Annual
Report
SKY NETWORK TELEVISION LIMITED
Silver Ferns celebrate their win at the Vitality Netball World Cup. ©Getty Images Available now on Sky on Demand
Bohemian Rhapsody © 2018 Twentieth Century Fox Film Corporation. All rights reserved.
/ 1
As a start up in Auckland,
we set out to revolutionise
the way New Zealanders
watched TV.
And we did just that.
We brought more entertainment, news,
sport and choice to New Zealanders.
We led the way with the first all-digital
and then high definition experience
available across the country.
We put customers in control through
MySky, and pioneered online streaming
for New Zealanders with Sky Go.
For nearly 30 years, we’ve helped to grow
sport, from grassroots to the elite, and
fuelled our nation of passionate sports fans.
We’ve brought the world’s stories to New Zealand,
and New Zealand’s stories to the world.
Today, we are proud to
be New Zealand’s leading
entertainment company.
We operate in a world that
is changing at pace so we’re
moving faster than ever before.
For our customers, our owners,
our people, our partners and
New Zealand.
Sky / 2019 Annual Report / 3
Kiwi Ferns in the lead up to their match against Fetu Samoa at Mt Smart Stadium. ©Photosport
Message
Welcome to our Annual Report
Peter Macourt
CHAIRMAN
As you read this Report I trust you have picked up on the mood of enthusiasm and energy in the business. While we continue to operate in a fast-moving, disrupted and competitive world, the passion and appetite for success is palpable across the company.When I addressed you at last year’s AGM I indicated that I had two personal priorities for the coming year: to recruit and induct the best Chief Executive for our business, and when that was completed, to consider a succession plan for the next Chair.I am delighted that we were able to appoint Martin Stewart as Chief Executive. He is a highly experienced leader who has energised the Sky team and is setting about transforming the business.Our Results for FY19 already tell the story of where Martin and the team are taking Sky. In the challenging conditions in which the media and entertainment sector is operating, it is pleasing that we are reporting an increase in streaming subscribers and adjusted earnings of $97m.There have been some important and difficult decisions in the past six months. Stopping the IVP project was a key one, and while it has resulted in a one-off $38m write-down, it represents an important pivot towards a true focus on streaming. We are confident that our refocused technology plans will allow us to achieve our wider ambitions. The Board’s decision to impair $670m of goodwill is clearly a key decision for the business. It reflects the fact that we live in an uncertain world, and our assessment involved a range of different scenarios and assumptions, as set out in this Report. Those of you who have followed our business for a while will know that the goodwill asset came about as a result of the INL transaction 14 years ago. While the headline figure is a large one, I note that the impairment is non-cash and has no impact on our banking covenants.We have set out the strategic direction in this Report and the accompanying Results presentations, and you will see a strong theme of investments that are designed to grow the business, to super-serve our customers and to evolve towards new revenue streams.Those investments are being made in an industry that faces increasing uncertainty and disruption, and it is our view that we need to continue to reduce debt over the next couple of years to ensure we have sufficient headroom for key investments, including in rights and new services, and for the long-term flexibility of the company.With that in mind, we have decided to not pay a dividend for the final six months of FY19.We acknowledge that this is not an ideal situation for investors, and ask that you support us in the strategy of investing to grow the business.Turning now to the leadership of the board, it has been my privilege to serve as Chair for the last 17 years. John Fellet was Chief Executive for most of my tenure, and I acknowledge his contribution and dedication to our business over that time.As many of you will know, the planned merger with Vodafone New Zealand was a key part of our succession plan for the leadership of the company and the Board. When the regulator declined to approve the merger, a decision I will always believe to be flawed, we had to re-set the plan.It is my pleasure today to advise that we have secured an exceptional new Chair for the board, Mr Philip Bowman.Mr Bowman is an experienced and distinguished businessman who has led several major global companies and served on the board of a significant number of public and private companies as an independent Chair or director. He brings knowledge of the media sector, including having served on the board of Sky UK for some ten years.I leave the Sky board with confidence in the direction of the business. Your board and leadership team is focused on creating a long term sustainable entertainment business that balances the needs of our customers and the desires of our content partners.To do that we need more customers, and we win them by innovating to create services that attract every New Zealander.Thank you for your continued support for Sky. It has been a privilege to serve as your Chair.Sky / 2019 Annual Report / 5
" The passion and
appetite for success
is palpable across
the company.”
St Andrew's wins a lineout during the First XV match against Christ's College. ©Getty Images
Chief
Executive
Sky / 2019 Annual Report / 7
People talk about
streaming being the
future. Well, the future
is happening right now,
and we are the premier
sport streaming service
in New Zealand.
On the entertainment side of our
business, Neon offers the biggest
range of TV shows and movies of
any New Zealand-based service
– and we’ll be announcing some
enhancements to it soon.
Our laser focus on streaming,
coupled with our commitment to
super-serve all Sky customers, is the
pathway to creating a long term
sustainable entertainment business
that balances the needs of our
customers and the desires of our
content partners, and delivers on
behalf of our shareholders.
We enter into FY20 with optimism
and energy. On behalf of the
talented, passionate, hardworking
Sky crew I thank you for your
support of our business.
Martin Stewart
CHIEF EXECUTIVE
It is six months today since
I joined the Sky team, and
it is my privilege to lead the
business in this vital time.
We have been hard at work
transforming our business,
and I’m pleased to share some
of our progress with you.
The world is changing,
and so are we.
Our goal is to grow our
business by accelerating
our focus on streaming
services while continuing
to super-serve all
Sky customers.
Our ambition is for Sky
to be in the hands of
every New Zealander, in
ways that work for them.
We are listening – to our
customers, our people, and our
partners - and moving much
faster than ever before.
In the last six months a significant
amount of progress has been
made, and it’s only the beginning.
In the last month alone we launched
the new Sky Sport Now app and
the new Sky Sport News service,
supercharged our Sky Sport offer
with 12 HD channels, acquired key
rights like the Cricket Australia deal,
and announced the acquisition of
global sports streaming business
RugbyPass. We are pursuing
opportunities to work with partners
to offer Sky services to more
customers, and are well on our way
to achieving our goal of being in
the hands of all New Zealanders.
The Results we have released
today demonstrate that we’re
heading in the right direction.
We are returning to growth by
embracing streaming, and it is
pleasing to see the 16% growth in
streaming and commercial revenues
as an early sign of success.
Our adjusted earnings of $97.4m
are better than the guidance
we provided in February,
despite the disrupted market
that we are operating in.
We are continuing to observe
good cost control as we rebalance
to a streaming future.
We made the clear decision
to accelerate our focus on
streaming when we decided to
stop the IVP Project, and we are
confident that our refocused
technology plans will allow us to
achieve our wider ambitions.
One of my first priorities when
I joined Sky was to build an
outstanding leadership team. I
believe we have managed to do
that, and I am enjoying working
with an excellent group of leaders
and experts in their fields.
We have a clear objective: Growth.
It’s our main focus. And there are
four pillars that we relentlessly
focus on to achieve it: Our
Customers, Our Content, Our
People and Our Products. The
following pages will give you a
sense of what we’re doing to
transform our business and
deliver on our goals, and we
look forward to sharing more
with you as key milestones are
reached throughout the year.
I’m proud that we have
revolutionised the viewing
experience, allowing people to
watch content whenever and
wherever they want, live and on
demand. Across DTH, free-to-air on
Prime, Sky Go, Sky Sport Now and
Neon, and through our partnership
with Vodafone TV, we offer the
broadest range of ways to watch.
Last weekend over a million
New Zealanders engaged with
Sky to watch the Bledisloe Cup
final, including 55,000 on our
streaming services, with excellent
delivery across the board.
Directors
Peter Macourt
CHAIRMAN
Martin Stewart
CHIEF EXECUTIVE & DIRECTOR
Susan Paterson ONZM
DIRECTOR
Mr Macourt was appointed as
chairman of the board of Sky in
August 2002. He is a director of Prime
Media Limited and Virtus Limited,
and a former director and chief
operating officer of News Limited
based in Sydney, Australia. Previously
Mr Macourt has also served as a
director of Premier Media, Foxtel,
Independent Newspapers Limited
and a number of subsidiaries and
associated companies of the News
Corporation Limited.
He holds a degree in commerce from
the University of New South Wales, is
a member of the Australian Institute
of Chartered Accountants and the
Australian Institute of Company
Directors. Mr Macourt is chairman of
Sky’s Nomination and Remuneration
Committee and Related Parties
Committee.
Mr Stewart joined Sky as Chief
Executive in February 2019 and was
appointed to the board in April 2019.
A highly-regarded media sector
operator with a wealth of experience
in the UK, Europe and the Middle
East, Mr Stewart brings a valuable
international perspective to Sky.
In the TMT space Mr Stewart has
been CEO of OSN, the leading
pay TV network in the Middle East
and was CFO of Sky in the United
Kingdom when Sky launched its
digital platform and the company
doubled its subscriber base in 4 years.
Other major roles include CFO of the
Football Association in the UK, CEO
of ONO (Cable Europa in Madrid),
and CFO and Executive Director of
EMI Group.
Ms Paterson began her career
as a pharmacist and later
completed a MBA at London
Business School, leading to a career
in management and strategy
consulting in New Zealand, Europe
and the United States of America.
She has been a professional
director for over 20 years, and is a
Chartered Fellow of the Institute
of Directors. Ms Paterson is Chair
of Steel and Tube and Theta, and
a director of Goodman NZ, Arvida
Group, ERoad and Les Mills NZ.
She is also a Member of the Electricity
Authority, Chair of Home of Cycling
(Avantidrome) and NZ Golf Board, and
past director or Chair of a number of
commercial infrastructure and growth
companies and not for profit entities
including Airways Corp, Transpower
New Zealand, Abano Healthcare,
Housing New Zealand, Auckland
Hockey, the NZ Eco-Labelling Trust,
St. Cuthbert’s College and EECA.
Previously she was an external
Monetary Policy Advisor to the Reserve
Bank Governor. In 2015 Ms Paterson
was made an Officer of the New
Zealand Order of Merit for her services
to corporate governance.
Sky / 2019 Annual Report / 9
Geraldine McBride
DIRECTOR
Derek Handley
DIRECTOR
Mike Darcey
DIRECTOR
Ms McBride was appointed to
the board in September 2013.
A renowned Enterprise Business
Technology and AI thought leader
with a science background, Ms
McBride’s global career spans 30
years, with senior executive roles in
IBM, Dell and SAP. Her most recent
roles were President & CEO of SAP
North America and SAP Asia Pacific
Japan.
Geraldine is a Director of National
Australia Bank, and Fisher and
Paykel Healthcare. She is also CEO &
Director of MyWave, a market leading
Enterprise AI company focused on
Intelligent Personalisation by putting
the customer at the centre of
business.
Mr Handley was appointed to the
board in September 2013. Mr Handley
is an entrepreneur who created the
Aera Foundation, a venture studio
advancing new models that fuse
social and financial goals. Before that
he spent two years helping Sir Richard
Branson set up the B Team, a global
non-profit leadership collective.
In 2001 at the age of 23, he co-
founded The Hyperfactory, one of
the first agencies in the world to
recognise the power of mobile devices
for connecting consumers, brands and
mass media (acquired by NYSE-listed
Meredith Corporation). Mr Handley
has attended Massey University,
MIT Sloan School of Management,
Singularity University.
With an extensive track record of
strategy and delivery across television,
publishing and technology, Mr Darcey
was appointed to the board in
September 2017. A New Zealander,
he has lived and worked in the UK
since 1989. Fifteen of those years
were spent at Sky UK, initially as the
Director of Strategy, then six years as
Chief Operating Officer.
He played a prominent role in most of
Sky UK’s major strategic decisions and
its major commercial and regulatory
dealings during this period. From 2013
to 2015 Mr Darcey was CEO of News
UK. Since 2015, Mr Darcey has had
a series of non-executive roles and
these currently include Chairman of
M247 (a global connectivity and cloud
services provider), Chairman of British
Gymnastics, and director of Arqiva
(the UK’s main independent provider
of television broadcast and mobile
infrastructure). He also provides
strategic consulting services in the
media sector.
Focus
World leading content delivered into
the homes, hands and hearts of
New Zealanders. That’s our turf.
OUR CORE GOAL:
Growth
OUR AMBITION:
Sky in the homes,
hands and hearts of
all New Zealanders
Building on strong foundations, over the past
six months we’ve refocused our priorities and
embarked on a transformation that we believe
will enhance our position for the long term.
Redefining how we
do business and
reshaping to become
truly customer led
Listening, making
changes and
moving quickly
Meeting New Zealanders’
needs in different ways
and transforming for our
digital future
Change will be reflected in a series of ongoing
strategic moves to position Sky for the future.
Sky / 2019 Annual Report / 11
WHAT MATTERS MOST:
Our Customers
Being clear on our customer promise and delivering on it every time to
rebuild trust and confidence in our brand. By being a truly customer and
data led business we will deliver the content our customers want, when
and where they want it.
