SKY NETWORK TELEVISION LIMITED ANNUAL REPORT JUNE 2016 the Way We Consume Entertainment Continues to Evolve at a Rapid Pace
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SKY NETWORK TELEVISION LIMITED ANNUAL REPORT JUNE 2016 The way we consume entertainment continues to evolve at a rapid pace. This is an exciting new era for SKY that we look forward to NEW PLATFORMS. taking to a new level MORE CONTENT, with Vodafone NZ. MORE CHOICE. IT’S FAST FORWARD FOR SKY. SKY ANNUAL REPORT 2016 3 SKY AT A GLANCE 2 YEAR IN REVIEW Chairman’s Letter 4 Chief Executive’s Letter 6 Board of Directors 10 IN FOCUS Creating a Leading 12 Telecommunications and Media Group We’ve got the Best Shows 14 from the Best Studios Good Sport 16 Full Stream Ahead 18 COMMUNITY AND 20 SPONSORSHIP SKY CHANNELS 22 2016 FINANCIALS 24 Financial Overview 25 Financial Trends 29 Directors’ Responsibility 31 Statement Consolidated Statement of 32 Comprehensive Income Consolidated Balance Sheet 33 Consolidated Statement of 34 Changes in Equity Consolidated Statement of 35 Cash Flows Notes to the Consolidated 36 Financial Statements Independent Auditors’ Report 63 OTHER INFORMATION 64 Corporate Governance 65 Interests Register 67 Company and Bondholder 69 Information Waivers and Information 74 Share Market and 75 Other Information Directory 76 2 SKY ANNUAL REPORT 2016 SKY AT A GLANCE CUSTOMERS FINANCIAL PERFORMANCE This year we have more total customers across all Our financial performance remains strong. our products, with digital oerings FAN PASS and NEON 852,679 928M 325M driving the growth. KIWIS ENJOY SKY REVENUE EBITDA EVERY DAY 147M NPAT SOCIAL PEOPLE SKY’s social reach continues to grow, with over 800,000 We employ over 1,200 permanent employees followers across our entertainment and sports brands on 800,000 and work with over 500 contractors hailing from 1,254 the country’s most popular social media platforms. Our social FOLLOWERS many dierent countries. Over 50% of us have EMPLOYEES content gains over 13 million impressions per month with both been part of the crew for more than five years. entertainment and sports content resonating with audiences in New Zealand and around the world. TOTAL STAFF SENIOR EXECUTIVES 13M 47% 53% 37% 63% IMPRESSIONS PER MONTH FEMALE MALE FEMALE MALE INNOVATION INVESTORS TOTAL DIVIDEND We are constantly reviewing how we can deliver the We have achieved strong growth over the years entertainment our customers want, in the way they and continue to deliver profits. Our dividend policy want. Each week hundreds of thousands of pieces of provides our investors with continuous returns. great content are downloaded via SKY GO, FAN PASS, 30 NEON and SKY On Demand. PER SHARE CONTENT COMMUNITY We have New Zealand’s largest portfolio of content We love supporting local communities and are proud with entertainment, sports, movies, news and much more. to be a Five Star Partner of the Starship Foundation. It can be viewed on a variety of platforms and devices. We’re contributing to the rebuild of Christchurch via We’ve secured exclusive premium content and long term the Christchurch Earthquake Appeal by gifting one rights with Disney, Discovery, HBO, Universal, Warner Bros., million dollars over a five year period. We’re supporting SANZAR Rugby, NZ Cricket, Netball NZ and the NRL. talented young kiwi athletes through our SKY NEXT programme, giving them funding and support. We’re also the major sponsor of the Special Christmas Children’s Parties, which our sta give their time to freely. SKY ANNUAL REPORT 2016 3 CUSTOMERS FINANCIAL PERFORMANCE This year we have more total customers across all Our financial performance remains strong. our products, with digital oerings FAN PASS and NEON 852,679 928M 325M driving the growth. KIWIS ENJOY SKY REVENUE EBITDA EVERY DAY 147M NPAT SOCIAL PEOPLE SKY’s social reach continues to grow, with over 800,000 We employ over 1,200 permanent employees followers across our entertainment and sports brands on 800,000 and work with over 500 contractors hailing from 1,254 the country’s most popular social media platforms. Our social FOLLOWERS many dierent countries. Over 50% of us have EMPLOYEES content gains over 13 million impressions per month with both been part of the crew for more than five years. entertainment and sports content resonating with audiences in New Zealand and around the world. TOTAL STAFF SENIOR EXECUTIVES 13M 47% 53% 37% 63% IMPRESSIONS PER MONTH FEMALE MALE FEMALE MALE INNOVATION INVESTORS TOTAL DIVIDEND We are constantly reviewing how we can deliver the We have achieved strong growth over the years entertainment our customers want, in the way they and continue to deliver profits. Our dividend policy want. Each week hundreds of thousands of pieces of provides our investors with continuous returns. great content are downloaded via SKY GO, FAN PASS, 30 NEON and SKY On Demand. PER SHARE