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British Sky Broadcasting Group Six Months Results

^{Published on 2011-01-27 01:00:39 - Market Wire}
 

Middlesex, UK--(Marketwire - January 27, 2011) -

 BRITISH SKY BROADCASTING GROUP PLC Unaudited results for the six months ended 31 December 2010 STRONG FIRST HALF RESULTS; STRATEGY DELIVERING Adjusted results Reported results Six months to 2010 2009 Variance 2010 2009 Variance 31 December Revenue GBP3,186m GBP2,773m 15% GBP3,186m GBP2,773m 15% Operating profit GBP520m GBP414m 26% GBP491m GBP414m 19% EBITDA GBP677m GBP568m 19% GBP648m GBP568m 14% Earnings per share 20.0p 15.2p 32% 20.3p 15.4p 32% (basic) Dividend per share 8.74p 7.875p 11% 8.74p 7.875p 11% All comparatives are restated to reflect continuing operations Record Q2 product growth * Total net product growth of 1.204 million - Surpassed 10 million customer milestone with 140,000 net additions - Net additional Q2 product growth up 7% to 1.064 million * HD reaches 3.5 million customers, up 68% year on year * Fastest broadband growth in 10 quarters with 204,000 net additions * 24% of customers now taking all three of TV, broadband and telephony Bringing outstanding content, more innovation and greater value to Sky customers * Sky Atlantic, a brand new entertainment channel, to launch on 1 February for Sky TV customers at no extra cost * Sky Anywhere to allow easy access to Sky content on multiple devices, supported by acquisition of leading public Wi-Fi operator 'The Cloud' * Improving customer service with the opening of new contact centres across the UK, creating 1,500 jobs at Sky Excellent financial performance; strong growth in revenue, profit and cash flow * Revenue up 15% to GBP3.2 billion with broadly-based growth * Adjusted operating profit up 26% to GBP520 million; operating margin expansion of 140 basis points to 16.3% * Adjusted basic EPS up 32% to 20.0 pence * Adjusted free cash flow up 44% to GBP443 million * Interim dividend up 11% to 8.74 pence Results highlights Customer Metrics (unaudited) Quarterly Net First Half Net Closing Additions Additions Base '000s 31-Dec-10 31-Dec-09 31-Dec-10 31-Dec-09 31-Dec-10 Net Customer Additions 140 172 236 266 10,096 Additional products Sky+HD 343 482 558 769 3,497 Multiroom 61 102 98 164 2,219 Broadband 204 101 382 201 3,006 Telephony 187 130 390 262 2,757 Line rental 269 178 529 387 2,215 Total Additional Product Growth 1,064 993 1,957 1,783 13,694 Total Net Product Growth 1,204 1,165 2,193 2,049 23,790 Other Metrics Gross Customer Additions (000) 378 402 752 764 ARPU (quarterly annualised) GBP541 GBP492 Churn (quarterly annualised) 9.5% 9.6% Business Performance (unaudited) (1) GBP'millions 6 months to 6 months to % Dec-10 Dec-09 movement Revenue 3,186 2,773 15% Adjusted operating profit 520 414 26% % Adjusted Operating Profit 16.3% 14.9% Margin Adjusted EBITDA 677 568 19% Adjusted free cash flow 443 308 44% Adjusted basic earnings per 20.0p 15.2p 32% share(2) Net debt as at end of period 945 1,679 -44% Reported Results (unaudited) (1) GBP'millions 6 months to 6 months to % Dec-10 Dec-09 movement Revenue 3,186 2,773 15% Operating profit 491 414 19% Cash generated from 799 687 16% operations Basic earnings per share 20.3p 15.4p 32% (1) All comparatives are restated to reflect continuing operations, excluding the Easynet operations divested on 1 September 2010. A reconciliation of adjusted operating profit and adjusted EBITDA from continuing operations to reported measures and cash generated from continuing operations to adjusted free cash flow from continuing operations is set out in Appendix 4. (2) Adjusted basic EPS is calculated from adjusted profit from continuing operations for the period. A reconciliation of reported profit to adjusted profit from continuing operations is set out in note 5 to the condensed consolidated interim financial statements. Jeremy Darroch, Chief Executive, commented: "The business has delivered a half year of outstanding performance, with record product sales and strong double-digit growth in revenue, profit and cash flow. In recognition of the growing strength of the business, we are increasing the interim dividend by a further 11%, the seventh consecutive year of growth. "In the second quarter, we saw strong demand across the board, passing our target of 10 million customers and adding more than one million additional subscription products for the first time. In particular, high definition continued to grow strongly and we achieved our highest broadband growth for more than two years. Overall, almost one in four customers now choose to take all three of TV, broadband and telephony from us, which is contributing to further strong ARPU growth and good levels of customer loyalty. "Looking ahead, we are cautious on the economic outlook for 2011, while remaining very confident in the long term opportunity for the business. We intend to maintain our consistent strategy of pursuing both growth and returns, by balancing