Other operating costs

We have delivered another strong performance in costs, where efficiency programmes have contributed to a 6% reduction in adjusted other operating costs for the period to £2,594 million (2011: £2,752 million) and a 350 basis points reduction as a percentage of sales.

Marketing costs were 13% lower year on year at £1,064 million (2011: £1,220 million) with lower cost route-to-market sales, less above-the-line spend and fewer gross additions. Online is now consistently our single largest route-to-market, with our best offers available via sky.com. In addition to savings from the closure of the Sky customer magazine, above-the-line costs were £25 million lower year on year. Overall, the cost to acquire a new TV customer (‘SAC') was £397 (2011: £376), with lower costs of direct marketing and set-top box costs offset by lower customer acquisition volumes.

Subscriber management and supply chain costs increased by £25 million year on year to £621 million (2011: £596 million). The largest contributor to the increase was the cost of sales of set-top boxes to Sky Italia (with corresponding revenue recorded within other revenue). Excluding the impact from these box sales, in both the current and comparative year, subscriber management and supply costs were down in absolute terms year on year; a good result in the context of a growing customer base and a 12% increase in the sale of total products year on year.

Transmission, technology and fixed network costs were flat at £395 million (2011: £395 million) as a result of favourable negotiations with suppliers and improved broadcasting efficiency due to the move to tapeless production within Sky Studios.

Administration costs fell by £27 million to £514 million (2011: £541 million) helped by a lower non-cash IFRS 2 ‘Share-based payment' charge and associated National Insurance costs than in the prior year.


On an adjusted basis, profit before tax was £1,148 million (2011: £987 million), which included the Group's share of joint ventures and associates' profits of £32 million (2011: £34 million) and a net interest charge of £107 million (2011: £120 million).

Adjusted taxation for the period was £273 million (2011: £262 million). The adjusted effective tax rate was 24% (2011: 27%) reflecting the reduction in the rate of UK Corporation Tax, and one-off tax losses recognised in the third quarter largely inherited at the time of acquisition of Sky's core network, formerly part of Easynet, in 2006.

Adjusted profit for the period was £875 million (2011: £725 million), generating an adjusted basic earnings per share from continuing operations of 50.8 pence (2011: 41.6 pence).

Over the year the weighted average number of shares, excluding those held by the Employee Share Ownership Plan for the settlement of employee share awards, was 1,721 million (2011: 1,743 million). The number of shares at the end of the year was 1,674 million (2011: 1,753 million).

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