SKY Network Television : 2022 Interim Report

2022 Interim Report

For the 6 months ended 31 December 2021

Sky Network Television Limited

Half Year Performance

Financial

Sky / 2022 Interim Report

Customer

REVENUE $M

371.7

EBITDA1 $M

85.3

FREE CASH FLOW2 $M

39.7

OPERATING EXPENSES $M

287.2

NPAT $M

28.3

CUSTOMER RELATIONSHIPS +6% YOY

TOTAL CUSTOMER RELATIONSHIPS

983,561

SKY BOX

CUSTOMERS

545,002

STREAMING CUSTOMER GROWTH3

+23% YOY

1. Earnings before income tax, interest expense, depreciation, amortisation and impairment, unrealised gains and losses on currency and interest rate swaps.
2. Net cash from operating activities less net cash used in investing activities less payments for lease liability principal.

3Comprising Neon, Sky Sport Now, Retransmission and RugbyPass

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Sky / 2022 Interim Report

Message from the CEO

I am delighted to present our results for the Half Year to December 2021.

When I addressed you this time last year, in my first report as your Chief Executive, I said that I was focused on getting to the heart of what matters most for Sky - to create better value for our customers, our partners, our people, and our stakeholders.

We needed to change, and we knew we needed to do better.

I am incredibly proud of the work of our team during the first half of the FY22 financial year, and the strengthened position we have created for our business. Despite

the challenges presented by the Covid-19 lockdowns, particularly for our Auckland-based teams, we have achieved what we set out to do, and then some.

First and foremost, we focused on what matters to our customers by continuing to secure the rights that matter, improving our streaming services and launching Sky Rewards for our loyal box customers. This focus on customer value has also given our teams real clarity and direction, and also enabled us to seriously review our spending, resulting in the significant cost-out initiative announced to the market towards the end of the period.

Highlights for the six months include:

• Delivering an increase in revenue - the first in many years - as we return the business to a sustainable growth path, with Sky Box revenues stabilising and streaming revenues continuing to rise.
• Continuing to grow our customer relationships,
  up another 6% to 983,561 as more New Zealanders turn to Sky to connect them with the content they love, in ways that work for them.
• Securing great sport and entertainment content for our customers, including exciting deals with HBO and HBO Max, the NBL and the A-League,and agreeing host market broadcast rights for FIFA Women's World Cup 2023.
• Delivering the first stage of our Sky Rewards programme, designed to recognise and reward our longstanding and valued Sky Box customers.

• Growing the number of Sky customers who are enjoying Sky Broadband, with customers reporting high levels of satisfaction at the ease, speed and value of the service.
• Negotiating the sale of our Mt Wellington properties, with a lease-back on Studio One, and securing space in Viaduct Harbour Ave to enable our new property strategy, which is focused on creating the best environment for our people to thrive, while ensuring we use capital in the most efficient and effective way for our business and our investors.
• Cutting significant, permanent costs from our business without impacting the customer experience or the revenue growth signalled for FY22. While the overall cost base was higher in the first half of FY22 than in the prior period, this largely reflects the expected step-upin rights costs without the same
  Covid-19 impacts. We are delivering permanent savings in FY22, with additional ongoing savings already targeted in FY23.

Most importantly for me as Chief Executive is that we are living up to the strategic bedrock we set ourselves in June last year: to be an efficient, adaptive and profitable business. Having brought together a highly skilled and experienced Executive Leadership Team with real ambition and passion for Sky, the momentum is tangible. Right across the business, we have entered the second half of this financial year with a spring in our step.

As today's results show, rather than being a business in defensive mode, we now have a balance sheet and a strengthened business poised to embrace opportunity and growth. I look forward to continuing to deliver on our customer promise - and continuing to build value for you, our investors.

Sophie Moloney

CEO

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Sky / 2022 Interim Report

Message from the Chair

I echo Sophie's sentiment that Sky enters the coming period with refreshed energy and optimism.

Whilst we remain acutely aware of the challenging environment in which we operate, exacerbated by the ongoing uncertainties catalysed by Covid-19, the hard work of the Sky team under Sophie's leadership is transforming the business, repositioning the company for future growth.

A key milestone in the coming months is to deliver the next generation of Sky Box - one that we believe will transform the viewing experience of our customers. This game-changing project is on track, with customer research confirming that the new features resonate strongly with customers, and that there is growing excitement for the product to be in customer homes from mid-2022.

In parallel we continue to prioritise our investment in data analytics to truly understand our customers and better personalise the viewing experience to meet their individual needs. The benefits of this investment, and the customer-focused mindset

it demands, are increasingly evident across the business, and in the customer satisfaction measures we track.

As outlined at the Annual Shareholder Meeting at the end of last October, the Board has been reviewing capital management strategy in the context of expected earnings outlook, investment needs and strategic opportunities. Following improved performance across a variety of metrics

(including cash generation) over the past twelve months and increased medium term certainty over the majority of our key content rights, the Board has now resolved to adopt a formal dividend policy of distributing between 50% and 80% of Free Cash Flow (excluding one-off items). The Board expects to resume paying dividends commencing with a final dividend in September 2022, consistent with this dividend policy.

More broadly, as a result of recent performance and the sale of OSB, Sky had $74m of cash on the balance sheet at the end of the half year. In addition, a further net cash inflow of $55m is expected when the sale of Sky's Mt Wellington properties settles in March 2022. Management and the Board continue to assess opportunities to invest capital to accelerate the growth of the business, to generate new revenue streams, and to improve returns for shareholders. As a result, the Board intends to provide a further update on capital management to coincide with an investor day to be held in June 2022. Any decisions on capital structure, including any return of capital, will be subject to market conditions and any other strategic opportunities that may arise.

Philip Bowman

Chairman

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Sky / 2022 Interim Report

Thank you

We are grateful to you, our shareholders, for your ongoing support through difficult times in recent years. The transformation journey towards establishing a platform for future growth is progressing well and the market is starting to recognise this with an improved valuation of Sky's shares. In parallel we continue to provide a vital and valued service to our customers whilst caring for the wellbeing of our people and our stakeholders. Sophie and I are confident in the ability and strength of the Sky team to continue to rise to future challenges.

We thank all the team, the Board, our content partners and stakeholders, and you, our investors, for your support and enthusiasm for Sky. Connecting New Zealanders with great sport and entertainment, in ways that work for every individual, right across the country, is an honour and a privilege. Thank you for the part you play.

Philip Bowman	Sophie Moloney
Chairman	CEO

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