Full year results 2015 Jeremy Darroch

The Last Panthers

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This document contains certain forward looking statements with respect to the Group’s financial condition, results of operations and business and our strategy, plans and objectives for the Group. These statements include, without limitation, those that express forecasts, expectations and projections, such as forecasts, expectations and projections in relation to new products and services, the potential for growth of free-to-air and pay television, fixed line telephony, broadband and bandwidth requirements, advertising growth, DTH and OTT customer growth, Multiscreen, On Demand, NOW TV, Sky Go, Sky Go Extra, Sky+HD, Sky Store, Sky Online, Multivision, second smartcard, mobile and other products and services penetration, revenue, administration costs and other costs, advertising growth, churn, profit, cash flow, product penetration, our broadband network footprint, content, wholesale, marketing and capital expenditure.

These statements (and all other forward-looking statements contained in this document) are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the Group's control, are difficult to predict and could cause actual results to differ materially from those expressed or implied or forecast in the forward-looking statements. These factors include, but are not limited to, the fact that the Group operates in a highly competitive environment and faces competition from a broad range of organisations, the effects of laws and government regulation upon the Group's activities, the fact that the Group’s business is based on a subscription model and its future success relies on  building long-term relationships with its customers, its reliance on a complex technical infrastructure which is subject to risk of failure, change and development, failure of key suppliers, ensuring the effective management of the Group’s financial exposures, the fact that the Group must protect its customer and corporate data and prevent breaches of security,  risks inherent in the implementation of large-scale capital expenditure projects, the fact that the Group relies on intellectual property and proprietary rights which may not be adequately protected under current laws or which may be subject to unauthorised use  and the fact that people at Sky are critical to the Group’s ability to meet the needs of its customers and achieve its goals as a business.

Information on the significant risks and uncertainties are described in the "Principal risks and uncertainties" section of Sky's Annual Report for the full year ended 30 June 2014 and Interim Report for the half year ended 31 December 2014. Copies of the Annual Report and Interim Report are available from the Sky plc web page at www.sky.com/corporate. All forward-looking statements in this presentation are based on information known to the Group on the date hereof. The Group undertakes no obligation publicly to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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2014/15 highlights

Financials and integration

Plans for 2015/16

Strong performance in a year of transformation

•  Record customer demand

•  Building new revenues to scale

•  Strong financial performance

•  Extending our lead in content

•  Innovating at pace

•  Bringing the three Skys together

The Last Panthers

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+973k

FY customer growth

+4.6m

FY product growth

6 Revenue, EBIT and Profit after tax on an adjusted basis. Assumes contribution from Italy and Germany from 01/07 to 30/06. From continuing operations and adjusted for exceptional items.

+5% +6% +18% +3%

Group revenue

£11.3bn

Profit after tax

£0.9bn

EBIT

£1.4bn

Dividend per share

32.8p

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•  More than 3 million products added

•  Surpassed 38 million paid for products

•  Further strong performance in Q4 — TV growth up 49% year on year — Broadband growth up 92% year on year

+2.6m

+3.1m +3.3m

FY 12/13 FY 13/14 FY 14/15

Organic growth, excluding the acquisition of O2 broadband and fixed line telephony business in April 2013

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•  Q4 customer growth up 65%

•  Passed 12 million customer milestone

•  Approach to market segmentation

is driving growth +257

+342

+506

Organic growth, excluding the acquisition of O2 broadband and fixed line telephony business in April 2013

FY 13/14 FY 14/15 FY 12/13

9 12 month rolling churn

FY 12/13

•  Churn reduced by 110 basis points on prior year

FY 13/14 FY 14/15 FY 10/11 FY 11/12 FY 09/10

11.1%

9.8%

•  Investment in connected home is driving loyalty

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12 month rolling churn

FY 12/13

8.2m

FY 13/14

8.6m

FY 14/15 FY 12/13 FY 13/14 FY 14/15

13.9%

10.3% 9.6%

12/13 13/14 14/15

7.3m

4.7m 4.7m 4.8m

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5.5m

FY 12/13

6.2m

FY 13/14

7.1m

FY 14/15

12.3%

10.4%

8.6%

12/13 13/14 14/15 FY 12/13 FY 13/14 FY 14/15

3.5m 3.8m

4.3m

12 month rolling churn

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•  Investment in breadth of choice paying dividends

