British Sky Broadcasting Group PLC Results for Year Ending June 30, 1997.

LONDON--(BUSINESS WIRE)--Aug. 15, 1997--British Sky Broadcasting Group plc (NYSE: BSY), the UK-based pay-television broadcasting group, today announced results for year ending June 30, 1997.

HIGHLIGHTS

-- Revenue reaches 1,270 million pound($2,121 million) as turnover rises 26%

-- Operating profit up 19% to 374 million pound($625 million)

-- Profit before tax up 22% to 314 million pound($524 million)

-- Earnings per share up 24% to 16.8 p (28.1 cents) ; earnings per ADR $1.68

-- Final dividend of 3.25p (5.4 cents) per Ordinary Share, or 32 cents per ADR, making a full year dividend of 6.0p (10.0 cents) per ordinary share or 60 cents per ADR(a)

-- Total paying subscribers up 878,000 to 6,372,000

-- Advertising revenue up 36% to 150 million pound($250 million)

-- UK digital plans further advanced following creation of British Interactive Broadcasting

-- Multi-platform distribution strategy enhanced by programming supply deal with British Digital Broadcasting

Sam Chisholm, Chief Executive and Managing Director of BSkyB, said:

"This is an impressive performance. Revenue and profits have grown strongly and debt levels have been reduced at a time when the Company is investing for the future. Our service now reaches one quarter of all homes in the UK and our subscribers are receiving more choice and better quality television than ever before."

-- US dollar equivalents are provided for reader convenience at the June 30, 1997 exchange rate of 1 pound = US$1.67

(a) Each ADR represents six ordinary shares and the actual ADR dividend payments will depend on the exchange rate prevailing on the date of payment.

RESULTS

OPERATING REVIEW

The Company has again produced excellent results increasing subscribers, revenues and profits. This growth was achieved at the same time as the Company advanced its preparations to launch digital satellite television in the UK in 1998.

Programming Investment

The Company continued to develop its programming output during the year in the key areas of sports, movies, multi-channels and pay-per-view.

The expansion of Sky Sports 2 into a full time premium service from September 1, 1997 reflects the increasing choice of quality sports programming available on Sky. The three dedicated sports channels will offer over 18,000 hours of sport a year, giving comprehensive coverage of many events that were never, or previously only partially, shown on terrestrial television. In May, Sky Sports was voted the best sports service on television by Campaign Magazine. During the year Rugby Union became a major focus. Expanding on our coverage of the Pilkington Cup, Courage Clubs Championship and southern hemisphere rugby, Sky Sports introduced for the first time this summer live coverage of the British Lions tour of South Africa. Starting from the 1997/98 season, all of England's home games will be shown exclusively live on Sky, including those in the Five Nations Championship. The Company's commitment to the sport as it enters the professional era should create a new driver to subscriber growth over the coming years.

New rights were obtained for other major sports including golf, cricket, football and tennis.

Sky continues to offer the best movie service, screening over 2,000 films a year and an average of more than one UK television premiere a day. The Company continues to provide support to the British film industry and welcomes the recent Government initiatives to inject new momentum into the industry.

In entertainment programming, the Company has reinforced the position of Sky One as the most watched cable and satellite channel. This has been achieved both through the acquisition of new rights to major international series and through expanding its home produced output by introducing new daily shows and a number of weekly series such as 'Ibiza Uncovered' which recently attracted a viewing record for a Sky own production with 1.4 million viewers. Sky One's autumn schedule will for the first time include new series of British television's two most popular American shows, ER and Friends.

Sky has continued to expand the range of the multi-channels package through the launch of 13 new channels in the year and there are now over 40 channels available to subscribers. The latest channel, from National Geographic, 50% owned by BSkyB, is due to be launched in September 1997.

Pay-per-view is now firmly established in the UK after five successful Sky Box Office events, four of them in the last year. The five events between them have attracted 2.5 million buys.

Programming expansion is key to reinforcing the Sky Brand and maintaining Sky's position as the leading provider of programming to the multi-channel market. As distribution increases, through the expansion of satellite, cable and terrestrial networks, so BSkyB's subscriber base increases, enabling the Company to maintain the growth in its programming capability.

