Annual Report 2015 Strategic report. Business overview. 10 Sky plc

Transcription

1 Business overview Sky plc

2 Governance Financial statements Shareholder information 1 Chelsea FC, 2015 Premier League Champions, Sky Sports HD, Sky UK; Fox Sports HD, Sky Italia 2 Italia s Got Talent, Sky Uno HD, Sky Italia 3 Game of Thrones, Sky Atlantic, All territories 4 50 Ways to Kill Your Mammy, Sky1 HD, Sky UK 5 Monkey Life, Pick TV, Sky UK 6 Newsroom, Sky TG24 HD, Sky Italia 7 Stella, Sky1 HD, Sky UK 8 Sky Sport News HD anchor Birgit Nössing for Sky Foundation, Sky Deutschland 5 Sky plc 11

3 Our marketplace Expanded opportunity for growth Sky has an addressable market of 98 million households across 5 countries Germany, Austria, Italy, UK and Ireland There is a significant opportunity for upsell of additional products with 21 million customers each taking an average of 2.6 products per household We have a significant headroom for growth with 65 million households in our markets yet to take pay TV We are exploiting adjacent market opportunities that are opening up as we extend our leadership in content and innovation. For example, the UK transactional home video market is worth 1.5 billion (BVA) UK Germany Ireland Austria Italy 12 Sky plc

4 Our performance Financial key performance indicators Adjusted revenue ,283m +5% ,776m ,253m Adjusted operating profit ,400m +18% ,185m ,279m Total shareholder return Adjusted revenue includes revenue from Subscription, Transactional, Wholesale and Syndication, Advertising and Other revenue. Adjusted revenue is a key measure of how the Group is delivering on its strategy to grow the business. In 2015, revenue grew by 5% with good growth in both retail and commercial operations. Adjusted operating profit is a measure of the profit generated by the business from its revenues and excludes items that may distort comparability from year to year. Adjusted operating profit is a key measure of the underlying business performance. In 2015 Adjusted operating profit increased by 18% on the previous year as the Group delivered strong revenue growth whilst controlling costs in the business. Adjusted EBITDA ,030m +10% ,848m ,883m Adjusted EPS p -2% p p Adjusted EBITDA is a measure of the profit generated by the business, excluding Depreciation and Amortisation costs. For the purposes of understanding the underlying performance of the Group, the measure also excludes items that may distort comparability. Adjusted EBITDA is a key measure of profitability. In 2015 adjusted EBITDA increased by 10% on the previous year as Group revenue increased by 5%, whilst EBIT increased by 18%. Adjusted basic EPS is the profit after tax for the year, excluding adjusting items and related tax effects, divided by the weighted average number of ordinary shares. Adjusted basic EPS provides a measure of shareholder return that is comparable over time. Adjusted EPS was lower year on year due to the dilutive impact of the share placing last July to fund the acquisitions of Sky Deutschland and Sky Italia. 1-year CAGR 5-year CAGR Total shareholder return ( TSR ) represents 1,860bps 0% FTSE % Sky 210bps 10% FTSE % Sky the change in value of a share held for a 12-month period to 30 June, assuming that dividends are reinvested to purchase additional shares at the close price applicable on the ex-dividend date. The value of the share is based on the average share price over the three months prior to 30 June. TSR represents a comparable measure of shareholder return over time. Sky shares outperformed the FTSE 100 index; Sky s TSR was 19% whilst the FTSE 100 was 0% in the year to June Governance Financial statements Shareholder information We have presented the results on an adjusted like for like basis for the full 12-month period to 30 June 2015 down to operating profit. Comparative figures are translated at a constant currency of 1.31: 1. For a reconciliation of statutory to adjusted measures: page 144. Sky plc 13