sensible investment with a strong emphasis on operational efficiency. "In this context, we will focus on giving even more value and better service to customers in 2011. Next week, customers can look forward to the launch of Sky Atlantic, a premium channel featuring outstanding entertainment from the US and the UK, available to Sky TV customers at no additional charge. Later in the year, we will launch a new service, Sky Anywhere, to make it easier for customers to enjoy our programmes wherever they are. And we will open a new facility in Sheffield as the next step in a programme to expand our network of contact centres, which will deliver an improved experience for customers and result in around 1,500 new Sky jobs around the UK." OVERVIEW The business has continued to perform well in the first six months of the 2011 fiscal year ("the period"), achieving our milestone of 10 million customers and delivering strong take-up of additional products. Total net product growth was 2.193 million, of which 1.204 million came in the three months to 31 December 2010 ("the quarter"). Within this, there was a particularly strong performance in high definition ("HD") and home communications. Almost 3.5 million customers now choose to subscribe to HD and we have exceeded three million Sky Broadband customers after achieving our highest growth for 10 quarters. In total, 24% of customers now take all three of TV, broadband and telephony, up by six percentage points on the prior year. The strong operational performance is reflected in our financial results, which show double-digit growth in revenue, operating profit and cash flow. Group revenue for the period was 15% higher, with continued strong growth in retail subscription, wholesale and advertising revenues. Combined with our continued focus on operational efficiency, this delivered a 26% increase in adjusted operating profit, 140 basis points of margin improvement and a 32% increase in adjusted basic earnings per share. The Directors are proposing an interim dividend of 8.74 pence per share. This represents an increase of 11% year on year and makes this the seventh consecutive year of increased dividends for shareholders. On the basis of the strong performance of the business, we expect to maintain good rates of dividend growth at the current payout ratio of around 50% of adjusted earnings. OUTLOOK Having achieved our 10 million customer milestone, we continue to see significant potential for long-term growth in the entertainment and communications marketplace. We expect that our growth will benefit from being more broadly based in the future, through the combination of continued take-up of pay TV, increasing penetration of premium TV products, growth in our share of home communications and in our other revenue lines. Our approach will be to balance our ongoing focus on operational efficiency with continued, sensible investment in areas that customers value and in the long-term capabilities of the business. We believe this approach will deliver sustainable growth in revenue, profit and cash flow, thereby maximising value for shareholders. In the short-term, we take a cautious view of the economic outlook for calendar 2011, as the impact of the Government's deficit reduction plan flows through to the consumer economy. In this context, we will stay flexible on costs while focusing on the customer, with more high-quality content, leading innovation and better service. OPERATIONAL REVIEW Operational Performance We saw continued success in our multiproduct strategy in the quarter. Total net product growth was 1.204 million, with strong demand from both new and existing customers. Within this, net DTH additions for the quarter were 140,000, taking total customers to 10.096 million, with gross additions of 378,000 and slightly lower churn year on year at 9.5%. We saw good growth in subscription product penetration across the board, with particularly strong performances in HD and home communications. HD net additions of 343,000 took the base to 3.497 million households. Since taking our decision to lower the upfront cost of the HD box two years ago, we have added a total of 2.718 million customers to our HD service. During the quarter we further enhanced our channel line-up, bringing the HD versions of ITV2, ITV3, and ITV4 exclusively to pay TV. With 54 channels and growing, we maintain a strong leadership position in HD and are well positioned for future growth with the broadest HD content offering at great value. In home communications we delivered another stand-out performance, with a new record total for combined broadband, telephony and line rental additions in the quarter of 660,000, 61% higher than the prior year. Broadband net additions of 204,000 were the highest for 10 quarters and continued strong growth in line rental customers took the total to 2.2 million, representing 22% penetration and an increase of nine percentage points on the prior year. In addition, we now