Advertising

Advertising growth has been particularly strong, increasing 36% year on year compared to an estimated increase of 7% for the total television advertising market. Sky's share of television advertising revenue is estimated to have risen to an average 6.1% from 4.8% last year, with a record last quarter of 6.7%. This compares with a fourth quarter viewing share of 5.7%. This strong advertising performance is a result of our audience profile which has a high proportion of young, affluent adults and also the continued growth in viewing share of cable and satellite channels. Non-terrestrial channels now account for 37.7% of all viewing and 52.8% of commercial viewing in multi-channel homes.

Subscriber Growth

The integrated "Summer of Sport" marketing campaign, generated strong fourth quarter growth, such that there are now 6.4 million Sky subscribers with 5.9 million in the UK and 0.5 million in Eire. One in four UK homes now pay to receive Sky. The total number of paying subscribers increased by 878,000 during the year - a similar level to last year.

The Company's primary form of distribution is through direct-to-home satellite (DTH). The number of DTH subscribers increased by 285,000 during the year to 3,532,000. Just over half of this net growth came in the quarter before Christmas, largely driven by a successful retail promotion where qualifying customers who signed up for a one year subscription were given a free dish and installation. Growth in the fourth quarter was the highest for three years, as the Company continued to promote the sale of analogue dishes. The level of cancellations (or churn), was maintained at an annual rate of 12.2% - a level broadly similar to that of last year's.

There are now 2,327,000 Sky subscribers through cable. Of these, around 2,056,000 are broadband cable subscribers, and this number has grown by a record 545,000 during the year. This growth has come as the cable operators continue to build out their networks - around 50% of the franchised areas have now been cabled - though cable penetration remains at around 22% of homes passed.

Digital Broadcasting

During the year the Company confirmed its plans for the introduction of digital satellite television in the UK.

In Spring 1998 a new digital service will be launched, featuring an extended range of basic and premium channels, and a near video on demand movie service. Later in the year interactive services will be added to give a significantly enhanced viewing package to digital subscribers.

The Company has continued to make significant progress towards this timetable. It has placed orders with manufacturers to produce up to one million set top boxes, reserved capacity on the new Astra 2A satellite, to be launched in December 1997, and put much of the required digital infrastructure in place such as transmission and play-out facilities. Negotiations with the Hollywood Studios for movie pay-per-view rights are continuing.

The establishment of British Interactive Broadcasting (BIB) will provide the technical infrastructure for interactive services, and will allow digital set top boxes to be retailed at less than 200 pound. BSkyB will take an equity share of 32.5% in BIB, and will contribute in that proportion to the total expected shareholder funding requirement of 265 million pound.

The Company has also reached agreement with British Digital Broadcasting, the operator of digital terrestrial services, to supply programming on a long term basis.

Management Changes

In June this year, Sam Chisholm (Chief Executive and Managing Director) and David Chance (Deputy Managing Director) announced their intention to retire from full time positions at the end of the calendar year. They will continue to work for the Company as consultants and will both remain on the Board of the Company. At the same time, it was announced that Mark Booth, currently Chief Operating Officer of JSkyB, will become Chief Executive of the Company as from January 1, 1998.

FINANCIAL RESULTS

Operating Results

The Company achieved significantly improved operating profits, up 19% on prior year at 374 million pound($625 million). Profit before taxation was 314 million pound($524 million), up 22% on prior year, attributable to lower interest charges and reduced overall borrowing levels.

Operating revenues were 26% higher than the same period last year, reaching 1,270 million pound($2,121 million) with increases in all categories. DTH subscriptions remain the most important source of revenue, accounting for 68% of total revenues. The increase in DTH subscription income of 18% reflected the growth in subscribers as well as the increasing revenue earned per subscriber. Cable revenue growth remained strong and increased by 57% on the year to 191 million pound($319 million). Advertising revenues increased by 36% on prior year to 150 million pound($250 million), while the total UK television advertising market only grew by an estimated 7%.