–  Sky Atlantic up 17% in UK, 28% in Germany

–  Entertainment up 44% in Italy

•  Record performances across the board

–  Fortitude and 1992 break records for original drama

–  Game of Thrones our most-watched show ever

–  Biggest ever pay-per-view event

–  New records for Formula 1, Bundesliga, darts

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•  Strong growth in On Demand

–  2.4bn views across connected services in the UK

–  100% growth in Box Sets downloads

–  On Demand movie views up 42%

•  Driving consumption of pay content

–  Two-thirds of downloads are pay content

0.8

2.4

FY 12/13 FY 14/15

195%

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•  Leading the industry for each of TV, broadband and telephony – Ofcom June 2015

•  Satisfaction scores at all time high

•  Service improvement driving efficiency

–  Right first time

–  Product reliability

–  Customer self-serve

•  Growing digital service channels

Bringing the three Skys together

•  Successful execution of the transaction

•  Moving to 100% ownership of Sky Deutschland

•  Integration working well

•  Clear set of priority workstreams

•  On track for £200m synergies

•  Building capability for expanded growth opportunity

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2014/15

•  Good progress on fundamentals

•  Record customer demand driving strong financial results

•  Strong start for the new Sky

•  Well positioned for future growth opportunity

The Last Panthers

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Financial Results Andrew Griffith

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Excludes intersegment revenues, ESPN revenues and revenue received from Mediaset for wholesaling the Champions League rights in Italy, using constant currency of €1.31:£1.

+6% Flat

2014 2015

£2,086m £2,095m

2014 2015

£7,820m

£7,368m

+9%

2014 2015

£1,377m

£1,262m

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Subscription 9,272 9,697 +425 +5% •  Price rise in the UK •  Highest organic customer growth for 11 years in UK & ROI •  Record growth in Germany

Transactional 142 173 +31 +22% •  Fastest growth area •  Buy & Keep passed £1m weekly revenue in Q4

Wholesale and syndication 524 550 +26 +5% •  Important way of monetising content

Advertising 690 716 +26 +4% •  Strong performances in UK and Germany •  Lapped football World Cup in Italy

Other 148 147 (1) (1%)

Total 10,776 11,283 +507 +5%

£m 2014 2015 Change

Using constant currency exchange rate of €1.31: £1

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•  Investing where customers see value

•  Careful choices between categories

•  Strong track record

•  Lots of opportunity

•  Clear set of plans in place

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Percentage of revenues

8% 10% 12% 13% 11% 12%

44% 43% 41% 38% 38% 37%

48% 47% 47% 49% 51% 51% Programming and Network costs

Profit margin

+300bps

+400bps

-700bps Other operating costs

2010 2011 2012 2013 2014 2015

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2010 2015

Owned content 13% 20%

Acquired content 11% 25%

Sky owned channels 24% 45%

Partner channels 76% 55%

Basic Entertainment Channel Spend 100% 100%

23 UK and Ireland only based on 2014/15 actuals.

Operating Costs

£2.8bn

Direct Network Costs

£840m

Marketing £680m

G&A £1,040m

Cost to serve £1,060m

Direct Network Costs

£840m

Last mile and connection

Backhaul, exchange, usage events and other

Media spend

Route to market, commissions, fixed marketing and vouchers

Customer service

Manufacture and supply chain

Field engineering, install and repair

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•  Simplify / reduce volume of projects & processes

•  Delayer our organisation, fewer managers, broader spans and fewer levels

•  New leaner operating models in technology & on-screen production

Lean and agile

•  Drive further channel shift from voice to digital channels

•  40% reduction in sales, service and retention calls

•  Consolidate digital estate / enhance data / email capabilities

Digital First

•  Better customer analytics, optimisation of direct marketing

•  Drive channel shift from voice to digital channels / self-serve

•  Site optimisation and management delayering

Genesis programme

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Operating Profit (like-for-like) 1,185 1,400 +18%