have over 1.2 million customers on our unbundled network. Today, 2.4 million customers take all of TV, broadband and telephony, 38% higher than the prior year, and there remains a significant opportunity for continued growth. As customers continue to respond to our great value products and reward us with more of their business, ARPU reached a new high of GBP541 per annum, which this quarter included GBP3 from the Haye vs Harrison pay per view event. This second quarter performance completed a strong first half. Total net product growth of 2.193 million in the period means we have a total of 23.79 million products, 21% higher than the prior year. Within this, we saw continued net customer growth in the period of 236,000 (2010: 266,000) and a strong performance in both home communications and HD. Content We have made good progress in content, where we are building on our traditional strengths in sports, news and movies to extend our entertainment offering further. On 1 February 2011, our new channel, Sky Atlantic, will launch for Sky TV customers. The channel will showcase must-see content from HBO, including the critically acclaimed 'Boardwalk Empire' and highly anticipated 'Game of Thrones'. The channel will also become the home of the award winning 'Mad Men' in 2011, as well as other distinctive programming from the US and the UK including an original comedy 'This Is Jinsy' and Paul Abbott's new drama, 'Hit and Miss'. The Sky Atlantic linear channel will be supplemented with an extensive on-demand offering, including catch-up TV and on-demand access to series' box sets. This premium content will be available at no extra charge to Sky TV customers as part of our basic channel line-up. The integration of Living TV Group ("Living TV") is progressing well. The acquired channels complement our existing entertainment channel line-up with popular brands, high profile talent and talked-about programmes, generating strong appeal for our female viewers. Looking ahead, Living, which will be rebranded to Sky Living from 1 February, has a strong schedule with the return of popular series such as 'Grey's Anatomy' and 'America's Next Top Model.' As part of the integration of Living TV, we are allocating a greater proportion of our programming spend to the channel, investing in new content including the channel's first ever commissioned British drama, 'Bedlam', starring Will Young. Sky1 continued its track record of bringing customers 'cut-through' programming. This quarter we screened more original British comedy with the conclusion of 'An Idiot Abroad', one of the most successful programmes in the channel's history, and 'Little Crackers,' a series of one-off comedy films featuring well known talent such as Catherine Tate, Stephen Fry, and Victoria Wood. In the coming months, Sky1 will continue its commitment to British drama, with original commissions of 'Mad Dogs' and Martina Cole's 'The Runaway.' In sports, the Premier League season has continued strongly as customers enjoy more live games on Sky. Monday Night Football is proving popular, with the Manchester United vs Arsenal match on 13 December achieving a record audience for Monday Night Football of over three million viewers. We also achieved record ratings for England's autumn rugby internationals and excellent audiences for England's success in the Ashes series. Sky Movies had a strong quarter with six premieres each attracting audiences of more than one million in the first week of broadcast. Over Christmas, the world TV premiere of 'Avatar' aired in HD and 3D, achieving a cumulative audience of three million in the first week. Innovation We continue to innovate to add value for customers. In October, we launched Europe's first dedicated in-home 3D TV channel, bringing live 3D sport, movies and entertainment to top-tier HD customers at no extra cost. In addition to the regular Premier League games broadcast in 3D, this quarter we screened the Ryder Cup, Scottish international football, England's rugby internationals, world heavyweight boxing and world championship darts in 3D. We have screened a wide range of 3D movies including 'Alice in Wonderland', 'Monsters vs Aliens', 'Ice Age: Dawn of the Dinosaurs' and the world TV premiere of 'Avatar.' Over the Christmas period, we premiered our first piece of commissioned 3D content, 'Flying Monsters,' a natural history documentary written and presented by Sir David Attenborough. Our full video-on-demand product, Sky Anytime+, launched in October and is a good example of the way in which we are utilising the broadband connectivity of the HD box to enhance the Sky+ experience. Customers with an HD box and our top broadband package can access a substantial library of on-demand entertainment at no extra charge, and Sky Movies customers also have on-demand access to our constantly updating movies library as part of their regular subscription. We continue to take advantage of the growing opportunity to broaden distribution