Our Content
We will continue to innovate in the way we deliver our partners’ great
content and continue to develop our own. By building trusted partnerships
and new complementary products we will improve our delivery of great
sports, entertainment and original production to New Zealanders.
Our People
Doing right by our people by focusing on our capability, capacity, culture
and community. With an obsessive focus on delighting customers every
day, our people and ways of working will meet the current and future
needs of our customers and content providers.
Investing in Our Future
By investing in our products and services, we’ll deliver our content in
ways that work for all of our customers, now and in the future. That
means continuing to provide premium quality broadcasting, and having
a laser sharp focus on streaming to satisfy customer demand for greater
flexibility. We’re investing in our future to build New Zealand’s leading
streaming business in both sport and entertainment products.
truly customer
and data led
business
To a large degree this sounds
like business speak, but it’s
just common sense.
Actively listening to customers,
ensuring they are at the heart
of every decision – even if
it costs money on a short-
term basis, and then shaping
future innovations around their
needs are all paramount.
It is also an effort that requires
new ways of working. New
supporting technology. New
customer facing processes. And
new measurement systems.
Sky has already started to gear
our measurement systems around
customer performance and it
has highlighted that we have a
way to go in a number of areas.
Customer feedback is starting
to challenge our decision-making
across the board. Direct customer
insight contributed to the decision
to remove the additional cost of
the Rugby Channel. To reduce Fan
Pass pricing and then supercharge
the new Sky Sport Now app with
12 sport channels. To improve
the sign-on process with a single
user name and password being
automatically populated across Sky
services. To improve the customer
on-boarding user experience –
reducing the time it takes to share
important information about
how to get the most out of Sky.
Executives are also getting
directly involved in responding
to customer feedback and
opportunities to improve.
This will grow and deepen as we
go forward with increasing levels
of direct customer immersion
planned across the Executive.
Each of these decisions could
easily be viewed as small and
in the greater picture of Sky’s
transformation immaterial.
Collectively however, they start to
add up. They start to demonstrate
a culture that is shifting. A culture
that genuinely listens and places
customers at the heart of our
decisions. We will continue to build
on this base in the coming year
with increasing levels of investment
in marketing automation, data
analytics, and personalisation tools.
We will build more capability
in the insights and customer
experience areas of the business.
We will ensure our people are
armed with the right customer
insight to inform decisions.
And we will provide increased
levels of feedback to track our
overall progress and momentum.
Sky / 2019 Annual Report / 13
Silver Ferns celebrate their win at the Vitality Netball World Cup. ©Getty Images
The Past
Six Months
Moving fast and
responding to
customer needs.
All Blacks perform the Haka during the Bledisloe Cup final 2019 ©Getty Images
Sky / 2019 Annual Report NEW CHIEF
EXECUTIVE
Martin Stewart
Joined 21 February 2019
/ 15
Supercharged
Sky Sport
With 12 new sport channels all in
HD, including our own Sky Sport
News channel and shows
STREAMING
SUCCESS
55,000 New Zealanders
successfully streamed
the All Blacks’ Bledisloe
Cup win on Sky Sport
Now and Sky Go
Significantly improved
New Zealand’s premier
sport streaming service
Added value for our
customers
By adding more HD channels after
removing the HD fee, with more to
come, and increasing MySky storage
LISTENED
Listened to customers
Made rapid changes in direct
response to customer insight
including reducing pricing
for our sports streaming
app Fan Pass (now Sky
Sport Now) and removing
the Rugby Channel fee
PRODUCTION
Invested in our production
With a new studio and sets, more
talented presenters, more Spidercam
action, the introduction of te reo
commentary on Sky Sport and closed
captions on key Sky Sport matches
WOMEN'S
SPORT
Enhanced our
commitment to
women’s sport
More broadcasting, more
visibility and direct support
Enhanced Sky Go
Customers can now sign on
with more devices, and we
improved the performance
RUGBY LEAGUE
GRASSROOTS
RUGBY
Deepened our support of
Rugby League in
New Zealand
And sponsored the Kiwis, Kiwi Ferns,
Junior Kiwis and Warriors Women
Celebrated 21 years
of broadcasting
grassroots rugby
And enhanced our 1st XV
rugby coverage
MORE MOVIES
Launched a new movie
premiere every night on
Sky Movies
Plus 1,000 movies On Demand
Enhanced NEON
With user experience improvements
and recommendations
DOCO'S
Told more NZ sport stories
with Sky Sport docos
WON
Won key broadcasting
rights
Across cricket, international
rugby, football, basketball,
netball, motorsport, international
tournaments and more
BASKETBALL
Deepened our support of
Basketball in NZ
And became the official sponsor
of the Sky Sport Breakers
PRIME
Made more content
free-to-air for all
New Zealanders to enjoy
Like the NBL, Game of Thrones, the
Cricket World Cup and the Netball
World Cup, including the finals live
Black Caps celebrate their win against West Indies at the ICC Cricket World Cup 2019. ©Photosport
© 2019 Image Reference Goes HereSky / 2019 Annual Report / 17
Delighting
New Zealanders
with great
entertainment
experiences
We know that we have a privileged
role in our customers’ lives – we
entertain them, we amuse them,
we challenge and inspire them.
Our customers choose Sky for great
content – and we’re obsessed about
delivering it in ways that best meet
their needs.
We bring a uniquely kiwi
flavour to our content,
as well as the best from
across the world.
Across sport and
entertainment, we are
focused on fostering
enduring partnerships,
building on our great
content, and delivering it
in ways that work for all
New Zealanders.
It’s an exciting and
dynamic time to be in the
entertainment industry.
The amount of content
continues to trend upwards
and in a world of seemingly
limitless choice, people are
watching more content,
and valuing quality and
curation more than ever.
Sky’s ability to offer the
best and broadest range
of content across sport,
TV shows and movies is
a key strength in a world
where customers have more
choices than ever before.
Home
of Sport
Sport matters to New Zealand. It fuels us.
It entertains us. And it connects us all across
the country. It has the ability to change lives,
to bring people together and to fuel the
passion of our nation.
We are honoured to have a key
place in the history of New Zealand
sport. For almost 30 years Sky has
been a ‘go to’ for sport lovers. We’ve
invested more than $1.5 billion into
sport in New Zealand, creating value
that has helped to grow games
from grassroots to the pinnacle of
international competition.
We have a deep commitment and
connection to all kiwi sport – from
the school rugby field to Eden Park;
the local club grounds to Mt Smart;
the school netball courts to the
Silver Ferns on the world stage.
Through our commitment to being
the Home of Sport we’re creating
rich experiences and content that
connects and engages with
all sports fans. Our focus is on
the Whole Game, fostering
enduring partnerships and
extending our reach and
commitment to all of the
sports that New Zealanders
love to play and watch.
The Highlanders celebrate after scoring a try in their Super Rugby match against the Bulls in Dunedin ©Photosport
Sky / 2019 Annual Report / 19
Focused on the
Whole Game
We’re committed to the Whole Game, and that means
world class production with more coverage across
multiple channels, new studio environments, and
compelling, original content – always fresh and always on.
It means backing all of the sports that New Zealanders
love to play and watch. From grassroots and school sport
to women’s leagues, we’re working with a wide range of
sport partners and innovating beyond just broadcast, to
in-stadium experience, social media and the community.
Supercharging
Sky Sport
Bringing sports fans more
sport – and making it easier
to find and enjoy.
We’ve supercharged Sky Sport with
12 dedicated sport channels to bring
customers the sport they love, and
sport they didn’t know they loved too.
More sport than ever before, including
dedicated channels for 24/7 coverage
of rugby, cricket, golf and football –
and channels that strongly feature
netball, league and motorsport. Plus
a better viewing experience with all 12
channels in High Definition.
We’ve also committed to delivering
our customers more great features
and documentaries, highlights
through the Sky Sport Highlights app,
and continued access to on demand
sport via an enhanced and improved
Sky Go. And we’ve kept the ability for
additional pop-up channels for major
events like the Australian Tennis Open
and the Tokyo Olympic Games.
All in on Digital
We’ve been working hard to truly
meet the needs of sport fans who
prefer to be digital-only.
Sky was the first company to bring
sports streaming to New Zealand,
first with Sky Go and then Fan
Pass. Since it launched in February
2015 we’ve streamed four Sky Sport
channels 24/7 – that’s a total of
156,788 hours of sport, with much
of it live. We’ve evolved Fan Pass to
become Sky Sport Now. More great
sport content. More competitive.
And more promotion so that more
kiwis hear about it.
Sky Sport Now really is New Zealand’s
premier sport streaming app.
Sky Sport News
To keep New Zealanders up-to-date
on all things sport around the country
and the world, we’ve launched the
Sky Sport News Channel. Drawing on
the resources of our world-renowned
Sky Sport crew, it features daily news
from New Zealand and around the
world, expert opinion and analysis,
exclusive interviews, and a raft of
features to keep every keen sports
fan engaged.
Our local sport news shows begins
2 September with talented local
broadcasters Kate King and Goran
Paladin joining us as presenters.
Sky Sport Now
– All 12 Sky Sport channels
– The ability to link to a big screen
– Access to replays, highlights,
features and documentaries
on demand
– Flexible pricing options,
including weekly, monthly and
a special rate for customers
who sign on for a year
– A new stats section with
results, fixtures, tables and
top performers
There every
minute, every
step of the way
The depth and breadth of
our sports offer is second
to none, and we continue
to add more. Week in week
out, 365 days a year, we
produce and broadcast
some of New Zealand’s
favourite sport including
rugby, netball, cricket,
basketball and rugby league.
Stronger
Together
Fostering enduring
partnerships
We value our relationships with our
sports partners. Fostering enduring
partnerships and working together
to help grow and nurture sport is a
vital foundation for our business.
New Zealand is a nation of sports
fans, but they are increasingly
time poor, and young fans in
particular are looking for a range
of experiences. We want to help
grow and engage New Zealand
fans, delight our customers
every day, and be in the hands
of every New Zealander. We are
committed to continuing to build
great fan experiences and products
that make sport accessible,
exciting and appealing.
Backing through
Sponsorship
Funding is a struggle for many of
our sports teams, and particularly
women’s sports. It can be a
challenge for athletes and teams
to get the recognition that they
deserve. We’re already committed
to increasing airtime for women’s
sport, and we’re also proud to be
the new sponsors of the Kiwi Ferns
and Warriors Women.
We’re also thrilled to have
sponsored the Kiwis and Junior
Kiwis, and to be the new naming
sponsor of the Sky Sport Breakers
when they take to the courts in
October 2019.
Deepening Engagement
with all New Zealanders
A window into Sky
through our free-to-air
channel Prime
Prime is Sky’s hub for free-to-air
sport and we’re showing more live
and delayed games, highlights, and
sports shows across the week and
weekends than ever before.
Through Prime the whole country
can access key sporting moments
as well as school and growth
sports that may not otherwise get
the exposure that they need. We
were delighted to be able to show
the finals of the Cricket World
Cup and Netball World Cup live
and free on Prime. By making
sport more accessible, we’re helping
to build greater fan bases, attract
sponsorships, and showcase our rich
local talent. We’re nurturing sports
fans, and most importantly future
sports fans, driving engagement
and giving non-customers a taste
of what they can find on Sky Sport.
Warrior fans enjoying the game at Mt Smart Stadium. ©Photosport
Social Media
Kiwis don’t just watch sport, they
follow every aspect of it. We’re
connecting with fans on social
more than ever before and ensuring
they’re never short of great content
from behind-the-scenes moments,
to a glimpse of what athletes
are doing outside of game time,
and of course snippets from our
knowledgeable and entertaining
Sky crew.
Creating original content
and telling sports stories
Telling sports stories, particularly
about our sports heroes and those
special moments, is important to
us. We know there’s nothing better
than an original story of triumph,
hard work and glory. Which is why
we’re creating more than ever
before of this rich content with the
production of compelling,
long-form documentaries.
Highlights include our three-part
series Keeping the Faith – 25 Years
with the Warriors, Greats of Super
Rugby: Christian Cullen, Inside
SailGP with Sir Russell Coutts and
the Red Bull Ignite7 documentary.
Supporting Women’s Sport
We’ve produced and
broadcast women’s
sport for years, and are
committed to doing more.
There are a number of areas
where we are working to make
a difference. Starting with more
broadcasting of women’s sport.
We love the pinnacle events like
the Netball World Cup and the
Black Ferns playing in the Rugby
Super Series, but we are also
focused on the Farah Palmer
Cup, the ANZ Premiership,
the Women’s NRL, the Winter
Games NZ and the White Ferns, as
well as covering more women’s sport
at grassroots level. We’ve enhanced
our programme to support athletes
during and after their sports careers
in different ways across our business.
We’re working with colleagues
in the media sector to increase
visibility and news coverage of
women’s sport. We’ll also give
direct support to women’s teams
where it is needed, starting with our
sponsorship of the Kiwi Ferns and
Warriors Women.
Sky / 2019 Annual Report Supporting Grassroots and Community
Community
Sport has a great part to play in
fostering children’s wellbeing, social-
skills and academic success. As the
Home of Sport, we’re committed to
improving access and engagement
to sport for all New Zealanders.
