Full Year Results 2018 Jeremy Darroch This announcement 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, DTT and OTT customer growth, On Demand, NOW TV, Sky Go, Sky Go Extra, Sky+ HD, Sky Q, Sky Store, Sky Online, Sky Mobile, Sky Ticket, Multiscreen, AdSmart and other services, penetration, revenue, administration costs and other costs, churn, profit, cash flow, products and our broadband network footprint, content, wholesale, marketing, synergies and integration, and capital expenditure.
These statements (and all other forward-looking statements contained in this announcement) are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the Group’s 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, the fact that the Group operates in a highly competitive environment and faces competition from a broad range of organisations, the effects of laws and government regulation upon the Group's activities, the fact that the Group’s business is based on a subscription model and its future success relies on building long-term relationships with its customers, its reliance on a complex technical infrastructure which is subject to risk of failure, change and development, failure of key suppliers, the Group’s exposure to financial market risks, the fact that the Group must protect its customer and corporate data and prevent breaches of security, risks inherent in the implementation of large-scale capital expenditure projects, the fact that the Group relies on intellectual property and proprietary rights which may not be adequately protected under current laws or which may be subject to unauthorised use and the fact that people at Sky are critical to the Group’s ability to meet the needs of its customers and achieve its goals as a business.
Information on the significant risks and uncertainties is provided in the “Principal risks and uncertainties” section of Sky’s Annual Report for the full year ended 30 June 2017 (as updated in Sky’s results for the six months ended 31 December 2017). Copies of the Annual Report are available from the Sky plc web page at www.sky.com/corporate and in hard copy from the Company Secretary, Sky plc, Grant Way, Isleworth, Middlesex TW7 5QD.
All forward looking statements in this announcement 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.
2 3 • Exceptional year of progress
• Continued delivery on strategy and plans
• Excellent results, strong growth
• Extended leadership in areas that matter for customers
• Established strong platform and plan for growth
Formula 1®
4 Operating and financial results Andrew Griffith, Group COO Moto GP Customer households1 Products2
62.8m 23.0m
22.5m 59.7m
57.1m 21.8m
53.8m 21.0m
2015 2016 2017 2018 2015 2016 2017 2018
1. Retail customers reported at the end of June each year 2. Paid for products – for full definition please refer to Sky’s Full Year 2018 Press Release 6 Proportion of new Proportion of new customers taking Sky Q1 customers taking Fibre2
91% 88% 88% 55%
46% 52% 39%
20%
Q1 Q2 Q3 Q4 2016 2017 2018
UK & Ireland Italy Germany & Austria New triple Play BB Customers New total BB Customers (launched in May ’18)
1. New acquisitions are residential DTH only (excludes NOW TV and Sky Ticket); Germany & Austria includes Sky+ Pro, Italy includes My Sky STB (both Sky Q ready) 2. Fibre attachment rate of new acquisitions taking Broadband (excludes existing DSL Customer upgrading to Fibre) over the year to 30th June 7 Streaming only Unique streams and downloads (bn)2
71% of customer base1 5.3 Hybrid (streaming plus satellite)
1.7 Satellite only
2012 2013 2014 2015 2016 2017 2018 2015 2016 2017 2018
1. Aggregates of connected DTH customers and NOWTV/Sky Ticket customers divided by total retail customer base 2. Number of video sessions over 12 months to 30th June 8 2018 2018 2018 1st run No of 1st run No of 1st run No of UK & Ireland average1 episodes Italy average1 episodes Germany & Austria average1 episodes Riviera 2,314 10 Gomorra 1,853 12 Babylon Berlin 959 16 Save Me 1,800 6 I Delitti del Barlume S5 1,465 2 Patrick Melrose3 129 4 Tin Star 1,743 10 Monolith 929 1 Britannia 108 9 Britannia 1,141 9 Il Miracolo 666 8 2
