Our performance

We have a clear and consistent strategy for growth: to attract new customers to Sky and to sell more products and services to our existing customers. This year, we saw continued growth in both of these areas as customers responded to the quality and value of our products. Operational delivery translated into strong financial results, with double-digit growth in each of revenue, operating profit, adjusted earnings per share and cash flow, on an adjusted basis.

We have identified a number of key performance indicators that we use to assess how the Group is performing against its core strategic priorities. They include both operational and financial measures and are set out below. In addition to operational and financial KPIs, we have developed 10 environmental KPIs. Our performance against these KPIs, together with a comprehensive review of our environmental initiatives, can be found in the Bigger Picture Review at www.sky.com/biggerpicturereview2010

Operational key performance indicators

Customer base (million)

Customer base (million)

Description

Total customers are defined as the total number of residential and commercial direct-to-home (DTH) customers at the close of a given period. The Group also retails certain Sky channels to a limited number of DSL subscribers which are included. This number excludes wholesale subscribers to our channels through the cable platform.

Analysis

Our total customer base is a key determinant of the Group's value. In 2010, we added 418,000 net new customers, growing the total base by 4%.

Churn (%)

10.3% 2010, 10.3% 2009, 10.4% 2008

Description

Churn represents the number of DTH customers over a given period that terminated their subscriptions, net of former customers who reinstated their subscription (within 12 months of their original subscription) expressed as a percentage of total average customers.

Analysis

Churn is a good measure of customer satisfaction, which is a key driver of value for our business. Churn for 2010 was in line with the previous year at 10.3%.

Sky+ HD penetration (%)

30% 2010, 14% 2009, 6% 2008

Description

HD penetration is defined as the percentage of customers paying an additional monthly subscription to view HD content.

Analysis

Driving take-up of HD is important for customer satisfaction while also generating incremental revenue and profit. In 2010 we added 1.6 million HD customers; twice the level of the previous year.

Customers taking each of TV, broadband and telephony (%)

21% 2010, 16% 2009, 11% 2008

Description

The percentage of the total DTH customer base taking any of our TV products and both a Sky Broadband and a Sky Talk product. Customers may also opt for our line rental product.

Analysis

This is an important measure for our business with higher penetration positively impacting ARPU and customer loyalty. At 30 June 2010, two million customers chose each of TV, broadband and telephony, up 36% from the prior year.

Financial key performance indicators

ARPU (£)

£508 2010, £464 2009, £427 2008

Description

Average Revenue Per User (ARPU) is calculated by taking the amount spent by the Group's residential customers (ex-VAT), divided by the average number of residential customers.

Analysis

ARPU is impacted by the type of subscription package taken by a customer, as well as the number of additional paid-for products. ARPU increased by £44 as customers rewarded us with more of their business.

Adjusted Group revenue (£m)

£5,912m 2010, £5,323m 2009, £4,952m 2008

Description

Adjusted Group revenue includes revenue from retail subscriptions, wholesale revenue, advertising, revenue from Easynet operations, and installation, hardware and service revenue. It is adjusted for any exceptional items to give a consistent yearly comparison of the business.

Analysis

Adjusted Group revenue is a key measure of how the Group is delivering on its strategy to grow the business. In 2010, adjusted revenue grew by £589 million to reach £5,912 million.

Adjusted operating profit (£m)

£855m 2010, £780m 2009, £752m 2008

Description

Adjusted operating profit for the Group excludes any exceptional or one-off items.

Analysis

Adjusted operating profit is a key measure of the underlying business performance. It increased by 10% in 2010.

Adjusted basic earnings per share (p)

31.1p + 20% 2010, 25.9p 2009, 25.1p 2008

Description

Adjusted basic EPS is the profit after tax for the year excluding exceptional items and related tax effects, divided by the weighted average number of ordinary shares.

Analysis

Adjusted basic EPS provides a measure of shareholder return that is comparable over time. Adjusted basic EPS increased by 20% to reach a record level of 31.1p.

Adjusted free cash flow (£m)

£626m 2010, £508m 2009, £399m 2008

Description

Adjusted free cash flow is defined as cash generated from operations after the impact of capital expenditure, interest and tax paid, cash flows to and from joint ventures, excluding exceptional items.

Analysis

Free cash flow is an important measure of the Group's success in converting profits to cash flow and of the underlying health of the business. Adjusted free cash flow increased by 23% as a result of higher profitability, improved working capital and lower interest payments.

Total shareholder return (%)

(Sky 41%, FTSE 30.9%) 2010, (Sky -11.9%, FTSE 25.7%) 2009, (Sky -11.1%, FTSE -4.9%) 2008

Description

Total shareholder return represents the change in value of a share held for the 12 months to 30 June, assuming that dividends are reinvested to purchase additional shares at the closing price applicable on the ex-dividend date. The value of the share is based on the average share price over the three months prior to 30 June.

Analysis

Total shareholder return represents a comparable measure of shareholder return over time. On this basis, BSkyB shares performed 10 percentage points better than the FTSE 100 index in the year to 30 June 2010.