So in addition to upping the ante
on grassroots sport, over the past
three months we’ve donated more
than 1500 sport tickets to schools
and junior club rugby and league
teams throughout New Zealand and
we look forward to developing this
initiative more in the year ahead.
We support our local communities
in a number of other ways, including
the Jonesy’s Youth Foundation,
Tania Dalton Foundation, Special
Children’s Christmas Parties,
Starship Foundation and Big Buddy,
to name some. More details are
available on our website.
It’s at grassroots level
where skills are honed
and talent is aplenty.
So it makes sense that
in an effort to grow all
sport in New Zealand,
we need to put extra
focus on our school,
local and niche sports.
We’re not just talking, we’re doing.
In 2019 we have upped the ante on
the production and broadcasting
of local grassroots sport.
We’ve delivered more live coverage
of key events such as schools
rugby league, NBL basketball in
partnership with Stuff, the Steven
Adams High School Invitational,
the National Women’s Tournament
for league and the finals of the
Women’s Basketball Championships
– some of these for the first time.
We’ve also super-sized our Land
Rover 1st XV Rugby offering by
broadcasting more live games
than ever before, moving
them from behind the Rugby
Channel pay wall to Sky Sport
and making select matches live
and free-to-air on Prime.
/ 21
Leading the Way
with Outstanding
Sports Production
Rain or shine, at sports
grounds and arenas
throughout the country the
Sky OB trucks are in action.
In the last 12 months we’ve done
550 live events, with the OB vehicles
travelling 280,000km across
New Zealand.
We’re improving our world-
class production capabilities by
investing in the latest technology
and new look studio sets, and
we’ve welcomed some new
additions to our talented team
of presenters and commentators
– including Mils Muliania, Israel
Dagg, Ruby Tui, Honey Hireme
and Brendon McCullum.
Our Sky Sport crew are exceptional
at what they do. We recently took
New Zealanders behind the scenes
of Sky and featured our Sky crew
in our mini-doco The Sport of
Television.
At the International Olympic
Committee Golden Rings Awards,
Sky’s Sport Production team won
silver in the Most Sustainable
Operation category and bronze in
the Best Feature category for their
Olympic Winter Games and Youth
Olympic Games coverage.
Game of Thrones © 2019 Home Box Office, Inc. All rights reserved. HBO and all related programs are the property of Home Box Office, Inc.
Sky / 2019 Annual Report / 23
Limitless
World
Choice
With more choice than ever
before, Sky’s entertainment
offering has never been
more exciting for fans.
Whether after escapism,
action, tears - or even tears
of laughter - our customers
have access to the best and
broadest range of content
in New Zealand.
Flexibility
We’re constantly
adapting and
refining ways to
make it easier for
our customers to
find and access the
content they love,
whether via their
TV or online.
Key to this is our relationships
with content providers across the
globe. For nearly 30 years we’ve
developed enduring partnerships,
which have been a vital foundation
for our business. Our close
relationships with content creators
and rights holders allow us to offer
content that’s highly valued by our
customers, and tailor our locally-
produced channels to a variety of
viewing preferences whether pure
escapism, outstanding dramas
and movies, light entertainment or
riveting documentaries.
We’re also continuing to forge new
relationships with content providers
so kiwis have access to world class
content, and look forward to including
great new international titles to
our line-up.
Sky’s proud of
our partnerships
With some of the world’s top
studios & content providers,
such as Warner Media (HBO,
Warner Movies, DC Series,
CNN and Cartoon Network).
NBC-Universal. Sony. MGM.
Village Roadshow. Fox. FX
Drama. Paramount. CBS.
Showtime. BBC. Discovery
Networks. Viacom: Comedy
Central, MTV, Nickelodeon.
Armchair fans can always
find something to watch
with our in-home Sky box;
whether they’re after a new
movie every night, keen to
catch a whole season at
once, want to watch an
episode of one of the most
talked-about shows, or to
choose from 1,000 movies
On Demand.
Customers who connect their Sky
Box to their home Wi-Fi have access
to a huge collection of shows, box
sets and movies at the touch of a
button.
For those on the go, we’ve added
more streaming channels to Sky Go
to complement the vast range of
catch up, movies and box sets. And
with an increasing list of download-
to-go titles we’re making it even
easier to watch a favourite show
when offline. Our youngest TV fans
are also well catered for with terrific
age-appropriate content available on
Nick Play, Nick Jr Play and Cartoon
Network Watch ‘n Play Apps.
Content fans who prefer streaming-
only for their entertainment are well
catered for by NEON, giving instant
access to a world of TV and Movies,
including terrific exclusive content.
Hot Content
If you’ve heard others talking about
it, chances are you’ll find it on Sky.
Compelling
Content
Some of our favourite new
content or returning series:
– GAME OF THRONES PREQUEL
– HIS DARK MATERIALS
– WATCHMEN
– TEMPLE
– YOUR HONOR
– YEARS AND YEARS
– ALL NEW NANCY DREW
– PEN 15
– THE ROOK
– LOOKING FOR ALASKA
– MAYANS M.C.
– HOMELAND
– SHAMELESS
– SUPERNATURAL
– THE FLASH
– RAY DONOVAN
– BILLIONS
– THE L WORD: GENERATION Q
– VERONICA MARS
– PEAKY BLINDERS
– EUPHORIA
Peaky Blinders © BBC
We have the shows that capture headlines and coffee break discussions around the country, whether it’s the runaway hit and highest rating show on IMBD Chernobyl, the drama of Big Little Lies or Euphoria, or the genuine thrill of returning cult favourites like Veronica Mars. We’ve the lion’s share of Emmy® nominated series compared to any other TV or streaming service in New Zealand with 225 nominations including Game of Thrones, Chernobyl, Barry, Pose and What We Do In The Shadows, The Daily Show, Who Do You Think You Are and Crazy Ex-Girlfriend. Sky’s movie offering is second-to-none by way of breadth and quality of titles, with our ‘new movie every night’ promise and the ability to access a huge catalogue of new release and favourite titles through Sky On Demand (available for no extra charge for all Sky customers who connect their Sky box to their home Wi-Fi). New titles can also be purchased to view any time through Sky Box Office. And as a special treat at the moment, Quentin Tarantino has us on his hit list, personally curating and hosting a channel of classic films for us this year in a new evolution of our Sky Movies pop-up innovation.We’ve also made sure there’s very little chance of anyone missing out on the latest series with more than 500 box sets ready and waiting for when the moment’s right on Sky On Demand, Sky Go and NEON.We know our customers value new and distinguishable content and we’re committed to delivering it. It’s the content that fuels passion, true fanship and drives engagement and they expect to find it across our linear and streaming services. Best of all, they know that if it’s new and exciting we’ll find a way to get it to them as quickly as possible, utilising Sky On Demand and Sky Go to ensure that there’s no missing out. Sky / 2019 Annual Report / 25
The Brokenwood Mysteries © South Pacific Pictures.
Uniquely Local
Our free-to-air
channel Prime
continues to be the
home of unique
New Zealand
stories made with
the support of
NZ On Air.
With high-quality local
storytelling at heart, our
documentaries and
factual series give an
insight into our nation
of innovators, travellers,
creators and characters.
Local content commands attention
and resonates with New Zealanders
who want to know more about, and
engage with, our past, present and
future. By following in the footsteps
of Captain Cook’s journeys around
the Pacific in the fascinating
Uncharted with Sam Neill; taking
an epic 12 hour journey from
Auckland to Milford Sound in the
unprecedented television event that
was Go South or having a fly-on-
the-wall look into the little known
world of Living with Tourettes,
Prime is at the forefront of these
important kiwi stories.
Our scripted drama series The
Brokenwood Mysteries, returning
this year for a sixth season on
Prime, and complemented by its
own Sky pop-up channel, continues
to garner universal acclaim. The
uniquely kiwi murder mysteries
continue to surprise and delight
viewers locally and internationally,
and as New Zealand’s most
successful export is sold into more
than 17 territories, a prime-time
hit in many countries around the
world. Looking to the future, we’re
committed to supporting and
producing an increasingly diverse
range of local content for Sky’s
platforms to reflect a broad range
of New Zealand communities.
Māori Language Week
The kaupapa (purpose) of Māori
Language Week is ‘Kia Kaha Te Reo
Māori’ (May the Māori language
be strong).
Sky celebrated Māori Language
Week in September with more than
50 bespoke pieces of content in a
platform-wide initiative including
Prime, Sky Sport, Nickelodeon,
Cartoon Network, Vice, MTV Music
and Sky Movies.
A highlight was Tiki Towns, a
successful collaboration between
Nickelodeon and Prime Kids which
won the Māori Language Award
for Broadcasting and Media at a
gala event in November. Tiki Towns
was made with the support of Te
Māngai Pāho and the expertise
of Te Amokura Productions.
The kaupapa (purpose) of Māori
Language Week ‘Kia Kaha Te Reo
Māori’ (May the Māori language
be strong) continues in 2019 with
a strong commitment to original
content in te reo on Sky digital
and linear platforms, including
a special tribute to the Māori
language version of the national
anthem, a second series of Tiki
Towns, featured content on
MTV Music and MTV, and rugby
commentary in te reo on Sky Sport.
Looking to the future, we’re
committed to supporting and
producing an increasingly diverse
range of local content for Sky’s
platforms to reflect a broad range
of New Zealand communities.
Sky / 2019 Annual Report / 27
Financials
For the year ended 30 June 2019
Financial overview ..................................................................................... 28
Financial trends ........................................................................................... 34
Directors’ responsibility statement ........................................... 37
Consolidated income statement ................................................. 38
Consolidated statement of comprehensive income .. 39
Consolidated balance sheet ............................................................. 40
Consolidated statement of changes in equity ................ 41
Consolidated statement of cash flows ................................. 42
Notes to the financial statements ............................................. 43
Independent Auditor's report ......................................................... 88
Financial overview
Summary
The net loss after tax for the year ended 30 June 2019 was $607.8 million compared to a net loss of
$240.7 in the prior year.
The net loss includes a goodwill impairment charge of $670 million (prior year $360 million). Earnings
before interest, tax, depreciation and amortisation are $230.1 million compared to $285.8 million in
the prior year.
Adjusted1 net profit after tax for the year ended 30 June 2019 is $97.4 million compared to a net profit
of $119.3 million in the prior year.
Adjusted earnings before interest, tax, depreciation, amortisation and impairment for the year ended
30 June 2019 is $241.0 million, a decrease of 15.7% from the prior year’s comparative of $285.8 million.
Adjusted operating earnings before interest, tax, and amortisation of goodwill decreased by 19.3% to
$148.0 million.
Revenue Analysis
Sky’s total revenue decreased to $795.1 million, consisting of:
For the years ended 30 June
2019
2018 % Inc/(dec)
in NZD millions
Residential – Satellite
Other subscription revenues
Total subscription revenue
Advertising
Installation and other revenue
Total other revenue
Total revenue
629.8
98.6
728.4
51.8
14.9
66.7
795.1
694.2
84.7
778.9
57.1
16.7
73.8
852.7
(9.3)
16.4
(6.5)
(9.2)
(10.8)
(9.5)
(6.8)
Residential subscription revenue decreased by 9.2% to $629.8 million due to fewer satellite customers,
a lower uptake of premium services and lower pay-per-view purchases and a reduction in the price of
Sky’s basic entry level package.
Other subscription revenue includes commercial revenue earned from Sky subscriptions at hotels,
motels, restaurants and bars throughout New Zealand, revenue derived from transmission of
programming for third parties and revenue from other subscriptions services such as NEON and
FAN PASS. This revenue increased 16.4% to $98.6 million in 2019 due mainly to an increase in subscriber
numbers for Sky’s streaming services NEON and FAN PASS.
Advertising sales revenue decreased by 9.2% to $51.8 million in 2019 due to a general weakening of
market conditions for advertising expenditure.
Installation and other revenues decreased by 10.8% to $14.9 million in 2019. This is mainly the result of
fewer installations undertaken.
1 Refer table on page 33 for non GAAP adjustments
Sky / 2019 Annual Report / 29
Revenue split
2019
2018
79%
Residential satellite
81%
Residential satellite
12%
Other subscription revenue
10%
Other subscription revenue
7%
Advertising revenue
7%
Advertising revenue
2%
Installation & other revenue
2%
Installation & other revenue
Expense Analysis
A further breakdown of Sky’s operating expenses for 2019 and 2018 is provided below:
30-Jun-19
30-Jun-18
In NZD Millions
(reported)
(adjusted)
% inc
(dec)2
% of
revenue
(restated)
% of
revenue
Programming
326.5
320.8
Subscriber related costs
Broadcasting and infrastructure
Other costs
Depreciation, amortisation
and impairment
88.3
95.8
54.3
131.1
88.3
95.8
49.1
93.0
Total operating expenses
696.0
647.0
(2.2)
(7.5)
3.5
(3.2)
(9.2)
(3.3)
41.1
11.1
12.0
6.8
16.5
87.5
328.1
95.5
92.6
50.7
102.4
669.3
38.5
11.2
10.9
5.9
12.0
78.5
Expenses split (adjusted)
2019
2018
49%
Programming
49%
Programming
14%
Subscriber related costs
14%
Subscriber related costs
15%
Broadcasting & infrastructure
14%
Broadcasting & infrastructure
14%
Depreciation & impairment
15%
Depreciation & impairment
8%
Other costs
8%
Other costs
2
Calculated movement from FY19 adjusted vs FY18.