Operating profit (statutory) 1,203 1,368 +14%

JVs and Associates 35 28 Disposal of interest in Nat Geo

Interest costs (109) (200) Increased level of debt

Tax (237) (251)

Effective tax rate 21% 21% Lower UK tax rate offset by Italian tax

Profit after tax 892 945 +6%

£m 2014 2015 Change

Operating profit (statutory) excludes profit relating to pre-completion (FY14: loss of £18m; FY15: £32m), using constant currency exchange rate of €1.34: £1 From continuing operations, excluding exceptional items

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Adjusted EBITDA 1,606 1,901 +18%

Working Capital 148 279

Capex (underlying) (478) (604)

Operating free cash flow 1,276 1,576 +24%

Capex (Campus redevelopment) (62) (139)

Interest and tax (355) (392)

Joint ventures and associates 26 15

Free cash flow 885 1,060 +20%

£m 2014 2015 Change

Germany and Italy cash flow has been consolidated from 12 November 2014, using constant currency exchange rate of €1.34: £1. Working Capital includes IFRS 2 adjustment of £60m in 2014 and £91m in 2015. Operating free cash flow excludes campus redevelopment capex and exceptional items

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Strong financial position

•  Growing revenues well

•  Good operating leverage

•  Further growth in dividend

•  Reduction in leverage

•  Strong liquidity

100 Code

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Integration update

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Best Content

Single Brand

Efficient Operations

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Saving

each year

•  Common hardware platform

•  Common UI and Services

•  Common Middleware

End of

2017

TDS866NSDX, Pace HD3000X, Humax

DE EPG and services DE version of Cisco Fusion

DRX8902i, Sky DPS5002NS, Pace

Italy EPG and services Italian version of Cisco Fusion

DRX890WL, Sky UK EPG and services

UK version of Cisco Fusion

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Platform Leadership

Single Brand

Efficient Operations

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•  Rapid implementation in time for 2015 season

•  Single production team

•  Sharing facilities, back-up feeds and logistics

•  Better quality coverage

–  Distinct national narratives, separate languages

–  Local talent

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per year

35

Best Content

Platform Leadership

Efficient Operations

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•  Single corporate brand

•  Aligning all channel brands within 15 months

•  Savings from shared:

–  Campaign creative

–  Promos

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Best Content

Platform Leadership

Single Brand

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Centralise rapidly, drive hard for savings

Structured programme of category reviews -  Consolidate group volumes and re-tendering -  Consolidate supplier base -  Insource or upstream

Fast decisions, local and autonomous

Corporate

Marketing

Technology

Travel Payment processes Security

Promotions

Rewards & Incentives

Shipping

Tech Royalties Desktop Marketing

HR – Recruitment Facilities HR – Fleet

Media Buying Creative (Agencies) Postage Digital Print

Market Research Data PR

Customer Tech

Supply Chain

STB components Software Development

Fleet Tools & Equipment Repair Cabling Logistics & Distribution

Technology

Broadcast support Network Core Infrastructure Software Business Applications

Corporate Corporate Property Utilities

Vouchers Marketing

Contact Centres Supply Chain

£2,300m

Coordinated Categories

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Osterley Chilworth

Milan

Rome

Munich

•  Connected sites with dedicated fibre links

•  Streamline and networked broadcast sites

•  Align diverse broadcast software and processes, to

–  Streamline assets

–  Standardise

–  Improve our geographic resilience

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25%

Saving

Broadcast infrastructure operating cost each year

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Conclusion

•  Good progress on the integration

•  Strong financial results

•  Growing revenues well

•  Discipline on costs

•  Double digit increase in profits and cash

Plans for 2015/16 The Last Panthers

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•  Broadening out to serve the whole market

•  Multiple products and services

•  Maximising monetisation of content investment

•  Opening up attractive new revenue streams

•  Relentless focus on operational efficiency

•  Developing our brand and organisation

June 2015

Rapid growth in UK

Future opportunity

across all markets

June 2010

Products +16.4m 38.0m

Cu

stom

ers

+2.

