sky network television annual results 2008. john fellet ceo

SKY NETWORK TELEVISIONANNUAL RESULTS 2008

JOHN FELLET CEO

Subscribers

050,000

100,000150,000200,000250,000300,000350,000400,000450,000500,000550,000600,000650,000700,000750,000

Jun-9

1

Jun-9

2

Jun-9

3

Jun-9

4

Jun-9

5

Jun-9

6

Jun-9

7

Jun-9

8

Jun-9

9

Jun-0

0

Jun-0

1

Jun-0

2

Jun-0

3

Jun-0

4

Jun-0

5

Jun-0

6

Jun-0

7

Jun-0

8

UHF Satellite Wholesale MY SKY

Subscriber Growth

711.2

13.7

114.0

529.8

53.7

2007

(42.1%)31.1UHF Residential

Total Subscribers

Commercial/Other

DBS Wholesale

DBS (Satellite) Residential

‘000

5.3%748.6

40.9%19.3

5.4%120.2

9.1%578.0

% Change2008

Total Net Gain

39,642

33,711

42,566

48,102

43,941

37,365

20,000

25,000

30,000

35,000

40,000

45,000

50,000

Subsc

riber

s

Jun-03 Jun-04 Jun-05 Jun-06 Jun-07 Jun-08

10%

12%

14%

16%

18%

20%

22%

24%

26%

28%

30%

32%

Jun-9

8

Dec-9

8

Jun-9

9

Dec-9

9

Jun-0

0

Dec-0

0

Jun-0

1

Dec-0

1

Jun-0

2

Dec-0

2

Jun-0

3

Dec-0

3

Jun-0

4

Dec-0

4

Jun-0

5

Dec-0

5

Jun-0

6

Dec-0

6

Jun-0

7

Dec-0

7

Jun-0

8

Moving Annual Churn

0.00%

0.50%

1.00%

1.50%

2.00%

2.50%

DBS (Satellite) UHF My Sky

2008 Monthly Churn Split

$391$441 $492

$549$619

$659

$0

$100

$200

$300

$400

$500

$600

$700

$N

Z m

illio

ns

2003 2004 2005 2006 2007 2008Year End 30 June

Total Revenue

$51.83

$54.55

$56.86

$58.30$60.50

$62.10

$47.00$48.00$49.00$50.00$51.00$52.00$53.00$54.00$55.00$56.00$57.00$58.00$59.00$60.00$61.00$62.00$63.00

$NZ

2003 2004 2005 2006 2007 2008

Total ARPU

$62.49

$63.13

$64.88

$66.12

$39.42

$39.51$39.68

$38.83$46.27

$48.39$50.88

$52.15

$20.00

$30.00

$40.00

$50.00

$60.00

$70.00

$NZ

Satellite UHF Wholesale

2005 2006 2007 2008

ARPU

41,598

47,35549,669

58,309

73,751

84,770

0

25,000

50,000

75,000

100,000

$N

Z

2003 2004 2005 2006 2007 2008

UHF Satellte

Additional Outlets

0

8

16

24

32

BIG

MA

C's

Foxtel(Australia)

Sky TV (NZ) DIRECTV (US) BSkyB (UK)

2004 2005 2006 2007 2008

Big Mac Index

Sky’s Share of All Television Viewing is Growing.