Operating profits benefited from a contribution of 14 million pound($23 million) relating to an agreement to continue to supply certain programming to British Digital Broadcasting following BSkyB's withdrawal from the consortium. Program costs have risen by 155 million pound($259 million) (37%) over prior year, reflecting the growth in subscribers and the Company's continued commitment to both increased programming choice and quality. Movie costs increased by 42% to 204 million pound($341 million), as a higher number of output films were delivered by the major studios, the overall base of subscribers rose and the rate per film increased. BSkyB continued to invest in sports with costs increasing to 166 million pound($277 million), 23% up on prior year. Carriage costs paid to third party channels reached 114 million pound($190 million), 50% up on prior year due to the additional channels; the growth in the subscriber base; and the contractual per subscriber rate increases.

Increased activity across all marketing areas has resulted in a 34% increase in marketing costs during the year. The cost of the Christmas promotion which was responsible for the high level of retail sales in November and December is being amortized over 12 months and 21.8 million pound($36.4 million) was included within prepayments at the year end. Overheads have increased by 16 million pound($26 million) over last year. The main component of overheads relates to administration costs which have increased due to staff additions and the continuing development of the Company's infrastructure in preparation for the launch of digital.

Operating margin declined from 31% last year to 29% as the Company made additional programming and technology investments and continued to drive its subscriber growth. Much of this investment is to enable BSkyB to compete in the future digital market place and to develop new revenue streams.

Cash Flows

The Company generated a net cash inflow from operating activities of 259 million pound($432 million). After payment of interest, funding of associated undertakings and capital expenditure, and the dividends and taxation, there was a net inflow of 31 million pound($52 million) which was used to reduce net debt.

Capital Expenditure

Capital expenditure during the year was 42 million pound($70 million). More than half of this expenditure was related to digital technology and investment in engineering for new channel requirements. To meet the future needs of the Company, significant investments are also being made in new computer systems, such as broadcasting support and finance systems.

Capital Structure and Financing

Net financing costs, at 50 million pound($84 million), were down by 3 million pound from last year. This reflects the reduction in debt levels during the year, which was partly offset by a higher interest rate on the longer term borrowings.

In October 1996, the Company successfully placed in the US public debt market $300 million of 7.30% Guaranteed Notes repayable in October 2006. The Company subsequently entered into swap transactions to convert the proceeds to sterling, half of which will carry a fixed rate of interest of 8.384% per annum for the full ten years, and the remainder fixed at 7.94% per annum for five years and thereafter floating at 62 basis points over six month LIBOR.

During the year the Company renegotiated and extended its main bank facilities. The syndicated loan facility has been increased by 100 million pound to 1,000 million pound, of which 475 million pound was drawn down at the year end.

Taxation

During the year the Company provided for 26 million pound($43 million) of Advance Corporation Tax (ACT) arising on the interim and proposed final dividends. This ACT may be set off against future Mainstream Corporation Tax (MCT) liabilities.

There was no charge for MCT in the year as each company in the Group either incurred losses or made profits which were offset by tax losses brought forward or by group relief. The remaining tax losses are expected to be fully utilized during the 1997/98 financial year. Dividends

The Company's dividend policy reflects the cash generative nature of its operations, while recognizing the need to maintain cash resources to invest in the business.

The Directors have accordingly proposed a final dividend of 3.25p (5.4 cents) per Ordinary Share, payable on 14 November 1997 to shareholders recorded on the share register on 1 September 1997. This gives a total dividend pay out for the year of 6.0p (10.0 cents) per Ordinary Share.

Outlook

The growth in the number of subscribers, together with the higher level of subscription charges, will increase the Company's revenue base. Against this, the Company has increased commitments to programming and marketing cost as it prepares for the launch of its digital services. Trading in the first six weeks of the new financial year is in line with the same period of last year. -0- ( For tabular information, please call Taylor Rafferty Associates at 212-889-4350)

CONTACT: Richard Brooke

British Sky Broadcasting plc

011-44-171-705-3000

- or -

James P. Prout

Taylor Rafferty Associates

212-889-4350