Group financial performance
To provide a more representative analysis of ongoing performance of the Group, all commentary down to the operating profit level for the Group is on an adjusted basis as if we had owned Germany and Italy for the full year from 1 July. The financial results of Germany and Italy are translated into sterling at a constant currency rate of €1.31:£1.
Unless otherwise stated, adjusted figures below are from continuing operations and on a recurring basis excluding i) the impact of Sky Bet as this is presented as a discontinued operation; ii) set-top-box sales to Italy which are now an intragroup transaction; and iii) ESPN carriage revenue in the UK and Ireland from FY14 comparatives, as we no longer retail the channel.
Numbers below the operating profit line for the Group consolidate Germany and Italy only for the actual period of ownership from 12 November and are on an adjusted basis.
Our statutory financial reporting consolidates Germany and Italy for the period from 12 November 2014 to 30 June 2015. During this period Italy contributed revenue of £1,297 million and operating profit of £25 million while Germany contributed revenue of £866 million and an operating loss of £21 million.
We have delivered strong rates of growth across all of our main revenue streams with good consumer demand for our products and services, helping drive subscription revenue up 5% whilst transactional revenue was our fastest growing area with revenue up 22%. We also achieved good growth in both advertising (+4%) and wholesale (+5%) revenues highlighting the strength of our ability to monetise content.
Subscription revenue growth of 5% was underpinned by excellent customer growth across the group of almost one million customers and strong product growth of 4.6 million, with the largest proportion of revenue growth continuing to be delivered through the UK where revenues were up over £300 million. Alongside this, our best year of customer growth in Germany drove a 10% increase in subscription revenues, whilst in Italy we held total customers and revenue flat.
Transactional revenues increased by 22% to £173 million (2014: £142 million) as we benefited from the success of our Buy and Keep service, which surpassed weekly revenue of £1 million in Q4, and NOW TV transactions, which totalled almost 1.5 million over the past 12 months.
Our content-related revenues also performed well. Wholesale and syndication revenues were up 5% to £550 million (2014: £524 million) largely driven by continued growth in the UK where revenues were up 19% as success on screen led to more favourable terms for our channels with wholesale partners. Alongside this, revenues were strong through the distribution of our programming internationally and the first time consolidation of Znak&Jones and Love Productions. In Italy, underlying wholesale revenues were broadly flat year on year (excluding the benefit in the prior year from Champions League resale revenues), whilst revenues in Germany were slightly down following the successful migration of former Deutsche Telekom wholesale customers to a retail relationship in the prior year.
We delivered good growth in advertising revenues of 4% to £716 million (2014: £690 million) with Germany delivering excellent growth of 26% through higher sellout rates and increased inventory around Bundesliga. Advertising revenues in the UK grew strongly, up 5%, due to the benefit of incremental AdSmart revenues combined with Sky Media increasing their share of net advertising revenue by almost 170 basis points, while advertising revenue was down in Italy as we lapped the €27 million benefit of the FIFA World Cup revenues in Q4 last year.
Programming costs increased 5%, in line with revenue growth as we increased the depth and breadth of our offering. We launched the exclusive ITV Encore channel in the UK in June 2014 and expanded our channel line-up in Germany, as well as having a full-year impact of the new Sky Atlantic channel in Italy. We continue to invest in a diverse content portfolio, with an enhanced box set offering in the UK and increased investment on Sky originated content, with successes including Fortitude and 1992. The strong growth in Sky Store revenues has driven an increase in our transactional programming costs.
Our network costs in the UK were up only 3%, well below the rate of home communications revenue growth.
The share of joint ventures and associates’ profits was £28 million (2014: £35 million) and net finance costs increased by £91 million to £200 million (2014: £109 million) due to the interest charge associated with an additional £5.4 billion of gross debt that we issued during the year.
The tax charge of £251 million (2014: £237 million) was at an effective tax rate of 21%.
Profit after tax for the year grew by 6% to £945 million (2014: £892 million) resulting in adjusted earnings per share of 56.0 pence (2014: 57.1 pence) after accounting for the higher number of shares following our issuance in July 2014. Over the year the weighted average number of shares excluding those held by the Employee Share Ownership Plan (‘ESOP’) for the settlement of employee share awards was 1,690 million (2014: 1,562 million). The closing number of shares excluding the ESOP shares at 30 June 2015 was 1,704 million (2014: 1,546 million).
Statutory profit after tax was £1,332 million (2014: £820 million).
|As at 1 July 2014
|As at 30 June 2015
|Borrowings-related derivative financial instruments||(80)||–||(298)||(378)|
|Cash and cash equivalents||(1,082)||(296)||–||(1,378)|
Total liabilities increased by £6,757 million to £12,134 million at 30 June 2015. Current liabilities increased by £1,685 million to £4,204 million, primarily due to a £1,144 million increase in trade and other payables, due to the impact of the consolidation of the trade and other payables of Sky Deutschland and Sky Italia, and a £483 million increase in current borrowings. Non-current liabilities increased by £5,072 million to £7,930 million, principally due to a £4,760 million increase in the Group’s non-current borrowings. Current and non-current borrowings have increased as a result of the issue of euro, dollar and sterling bonds in the year.
The proposed dividend continues the track record of shareholders benefiting from our strong financial performance and represents the 11th consecutive year-on-year increase in the dividend.
The ex-dividend date will be 22 October 2015 and, subject to shareholder approval at the 2015 Annual General Meeting, the final dividend of 20.5 pence will be paid on 20 November 2015 to shareholders appearing on the register at the close of business on 23 October 2015.