5 Our performance (continued) Operational key performance indicators Retail customers Total products m +5% m m A customer is defined as a subscriber to one of our TV packages or standalone home communications services. A key element of our strategy is to continue adding new customers. In 2015, we added a total of 1.0 million new customers, 45% more than the prior year, with record growth in Germany and the highest organic growth in the UK for 11 years m +9% m m Total products is defined as the total of all paid-for subscription products taken by our customers across the Sky group. In the UK and Ireland, this includes TV, HD, Multiscreen, Sky Go Extra, Broadband, Telephony and Line Rental. In Italy, this includes TV, Multivision, Sky Online and paying HD. In Germany and Austria, this includes TV, Second Smartcard, Premium HD and Sky Online. A key element of our strategy is to encourage new customers to take multiple products when joining and to sell more products to existing customers. In 2015, we added 4.6 million products taking our total subscription products to almost 54 million. Churn UK & Ireland 110bps 10.7% 10.9% 9.8% Germany & Austria 180bps 12.3% 10.4% 8.6% 13.9% Italy 70bps 10.3% 9.6% Churn represents the number of total customers during the year who terminated their subscriptions, net of former customers who reinstated their subscription (within 12 months of terminating their original subscription), expressed as a percentage of total average customers. Churn is a good measure of customer loyalty, which is a key driver of value for our business. In each market, churn was under 10% which was significantly lower year on year illustrating high customer loyalty Seeing the bigger picture Social reach ,100 Our full set of independently assured key performance indicators used to measure our sustainability performance can be found at sky.com/biggerpicture Our social reach number represents the number of young people who have participated in our social initiatives across the Group. In the UK and Ireland we have a target to reach one million young people by 2020 through Sky Academy. In 2015 our cumulative total is 231, For the first time in 2014/15, we have collected data from our young people initiatives in Germany and Italy for an overall social reach. This is made up of 127,000 1 for Sky Academy in the UK and Ireland, 5,200 for Sky Foundation 2 in Germany and 7,900 for our initiatives in Italy. 14 Sky plc

6 Content Programming investment ,886m +5% ,662m ,339m Innovation Sky Go customers m +25% m m Carbon intensity tco 2 e/ m 1 Content investment is the amount spent every year bringing the very best content to our customers. This includes investment in Sky channels, such as Sky 1 in the UK and Ireland, and Sky Uno in Italy. It also includes investment in partner channels, such as the Discovery Channel or National Geographic. The amount spent on content will include the cost of acquiring the rights to programmes made by others, or commissioning original programmes ourselves. We grow our content investment every year to differentiate our proposition and to give our customers more of the TV they want to watch. Recently, we ve increased our investment in securing rights to non-tv products such as Sky Go, Sky Go Extra or Sky Online. Sky Go customers are those that have registered to use our mobile TV service. Innovation across multiple technologies enables the Group to expand into new areas, develop new revenue streams and benefit from adjacent sectors. In 2015, two million more customers registered for Sky Go across all of our markets. 1 Independently assured by Deloitte LLP. 2 Sky Foundation is a separate legal entity; its Board is answerable to the respective regulatory authorities in Germany. Programming spend as % of revenue % flat % % Connected customers m +32% m m Carbon intensity, defined as tonnes of CO 2 equivalent (tco 2 e) emissions relative to revenue, is one of the key performance indicators we use to measure our environmental performance. Our total gross CO 2 e emissions include all direct Greenhouse Gas emissions across all of our territories, and are 128,819 1 tco 2 e for 2014/15. Investment in content broadly grows in line with the rate of revenue growth over the medium term. Holding growth in other operating costs below the rate of revenue growth frees up capacity to invest an increasing proportion of revenues in the content that matters most to customers. A connected customer is one that has connected their Sky box to the internet and therefore has access to Sky s on demand services such as Catch Up TV and box sets. In 2015, we connected a further two million customers across the Group. Connected customers have access to a wider range of content and generally they will watch more pay TV content, churn less and use more of our transactional services. In 2014/15, our carbon intensity is in line with that reported in previous years, noting that in 2014/15, we have reported across all our territories. We are working on a set of Group environment targets for 2015/16. For CO 2 e/ m territory breakdown and progress against our emission targets: pages Governance Financial statements Shareholder information Sky plc 15