Financial overview (continued)Sky / 2019 Annual Report
/ 31
Programming costs (adjusted) comprise both the costs of purchasing programme rights and also
programme operating costs. Programme rights costs include the costs of sports rights, pass-through
channel rights (e.g. Disney Channel, Living Channel, etc.), movies (including PPV) and music rights.
Programme operating costs include the costs of producing live sports events, satellite and fibre linking
costs and in-house studio produced shows.
Sky’s programming expenses (adjusted) have decreased by $7.3 million and equate to 40.3% of revenue
in 2019, up from 38.5% in 2018. Adjustments include content costs of $5.7 million which were expensed
as the result of a review of Sky’s content inventory.
A significant proportion of Sky’s programme rights costs are in Australian dollars (20% of rights costs)
and United States dollars (52% of rights costs). This means the NZ dollar cost included in Sky’s accounts
is affected by the strength of the NZ dollar during a particular year and by Sky’s hedging policy.
The board’s policy is to hedge a minimum of 85% of the forecast exposures over 0 to 12 months, up
to 50% of variable exposures over 13 to 24 months and up to 30% over 25 to 36 months. Fixed price
contracts denominated in foreign currencies are fully hedged at the time of signing the contract.
Subscriber related costs include the costs of servicing and monitoring equipment installed at subscribers’
homes, indirect installation costs, the costs of Sky’s customer service department, sales and marketing
costs and general administrative costs associated with subscriber management.
In 2019, subscriber related costs decreased by 7.5% due to lower employee and contractor costs,
lower trouble calls and decoder repair costs.
Broadcasting and infrastructure costs consist of transmission and linking costs for transmitting Sky and
Prime’s television signals from its studios in Auckland to other locations in New Zealand and the costs of
operating Sky’s television stations at Mt Wellington and Albany. The costs of leasing seven transponders
on the Optus D1 satellite are included, as is the cost of high definition television broadcasting and
management of Sky’s streaming platforms. Broadcasting and infrastructure costs have increased
by 3.5% to $95.8 million due to increased internet delivery costs for on demand content and costs of
supporting Sky’s streaming products (NEON, FANPASS).
Other costs (adjusted) include advertising costs, the overhead costs relating to corporate management
and the affiliated businesses. These costs have decreased by 3.2% to $49.1 million. Reported cost of
$54.3 million includes consultancy and employee costs of $5.0 million in relation to changes in strategic
direction being implemented by the new executive team.
Depreciation and amortisation costs (adjusted) include depreciation charges for subscriber equipment
including satellite dishes and decoders owned by Sky and fixed assets such as television station facilities.
Depreciation and amortisation costs have decreased by 9.2% to $93 million for the current year due
principally to an aging decoder base and fewer installations.
Unadjusted amortisation includes impairment of the infinite video platform (IVP) project and related
assets of $38.2 million (refer note 11 in the financial statements).
Finance costs, net have decreased from $17.5 million to $12.4 million. The reduction in interest is due to
reduced levels of debt. During the year Sky refinanced its facility agreement with a new banking syndicate.
This led to an increase in interest rates from the previous arrangement. Sky’s weighted average interest
rates are as follows:
Borrowings
Bonds
Combined weight average
Capital expenditure
2019
6.52%
6.13%
6.34%
2018
5.58%
6.18%
5.79%
Sky’s capital expenditure over the last five years is summarised as follows:
In NZD Millions
Subscriber equipment
Installation costs
Other
Total capital expenditure
2019
2018
2017
2016
2015
7.3
15.5
53.5
76.3
9.2
18.8
30.2
58.2
19.7
29.3
30.7
79.7
63.8
32.6
32.4
22.8
29.7
63.0
128.8
115.5
Capital expenditure increased by $18.1 million in 2019 to $76.3 million.
The main increase was incurred in relation to the IVP project which was abandoned as a result of
changes to Sky’s strategic plan. Costs of $38.2 million were written off as a consequence.
Non-GAAP Financial Information
Sky has used non-GAAP profit measures when discussing financial performance. The directors and
management believe that these measures provide useful information on the underlying performance
of the Group. They are used internally to evaluate performance, analyse trends and allocate resources.
Non-GAAP financial measures are not prepared in accordance with NZ IFRS and are not uniformly
defined and therefore should not be viewed in isolation nor considered as a substitute for measures
reported in accordance with NZ IFRS.
Sky’s strategic direction has moved towards enhancing its streaming services. The costs adjusted in
the following table have been incurred in relation to the changes in strategy being implemented by
the Group’s new executive team and include the abandonment of the IVP project, content write-offs,
redundancy and consultancy payments.
The Sky board is required to assess the fair value of intangible assets at each reporting period and
if this is determined to be less than the book value, then the assets are impaired. The impairment
charge reduces the net book value of Sky’s equity at 30 June 2019 to $352 million compared to $1,027
million in the prior year. This is a non-cash charge that has no impact on Sky’s 2019 cash flows or any of
its bank covenants.
Financial overview (continued)Sky / 2019 Annual Report / 33
The results and adjustments are summarised below:
For the year ended 30 June
In NZD Millions
Financial performance data
Total revenue
Total operating expenses (1)
Adjusted EBITDA
Less
Depreciation, amortisation and impairment (2)
Adjusted net operating profit before interest, income tax
and amortisation of goodwill
Impairment of goodwill
Net finance costs
Adjusted profit/(loss) before tax
Income tax expense
Profit/(loss) after tax
2019
(adjusted)
2019
(reported)
2018
(adjusted)
2018
(reported)
795.1
554.1
241.0
93.0
148.0
—
12.4
135.6
38.2
97.4
795.1
565.0
230.1
131.1
99.0
670.0
12.4
(583.4)
24.4
(607.8)
852.7
566.9
285.8
102.4
183.4
—
17.5
165.9
46.6
119.3
852.7
566.9
285.8
102.4
183.4
360.0
17.5
(194.1)
46.6
(240.7)
Summary of adjustments
In NZD Millions
Statutory loss after tax
Adjustments to earnings as follows:
Content write-offs
Non recurring costs included in other costs
Impairment of property, plant and equipment
Abandonment of IVP project
Impairment of goodwill
Tax effect of adjustments
Total adjustments
Adjusted profit after tax
30-Jun-19
30-Jun-18
(607.8)
(240.7)
5.7
5.0
4.8
33.4
670.0
(13.7)
705.2
97.4
—
—
—
—
360.0
—
360.0
119.3
(1) Adjustments to operating costs include content write-offs (note 9) and redundancy and consulting costs incurred as a result of
changes in strategic direction.
(2) Adjustments to depreciation, amortisation and impairment include abandonment of the IVP project and impairment of
decoders and associated equipment (note 11).
Financial trends
Income statement — five year summary
In NZD 000
For the year ended 30 June
Total revenue (1)
2019
2018
2017
2016
2015
795,126
852,710
893,485
928,200
927,525
Total operating expenses (1,2)
564,958
566,900
601,145
602,914
547,756
EBITDA (3)
Less
230,168
285,810
292,340
325,286
379,769
Depreciation, amortisation and impairment (4)
131,103
102,414
105,148
100,241
119,194
Impairment of goodwill
670,000
360,000
—
—
—
Net interest expense and financing charges
Unrealised losses/(gains) on currency and other
13,650
(1,208)
17,576
20,470
19,684
21,696
(66)
(850)
371
—
Net (loss)/profit before income tax
(583,377)
(194,114)
167,572
204,990
238,879
Balance sheet – five year summary
In NZD 000
As at 30 June
2019
2018
2017
2016
2015
Property, plant, equipment and intangibles
213,702
268,925
301,008
331,157
299,243
Goodwill
Total assets
395,331
1,065,331
1,425,331
1,425,331
1,425,331
771,353
1,503,002
1,887,200
1,943,564
1,942,021
Interest bearing loans and liabilities
193,662
235,344
298,663
348,085
350,763
Working capital (5)
Total liabilities
Total equity
8,607
9,038
10,215
30,945
29,953
419,785
476,315
559,322
612,641
604,818
351,568
1,026,687
1,327,878
1,330,923
1,337,203
Cash flow - five year summary
IN NZD 000
As at 30 June
2019
2018
2017
2016
2015
Net cash from operating activities
178,026
213,613
244,536
275,844
282,915
Net cash used in investing activities
(69,780)
(58,194)
(79,640)
(133,635)
(115,416)
Free cash flow
108,246
155,419
164,896
142,209
167,499
(1) The 2018 revenue and operating expenses have been adjusted to reflect the changes in revenue recognition following
adoption of NZ IFRS 15 as disclosed in note 4 of the financial statements. Revenues prior to this have not been restated.
(2) Exclusive of depreciation, amortisation and impairment.
(3) Earnings before income tax, interest expense, depreciation, amortisation and impairment, unrealised gains and losses on
currency and interest rate swaps.
(4) Includes impairment of property, plant and equipment of $38.2 million relating to abandonment of infinite video platform
(IVP) and related decoders and associated equipment. Refer note 11.
(5) Working capital excludes current borrowing, bonds, derivative financial instruments, short term investments and contract
liabilities. Prior periods have been adjusted to exclude contract liabilities.
Sky / 2019 Annual Report / 35
Depreciation and capital expenditure
In NZD 000
2019
2018
2017
2016
2015
Depreciation, amortisation and impairment (1)
131,103
102,414
105,148
100,241
119,194
Capital expenditure
76,300
58,200
79,700
128,800
115,500
(1) Includes IVP impairment of $38.2 million excludes goodwill impairment.
History of dividend payments
(By calendar year in cents per share)
2019
2018
2017
2016
2015
Interim dividend (paid in March)
Final dividend (paid in September)
Total ordinary dividend
7.5
—
7.5
7.5
7.5
15.0
15.0
12.5
27.5
15.0
15.0
30.0
15.0
15.0
30.0
Subscriber base
2019
2018
2017
2016
2015
Total subscribers (1)
778,840
767,727
824,782
852,679
851,561
Average monthly revenue per residential subscriber
(ARPU) (2)
74.84
77.73
78.82
78.63
79.54
Gross churn (3)
Net churn (4)
14.6%
14.0%
15.4%
15.2%
15.9%
15.8%
17.5%
16.8%
14.5%
13.9%
(1) Includes subscribers to Sky’s streaming services NEON and FAN PASS
(2) The 2018 ARPU has been adjusted to reflect the changes in revenue recognition following adoption of NZ IFRS 15 as disclosed
in note 4 of the financial statements. ARPU’s prior to this have not beeen restated.
(3) Gross churn refers to the percentage of residential subscribers over the 12-month period ended on the date shown who
terminated their sports and entertainment media subscriptions net of existing subscribers who transferred their services to
new residences during the period.
(4) Gross churn adjusted for migrants to a third party platform.
Sky / 2019 Annual Report / 37
Directors’ Responsibility
Statement
The directors of Sky Network Television Limited (the Group) are responsible for ensuring that the
consolidated financial statements of the Group present fairly the financial position of the Group as at
30 June 2019 and the results of its operations and cash flows for the year ended on that date.
The directors consider that the consolidated financial statements of the Group have been prepared
using appropriate accounting policies, consistently applied and supported by reasonable judgements and
estimates and that all relevant financial reporting and accounting standards have been followed.
The directors believe that proper accounting records have been kept which enable, with reasonable
accuracy, the determination of the financial position of the Group and facilitate compliance of the
consolidated financial statements with the Financial Markets Conduct Act 2013.
The directors consider they have taken adequate steps to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
The directors present the consolidated financial statements of the Group for the year ended
30 June 2019.
The board of directors of Sky Network Television Limited authorise these financial statements for issue
on 21 August 2019.
For and on behalf of the board of directors
Peter Macourt
Chairman
Susan Paterson
Director
Date: 21 August 2019
Consolidated income statement
For the year ended 30 June 2019
IN NZD 000
Total revenue
Expenses
Programming
Subscriber related costs
Broadcasting and infrastructure
Depreciation, amortisation and impairment of assets
Other costs
Total expenses
Operating profit before impairment of goodwill
Impairment of goodwill
Operating loss
Finance costs, net
Loss before tax
Income tax expense
Loss for the year
Attributable to
Equity holders of the Company
Non-controlling interests
Loss per share
Notes
30-Jun-19
30-Jun-18
(Restated)1
4
4
4
5
12/5
6
7
795,126
852,710
326,461
88,323
95,846
131,103
54,328
696,061
99,065
670,000
(570,935)
12,442
328,109
95,573
92,558
102,414
50,660
669,314
183,396
360,000
(176,604)
17,510
(583,377)
(194,114)
24,460
46,560
(607,837)
(240,674)
16
(608,158)
(240,956)
321
282
(607,837)
(240,674)
Basic and diluted loss per share (cents)
16
(156.28)
(61.92)
1
As per note 4 restated for NZ IFRS 15.