of our content beyond the DTH platform. Sky Mobile TV is now available on a number of devices, including the iPad and iPhone, and we are the leading media provider on mobile and tablet platforms in the UK with almost eleven million applications downloaded to date. In anticipation of continued growth in sales of mobile data devices and increasing demand for flexible access to content, we will launch Sky Anywhere later this year, a new service allowing Sky TV customers to enjoy our programmes wherever they choose. Sky Anywhere will combine access to the existing Sky Player and Sky Mobile TV services to make it easy for customers and their families to access our content on multiple devices both inside and outside the home. To support our mobile content activities, today we are announcing the acquisition of the leading public Wi-Fi operator, 'The Cloud'. The acquisition gives us ownership of over 5,000 public Wi-Fi locations across the UK, ensuring that customers can access our online service at a network of convenient locations. In addition, the initiative will complement our existing broadband services by offering customers a comprehensive option for Wi-Fi connectivity while they are on the move. For further detail, please refer to the 'Corporate' section below. The Bigger Picture As part of our commitment to making a positive contribution to the community, we delivered a number of initiatives in the quarter through our Bigger Picture programme. To help combat climate change, we broadcast a week of environment-themed programming in November, including 'The Family Show Goes Green', showcasing the Sky Rainforest Rescue Schools Challenge on Sky Movies. In recognition of our efforts to reduce emissions from travel, we received WWF's '1 in 5' award for reducing air travel by 38% over the last 3 years. We were also awarded 'Sustainable Project of the Year' at the UK Green Building Council's Sustainability Awards 2010 for our new broadcasting facility. In acknowledgment of our volunteering initiatives and the difference these make to the local community, we were awarded the 'Corporate Responsibility Award of the Year' by the HR Network Scotland. In our Scottish operations alone, more than 1,900 Sky people have volunteered through the scheme since March. In October we launched Sky Talker, a new device that makes it easier for blind and partially-sighted customers to use the Sky Guide, our Electronic Programme Guide ("EPG"). Developed in partnership with the Royal National Institute of Blind People, Sky Talker will, for the first time, allow customers to hear some of the programme information and navigation functions contained within the EPG on our Sky+ box and Sky digiboxes. FINANCIAL SUMMARY Results for the six months to 31 December 2010 ('the period') reflect an excellent financial performance, with double digit growth in each of revenue, operating profit, cash flow and earnings. Group revenue was 15% higher than the prior year, the result of continued customer growth and increased penetration of additional products. Alongside this revenue growth, our focus on operational efficiency delivered an adjusted operating margin of 16.3% and a 26% increase in adjusted operating profit to GBP520 million. With higher income from joint ventures and associates and lower interest charges, this translated into adjusted basic earnings per share of 20.0 pence, 32% higher year on year. The results for the period include the acquisition of Living TV, which completed on 12 July 2010. In the period, Living TV contributed GBP60 million in revenue (of which GBP45 million is advertising; GBP14 million is wholesale; and GBP1 million is other revenue) and GBP49 million of costs (of which GBP33 million is programming; GBP3 million is marketing; GBP10 million is transmission, technology and fixed networks; and GBP3 million is administration). In relation to Living TV, we incurred exceptional restructuring costs of GBP22 million principally relating to redundancy payments and the early termination of a pre-acquisition contract. These restructuring costs are included within reported operating profit of GBP491 million and excluded from adjusted figures. Unless otherwise stated, all figures and growth rates exclude exceptional items and are from continuing operations (including Living TV in the current year and excluding Easynet from both the current year and the prior year comparative). Revenue Group revenue for the period increased by 15% on the prior year to GBP3,186 million (2010: GBP2,773 million) benefiting from strong growth in retail subscription, wholesale and advertising. Retail subscription revenue increased to GBP2,631 million (2010: GBP2,294 million), up 15% year on year. The growth reflects strong total net product sales of 2.2 million in the period, as we continued to add new customers and sell more products. Our success in selling more products contributed to a 10% year on year increase in ARPU to GBP541, which this quarter