Jamestown S2 1,101 8 2
2
2017 2017 2017 1st run No of 1st run No of 1st run No of UK & Ireland average1 episodes Italy average1 episodes Germany & Austria average1 episodes Delicious 1,875 4 The Young Pope 1,408 10 Hooten & The Lady S1 81 8 Jamestown S1 1,644 10 I Delitti del Barlume S4 1,467 2 Stan Lee’s Lucky Man S2 74 10 Fortitude 1,372 10 1993 887 8 Stan Lee’s Lucky Man S1 64 10 Hooten & The Lady 1,109 8 In Treatment 189 35 Stan Lee’s Lucky Man S2 1,009 10
1. Series average audience size for the first run based on 7-day consolidated cumulative average 000s (premiere episode plus weekly narrative repeats) inc. all TV-set viewing via Live, Sky+ playback and Catch Up On Demand. 2. YoY growth of original drama shows by weighted total viewer minutes in each territory (7-day consolidated cumulative average 000s x duration x number of episodes). 3. Patrick Melrose series not yet finished airing 9 Revenue1 Established EBITDA2 EPS
67.3p £2.5bn £13.6bn 61.4p £2.2bn £13bn
2017 2018 2017 2018 2017 2018
Results for 12 months to 30th June. 1. Revenue on an adjusted constant currency basis (€1.13/£); excludes revenue from one off sale of Rio Olympic Games in Italy in 2017 2. Established EBITDA on adjusted constant currency basis (see Sky’s Full Year 2018 Press Release for definition) 10 £m 2017 2018
• Customer and product growth Direct to consumer 11,434 11,830 • Price rises in UK and Italy • Transactional revenue up
• Each territory outperforming the market Advertising 835 917 • Standout performance in Germany, up 23%
• Growing international sales of Sky originals Content 728 838 • Sky Vision hit £200m p.a. target 2 years early
Total 12,997 13,585
Content revenue in prior year excludes revenue from one off sale of Rio Olympic Games in Italy Constant currency basis (rate of €1.13/£) 11 38% 37% 36% 33% 33% • Driving operating efficiencies through the business
£4.3bn £4.4bn £4.6bn £4.4bn £4.4bn • Operating costs down 500bps as % of sales over five years • Absolute SG&A broadly flat despite increased volume and activity 2014 2015 2016 2017 2018
Operating costs (£m) Operating costs as a % revenue
Results for 12 months to 30th June, on a constant currency basis (rate of €1.13/£) and excludes adjusting items. 2014 and 2015 includes pro-forma financials for Italy and Germany & Austria Operating costs are sales, general and administration costs including depreciation and amortisation 12 Digital First Network efficiency Organisation efficiency
Service App downloads (m)1 11.0 +93%
5.7
Serie A
2017 2018 UK Italy Germany
• Majority of interactions digital2 • New Telefonica MVNO deal • Streamlining resources across Group • 40% fewer service calls since 20133 • 50% reduction in legacy BT • Renegotiating key contracts Connect base4 • Reduced call centre resource • Dedicated centres of excellence • In housing maintenance and support
1. Total downloads to date of service app as at 30 June 2. > 50% Inbound customer service requests through digital channels 3. Reduction in incoming customer service calls in 12 months to 30 June 2018 vs same period in 2013 4. Reduction of Sky customers using BT Connect DSL product over past 12 months to 30 June 2018 13 £m 2017 2018
EBITDA 2,139 2,349 Depreciation (534) (551) • Increase due to mobile infrastructure investment STB amortisation (137) (224) • Higher Sky Q volumes, now in all markets Operating Profit 1,468 1,574 JVs and Associates • Positive contribution from Sky Bet, Nickelodeon 26 34 • Small profit from York Fibre JV disposal Interest costs & other • Average cost of debt 2.5% (231) (226) • First time cost of mobile handset financing (£11m) Tax (215) (214) • Effective rate of 15.5% (PY: 17.0%) Profit after tax 1,048 1,168
EPS 61.4p 67.3p
Results for 12 months to 30 June as reported, with growth on a constant currency basis (rate of €1.13/£) down to operating profit and excluding adjusting items. EPS includes impact of minority interests. 14 Net debt (£ million)
2.9x 2.6x • 1 592 534 311 947 • 415
• 6,211 6,048 •