Sky / 2019 Annual Report / 39
Consolidated statement
of comprehensive income
For the year ended 30 June 2019
IN NZD 000
Loss for the year
Notes
30-Jun-19
(607,837)
30-Jun-18
(240,674)
Items that may be reclassified to profit or loss in subsequent periods
Deferred hedging (losses) /gains transferred to operating
expenses during the year
Loss on available for sale investments
10
Income tax effect
Net other comprehensive (loss)/income to be reclassified to
profit or loss in subsequent periods, net of income tax
Items that may not be reclassified to profit and loss in
subsequent periods
Deferred hedging losses transferred to non-financial
assets during the year
Income tax effect
Net other comprehensive loss not being reclassified to profit or
loss in subsequent periods, net of income tax
(2,745)
—
769
(1,976)
(10,097)
2,827
(7,270)
25,131
(646)
(6,856)
17,629
—
—
—
Total comprehensive loss for the year
(617,083)
(223,045)
Attributable to:
Equity holders of the Company
Non-controlling interest
(617,404)
(223,327)
321
282
(617,083)
(223,045)
Consolidated balance sheet
As at 30 June 2019
IN NZD 000
Current assets
Cash and cash equivalents
Trade and other receivables
Short term investment
Programme rights inventory
Derivative financial instruments
Non-current assets
Property, plant and equipment
Intangible assets
Goodwill
Derivative financial instruments
Total assets
Current liabilities
Interest bearing loans and borrowings
Trade and other payables
Contract liabilities
Income tax payable
Derivative financial instruments
Non-current liabilities
Interest bearing loans and borrowings
Deferred tax
Derivative financial instruments
Total liabilities
Equity
Share capital
Reserves
Retained earnings
Notes
30-Jun-19
30-Jun-18
8
10
9
15
11
12
12
15
14
13
13
15
14
7
15
16
16
4,283
61,996
—
89,458
5,019
4,694
63,117
6,334
78,378
9,917
160,756
162,440
163,217
50,485
395,331
1,564
610,597
771,353
1,701
136,078
54,396
11,052
2,721
209,582
59,343
1,065,331
6,306
1,340,562
1,503,002
1,040
125,308
60,746
11,843
595
205,948
199,532
191,961
18,924
2,952
213,837
419,785
577,403
(53)
(227,111)
234,304
40,826
1,653
276,783
476,315
577,403
9,032
438,998
Total equity attributable to equity holders of the Company
350,239
1,025,433
Non-controlling interest
Total equity
Total equity and liabilities
1,329
351,568
771,353
1,254
1,026,687
1,503,002
Peter Macourt
CHAIRMAN
For and on behalf of the Board 21 August 2019
Susan Paterson
DIRECTOR
Sky / 2019 Annual Report
/ 41
Consolidated statement
of changes in equity
For the year ended 30 June 2019
Attributable to owners of the parent
Notes
Share
capital
Reserves
Retained
earnings
Total
Non-
controlling
interest
Total
equity
IN NZD 000
For the year ended 30 June 2019
Balance at 1 July 2018
577,403
9,032
438,998
1,025,433
1,254
1,026,687
Reversal of deferred tax on
available for sale investment
10
—
—
420
420
—
420
Balance at 1 July 2018 (restated)
577,403
9,032
439,418
1,025,853
1,254
1,027,107
(Loss)/profit for the year
Cash flow hedges, net of tax
16
Total comprehensive (loss)
/income for the year
—
—
—
—
(608,158)
(608,158)
321
(607,837)
(9,246)
—
(9,246)
—
(9,246)
(9,246)
(608,158)
(617,404)
321
(617,083)
Transactions with owners in their capacity as owners
Dividend paid
Supplementary dividends
Foreign investor tax credits
Employee share scheme
5
—
—
—
—
—
—
—
—
161
161
(58,371)
(58,371)
(246)
(58,617)
(8,552)
(8,552)
8,552
—
8,552
161
—
—
—
(8,552)
8,552
161
(58,371)
(58,210)
(246)
(58,456)
Balance at 30 June 2019
577,403
(53)
(227,111)
350,239
1,329
351,568
For the year ended 30 June 2018
Balance at 1 July 2017
577,403
(9,062)
758,247
1,326,588
1,290
1,327,878
(Loss)/profit for the year
Loss on available for sale financial
assets, net of tax
Cash flow hedges, net of tax
16
Total comprehensive (loss)/
income for the year
—
—
—
—
Transactions with owners in their capacity as owners
—
—
(240,956)
(240,956)
282
(240,674)
(465)
(465)
18,094
—
18,094
—
—
(465)
18,094
18,094
(241,421)
(223,327)
282
(223,045)
Dividend paid
Supplementary dividends
Foreign investor tax credits
—
—
—
—
—
—
—
—
(77,828)
(77,828)
(318)
(78,146)
(11,113)
(11,113)
11,113
11,113
—
—
(11,113)
11,113
(77,828)
(77,828)
(318)
(78,146)
Balance at 30 June 2018
577,403
9,032
438,998
1,025,433
1,254
1,026,687
Consolidated statement
of cash flows
For the year ended 30 June 2019
IN NZD 000
Cash flows from operating activities
Loss before tax
Adjustments for:
Depreciation and amortisation
Impairment of goodwill
Impairment of programme rights
Unrealised foreign exchange (gain)/loss
Interest expense
Bad debts and movement in provision for loss allowance
Other non-cash items
Movement in working capital items:
(Increase)/decrease in receivables
Increase/(decrease) in payables
(Increase)/decrease in programme rights
Cash generated from operations
Interest paid
Bank facility fees paid
Income tax paid
Net cash from operating activities
Cash flows from investing activities
Proceeds from sale of property, plant and equipment
Acquisition of property, plant and equipment
Acquisition of intangibles
Disposal of short term investment
Net cash used in investing activities
Cash flows from financing activities
Repayment of borrowings - bank loan
Advances received - bank loan
Vendor finance received
Repayment of other borrowings
Dividend paid to minority shareholders
Dividends paid
Net cash used in financing activities
Net decrease in cash and cash equivalents
Cash and cash equivalents at beginning of year
Cash and cash equivalents at end of year
Notes
30-Jun-19
30-Jun-18
(583,377)
(194,114)
5
5
6
6
5
12
10
14
14
14
14
131,103
670,000
5,715
(258)
13,895
1,186
605
(65)
5,362
(16,795)
227,371
(14,045)
(800)
(34,500)
178,026
228
(66,307)
(10,035)
6,334
(69,780)
(300,000)
257,000
3,205
(1,693)
(246)
(66,923)
(108,657)
(411)
4,694
4,283
102,414
360,000
—
7
17,756
895
83
729
(9,320)
625
279,075
(15,766)
(696)
(49,000)
213,613
29
(43,664)
(14,559)
—
(58,194)
(166,000)
97,000
2,386
(296)
(318)
(88,941)
(156,169)
(750)
5,444
4,694
Sky / 2019 Annual Report / 43
Notes to the
Financial Statements
1. General information
This section sets out the Group’s accounting policies that relate to the consolidated financial
statements as a whole. Where an accounting policy is specific to one note, the policy is described in
the note to which it relates.
Sky Network Television Limited (Sky) is a company incorporated and domiciled in New Zealand.
The address of its registered office is 10 Panorama Road, Mt Wellington, Auckland, New Zealand.
The consolidated financial statements of the Group for the year ended 30 June 2019 comprise the
Company, Sky Network Television Limited and its subsidiaries.
Sky is a company registered under the Companies Act 1993 and is a reporting entity under Part 7 of
the Financial Markets Conduct Act 2013. The financial statements of the Group have been prepared in
accordance with the requirements of the Financial Markets Conduct Act 2013 and the NZX Main Board
Listing Rules.
The Group’s primary activity is to operate as a provider of sport and entertainment media services in
New Zealand.
These consolidated financial statements were authorised for issue by the Board on 21 August 2019.
Basis of preparation
The consolidated financial statements of the Group have been prepared in accordance with Generally
Accepted Accounting Practice in New Zealand (NZ GAAP). The Group is a for-profit entity for the
purpose of complying with NZ GAAP. The consolidated financial statements comply with New Zealand
equivalents to International Financial Reporting Standards (NZ IFRS), other New Zealand accounting
standards and authoritative notices that are applicable to entities that apply NZ IFRS. The consolidated
financial statements also comply with International Financial Reporting Standards (IFRS).
These consolidated financial statements are prepared on the basis of historical cost except where
otherwise identified. The consolidated financial statements are presented in New Zealand dollars.
Group structure
The Group has a majority share in the following subsidiaries, all of which are incorporated in and have
their principal place of business in New Zealand:
Name of Entity
Principal Activity
Parent
Interest held
Sky DMX Music Limited
Commercial Music
Sky Ventures Limited
Media Finance Limited
Investment
Non-trading
Outside Broadcasting Limited
Broadcasting services
Screen Enterprises Limited (1)
Igloo Limited
Non-trading
Non-trading
Believe It Or Not Limited
Entertainment quizzes
Sky
Sky
Sky
Sky
Sky
Sky
Sky
2019
2018
50.50%
100.00%
100.00%
100.00%
100.00%
100.00%
51.00%
50.50%
100.00%
100.00%
100.00%
100.00%
100.00%
51.00%
(1) Ceased trading during the prior year
2. Basis of consolidation
The Group financial statements consolidate the financial statements of the Company and its subsidiaries.
The acquisition method of accounting is used to account for the acquisition of subsidiaries and
businesses by the Group. The consideration transferred in a business combination is measured at fair
value, which is calculated as the sum of the acquisition date fair value of the assets transferred and the
liabilities incurred. Each identifiable asset and liability is generally measured at its acquisition date fair
value except if another NZ IFRS requires another measurement basis. The excess of the consideration of
the acquisition and the amount of any non-controlling interest in the acquired company, less the Group’s
share of the net of the acquisition date amounts of the identifiable assets acquired and the liabilities
assumed is recognised as goodwill. Acquisition related costs are expensed as incurred.
Subsidiaries
Subsidiaries are entities that are controlled, either directly or indirectly, by the Group. The Group controls
an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and
has the ability to affect those returns from its power over the entity. Subsidiaries are fully consolidated
from the date on which control is transferred to the Group. They are deconsolidated from the date on
which control ceases.
Intragroup balances and any unrealised gains and losses or income and expenses arising from intragroup
transactions, are eliminated in preparing the consolidated financial statements. Unrealised losses are
eliminated in the same way as are unrealised gains unless the transaction provides evidence of an
impairment of the asset transferred.
Transactions with non-controlling interests
Transactions with non-controlling interests that do not result in loss of control are accounted for as
equity transactions – that is, as transactions with the owners in their capacity as owners. The difference
between fair value of any consideration paid and the relevant share acquired of the carrying value of net
assets of the subsidiary is recorded in equity. Gains or losses on disposals to non-controlling interests are
also recorded in equity.
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 45
3. Significant accounting policies and changes
Sky has applied NZ IFRS 9 Financial Instruments without restating comparative information and
NZ IFRS 15 Revenue from Contracts with Customers using a full retrospective approach which requires
restatement of comparatives of the 2018 financial year. The nature and effect of these changes are
disclosed below.
NZ IFRS 9 Financial Instruments
NZ IFRS 9 replaces the provisions of NZ IAS 39 that relate to the recognition, classification and
measurement of financial assets and financial liabilities, de-recognition of financial instruments,
impairment of financial assets and hedge accounting.
NZ IFRS 9 was generally adopted without restating comparative information. No adjustments were
made as a result of adoption of the new impairment rules.
The new impairment model requires the recognition of impairment provisions based on expected credit
losses (ECL) rather than only incurred credit losses as was the case under NZ IAS 39. The standard
applies to the Group in relation to financial assets classified at amortised cost, within the Group’s trade
receivables. Based on the Group’s assessment of historical provision rates and forward-looking analysis,
there is no material financial impact on the impairment provisions.
Classification and measurement
On 1 July 2018 (the date of initial application of NZ IFRS 9), the Group’s management has assessed
which business models apply to financial assets held by the Group and has classified its financial
instruments into the appropriate NZ IFRS 9 categories.
From 1 July 2018 the Group classifies its financial assets in the following measurement categories;
− those to be measured subsequently at fair value (either through other comprehensive income
or through profit or loss), and
− those to be measured at amortised cost.
Except for cash and cash equivalents and trade receivables, under NZ IFRS 9, the Group initially
measures a financial asset at its fair value, plus transaction costs where a financial asset is classified
at fair value through other comprehensive income.
The only reclassification arising on transition to NZ IFRS 9 is for the investment in 90 Seconds Limited
which under NZ IAS 39 was classified as an available for sale financial asset. At the date of initial
application, this investment qualified as held for trading and therefore it was reclassified as a financial
asset at fair value through profit of loss. Related fair value gains of $1,081,000 (net of tax) were
transferred from the available-for-sale financial assets reserve to retained earnings on 1 July 2018.
The value is combined in the retained earnings line in the consolidated statement of changes in equity.