included GBP3 from the Haye vs Harrison pay per view event. Wholesale subscription revenue increased by 31% to GBP151 million (2010: GBP115 million) reflecting a higher number of wholesale subscribers to our premium channels, the first-time inclusion of wholesale revenues relating to Living TV and the carriage of HD on another platform for the first time. Excluding Living TV, wholesale revenue increased by 19%. Advertising revenue of GBP236 million (2010: GBP168 million) was 40% higher, benefiting from our increased share of the TV advertising sector and the consolidation of Living TV. During the period, we estimate our share of TV advertising increased by nearly three percentage points year on year, to 17.4%. We continue to outperform the overall sector, which we estimate increased by 13% year on year, reflecting our increased share and continued growth in pay TV customers. Advertising revenue now includes revenue related to our online properties and Sky Magazine; of which GBP11 million was reclassified from 'other revenue' in the period and GBP11 million in the prior year comparative. Excluding Living TV, advertising revenue was 14% higher at GBP191 million. Installation, hardware and service revenue was GBP63 million (2010: GBP99 million), reflecting our decision to lower the retail price of HD boxes in January 2010. Other revenue increased by 8% to GBP105 million (2010: GBP97 million), benefiting from a continued strong performance in Sky Bet and the integration of Living TV. Excluding Living TV, other revenue was 7% higher. Direct Costs We continue to invest in high-quality content, creating more reasons for new customers to join Sky, as well as adding more value for existing customers. As a result, programming costs increased by 15% to GBP1,058 million (2010: GBP920 million) in line with revenue growth. Around half of the year on year increase is due to the acquisition of new sports rights, including the addition of the fifth Premier League pack, bringing customers 25% more games. Increased sports costs also reflected the biennial nature of the Ryder Cup and the inclusion of the Ashes. The remainder of the increase reflects our investment in entertainment, bringing more quality content to Sky1 with shows such as 'An Idiot Abroad' and 'Thorne', as well as the acquisition of Living TV. Movie costs were lower year on year, benefiting from improved terms on contract renewals. Third party channel costs were slightly higher, reflecting an increased number of HD channels on the platform. Direct network costs were GBP269 million (2010: GBP207 million), 30% higher, directly related to strong growth in customers which led to 41% revenue growth in broadband and telephony. Other Operating Costs Marketing costs increased by GBP75 million to GBP613 million (2010: GBP538 million), reflecting acquisition-related expense associated with record net product sales and a greater proportion of new customers joining directly with the HD box. Above the line spend was also higher year on year, reflecting our campaign in home communications and the successful Sky Sports marketing campaign as well as the one-time launch costs of 3D. The cost to acquire a new subscriber ("SAC") increased by GBP34, to GBP354. The increase reflects our success in increasing the proportion of new customers joining directly on our HD service and is consistent with the plans we set out when moving to our standardised HD box strategy. Subscriber management and supply chain costs were GBP35 million lower, at GBP286 million, reflecting good progress in our operational efficiency programmes. In supply chain, we are benefiting from lower box costs and more reliable boxes, as we increase the proportion of set-top boxes sourced in-house. The cost reduction also reflects a lower number of engineer visits, as an increased proportion of jobs are completed right first time and more upgrading customers chose our self- install option. Transmission, technology and fixed network costs increased by 27% to GBP189 million (2010: GBP149 million). Living TV contributed GBP10 million of the increase. In addition, we incurred higher net transponder costs, as more capacity is used for our own HD channels as well as the inclusion of costs for network services previously accounted for within the Group by Easynet. Administration costs, excluding exceptional items, were GBP251 million (2010: GBP224 million) reflecting the consolidation of Living TV and the increase in the Group's non-cash IFRS 2 'Share-based payment' charge and associated National Insurance costs. The phasing of the Group's share-based compensation schemes and the increase in the share price when compared to the prior year contributed to a GBP20 million increase in the period, despite the volumes of awards made remaining broadly constant. Excluding this amount and the integration of Living TV, administration costs were broadly flat. The IFRS 2 charge and related National Insurance costs for the year are expected