Press Release – Draft
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BRITISH SKY BROADCASTING GROUP PLC Unaudited results for the nine months ended 31 March 2012 Adjusted results Reported results Nine months to 31 March 2012 2011 Variance 2012 2011 Variance Revenue £5,078m £4,833m +5% £5,078m £4,833m +5% EBITDA £1,161m £1,030m +13% £1,192m £992m +20% Operating profit £908m £790m +15% £939m £752m +25% Earnings per share (basic) 37.8p 30.5p +24% 39.7p 30.3p +31% CONSISTENT EXECUTION DELIVERING STRONG GROWTH Strong financial performance Revenue up 5% to £5.1 billion Adjusted operating profit up 15% to £908 million Adjusted operating margin expansion of 160 bps to 17.9% Adjusted basic EPS up 24% to 37.8 pence Completed £387 million of £750 million buyback programme Britain’s favourite triple play provider Total quarterly net product growth of 904,000 to 27.7 million 78,000 net new households in the quarter to reach 10.55 million customers Largest base of triple play customers in Britain at 3.2 million, up 24% year-on-year Strongest ever quarter for home communications with 702,000 net broadband, telephony and line rental product additions Consistently delivering the best experience for customers Ensuring continued excellence in sports coverage with successful launch of Sky Sports F1 HD and new long term agreements in golf and cricket Bringing the best HD and 3D experience of the Olympics to Sky customers Leading broadband service getting even better with free out-of-home WiFi and launch of fibre products Huge choice of on demand content extended and now available to over five million Sky TV homes NOW TV on track for launch in first half of calendar 2012, widening the availability of Sky content on broadband-connected devices Results highlights Customer Metrics (unaudited) Quarterly As at As at Annual Growth to 31-Mar-12 31-Mar-11 Growth 31-Mar-12 Total products (‘000s) 27,734 24,591 +3,143 +904 TV 10,268 10,147 +121 +15 HD 4,222 3,686 +536 +159 Multiroom 2,378 2,237 +141 +28 Broadband 3,863 3,161 +702 +212 Telephony 3,627 2,916 +711 +220 Line rental 3,376 2,444 +932 +270 Total customers (‘000s) 10,549 10,223 +326 +78 Products per customer 2.6 2.4 +0.2 Other metrics Customers taking each of TV, broadband & talk 31% 26% +5% ARPU (1) £546 £537 +£9 Churn (quarterly annualised) 10.1% 10.4% An additional KPI summary table containing further detailed disclosure may be found in Schedule 1. Business Performance (2) (unaudited) £’millions 9 months to 9 months to 31-Mar-12 31-Mar-11 Movement Revenue 5,078 4,833 +5% Adjusted operating profit 908 790 +15% % Adjusted operating profit margin 17.9% 16.3% +160 bps Adjusted EBITDA 1,161 1,030 +13% Adjusted free cash flow 601 615 -2% Adjusted basic earnings per share (3) 37.8p 30.5p +24% 1 Quarterly annualised. Calculations have been restated to include customers taking standalone home communications products and to reflect the impact of the Sky magazine closure. 2 A reconciliation of adjusted operating profit and adjusted EBITDA from continuing operations to reported measures as well as cash generated from continuing operations to adjusted free cash flow from continuing operations is set out in Appendix 3. 3 Adjusted basic EPS is calculated from adjusted profit from continuing operations for the period. A reconciliation of reported profit from continuing operations to adjusted profit from continuing operations is set out in note 4 to the consolidated financial information. 2 Jeremy Darroch, Chief Executive, commented: “We have made a good start to 2012. In what remains a tough economic environment, strong and consistent execution of our plan has delivered good growth across our product range. We have grown revenues by 5% while holding prices flat for customers and delivered a record nine-month operating profit of £908 million alongside 24% growth in earnings per share. The decision to focus our marketing on home communications has paid off with our fastest quarter of growth since launch and confirmation that Sky is now Britain’s favourite triple play provider. “More households are choosing Sky and taking more products from us because we’re constantly looking to improve the quality and value that we offer. Already in 2012, we’ve launched an entirely new channel dedicated to Formula 1, given millions of households access to a huge choice of on demand TV and made our market-leading broadband service even better with the launch of our fibre products and free out-of-home WiFi. Looking ahead, we will continue to improve our service for all Sky customers as we believe this is the best way to build a larger business and continue to increase returns for shareholders.” 