CONTENT COMMUNITY We have New Zealand’s largest portfolio of content We love supporting local communities and are proud with entertainment, sports, movies, news and much more. to be a Five Star Partner of the Starship Foundation. It can be viewed on a variety of platforms and devices. We’re contributing to the rebuild of Christchurch via We’ve secured exclusive premium content and long term the Christchurch Earthquake Appeal by gifting one rights with Disney, Discovery, HBO, Universal, Warner Bros., million dollars over a five year period. We’re supporting SANZAR Rugby, NZ Cricket, Netball NZ and the NRL. talented young kiwi athletes through our SKY NEXT programme, giving them funding and support. We’re also the major sponsor of the Special Christmas Children’s Parties, which our sta give their time to freely. 4 SKY ANNUAL REPORT 2016 CHAIRMAN’S LETTER SKY IS IN A STRONG POSITION TO FACE THE FUTURE. Dear shareholders The 2016 financial year has been the change of balance in SKY to new more about later in this report. very challenging and this can be NEON and FAN PASS customers. Our digital products, fuelled with the seen in our results. SKY’s revenue very best content, are off to a strong is up at an all-time high of $928.2 For SKY’s board and management team start, and can only be enhanced million from $927.5 million in the there has been an intense focus this further with Vodafone’s global previous period, however net profit financial year on the future options for telecommunications expertise. after tax fell 14.4% to $147.1 million SKY to develop and grow its business, from $171.8 million reflecting eventuating in the proposed merger Our software rollout to all SKY boxes higher programming costs and with Vodafone. This transaction is one is complete and I am pleased to report increased churn following the of the largest in New Zealand’s history nearly 30% of boxes are internet Rugby World Cup. It should also and has required dedication from the connected and enjoying content be noted that these results include team to secure an excellent future for downloaded online. $13.4 million of costs associated SKY’s shareholders, customers and The coming year has plenty to look with progressing the acquisition staff. Commerce Commission and forward to. The Rio Olympics dominated of Vodafone New Zealand. Overseas Investment Office approvals have been sought, with an indicated screens during August. The America’s Cup and 2017 Lions Tour, exclusively While traditional SKY subscribers are decision time at the end of 2016. on SKY, will grab the attention of many declining we have seen good growth I, along with SKY’s board and staff New Zealanders. I’m also delighted for our new online products and a are looking forward to working with to see the very best of world golf and pleasing overall growth in subscriber Vodafone to deliver New Zealanders football firmly back on SKY screens. numbers from 851,561 to 852,679. the very best in entertainment into the future. I thank our shareholders SKY customers in 2016 comprised In August 2015 Susan Paterson for considering the proposal and 729,058 residential and wholesale ONZM joined SKY’s board. Susan has voting overwhelmingly 99% in favour subscribers and 123,621 other been a professional director for the of our recommendation to merge subscribers including hotels, motels, past 15 years and is a Fellow of the with Vodafone New Zealand. and restaurants, along with NEON, Institute of Directors. Among other FAN PASS and IGLOO. SKY is in a strong position to face board roles she is the Chair of Airways Corporation of New Zealand Ltd, Chair Average revenue per user (ARPU) was the future. We have extensive content of IT consultancy Theta Systems Ltd fairly flat dropping from $79.54 to $78.63 deals in place with entertainment and former Deputy Chair of Abano or down 1.2%. This can be attributed to and sports rights that you can read SKY ANNUAL REPORT 2016 5 The way we consume entertainment continues to evolve at a rapid pace. This is an exciting new era for SKY that we look forward to taking to a new level with Vodafone NZ. SKY IS IN A STRONG POSITION TO FACE THE FUTURE. Healthcare Ltd. Susan brings a wealth of experience and we welcome her REVENUE IS AT AN to SKY’s board. $928.2M ALL TIME HIGH This year more than any other I thank John Fellet and all of SKY’s staff 2016 928,200 and contractors for their dedication and hard work. Thank you also to you, 2015 927,525 our shareholders for your continued support. I am pleased to announce 2014 909,001 a final dividend of 15 cents per share. 2013 885,024 2012 843,074 NZD 000 Peter Macourt Chairman 6 SKY ANNUAL REPORT 2016 CHIEF EXECUTIVE’S LETTER Dear shareholders This is the 15th CEO letter that Now we have numerous nationwide PENDING Merger has been my pleasure to send to and regional FTA channels which After much debate at board level we you.