0

5

10

15

20

25

30

35

Month

% S

hare

of A

ll N

Z T

V V

iew

ing

All Sky TV 12 Month Moving Average

% Share of viewing in all NZ Homes

Source: Nielsen TV Ratings, All New Zealanders 5+

Prime’s Share

Source: Nielsen TV Ratings, All New Zealanders 25-54 Peak

3.00%

3.50%4.00%

4.50%5.00%

5.50%

6.00%6.50%

7.00%Jul

Aug

Sep

Oct

Nov

Dec

Jan

Feb

Mar

Apr

May

Jun

2005/06 2006/07 2007/08

$20$27

$36 $40

$7

$41

$23

$40

$27

$0

$10

$20

$30

$40

$50

$60

$70

$NZ m

illio

ns

2003 2004 2005 2006 2007 2008

Year End 30 June

SKY PRIME

Advertising Revenue

Viewerhours generated by Subscriber per annum

Source: Nielsen TV Ratings, All New Zealanders 5+/SKY TV

0

200

400

600

800

1000

1200

1400Dec

-02

Feb

-03

Apr-03

Jun-0

3

Aug-0

3

Oct

-03

Dec

-03

Feb

-04

Apr-04

Jun-0

4

Aug-0

4

Oct

-04

Dec

-04

Feb

-05

Apr-05

Jun-0

5

Aug-0

5

Oct

-05

Dec

-05

Feb

-06

Apr-06

Jun-0

6

Aug-0

6

Oct

-06

Dec

-06

Feb

-07

Apr-07

Jun-0

7

Aug-0

7

Oct

-07

Dec

-07

Feb

-08

Apr-08

Jun-0

8

Sport Movies Pass Thru

Programming Costs % Revenue

43% 40%

34% 32% 33% 32%

20%22%24%26%28%30%32%34%36%38%40%42%44%46%48%50%52%

2003 2004 2005 2006 2007 2008

Year End 30 June

$150.8$187.2

$219.9$247.7

$249.4$266.6

$0.0

$50.0

$100.0

$150.0

$200.0

$250.0

$300.0

$NZ

mill

ions

2003 2004 2005 2006 2007 2008

Year End 30 June

EBITDA

Satellite ImpactFinance Lease 2007 2008

Interest

0.8 0

Depreciation

5.1 0

5.9 0

Operating lease(9 months in 2007) 18.8 24.6

$0.7

$35.3

$74.5 $60.2 $77.9

$97.7

$0.0

$10.0

$20.0

$30.0

$40.0

$50.0

$60.0

$70.0

$80.0

$90.0

$100.0

$NZ

mill

ions

2003 2004 2005 2006 2007 2008

Year End 30 June

Net Profit/(Loss)

DIVIDEND

0

2

4

6

8

10

12

14

cents

2006 2007 2008

Dividend CPS

DIVIDENDThe SKY Board has declared a fully imputed final dividend of 7.0 cps.

Record date is 5 September 2008.

Payment date is 12 September 2008.

Total dividend for the year is 14.0 cps

JASON HOLLINGWORTH

CFO

$86.1

$57.4$76.0

$86.8 $81.4

$119.5

$0

$20

$40

$60

$80

$100

$120

$N

Z m

illio

ns

2003 2004 2005 2006 2007 2008Year End 30 June

Capital Expenditure

(excluding transponders and Prime assets)

Capital Expenditure Analysis

$ NZ million 2007 2008 %Change

Subscriber Equipment 62.0 62.6 1.0%

Studio Upgrade 12.3 42.6 246.3%

Building 2.2 2.7 22.7%

Other 4.9 11.6 136.7%

Total Capital Expenditure 81.4 119.5 46.8%

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$N

Z

2003 2004 2005 2006 2007 2008

Decoder Material/Labour

DBS (Satellite) Install Costs

$512

$719

$487 $454 $506$439

Results Summary$NZ Million 2007 2008 % Change

Revenue 618.5 658.8 6.5%

Operating Expenses 369.2 392.2 6.2%

EBITDA 249.3 266.6 6.9%

Depn & Amort 85.0 78.0 (8.2%)

EBIT 164.3 188.6 14.8%

Interest 46.4 44.3 (4.5%)

Tax 39.9 46.4 16.3%

Other 0.2 0.2 0%

Net Profit after Tax 77.8 97.7 25.6%

Revenue Analysis

618.5

12.6

63.4

20.9

88.1

433.4

2007

9.9%476.3Residential satellite subscriptions

Total Revenue

Other income

Advertising

Installation

Other subscriptions

$NZ million

6.5%658.8

11.9%14.1

4.9%66.5

(23%)16.1

(2.5%)85.9

% Change2008

Expense Analysis$million 2007 2008 % Change

Programme rights 166.6 169.5 1.7%

Programme operations 38.0 40.2 5.8%

Subscriber management 41.7 45.1 8.2%

Sales and marketing 37.4 39.8 6.4%

Advertising 18.7 19.8 5.9%

Broadcasting and infrastructure 51.4 61.5 19.6%

Depreciation and amortisation 84.9 78.0 (8.1%)

