Financial summary

For the 12 months ended 30 June 2012 ('the year'), we delivered record financial results. Revenue increased by 4.5% on a like-for-like basis1, reflecting our continued growth in households and total products, and good contribution from other businesses. Top-line growth translated into strong profitability with adjusted EBITDA up 12% at £1,567 million and adjusted operating profit at its highest ever level of £1,223 million, at an expanded adjusted operating margin of 18.0%. Adjusted basic earnings per share increased by 22% to reach 50.8 pence and we grew the final dividend by 11% to reach 25.4 pence per share for the year.

Unless otherwise stated, all figures and growth rates included within this financial summary exclude exceptional items and are from continuing operations.

Revenue

Group revenue increased by £194 million to £6,791 million (2011: £6,597 million). Like-for-like revenue1 increased by 4.5% as the growth in customers and products more than offset headwinds in advertising and Sky Business.

Retail subscription revenue increased to £5,593 million (2011: £5,471 million) as a result of strong product growth over the year and a larger customer base more than offsetting our decision to freeze subscription prices. Excluding the impact of the additional week of revenue in the comparative, subscription revenue1 grew 4% on the prior year on a like-for-like basis.

Our wholesale business continues to perform strongly with revenue up by 9% to £351 million (2011: £323 million), due to increased take up for our channels across other platforms, the addition and success of our new Formula 1 channel and the addition of new carriage deals in the the first quarter of the fiscal year.

Advertising revenue was 4% lower year on year at £440 million (2011: £458 million). We continued to increase our market share, by 100 basis points across the year to 21.2%, with the majority of growth due to improved channel ratings for our third-party partners with whom we share revenue upside. Looking over a longer period, the benefits of increased scale have enabled us to grow revenue by £111 million since 2008/09 at an average annual growth rate of 10%.

Installation, hardware and service revenue of £98 million was lower year on year (2011: £112 million). In the context of continued growth in customers and product penetration, our work on product reliability and right-first-time installation rates led to the lowest level of service visits for eight years.

Other revenue increased by 33% to £309 million (2011: £233 million), including £52 million from the sale of set-top boxes to Sky Italia, for which the corresponding cost is recognised in subscriber management and supply chain. Excluding these sales, other revenue was up by 22% benefiting from continued strong performance in Sky Bet and the consolidation of The Cloud (acquired on 23rd February 2011).

Direct costs

Programming costs increased by 5% to £2,298 million (2011: £2,188 million) reflecting our continued investment in high-quality content. Of the £110 million increase year on year, entertainment costs accounted for £70 million as a result of a full 12 months of Sky Atlantic programming, alongside increased investment in original UK content. Third-party channel costs were £30 million higher as a result of adding seven additional HD channels in the year and 14% growth in HD customers year on year. Sports costs were £12 million higher year on year with the first time inclusion of the Formula 1 channel being partly offset by lower costs for cricket, golf and boxing due to the absence of biennial and other events such as the Ryder Cup and the Haye Klitschko fight that were included in the comparative year. Movies costs were flat year on year.

Direct network costs increased by 16% to £676 million (2011: £584 million), with 24% growth in home communications products partially offset by our continued progress in migrating customers to our fully unbundled network, thereby reducing the per customer cost. Gross margin of our home communications products improved as a result of revenue growth, additional scale and cost savings achieved as a greater proportion of customers are on our network.

1Like-for-like revenue growth is calculated by removing one week of trading (estimated £100 million of revenue) from 2011 which was a 53-week year.

Adjusted
operating profit
+14%

£1,223m

Adjusted basic earnings per share (EPS)
+22%

50.8p

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