Net Debt Adjusted Interest, tax, Dividend Sky Bet Non cash Net Debt Jun-17 operating JV, other & ESOP receipts2 movements Jun-18 cash flow1 and one-off (pro-forma items3 Sky Bet) Net debt / EBITDA4
1. Adjusted operating cash flow include Premier League and Serie A deposit payments (excluded from underlying cash flow) 2. Sky Bet receipts reflect cash received from its recapitalisation (£113m) and the sale of our 20% stake to The Stars Group in July 2018 (£421m) 3. Non-cash movements and one-off items include adverse movements from weaker GBP FX rate on Euro debt and hedge book unwind 4. Net debt to EBITDA on a reported basis using spot exchange rates. 15 •
•
•
•
MotoGP
16 2018/19 Jeremy Darroch
17 18 Revenue
EBITDA
+£6.2bn £13.6bn
£2.3bn +£0.7bn
+£1.5bn
+£1.8bn
£4.1bn +£0.4bn +£0.2bn
£1.0bn
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
All figures based on adjusted revenue and EBITDA for Sky plc. 19 20 • Shape our content investment more towards originals • Deliver the best customer experience through Sky Q • Become one of the UK’s leaders in Super Fast broadband and Mobile • Evolve how we operate; be world class in digital customer service at scale
• Broaden out our Entertainment proposition and add more Sky Originals • Establish Sky Q as the best TV experience and scale Sky Ticket • Step-change customer service and transform our German organisation
• Fully leverage the first time exclusivity of Serie A, Champions League and F1 • Build Sky Q as the best TV experience • Exploit our multi-platform offering; grow a whole new segment via DTT • Put building blocks in place to become a leading player in the Italian triple-play market
• Build existing Spain and Switzerland services to scale, exploiting strength of International group OTT platform • Build the most capable, most efficient organisation with robust infrastructure
21 Sky originals Aggregator of choice
A Discovery of Witches Austrian Bundesliga
• High quality, distinctive local • Best entertainment in one place • >90% of rights secure to 2021 • 25% more drama hours • Netflix launching for Christmas • Austrian Bundesliga and Champions League in Germany • 50% returning series • New subscription pack • Exclusive Formula 1 in UK • 4x more investment in Germany • Integrated to allow seamless & Austria access • Step-change in Italy
All Sky original data points relate to FY2019, with comparisons to FY2018. Formula 1 UK exclusivity over 95% of races. 22 114 matches, - 4 of top 20 picks on DAZN
1 game per matchday - on RAI
1 game per matchday - on Sky’s TV8 I 4 live & 17 deferred GPs - on Sky’s TV8
8 live & 11 deferred GPs - on Sky’s TV8
- -
TV8 is Sky’s free-to-air general entertainment channel. Other Pay-TV channels excludes our own Sky Sport Mix channel available on Vodafone. 23 24 Superior flexibility Superior control
Voice search and control
Superior experience Superior personalisation
Superior choice
25 26 Hey Sky, play Patrick Melrose
Illustrative purposes only. 27 New customer segments Broader distribution New markets
Triple play
Source: Italy households at 31 December 2017 from Istat; Spain households from Instituto Nacionale de Estadistica 12 April 2018; Swiss households from Federal Statistical Office March 2017; BT TV customers from Q4 results 10 May 2018; Mediaset Premium/DTT households based on press reports, results presentations/press releases and market research; Yoigo customers from P3-networkanalysis.com Mobile Benchmark Report 2016; Sky over fibre based on internal estimates and research. 28 Revenue
+£6.2bn EBITDA
+£0.7bn
+£1.5bn
+£1.8bn
+£0.4bn £4.1bn
Sky Atlantic Sky Q Scale Q, OTT, Mobile and DTT £1.0bn Connected strategy OTT platform Broadband in Italy +£0.2bn NOWTV Sky Mobile Scale Spain/Switzerland Acquisition of Italy and Germany Sky originals Grow Sky originals
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Medium term goal
All figures based on adjusted revenue and EBITDA for Sky plc. Revenue and EBITDA growth illustrative beyond 2018 29 • Excellent results
• 2017/18, a year of building for the future
• Strong set of plans for 2018/19
• Well placed for sustained growth
30 Q & A