Other administrative 15.4 16.2 5.2%

Total Operating Expenses 454.1 470.1 3.5%

Cash Flow Analysis

$NZ Million 2007 2008

Capex 83 108 30%

Debt reduction 79 30 (62%)

Dividend 39 52 33%

Cash inc/(dec) (26) 2 (108%)

Operating Cash Flow 175 192 10%

Prime Financials

$NZ Million 2007 2008

Revenue 23.0 27.0

Rights 10.5 11.8

Operations 5.2 4.4

Program Costs 15.7 16.2

Margin 7.3 10.8

Foreign Currency Hedging• Sky’s hedging positions at 30 June 2008

• 94% hedged for 0 -12 months $US exposures @ .6769• 56% hedged for 13-24 months $US exposures @ .6672• 49% hedged for 25-36 months $US exposures @ .6715• 94% hedged for 0 -12 months $A exposures @ .8612• 74% hedged for 13-24 months $A exposures @ .8648• 70% hedged for 25-36 months $A exposures @ .8540

• average $US payment rate » for opex for year to June 08 = 69.0c

June 07 = 63.5c

MYSKY HDi Financial Assumptions

Our working assumptions for FY 08/09 are:

• Monthly box rental $15 or one-off $599• HD ticket $10/month• Multiroom $25/month (including free HD ticket)• Target 80,000 new MYSKY HDi boxes• 15% upfront, 85% pay monthly• 10% to new subscribers, 90% to existing subscribers• 45% of MYSKY HDi take multiroom (to 103,000 boxes)• 15% buy HD ticket (and no multiroom)• MYSKY HDi gross churn rate of 7.4%• MYSKY HDi cost is US$330 (vs standard decoder of US$122)• MYSKY HDi ARPU $81 (vs $62 FY07)

Pro forma ImpactFY09 FY10

Capex $million $million

Decoder Capex 40 43

MySKY HDi Installs 12 13

Depreciation

Base depreciation 71 75

MySKY HDi 7 19

78 94

P&L Impact

MySKY HDi revenues 17 31

Incremental Opex 8 10

EBITDA 9 21

Depreciation 7 19

EBIT 2 2

MY SKYMY SKY

MY SKY HDi

MY SKY HDi &

Multiroom

HD Access Ticket

Installed 25,137 4,517 35% 92%

Pending 135 8,597 46% 93%

Total 25,272 13,114 42% 93%

JOHN FELLET CEO

GUIDANCE

Ratio Too Low

Ratio Too High

Ratio just Right

Sky Network

How appropriate is the level of gearing?

Ross Carmichael Singer (NZ) Pty Limited, April 2008

SKY Highlights1. 6 new channels

Crime & Investigation Vibe CNBC SKY Movies Greats SKY Sport Highlights Fashion TV

2. SKY Online launched3. SKY Sport Magazine4. Netball World Champs Nov 20075. Inaugural ANZ Championship 6. Screen Enterprises (Fatso, DVD Unlimited,Movieshack)7. MYSKY HDi launch

Available now:

•35 top Movies

SKY Movies, MGM, Rialto

•Cartoon Network

•Discovery Channel

•The Box

•Air New Zealand Cup

•200 sporting downloads

Netball, Cricket, Rugby

Live streaming and content download via broadband internet

SKY Online

• Net profit of $97.7m, up 26%• Subscriber numbers up 5.3% to 748.6• ARPU up 2.6% to $62.10, DBS ARPU up 1.9% to $66.12• Churn increased from 13.4% to 14.9%• SKY share of total television viewing up from 25% to 28%

2008 Key Messages

SKY NETWORK TELEVISIONANNUAL RESULTS 2008