Subsequent changes in the fair value of financial assets at fair value through profit or loss are recognised
in other gains/losses in profit or loss as applicable. The Group sold its investment in 90 Seconds Limited
in July 2018 (Refer note 10).
3. Significant accounting policies and changes (continued)
The accounting for the Group’s financial liabilities remains the same as it was under NZ IAS 39.
Derivatives and hedging activities
The foreign currency forwards and interest rate swaps in place as at 1 July 2018 qualified as cash flow
hedges under NZ IFRS 9. The Group’s risk management strategies and hedge documentation are aligned
with the requirements of NZ IFRS 9 and these relationships are therefore treated as continuing hedges.
Sky applied hedge accounting prospectively. Consistent with prior periods Sky has continued to
designate the change in fair value of the entire forward contract as a cash flow hedge relationship and
as such, the adoption of the hedge accounting requirements of NZ IFRS 9 had no significant impact on
Sky’s consolidated financial statements.
Under NZ IAS 39, all gains and losses arising from Sky’s cash flow hedging relationships were eligible to
be subsequently reclassified to profit or loss. However, under NZ IFRS 9, gains or losses arising on cash
flow hedges of forward purchases of non-financial assets need to be incorporated into the initial carrying
amounts of the non-financial assets. This change was adopted by Sky on 1 July 2017 and consequently
has no effect on Sky’s consolidated financial statements other than the reclassification described below.
Upon adoption of NZ IFRS 9 the portion of the net gain or loss on cash flow hedges relating to non-
financial assets, ie programme rights and sports rights is presented as “Other comprehensive income not
being reclassified to profit or loss in subsequent periods.” This change only applies prospectively from the
date of initial application of NZ IFRS 9 and has no impact on the presentation of comparative figures.
NZ IFRS 15 Revenue from contracts with customers
NZ IFRS 15 supersedes NZ IAS 11 Construction Contracts, NZ IAS 18 Revenue and related
interpretations and it applies to all revenue arising from contracts with customers, unless those
contracts are in the scope of other standards. The new standard establishes a five-step model to
account for revenue arising from contracts with customers. Under NZ IFRS 15, revenue is recognised
at an amount that reflects the consideration to which an entity expects to be entitled in exchange for
transferring goods or services to a customer.
The standard requires entities to exercise judgement, taking into consideration all of the relevant
facts and circumstances when applying each step of the model to contracts with their customers. The
standard also specifies the accounting for the incremental costs of obtaining a contract and the costs
directly relating to fulfilling a contract.
Sky adopted NZ IFRS 15 for the first time on 1 July 2018, using the full retrospective approach. Sky
did not identify any significant changes in the timing of revenue recognition as a result of the adoption
of NZ IFRS 15 and accordingly there was no adjustment for the cumulative effect against opening
retained earnings at 1 July 2018. Certain contracts where Sky has been identified as the principal,
which historically were recognised net of expenses are now presented on a gross basis with expenses
recognised in operating costs. As a result of the assessment made for adopting NZ IFRS 15, an
adjustment was made which increased both revenue and expenses with no impact to net profit as
referred to in note 4.
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 47
Presentation and disclosure requirements
As required by NZ IFRS 15 the Group disaggregated revenue recognised from contracts with customers
into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows
are affected by economic factors. Refer to note 4 for the disclosure on disaggregated revenue.
Under NZ IFRS 15 a contract liability is recognised for payments received from customers in advance
and is recognised in revenue as services are provided. (Refer note 13). These payments were previously
included in trade and other payables but are now presented separately on the balance sheet. Sky invoices
customers in advance for both residential and commercial subscriptions.
The Group has identified certain transactions which are impacted by the adoption of NZ IFRS 15 but
for which no adjustments have been made due to the immateriality of the amounts involved. These
transactions which include installation revenue, customer acquisition costs, discounted services, and
any new revenue streams will be monitored on an interim basis in order to ensure continued compliance
with NZ IFRS 15.
Impact of standards issued but not yet applied by the entity
NZ IFRS 16 Leases (effective date: 1 January 2019)
NZ IFRS 16 will primarily change lease accounting for lessees; lease agreements will give rise to the
recognition of an asset representing the right to use the leased item and a lease liability for future lease
payables. Lease costs will be recognised in the form of depreciation of the right to use asset and interest
must be recognised on the lease liability. The new standard will be substantively different for current
operating leases where rental charges are currently recognised on a straight-line basis and no lease asset
or lease obligation is recognised. The standard is effective for accounting periods beginning on or after
1 January 2019. The Group intends to adopt the standard from 1 July 2019.
The Group has assessed the impact of applying NZ IFRS 16 and determined that the adjustments
to recognise right of use assets and corresponding lease liabilities are likely to be significant. Most of
this value relates to the Optus transponder lease which is currently treated as an operating lease for
accounting purposes.
3. Significant accounting policies and changes (continued)
The expenses for operating leases previously recorded within operating expense will now be moved to
depreciation and finance expense. The impact on net income over the term of the lease will remain the
same. However, a higher interest expense occurs in earlier years of the lease leading to higher costs in the
initial lease period.
Sky has a large number of operating leases which will be recognised as “right of use assets” under
NZ IFRS 16. These include:
Transponder Lease – The Optus transponder lease is the most significant of Sky’s operating leases
and given its high value will have a material impact on “right of use assets” and lease liabilities on
adoption of NZ IFRS 16.
Property – The Group has various rental properties throughout New Zealand which will also materially
impact on “right of use assets” and lease liabilities after taking into account renewal rights which are
reasonably certain to be exercised.
Motor Vehicles – The Group leases motor vehicles for use in field operations and vans for use in its
installation activities.
Equipment – The Group has certain lease agreements for transmission networks, technology
equipment and network infrastructure. These leases have been reviewed on an individual lease basis.
The Group has utilised the recognition exemption for leases of low–value items where appropriate.
Adoption process
The Group has carried out a review of its lease contracts that could be impacted by adoption of
NZ IFRS 16. In order to manage these lease contracts the Group has implemented an NZ IFRS 16
compliant lease management and accounting system.
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 49
Transition, estimated financial impact, and assumptions
The Group has elected to use the modified retrospective approach on transition whereby the lease
liability is valued at the net present value of future lease payments based on the transition date
discount rate while the right of use asset is valued as if it existed at the lease commencement date.
The difference between the value of the lease liability and the right of use asset is an adjustment to
retained earnings.
The major assumptions where judgements are required are the discount rate and the lease term where
renewal options exist.
The Group has performed an assessment of the financial impact based on leases in effect on 1 July
2019.
Impact on transition
Impact on FY20
IN NZD 000
Transponder
Property
Motor vehicles
Equipment
Discount rate
(average
for class)
Right of
use asset
Lease
liability
Retained
earnings
6.50%
5.20%
5.20%
5.50%
54,045
74,052
7,602
424
8,012
8,954
426
8,177
20,007
1,352
2
165
Interest
expense
(year 1)
Depreciation
annual
Current
accounting
treatment
3,719
22,118
32,727
430
19
301
1,238
140
4,899
1,687
155
5,510
70,083
91,609
21,526
4,469
28,395
40,079
Total expense (depreciation and interest) for FY 2020 is estimated at $33 million, in comparison to
the lease expense of approximately $40 million, which would be recognised in FY20 if current lease
accounting would be applied.
Actual results may differ from the estimated results due to changes in assumptions and estimates.
The estimated ratio of total assets to net liabilities would increase from 2.2 to 2.6.
The adoption of NZ IFRS 16 will not have any significant effect on the Group’s banking covenants since an
adjustment is already in place to treat the Optus transponder lease as if it was a finance lease contract.
Other than NZ IFRS 16 “Leases”, there are no new standards, amendments or interpretations that have
been issued and effective, or not yet effective, that are expected to have a significant impact on the Group.
Goods and Services Tax (GST)
The consolidated income statement, consolidated statement of comprehensive income and consolidated
statement of cash flows have been prepared so that all components are stated exclusive of GST. All
items in the consolidated balance sheet are stated net of GST, with the exception of receivables and
payables, which include GST invoiced.
4. Segment and revenue information
In NZD 000
Residential satellite subscriptions
Other subscriptions
Advertising
Other revenue
30-Jun-19
629,763
98,595
51,805
14,963
795,126
30-Jun-18
(Restated)
694,212
84,728
57,045
16,725
852,710
Description of revenue streams
Within its operating business segment Sky has several revenue streams which it reports against.
These include:
Residential satellite revenue: This includes revenue from Sky’s subscription services linked to its
satellite customers. Customers are invoiced on a monthly basis and contracts are normally for a
period of 6 or 12 months with monthly renewals thereafter. Early termination fees apply. Revenue is
recognised over the period to which the subscription related.
Unearned subscriptions and deferred revenues are revenues that have been invoiced relating to
services not yet performed and are reported as contract liabilities (refer note 13).
Other subscription revenue: This includes commercial revenue earned from Sky subscriptions at
hotels, motels, restaurants and bars throughout New Zealand, revenue from content sold to third
parties for retransmission and revenue from other subscription services such as NEON and FAN
PASS. This revenue is recognised over time based on the timing of the services provided. Contracts
are normally for a period of one year payable monthly in advance.
Contracts with partners (reseller contracts), where some of the Group’s services (including NEON,
Sky and FAN PASS) are combined with the partner’s products and sold as part of a bundled service
have differing provisions such that the Group has been determined to be the principal in some
of these contracts. Revenue from these contracts is invoiced monthly depending on the services
provided and is reported on a gross basis with the commission paid or discount offered being treated
as an operating expense.
Advertising revenue: This relates to revenue received from customers in return for advertising placed
on Sky’s satellite services. This revenue is reported when the advertisement is screened. Contract
terms and rates vary depending on the customer and services provided. Customers are billed monthly
in arrears. Revenue is recognised at a point in time.
Other revenue: This includes revenue from installation services, transmission services and various
other non-subscriber related revenue. This revenue is recorded when the product or service has been
delivered to the customer at a point in time.
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 51
Operating segments are reported in a manner consistent with the internal reporting provided to Sky’s
executive directors who are the chief operating decision-makers. Sky’s executive directors are responsible
for allocating resources and assessing performance of the operating segments. Sky operates in a single
operating segment; the provision of sport and entertainment media services in New Zealand.
The table below shows the disaggregation of the Group's revenue from contracts with customers on the
basis of when revenue is recognised for its principal revenue streams as described below.
In NZD 000
For the year ended 30 June 2019
Residential
satellite
subscriptions
Other
subscriptions
Advertising
Other
revenue
Total revenue
from contracts
with customers
Revenue from customers
629,763
98,595
51,805
32,847
Inter-segment revenue
—
—
—
(17,884)
Total revenue
629,763
98,595
51,805
14,963
Timing of revenue recognition
At a point in time
Over time
13,895
615,868
629,763
—
51,805
—
7,505
7,458
51,805
14,963
98,595
98,595
For the year ended 30 June 2018 (restated)
Revenue from customers
694,212
84,728
57,045
30,532
Inter-segment revenue
—
—
—
(13,807)
Total revenue
694,212
84,728
57,045
16,725
Timing of revenue recognition
At a point in time
Over time
18,791
675,421
694,212
—
57,045
—
8,567
8,158
57,045
16,725
84,728
84,728
813,010
(17,884)
795,126
73,205
721,921
795,126
866,517
(13,807)
852,710
84,403
768,307
852,710
4. Segment and revenue information (continued)
Principal versus agent considerations
From time to time the Group enters into contracts with partners whereby the partner may provide
some of the Group’s services such as Sky, NEON or FANPASS to its own customers as part of a bundled
service. These contracts have differing provisions and for certain of them the Group has determined that
it is the principal in these contracts on the basis that it is responsible for the provision of services to its
partners’ customers and that the partner has no control over the delivery of these services.
Prior to the adoption of NZ IFRS 15, commission paid or discounts offered to these partners was treated
as a deduction from revenue. Upon adoption of NZ IFRS 15 the Group has determined that as it is the
principal in these contracts the commission paid or discount offered is treated as an operating expense
rather than a deduction from revenue. This change resulted in an increase in both revenue and expenses
with no impact on net profit. The table below shows the amount by which each financial statement line
item is affected.
For the year ended 30 June 2018:
In NZD 000
Total revenue
Expenses
Programming
Subscriber related costs
Broadcasting and infrastructure
Depreciation and amortisation
Other costs
As originally presented
NZ IFRS 15
Restated
839,729
12,981
852,710
328,109
83,168
91,982
102,414
50,660
656,333
—
328,109
12,405
576
—
—
95,573
92,558
102,414
50,660
12,981
669,314
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 53
5. Operating expenses
Loss before tax includes the following separate expenses/(credits):
IN NZD 000
Depreciation, amortisation and impairment
Depreciation and impairment of property, plant and equipment (1)
Amortisation of intangibles
Impairment of goodwill
Total depreciation, amortisation and impairment
Credit loss
Movement in provision
Net write-off
Total credit loss
Fees paid to external auditors
Audit fees paid to principal auditors (2)
Audit of regulatory returns
Non-assurance services by principal auditors
Bank compliance certificate work
Treasury advisory services
Total fees to external auditors
Professional fees in relation to acquisition of Vodafone NZ
Employee costs (3)
Kiwisaver employer contributions
Donations
Operating lease and rental expenses
Related party transactions
Notes
30-Jun-19
30-Jun-18
11
12
12
8
109,100
22,003
670,000
801,103
(57)
1,243
1,186
369
2
3
28
402
—
92,483
2,193
214
35,872
81,224
21,190
360,000
462,414
(290)
1,185
895
409
2
—
28
439
21
92,696
2,180
251
36,152
Remuneration of key personnel (included in employee costs) (4)
14,750
11,415
Employee share scheme (6)
Directors’ fees
Dividends paid to directors and key management personnel (5)
161
636
40
—
615
54
Total related party transactions
15,587
12,084
(1) The majority of depreciation and amortisation relates to broadcasting assets (refer notes 11 and 12).
