2 Sky plc Strategic report Broadening our product portfolio Sky Mobile TV, our to more customers first streaming service, Sky+ HD launched with launched 10 channels in high definition 2005 2006 Launch of Sky Talk 2007 Expanded into home communications with Sky Broadband Developing our streaming services Sky Go launched, letting customers watch live and on Reached our ambitious demand TV on mobile devices 10 million customer target 2009 2011 2010 Introduction of the Sky+ app, letting customers record shows Creation of whilst out of the home becoming the home of HBO Serving a bigger market with our best products NOW TV rolls Germany’s streaming The start of Sky VR, out in Italy service introduced a dedicated virtual Our services expanded Sky launched app to be added to Sky Q, reality app into Spain and Switzerland over DTT in Italy starting in the UK and Ireland 2016 2017 2018 Sky+ Pro launches with Launch of Sky Mobile Sky Q starts rolling Sky over Fibre Ultra-HD in Germany – the UK’s most flexible out across Europe joins the Sky Q becomes available mobile phone service platform in Italy Annual Report 2018 3 Chairman’s statement As we continue to generate strong returns, we are able to make an ever-growing contribution to the countries and communities in which we operate. This year we collected and paid £1.8 billion in total taxes. In total, we generate around £4.8 billion in tax revenues, and proudly employ over 31,000 people while supporting a further 216,800 jobs throughout Europe (Oxford Economics 2017). Our Sky Ocean Rescue campaign, which launched over a year ago, has contributed to making the matter of ocean health and plastic pollution an issue of national importance. Sky’s efforts in raising awareness and taking action have been recognised by world leaders and policy makers and we are using our skills and experience to attract high-profile partners to this important cause. Additionally, in March we launched Sky Ocean Ventures, our impact investment vehicle, to accelerate breakthrough James Murdoch and scalable ideas to help solve the ocean plastic crisis and Chairman encourage responsible consumption. I’m proud to announce that we have exceeded our target of reducing our carbon emissions intensity by 50% two years early At a time of significant change in our industry, Sky has and, together with our pledge to remove all single-use plastics continued to strengthen its position as Europe’s leading from our operations by 2020, we are proving our commitment to building a better and more sustainable business. direct-to-consumer media and entertainment business. We have more ways than ever before to reach customers As you know, Sky remains in an extended offer period, having and let them access their favourite content in whichever received firm offers from 21st Century Fox and Comcast to acquire the business. Sky’s Independent Directors led by our way they choose. At the same time, we’re using our Deputy Chairman, Martin Gilbert, have conduct over the offer European footprint to make a significant positive process. Sky shareholders, who will have the final say, continue impact in the communities in which we operate. to be kept fully informed. Finally, I would like to take this opportunity to thank all my We have once again delivered on our strategy to give customers colleagues for delivering another strong performance and the best and broadest range of content, market-leading product remaining focused throughout the year. The talent of our innovation and excellent front-line customer service, while at people means we continue to find more ways to improve the the same time constantly improving our operational capability customer offer and drive the growth of this great business. and efficiency. Additionally, we have continued to open up new opportunities for growth by capitalising on the strength of the Sky brand, developing new services and entering additional geographic James Murdoch, Chairman markets. This year, we’ve taken Sky Q, Europe’s best home and entertainment service, into our main territories, have made the Sky service available without a satellite dish for the first time and have launched pay-as-you-go streaming services in both Spain and Switzerland.