to be around GBP80 million, an increase of GBP35 million. Earnings On an adjusted basis, profit before tax from continuing operations was GBP477 million (2010: GBP364 million) including the Group's share of joint ventures and associates' profits of GBP17 million (2010: GBP14 million) and a net interest charge of GBP60 million (2010: GBP64 million). Taxation excluding exceptional items was GBP129 million (2010: GBP99 million). We expect the adjusted tax charge on continuing operations to be approximately 27% for the full year (2010: 27%). The effective rate is largely unchanged with the reduction in the UK statutory rate, from 28% to 27% in April 2011, having only a modest positive impact on the full year rate. Adjusted profit for the period was GBP348 million (2010: GBP265 million), generating an adjusted basic earnings per share from continuing operations of 20.0 pence (2010: 15.2 pence). Please refer to the 'Exceptional Items' paragraph for more detail. Reported profit before tax for the period from continuing operations of GBP467 million (2010: GBP371 million) includes the Group's share of joint ventures and associates' profits of GBP17 million (2010: GBP14 million) and a net interest charge of GBP41 million (2010: GBP57 million). Reported taxation was GBP113 million (2010: GBP102 million) resulting in profit for the period from continuing operations of GBP354 million (2010: GBP269 million) and basic earnings per share of 20.3 pence (2010: 15.4 pence). Reported profit for the period including discontinued operations was GBP407 million (2010: GBP256 million) resulting in reported basic earnings per share of 23.3 pence (2010: 14.7 pence). Over the entire period the weighted average number of shares excluding those held by the Employee Share Ownership Plan for the settlement of employee share awards was 1,744 million. Cash Flow and Financial Position Reported cash generated from continuing operations was 16% higher at GBP799 million (2010: GBP687 million), reflecting higher EBITDA and broadly level working capital. Capital expenditure was GBP221 million (2010: GBP198 million) - 6.9% of revenue - and broadly in line with our expectations of sustainable capex around 6.5% of revenue in the medium term. We continued with the technical fit-out of our new broadcast facility in the period and expanded our broadband network by a further 141 exchanges. Adjusted free cash flow was 44% higher at GBP443 million. See Appendix 4 for details of adjusting items. Net cash inflow from continuing operations was GBP79 million (2010: outflow of GBP299 million) and included the acquisition of Living TV. Strong cash flow generation during the period contributed to a reduction in net debt to GBP945 million, for a reconciliation of net debt see Appendix 4. The Group's liquidity and headroom remain comfortable with no bond redemptions falling due until October 2015 and the Group's revolving credit facility of GBP750 million remaining undrawn. Exceptional Items Reported operating profit of GBP491 million included GBP22 million of restructuring costs arising on the acquisition of Living TV, which comprise principally redundancy payments and costs related to the early termination of an existing contract. Costs of GBP7 million relating to the News Corporation proposal were also incurred in the period; both of these amounts were classified as administration costs. Reported profit after tax also included a GBP34 million exceptional gain (2010: GBP7 million gain), of which GBP19 million were mark to market gains relating to derivative financial instruments not qualifying for hedge accounting and gains and losses arising from designated fair value hedge accounting relationships, and a GBP15 million non-cash tax credit for a tax settlement relating to the network operations retained from the Easynet business. Related tax effects on exceptional items is a GBP1 million gain (2010: GBP3 million loss). Distribution to Shareholders The Directors are proposing an interim dividend of 8.74 pence per share. This represents an increase of 11% year on year and makes this the seventh consecutive year of increased dividend for shareholders. The ex-dividend date will be 30 March 2011 and the dividend will be paid on 21 April 2011 to shareholders of record on 1 April 2011. The final dividend in respect of 2009/10 financial year was paid to shareholders during the period, resulting in a total cash dividend payment in respect of the 2009/10 financial year of GBP339 million. Corporate News Corporation Proposal On 21 December 2010, the European Commission announced its decision to approve the News Corporation proposal to acquire the shares it does not already own in BSkyB without a further Phase Two review. Separately, after receiving a report from Ofcom, the Secretary of State intends to refer the proposal to the Competition Commission for a further review of whether the proposal raises public interest considerations in respect of media plurality. However, prior