(2) The audit fee includes the fee for both the annual audit of the financial statements and the review of the interim
financial statements.
(3) All employee costs are short-term employee benefits.
(4) Includes redundancy payments of $2,236,000 as a result Sky’s change in strategic direction.
(5) The Group’s directors and key management personnel collectively had shareholdings of 318,243 shares (2018: 268,988 shares)
which carry the normal entitlement to dividends. Share transactions undertaken by directors can be found as part of the
statutory disclosures in the annual report.
(6) Comprises the accrued share entitlements earned by the Chief Executive at the balance date. (Refer statutory disclosures in
the annual report).
Leases under which all the risk and benefits of ownership are substantially retained by the lessor are
classified as operating leases. Operating lease payments are recognised as an expense in the periods
the amounts are payable.
5. Operating expenses (continued)
Employee entitlements to salaries and wages and annual leave, to be settled within 12 months of the
reporting date represent present obligations resulting from employees’ services provided up to the
reporting date, calculated at undiscounted amounts based on remuneration rates that the Group
expects to pay.
Bonus plans are recognised as a liability and an expense for bonuses based on a formula that
takes into account the economic value added by employees during the reporting period. The Group
recognises this provision where contractually obliged or where there is a past practice that has
created a constructive obligation.
6. Finance costs, net
In NZD 000
Finance income
Interest income
Finance expense
Interest expense on bank loans
Interest expense on bonds
Finance lease interest
Amortisation of bond costs
Bank facility finance fees
Total interest expense
Unrealised exchange (gain)/loss - foreign currency payables
Unrealised exchange loss/(gain) - foreign currency hedges
Realised exchange (gain)/loss - foreign currency payables
30-Jun-19
30-Jun-18
(275)
(275)
6,564
6,132
261
272
666
13,895
(599)
341
(920)
12,442
(312)
(312)
10,395
6,179
50
272
860
17,756
2,520
(2,513)
59
17,510
Interest income is recognised on a time-proportion basis using the effective interest method, which is
the rate that exactly discounts estimated future cash flow receipts through the expected life of the
financial asset to that asset’s net carrying amount.
Borrowing costs directly attributable to acquisition, construction or production of an asset that takes
a substantial period of time to prepare for its intended use are capitalised as part of the cost of the
respective assets. All other borrowing costs are expensed in the period in which they are incurred.
Borrowing costs consist of interest and other costs that the Group incurs with the borrowing of funds.
Transactions in foreign currencies are translated at the foreign exchange rate ruling at the date of
the transaction. Non-monetary items carried at fair value that are denominated in foreign currencies
are translated to New Zealand dollars at the rates prevailing on the date when the fair value was
determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are
not re-translated. Foreign exchange gains and losses resulting from the settlement of foreign currency
transactions and from the translation at the year-end exchange rate of monetary assets and liabilities
denominated in foreign currencies are recognised in profit and loss except where hedge accounting is
applied and foreign exchange gains and losses are deferred in other comprehensive income.
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 55
7. Taxation
Income tax expense
The total charge for the year can be reconciled to the accounting (loss)/profit as follows:
IN NZD 000
Loss before tax
Prima facie tax expense at 28%
Non deductible expenses
Prior year adjustment
Other
Income tax expense
Allocated between
Current tax payable
Deferred tax
Income tax expense
Imputation credits
IN NZD 000
Imputation credits available for subsequent
reporting periods based on a tax rate of 28%
30-Jun-19
30-Jun-18
(583,377)
(163,346)
187,812
(8)
2
24,460
42,344
(17,884)
24,460
(194,114)
(54,352)
101,098
(132)
(54)
46,560
50,392
(3,832)
46,560
30-Jun-19
30-Jun-18
119,646
100,903
The above amounts represent the balance of the imputation account as at the end of the reporting
period adjusted for:
− Imputation credits that will arise from the payment of the amount of the provision for income tax;
− Imputation debits that will arise from the payment of dividends; and
− Availability of these credits is subject to continuity of ownership requirements.
Current income tax expense
Income tax expense represents the sum of the tax currently payable and deferred tax, except to the
extent that it relates to items recognised directly in other comprehensive income, in which case the
tax expense is also recognised in other comprehensive income. The tax currently payable is based
on taxable profit for the year. Taxable profit differs from profit as reported in profit or loss because
it excludes items of income or expense that are taxable or deductible in other years and it further
excludes items that are never taxable or deductible. The Group’s liability for current tax is calculated
using the rates that have been enacted or substantively enacted by the balance date.
7. Taxation (continued)
Deferred tax liabilities and (assets)
The following are the major deferred tax liabilities and assets and the movements thereon during the
current and prior reporting periods.
IN NZD 000
Notes
Fixed
assets
Leased
assets
Other Recognised
directly in
equity
Total
For the year ended 30 June 2019
At 1 July 2018
NZ IFRS 9 hedging adjustment recognised through
other comprehensive income
Revaluation of short term investment recognised
through other comprehensive income
(Credited)/charged to profit and loss
Balance at 30 June 2019
For the year ended 30 June 2018
At 1 July 2017
NZ IAS 39 hedging adjustment recognised through
other comprehensive income
Revaluation of available for sale investment
recognised through other comprehensive income
16
10
16
10
17,543
22,364
(3,133)
4,052
40,826
—
—
—
—
—
—
(3,597)
(3,597)
(421)
(421)
(9,365)
(6,381)
(2,138)
8,178
15,983
(5,271)
—
34
(17,884)
18,924
16,168
27,697
(3,259)
(2,923)
37,683
—
—
—
—
—
—
7,037
7,037
(62)
(62)
(Credited)/charged to profit and loss
1,375
(5,333)
126
—
(3,832)
Balance at 30 June 2018
17,543
22,364
(3,133)
4,052
40,826
Certain deferred tax assets and liabilities have been offset as allowed under NZ IAS 12 where there
is a legally enforceable right to set off current tax assets against current tax liabilities and where the
deferred tax assets and liabilities are levied by the same taxation authority.
Deferred income tax is provided in full, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated
financial statements. Deferred income tax is not accounted for if it arises from initial recognition
of an asset or liability in a transaction, other than a business combination, that at the time of the
transaction neither affects accounting nor taxable profit or loss. Deferred income tax is determined
using tax rates that have been enacted or substantively enacted by the balance date and are
expected to apply when the related deferred income tax asset is realised or the deferred income tax
liability is settled. Deferred income tax assets are recognised to the extent that it is probable that
future taxable profit will be available against which the temporary differences can be utilised.
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 57
Key estimates and assumptions
Deferred tax assets are recognised for unused tax losses and other deductible temporary differences
to the extent that it is probable that taxable profit will be available against which the losses and
other deductible temporary differences can be utilised. Significant management judgement is
required to determine the amount of deferred tax assets that can be recognised based upon the
likely timing and level of future taxable profits. No deferred tax asset has been recognised in relation
to Igloo Limited’s (IGLOO) accumulated losses of $12,150,000 (30 June 2018: $12,150,000). Those
tax losses can be carried forward for use against future taxable profits of IGLOO subject to meeting
the requirements of the income tax legislation including shareholder continuity.
8. Trade and other receivables
IN NZD 000
Trade receivables
Less provision for loss allowance
Trade receivables - net
Other receivables
Prepaid expenses
Balance at end of year
Deduct prepaid expenses
Note
30-Jun-19
30-Jun-18
51,405
56,575
(579)
(636)
50,826
55,939
2,308
8,862
1,300
5,878
61,996
63,117
(8,862)
53,134
(5,878)
57,239
Balance financial instruments
17
Impairment of trade receivables
The Group applies the NZ IFRS 9 simplified approach to measuring expected credit losses which uses
a lifetime expected loss allowance for all trade receivables.
To measure the expected credit losses trade receivables have been grouped based on the shared
credit risk characteristics and the days past due. The expected loss rates are based on the payment
profiles of sales over a period of 24 months before 30 June 2019 and 1 July 2018 respectively and the
corresponding historical credit losses experienced within this period. The Group considers that there
are no macroeconomic factors affecting the ability of customers to settle receivables in the future
and that the historical credit risk characteristics are a fair representation for future settlement.
IN NZD 000
Residential subscribers
Commercial subscribers
Wholesale customers
Advertising
Commercial music
Other
Gross Impairment
Gross Impairment
30-Jun-19
30-Jun-18
31,622
(423)
5,197
8,040
5,132
102
1,312
(17)
—
(42)
(13)
(84)
51,405
(579)
32,837
5,213
11,592
5,197
98
1,638
56,575
(504)
(18)
—
(27)
(21)
(66)
(636)
8. Trade and other receivables (continued)
As at 30 June, the ageing analysis of trade receivables is as follows:
The prior period has not been restated.
30-Jun-19
30-Jun-18
In NZD 000
Not past due
Past due 0-30 days
Past due 31-60 days
Past due 61-90 days
Greater than 90 days
Expected
loss rate
0.19%
2.28%
6.89%
39.10%
43.58%
Gross
carrying
amount
44,527
5,177
944
399
358
51,405
Loss
allowance
84
118
65
156
156
579
Neither past
due nor
impaired
49,504
—
—
—
—
49,504
Past due not
impaired
Impaired
—
5,093
1,115
167
60
6,435
—
26
15
213
382
636
Movements in the provision for impairment of receivables were as follows:
In NZD 000
Opening balance
Charged during the year
Utilised during the year
Closing balance
Note
30-Jun-19
30-Jun-18
8
636
1,186
(1,243)
579
926
895
(1,185)
636
The creation and release of the provision for impaired receivables has been included in subscriber related
costs in profit or loss. Amounts charged to the allowance account are generally written off when there
is no expectation of receiving additional cash. The maximum exposure to credit risk at the reporting
date is the fair value of each class of receivable. The Group holds collateral in the form of deposits for
commercial customers.
Trade and other receivables are recognised initially at fair value and subsequently measured at
amortised cost using the effective interest method, less provision for impairment. Collectability
of trade receivables is reviewed on an on-going basis. Debts which are known to be uncollectible
are written off. An impairment loss is recognised based on expected credit losses for each trade
receivable group. The amount of the provision is the difference between the asset’s carrying amount
and the present value of the estimated future cash flows, discounted at the effective interest rate.
The amount of the provision is expensed in profit or loss.
Notes to the Financial Statements (continued)Sky / 2019 Annual Report 9. Programme rights inventory
IN NZD 000
Opening balance
Acquired during the year
Written off during the year
Charged to programming expenses
Balance at end of year
/ 59
30-Jun-19
30-Jun-18
78,378
275,789
(5,715)
(258,994)
89,458
79,003
267,829
—
(268,454)
78,378
Programme rights are recognised at cost, as an asset in the consolidated balance sheet provided
the programme is available and the rights period has commenced at the balance date. Long-term
sports rights are executory contracts as the obligation to pay for the rights does not arise until the
event has been delivered. Most sports rights contracts are, however, payable in advance and as such,
are recognised only to the extent of the portion not yet utilised. Rights are expensed over the period
they relate to on a proportionate basis depending on the type of programme right and the expected
screening dates, generally not exceeding twelve months. Any rights not expected to be utilised are
written off during the period.
10. Short term investment
In March 2016 Sky Ventures Limited acquired a 15.78% interest in 90 Seconds Pty Limited (a cloud video
production company) for a cost of $4,800,000. The investment was subsequently diluted to 13.54%.
This investment was classified as an available for sale financial asset, recognised initially and
subsequently at fair value, with changes in fair value recognised in other comprehensive income.
With the adoption of NZ IFRS 9 it was reclassified to financial assets at fair value through profit or loss.
The fair value at 30 June 2018 was $6,334,000.
In July 2018 this investment was sold for a value of $6,334,000. The deferred tax effect on the unrealised
revaluation of $420,326 was released from equity on adoption of NZ IFRS 9 and recorded in retained
earnings as a result of it not being taxable under New Zealand tax legislation.
