BRITISH SKY BROADCASTING GROUP PLC Results for the three months ended 30 September 2010 CONSISTENT STRATEGY DELIVERING STRONG OPERATIONAL AND FINANCIAL RESULTS Record Q1 net product growth of 989,000, up 12% on the prior year Net customer growth of 96,000 to reach 9.956 million households Net additional Q1 product sales up 13% to 893,000 2.3 million customers now taking all three of TV, broadband and telephony, up by 39%; broadband growth accelerates with 178,000 net additions Further good growth in HD with net additions of 215,000 to reach 3.2 million customers Plans to support growth with opening of new contact centre, creating 500 jobs More great content for customers New channel ‘Sky Atlantic HD’ launching as the home of HBO and ‘Mad Men’ The Masters golf live from 2011 Over 50 HD channels now available to Sky customers More innovation for customers Successful launch of Europe’s first dedicated 3D channel ‘Sky 3D’ + Beginning rollout of Sky Anytime on-demand service Converting into strong growth in revenue, profit and cash flow1 Revenue up 15%, with strong growth in subscription, advertising and wholesale Operating profit up 25% to £255 million; margin expansion of 140 b.p. to 16.7% Basic EPS of 9.7 pence, up 33% Free cash flow up £156 million on the prior year to £65 million 1 Revenue, operating profit and basic EPS are stated excluding exceptional items and from continuing operations (excluding the Easynet operations divested on 1 September 2010, and including Living TV Group). Free cash flow is from continuing operations. Results highlights Customer Metrics (unaudited) Quarterly Net Additions Closing Base '000s 30-Sep-10 30-Sep-09 30-Sep-10 Net Customer Additions 96 94 9,956 Net Growth in Additional Products: Sky+HD 215 287 3,154 Multiroom 37 62 2,158 Broadband 178 100 2,802 Telephony 203 132 2,570 Line rental 260 209 1,946 893 790 12,630 Total Net Product Growth 989 884 22,586 Other Metrics Gross additions for the quarter (000) 374 362 Churn for the quarter (annualised %) 11.2% 11.3% ARPU (£) £514 £469 Business Performance (unaudited) (1) £’millions 3 months to 3 months to % movement (from continuing operations) Sep-10 Sep-09 Revenue 1,526 1,330 15% Adjusted operating profit(2) 255 204 25% % Adjusted Operating Profit Margin(2) 16.7% 15.3% Adjusted EBITDA(2) 335 279 20% Adjusted basic earnings per share(3) 9.7p 7.3p 33% Free Cash Flow 65 (91) Statutory Results (unaudited) (1) £’millions 3 months to 3 months to % movement (from continuing operations) Sep-10 Sep-09 Revenue 1,526 1,330 15% Operating profit 248 204 22% Cash generated from operations 217 119 82% Basic earnings per share 10.5p 7.7p 36% 1 All comparatives are restated to reflect continuing operations, excluding the Easynet operations divested on 1 September 2010 2A reconciliation of adjusted operating profit and adjusted EBITDA from continuing operations to reported measures and cash generated from operations to free cash flow 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 to adjusted profit for continuing operations is set out in note 4 to the consolidated financial information. 2 Jeremy Darroch, Chief Executive, said: “Today’s results show that our consistent strategy is delivering an excellent performance in a challenging environment. Strong top-line growth is converting to accelerating profit and earnings. “Operationally, we have made a very good start to the year with 96,000 net customer additions and record take-up of our additional subscription products. In particular, our focus this quarter on home communications has been rewarded with our highest ever take-up of broadband, telephony and line rental, alongside further good growth in high definition. To support our continued growth, we plan to open a new contact centre next year with the creation of 500 jobs. “This performance, combined with our continued emphasis on operational efficiency, is translating into strong financial results. We’ve delivered 15% growth in revenue, 25% growth in operating profit, 33% growth in earnings per share and our operating margin increased for the third consecutive quarter. These results are underpinned by continued investment in content and innovation, which is bringing more value to customers and growing returns for shareholders.” 