1m

12.0m

Lots more to go for in UK; applying approach in Germany and Italy

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2.6 Average

products per customer

21m Existing Sky

homes to take more products

65m New homes yet to take

Pay TV

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Getting even stronger in core areas

Delivering broad revenue growth

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100 Code

•  Key priority for investment

–  Growing capability in original production

–  Best partner for major studios

•  Strengthening in key areas

–  Premier League renewed with improved rights

–  15 other UK rights deals including British Open Golf

–  Exclusivity in Italy for franchises including X-Factor

•  Building for the future

–  Developing group-wide approach to acquisition

–  Co-ordinating commissioning across markets

–  Sky Arts Production Hub in Milan

Best content

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•  Strong pipeline of home-grown productions

–  Building on success of Fortitude, 1992 and 100 Code

–  35 new and returning series over next three years

–  Mix of group-wide and local projects

•  Working with world-class creative talent

–  Co-production partners include HBO, Canal+, NBCUniversal, Showtime

–  First TV project from Oscar-winning director Paolo Sorrentino

VT

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•  Connecting more customers to On Demand

–  More than 7m boxes connected in the UK

•  Investment delivering strong returns

–  Increasing consumption of Sky content

–  Customers willing to pay more

–  Significant improvement in loyalty

–  Selling more products

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•  Making Sky On Demand even better in the UK

–  Adding more exclusive Box Sets

–  Expanding kids offering to 4,000 episodes

–  Adding more Catch Up channels

–  ‘Watch from Start‘ feature for movies

•  Rolling out across the group

–  Targeting 50% connected customers in Italy

–  Box Sets coming to Italy in H2

–  Full On Demand service launching in Germany in the autumn

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Efficient operations and service

•  More efficient model to serve the core

•  Low incremental cost in new areas

•  Strong revenue to profit conversion

•  Efficiency plans established in each market

British Grand Prix

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Getting even stronger in core areas

Delivering broad revenue growth

Best Content

Innovation leadership

Efficient Operations & Service

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Efficient marketing

Attracting new segment of customers

Accelerating growth

Increasing loyalty

Shared base of content

Trusted market leader

Peace of mind subscription

Unrivalled breadth of choice

Best TV experience: Sky+HD

Best choice for instant entertainment

Flexible range of passes

Latest movies, live sport, must-see TV

Quality streaming on multiple devices

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•  Strong growth in the UK

–  Sports transactions more than doubled

–  Almost 30% buy more than one pass each month

–  90% did not consider joining Sky

•  Maintaining momentum in 15/16

–  Sky Sports Month Pass

–  New NOW TV box

•  Developing opportunity in Italy and Germany

–  Sky Online TV box successfully launched

–  Broadening distribution: iOS; Android; SmartTV

–  Adding retail partnerships

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Fibre Talk Mobile

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•  Building scale in £1.5 billion UK market

–  Sky Store revenue up 77%

•  Successful launch of Buy & Keep

–  Access on multiple devices

–  #1 digital retailer for key titles

•  Strong set of growth plans

–  Buy & Keep Box Sets

–  Pre-order opportunity

•  Future opportunity in Italy and Germany

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•  Growing UK market share

–  Selling Channel 5 from 1 June

•  Building Sky AdSmart to scale

–  500 advertisers to date; revenue up five-fold

–  Increasing inventory: On Demand, Sky Go, Channel 5

–  Planning launch in Italy

•  Opportunity in Italy and Germany

–  DTT growth in Italy

–  Increasing inventory in Germany

Grow monetisation through adjacent businesses: wholesale and syndication

•  Distribution partnerships to extend reach

•  Attractive returns for high-quality channels

•  Building scale in programme sales through Sky Vision

–  Fortitude sold to over 100 countries

–  Investment in production assets

–  Developing pipeline of rights for international market

Fungus the Bogeyman

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Getting even stronger in core areas

Delivering broad revenue growth

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Summary

•  Clear set of priorities

•  Getting even stronger in core areas

•  Delivering broad revenue growth

•  Stronger, more profitable business

The Last Panthers

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Q&A