to making a final decision, the Secretary of State will consider undertakings in lieu offered by News Corporation to address the concerns raised by Ofcom's report. BSkyB will continue to co-operate with the ongoing regulatory process. The Cloud On 11 January 2011, the Group reached an agreement to acquire The Cloud Networks Limited ("The Cloud"), a public Wi-Fi network operator. Completion of the transaction is subject to regulatory clearance in Jersey. The Cloud had gross assets of GBP17.1 million as at 31 December 2009, its most recent audited group financial statements. Risks and uncertainties The Board continually assesses and monitors the key risks of the business. The following key risks that could affect the Group's long-term performance, and the factors which mitigate these risks, are set out in more detail on pages 23 - 26 of the 2010 Annual Report. Other than where indicated below, the Board does not consider that the following principal risks and uncertainties have changed. Additional risks and uncertainties of which we are not aware or which we currently believe are immaterial may also adversely affect our business, financial condition, prospects, liquidity or results of operations. * The Group's business is highly regulated and changes in regulations, changes in interpretation of existing regulations or failure to obtain required regulatory approvals or licences could adversely affect the Group's ability to operate or compete effectively. Since the 2010 Annual Report, Ofcom announced its decision to refer the supply and acquisition of certain pay-TV movie rights and the supply and acquisition of pay-TV packages including certain movie channels to the Competition Commission ("CC") for investigation. The CC's provisional findings are due to be published in April. The Group is not yet able to assess whether, or the extent to which this review will have a material effect on the Group. * The Group operates in a highly competitive environment that is subject to rapid change and it must continue to invest and adapt to remain competitive. * The Group's business is reliant on technology which is subject to the risk of failure, change and development. * The Group is reliant on encryption and other technologies to restrict unauthorised access to its services. * Failure of key suppliers could affect the Group's ability to operate its business. * The Group undertakes significant capital expenditure projects, including technology and property projects. * The Group, in common with other service providers that include third party services which the Group retails, relies on intellectual property and proprietary rights, including in respect of programming content, which may not be adequately protected under current laws or which may be subject to unauthorised use. * The Group generates wholesale revenue principally from one customer. * The Group is subject to a number of medium and long-term obligations. Responsibility statement The directors confirm that to the best of their knowledge: * The unaudited condensed consolidated interim financial statements have been prepared in accordance with IAS 34 as adopted by the EU. * The interim management report includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R of the Disclosure and Transparency Rules. The directors of British Sky Broadcasting Group plc are listed on pages 34 - 35 of the 2010 Annual Report. Copies of this report are available on the Company's website, [ www.sky.com/corporate ], and in hard copy from the Company Secretary, British Sky Broadcasting Group plc, Grant Way, Isleworth, Middlesex TW7 5QD. By order of the Board Jeremy Darroch Chief Executive Officer Enquiries: Analysts/Investors: Lang Messer Tel: 020 7800 2657 Chris Wiles Tel: 020 7800 2654 E-mail: [ investor-relations@bskyb.com ] Press: Robert Fraser Tel: 020 7705 3000 Bella Vuillermoz Tel: 020 7705 3000 E-mail: [ corporate.communications@bskyb.com ] Click on, or paste the following link into your web browser, to view the associated PDF document. [ http://www.rns-pdf.londonstockexchange.com/rns/1591A_1-2011-1-27.pdf ] There will be a presentation to analysts and investors at 09:30 a.m. (GMT) today. Participants must register by contacting Emily Dimmock or Yasmin Charabati on +44 20 7251 3801 or at [ bskyb@finsbury.com ]. In addition, a live webcast of this presentation to UK/European analysts and investors will be available via [ http://www.sky.com/investors ] and subsequently available for replay. There will be a separate conference call for US analysts and investors at 10.00 a.m. (EST) today. Details of this call have been sent to US institutions and can be obtained from Dana Diver at Taylor Rafferty on +1 212 889 4350. A live conference call and supporting materials will be available on Sky's corporate website, [ http://www.sky.com/corporate ]. A replay will be subsequently available. This information is provided by RNS The company news service from the London Stock Exchange END