3 OPERATIONAL REVIEW In the three months to 30 September 2010 (“the quarter”), we saw further good DTH customer growth and an outstanding take-up of additional products. Net DTH additions for the quarter were 96,000, taking our total number of customers to 9.956 million. Within this, gross additions were up 3% at 374,000 and churn was stable at 11.2%, in what remains a challenging consumer environment. We are executing well against our multiproduct strategy and customers are choosing to take more of our products. Following three very strong quarters of growth in HD, we turned the focus of our marketing to home communications and saw an excellent response from customers. We achieved the highest ever combined quarterly growth rate in broadband, telephony and line rental customers, contributing to record first quarter net additional product sales of 893,000 - up 13%. As customers respond to our great value products and reward us with more of their business, ARPU reached a new high of £514 per annum. Importantly, each new customer and additional product makes a positive contribution and, together with our continued focus on operating efficiency, profitability was strong with adjusted operating margin from continuing operations up by 140 basis points year on year. In support of continued customer growth and additional product take-up, we will create 500 new customer-facing roles with the opening of a new contact centre facility next year. Content We continue to invest on screen to bring more great content to customers. In sports, Sky Sports News became exclusive to pay TV and available in HD, and, with the return of Monday Night Football, we are bringing customers 23 additional live Premier League matches this season. We have also acquired new sports rights during the quarter, with an agreement to broadcast the Masters golf tournament from April 2011. Sky Sports will be the only broadcaster in the UK and Ireland to screen all four tournament days live, together with exclusive live coverage of Wednesday’s Par-3 competition for the first time. All Sky coverage of the Masters will be in HD, and it will be the first of golf’s Majors to be broadcast in 3D. Our expanded breadth and depth of sports coverage is attracting new customers, with the highest ever first quarter level of Sky Sports subscribers across all platforms. 4 We are making good progress with our arts and entertainment channels. This quarter we completed our acquisition of the Living TV Group and announced the launch of an entirely new channel, Sky Atlantic HD, in early 2011. In addition to Sky1 and Sky Arts, these channels will extend our top quality entertainment portfolio, all of which will be available in HD. Sky Atlantic HD will be the exclusive home of new HBO series, as well as our recent acquisition of ‘Mad Men’ from season five onwards, and a range of new UK programming to complement Sky1’s emphasis on drama and comedy. The addition of Living complements our existing channel line up, with a strong female viewership and attractive demographic profiles. The sixth - and most watched - series of ‘Britain's Next Top Model’ concluded in October, achieving an average audience of 700,000 per show. Looking ahead, Living has a strong schedule, with brand-new US drama ‘Nikita’, a new series of ‘America’s Next Top Model’ and ‘Party Wars’, a ‘Four Weddings’ spin-off. Sky1 continues its track record of bringing more talked about programming to customers. Our search for new music talent, ‘Must Be The Music’, concluded this quarter and achieved a weekly cumulative audience over 800,000. ‘An Idiot Abroad’, featuring Karl Pilkington and Ricky Gervais, has started strongly with the opening episode achieving an audience of 1.8 million viewers. In-house commissions airing through the Autumn include the original UK drama ‘Thorne’, starring David Morrissey and Natascha McElhone. Innovation Sky 3D, Europe’s first in-home 3D channel, launched with live coverage of golf’s Ryder Cup on 1 October 2010. The channel will showcase a wide range of 3D programming including sport, movies, documentaries, arts and entertainment. The channel is available at no extra cost to top tier HD subscribers, adding further value to the £10 monthly HD subscription. We also have a pipeline of products maximising the benefits of the broadband connectivity of the HD box. From the end of October we will begin the phased roll-out of our full on-demand service. ‘Anytime+’ will give customers access to over 600 movies from the Sky Movies and Sky Box Office collections, as well as entertainment, documentaries, children’s programming and classic sport. We are also building on the flexibility of our offering by giving customers new and innovative ways to enjoy our products. We are now the leading media provider in the UK on mobile and tablet platforms, with over 7.5 million Sky apps downloaded on iPhone, iPod touch and iPad. 5 Leadership in HD We continue to see good demand for our high quality and great value HD offering, such that today, 32% of customers choose to pay for our HD service. We achieved a further 215,000 net additions in the quarter to surpass three million HD customers.