3 OVERVIEW We have once again delivered a strong operational and financial performance in the third quarter and first nine months driven by our sustained customer focus and the growing breadth of our product range. We are continuing to add to the customer experience through our innovation while maintaining our tight focus on costs. This has contributed to double digit growth in adjusted operating profit, growth in adjusted basic earnings per share of 24%, and expansion of our adjusted operating margin by 160bps to 17.9%. Consumers are still facing a tough economic environment but customers are continuing to take more products from us as they recognise the great quality and value that Sky offers. We had our strongest quarter ever for home communications with 702,000 net product additions and Sky has now become Britain’s favourite triple play provider. Net product additions of 904,000 in the three months to 31st March 2012 (“the quarter”) were higher than both the prior year and the second quarter, and took the total base to 27.7 million, up by 13% year on year. Within this growth, we added 78,000 net new customer households. Churn at 10.1% was slightly lower than the prior year. This operating performance has allowed us to deliver another strong set of financial results. Revenue growth was 5% in the first nine months despite freezing prices for customers and this, combined with our focus on efficiency, translated into 15% growth in adjusted operating profit and 24% growth in adjusted basic EPS. In addition, we have returned £387 million to shareholders to date through our on-going £750 million share buyback programme. OPERATIONAL REVIEW Operational Performance We added 904,000 total net products in the quarter, growing the base by 13% year on year to reach a total of 27.7 million products. Within this, we added 78,000 net new households with 63,000 new standalone broadband customers and 15,000 TV customers. Our total customer base is now 10.55 million, of which 281,000 are standalone broadband customers. We have delivered growth across all product categories and customers are now taking an average of 2.6 products each, double the figure of five years ago. We are continuing to see strong demand for home communications with record net new product additions of 702,000 during the quarter, including 212,000 broadband, 220,000 telephony and 270,000 line rental net new customers. Our continued strong growth in home communications has taken the number of customers with each of TV, broadband and telephony (“triple play”) to 3.2 million, up 24% year on year. Triple play penetration of our customer base has now reached 31%. During the quarter, we also added 277,000 customers to our own network, meaning that 63% of our customers are now fully unbundled and, as a result, we continue to improve the economics of our home communications business. Total HD customers reached 4.2 million, with 159,000 net additions in the quarter, an increase on the 138,000 net additions in the second quarter. This reflected continued strong demand for the product as well as the launch of our new Sky Sports Formula 1 HD channel (now included at no extra cost with an HD subscription). Our multiroom base also grew by 28,000 to 2.4 million. 4 ARPU grew to a new high of £546 in the quarter, with the impact of this year’s price freeze more than offset by our success in selling our home communications products to new and existing customers. While the economic environment remains tough, we also saw good customer loyalty with churn falling to 10.1% (from 10.4% last year) as customers continue to recognise the value of our product range. We continue to enhance our broadband service, providing further value to our customers. In April, we launched our WiFi hotspots from The Cloud service, giving internet access free of charge to Sky Broadband Unlimited, Sky Fibre Unlimited and Sky Connect customers in over 10,000 hotspots across the UK, including major outlets such as Pizza Express, Caffè Nero, Eat and Pret A Manger. We are currently adding over 200 new live hotspots each week and new contracts with Greggs and London Overground were agreed during the quarter. We also launched our new fibre service in April, giving customers access to download speeds of up to 38Mb and 76Mb for £20 and £30 a month, respectively. Great customer service remains central to our offering. We remain focused on improving product reliability and are providing ever-improving levels of issue resolution. By continuing to encourage customers to interact with us online we have also reduced our cost to serve in our contact centres, with call volumes per customer in the quarter down 10% versus the same period last year.