11. Property, plant and equipment
IN NZD 000
For the year ending 30 June 2019
Cost
Land,
buildings &
leasehold
improvements
Broadcasting
& studio
equipment
Decoders &
associated
equipment
Capitalised
installation
costs
Other
plant &
equipment
Projects under
development
Total
Balance at 1 July 2018
64,582
139,293
331,720
287,210
77,062
23,295
923,162
Transfer between categories
3,364
1,737
Transfer to software assets
-
-
-
-
-
-
6,739
(11,840)
-
-
(3,127)
(3,127)
Additions
Disposals
2,951
4,153
3,229
15,566
5,476
34,538
65,913
(886)
(372)
(13,707)
(40,862)
(186)
-
(56,013)
Balance at 30 June 2019
70,011
144,811
321,242
261,914
89,091
42,866
929,935
713,580
70,931
38,169
Accumulated depreciation
Balance at 1 July 2018
24,753
129,828
280,099
222,512
56,388
Depreciation for the year
2,400
6,869
27,165
27,362
7,135
-
-
Impairment
Disposals
-
-
4,743
-
-
33,426
(886)
(372)
(13,656)
(40,862)
(186)
-
(55,962)
Balance at 30 June 2019
26,267
136,325
298,351
209,012
Net book value at 30 June 2019
43,744
8,486
22,891
52,902
63,337
25,754
33,426
766,718
9,440
163,217
For the year ending 30 June 2018
Cost
Balance at 1 July 2017
64,271
139,786
352,918
306,246
81,631
5,228
950,080
Transfer between categories
Transfer to software assets
Additions
Disposals
-
-
364
(53)
962
-
-
-
-
-
906
(1,868)
-
-
(3,032)
(3,032)
550
8,581
18,789
4,850
22,967
56,101
(2,005)
(29,779)
(37,825)
(10,325)
-
(79,987)
Balance at 30 June 2018
64,582
139,293
331,720
287,210
77,062
23,295
923,162
Accumulated depreciation
Balance at 1 July 2017
22,694
122,987
278,757
228,875
58,701
Depreciation for the year
2,112
8,846
30,896
31,459
7,911
Disposals
(53)
(2,005)
(29,554)
(37,822)
(10,224)
Balance at 30 June 2018
24,753
129,828
280,099
222,512
Net book value at 30 June 2018
39,829
9,465
51,621
64,698
56,388
20,674
-
-
-
-
712,014
81,224
(79,658)
713,580
23,295
209,582
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 61
Land, buildings and leasehold improvements at 30 June 2019 includes land with a cost of $8,820,000
(30 June 2018: $8,820,000).
Depreciation related to broadcasting assets (including decoders and capitalised installation costs) of
$61,396,000 (30 June 2018: $71,201,000) accounts for the majority of the total depreciation charge.
Due to immateriality of the remaining depreciation, no allocation of deprecation has been made across
expense categories in the consolidated income statement.
In addition, an impairment charge of $38,169,000 was incurred in relation to the closure of the infinite
video platform (IVP) project and impairment of decoders and associated equipment.
The net book value of assets subject to finance leases totals $2,361,000 (30 June 2018: $3,050,000).
Property, plant and equipment are stated at cost less accumulated depreciation and impairment
losses except land which is shown at cost less impairment. Cost includes expenditure that is directly
attributable to the acquisition of the items. Capitalised installation costs are represented by the
cost of satellite dishes, installation costs and direct labour costs. Where parts of an item of property,
plant and equipment have different useful lives, they are accounted for as separate items of
property, plant and equipment.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that the future economic benefits embodied within the item
will flow to the Group and the cost of the item can be measured reliably. The cost of additions to
plant and other assets constructed by the Group consist of all appropriate costs of development,
construction and installation, comprising material, labour, direct overhead and transport costs. For
qualifying assets directly attributable interest costs incurred during the period required to complete
and prepare the asset for its intended use are capitalised as part of the total cost. All other costs are
recognised in profit or loss as an expense as incurred. Additions in the current year include $746,000
of capitalised labour costs (30 June 2018: $110,000).
Projects under development comprise expenditure on partially completed assets. The projects include
items of property, plant and equipment and intangible assets. At completion of the project the costs
are allocated to the appropriate asset categories and depreciation or amortisation commences.
Costs may also include transfers from equity of any gains or losses on qualifying cash flow hedges
of foreign currency purchases of property, plant and equipment.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount
and recognised in other costs in profit or loss.
11. Property, plant and equipment (continued)
Depreciation
Property, plant and equipment are depreciated using the straight-line method so as to allocate the
costs of assets to their residual values over their estimated useful lives as follows:
ASSETS
Land
Leasehold improvements
Buildings
Broadcasting and studio equipment
Decoders and associated equipment
Other plant and equipment
Capitalised installation cost
Time
Nil
5 — 50 years
50 years
5 — 10 years
4 — 5 years
3 — 10 years
5 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each
balance date.
Key estimates and assumptions
The estimated life of technical assets such as decoders and other broadcasting assets is based
on management’s best estimates. Changes in technology may result in the economic life of these
assets being different from that estimated previously. The board and management regularly review
economic life assumptions of these assets as part of management reporting procedures.
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 63
12. Intangible assets and goodwill
Intangible assets
IN NZD 000
For the year ending 30 June 2019
Cost
Balance at 1 July 2018
Transfer from projects under development
Additions
Disposals
Balance at 30 June 2019
Accumulated amortisation
Balance at 1 July 2018
Amortisation for the year
Disposals
Balance at 30 June 2019
Net book value at 30 June 2019
For the year ending 30 June 2018
Cost
Balance at 1 July 2017
Transfer from projects under development
Additions
Disposals
Balance at 30 June 2018
Accumulated amortisation
Balance at 1 July 2017
Amortisation for the year
Disposals
Balance at 30 June 2018
Net book value at 30 June 2018
Software
Broadcasting
rights
Other
intangibles
Total
138,883
3,127
10,035
(156)
151,889
79,573
21,990
(139)
101,424
50,465
135,690
3,032
14,559
(14,398)
138,883
72,837
21,134
(14,398)
79,573
59,310
—
—
—
—
—
—
—
—
—
—
1,083
139,966
—
—
—
1,083
1,050
13
—
1,063
20
3,127
10,035
(156)
152,972
80,623
22,003
(139)
102,487
50,485
2,185
3,167
141,042
—
—
(2,185)
—
2,185
—
(2,185)
—
—
—
—
(2,084)
1,083
3,078
56
(2,084)
1,050
33
3,032
14,559
(18,667)
139,966
78,100
21,190
(18,667)
80,623
59,343
12. Intangible assets and goodwill (continued)
Broadcasting rights consisting of UHF spectrum licences are recognised at cost and are amortised
on a straight-line basis over the lesser of the period of the licence term and 20 years.
Software development costs recognised as assets are amortised on a straight-line basis over their
estimated useful lives (three to five years).
Direct costs associated with the development of broadcasting and business software for internal use
are capitalised where it is probable that the asset will generate future economic benefits. Capitalised
costs include external direct costs of materials and services consumed and direct payroll-related costs
for employees (including contractors) directly associated with the project and interest costs incurred
during the development stage of a project. Additions in the current year to software include $4,014,000
of accumulated capitalised labour costs, $3,331,000 of which were incurred in the current year.
Key estimates and assumptions
Assets that are subject to amortisation and depreciation are tested for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value-in-use.
Goodwill
IN NZD 000
Opening balance
Impairment
Closing balance
30-Jun-19
1,065,331
(670,000)
395,331
30-Jun-18
1,426,293
(360,962)
1,065,331
Assets that have an indefinite useful life, are not subject to amortisation and are tested at each
reporting date for impairment and whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable.
Goodwill represents the excess of the cost of acquisition over the fair value of the Group's share of
the net identifiable assets, liabilities and contingent liabilities of the acquired subsidiary at the date
of acquisition and the fair value of the non-controlling interest in the acquiree. The goodwill balance
is allocated to the Group’s single operating segment. The majority of the goodwill ($1,422,115,000)
arose as a result of the acquisition of Sky by Independent Newspapers Limited (INL) in 2005.
Subsequent acquisitions have resulted in immaterial increases to goodwill.
The Group operates as a single business segment and monitors goodwill for the business as a whole.
If the testing indicates the carrying value exceeds the recoverable amount, goodwill is considered to
be impaired. The recoverable amount of the cash generating unit (CGU) which is classified within
Level 3 of the fair value hierarchy has been determined based on fair value less cost of disposal
calculations which includes the benefits of proposed changes to the cost structure of the business as
Sky leverages new technologies and adapts its operating model, some of which would be excluded
from a value-in-use calculation.
The recoverable amount of goodwill has been determined using the fair value less cost of disposal
approach consistent with prior year. This utilises the estimated future cash flows per the five-year
business plan approved by the Board.
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 65
A pre-tax discount rate of 12.5% (2018:12.5%) and a terminal growth rate of 0% (2018: 0%) have
been applied to the cash flows to calculate the recoverable amount.
During the current year, the Group’s market capitalisation fell significantly below the value of
net assets and average revenue per user (ARPU) decreased from the prior year. Following the
appointment of a new Chief Executive Officer in February 2019, a new strategy has been developed
and a five-year business plan was approved by the Board in June 2019. In a highly competitive
streaming environment margins are expected to be lower which results in a lower ARPU than
previously assumed. While the Group expects to have increased customer relationships as a result
of the focus on streaming, it is unclear whether the increased number of customer relationships
will offset the margin declines arising from the loss of residential satellite subscribers. Significant
enhancements to product offerings and pricing options are also planned such as the new Sky Sport
Now service.
The key assumptions used within the modelling of future cash flows are: net subscriber numbers,
ARPU and programming costs. These assumptions are heavily dependent on the retention of key
programming rights, in particular sporting rights. The model assumes that all key programming
rights are retained.
Due to the increased competitive environment and the inclusion of new products and offerings in
the business plan, there is an increased level of uncertainty around the future level of subscriber
numbers, ARPU and programming costs than was the case in prior year forecasts. Management
have considered a number of alternative scenarios in the modelling of future cash flows that show
a wide range of reasonably possible outcomes. In addition to modelling of cash flows, management
performed a cross check against other valuation techniques; for example if the recoverable amounts
was determined based on the Company’s share price at 30 June, an impairment of approximately
$572 million would be required.
The table below illustrates the sensitivity of the impairment assessment to the changes in key
assumptions over the five year forecast period used in the model (prior to the impairment charge in
the current year).
NZD (million)
Increase/decrease of 10% in subscriber numbers
Increase/decrease of 10% in ARPU
Decrease/increase of 10% in programming costs
Impairment
419m–921m
329m–1,011m
405m–935m
Based on the business plan and taking into account the volatility and uncertainty inherent in the cash
flow forecast, an impairment of $670 million has been recognised in the current year.
13. Trade and other payables and contract liabilities
Trade and other payables
IN NZD 000
Trade payables
Employee entitlements
Tax payables
Accruals
Balance at end of year
Less
Note
30-Jun-19
30-Jun-18
79,000
13,575
8,885
34,618
136,078
(22,460)
113,618
77,767
14,315
8,761
24,465
125,308
(23,076)
102,232
Payables not classified as financial instruments
Balance financial instruments
17
Trade and other payables are initially measured at fair value and are subsequently measured at
amortised cost, using the effective interest method.
Tax payables and employee benefits do not meet the definition of a financial instrument and have been
excluded from the “Trade and other payables” category. The prior year balance of financial instruments
has been restated.
The increase in accruals mainly relates to costs accrued in relation to the abandonment of the IVP
project (refer note 11).
Contract liabilities
IN NZD 000
Deferred revenue
Notes
30-Jun-19
30-Jun-18
54,396
54,396
60,746
60,746
Deferred revenue and unearned subscriptions are not classified as financial instruments.
Contract liabilities are recognised for payments received from customers in advance and are
recognised into revenue over the service period. These payments were previously included in trade and
other payables. Sky invoices customers in advance for both residential and commercial subscriptions.
Contract liabilities recognised at the end of the financial year are recognised as revenue in the
following year.
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 67
Total
Current
30-Jun-18
Non-
current
Total
91,736
2,404
99,522
99,522
458
582
—
132,625
133,083
2,429
3,011
99,250
99,250
14. Borrowings
IN NZD 000
Borrowings
Finance lease
Bonds
Current
1,093
608
—
30-Jun-19
Non-
current
90,643
1,796
1,701
191,961
193,662
1,040
234,304
235,344
30-Jun-19
30-Jun-18
1,701
1,040
191,961
234,304
193,662
235,344
Repayment terms
IN NZD 000
Less than one year
Between one and five years
Bank Loans
In October 2018 the Group refinanced its bank facility with a syndicate of banks comprising Bank of
New Zealand, Commonwealth Bank of Australia and Westpac Bank for a value of $200 million expiring
in 22 July 2022 with the facility reducing to $150 million by July 2021. This facility refinanced the Group’s
$300 million revolving credit bank facility scheduled to expire in July 2020 provided by a syndicate of
banks comprising ANZ National Bank Limited, Bank of New Zealand, Commonwealth Bank of Australia
and Westpac Bank.
The new facility arrangements (together with certain hedging arrangements and the existing $100
million bond) take the benefit of shared security granted by certain members of the Group, including (i)
a general security deed granted by each of Sky Network Television Limited and Outside Broadcasting
Limited; (ii) real property mortgages granted over certain real property interests of Sky Network
Television Limited; and (iii) a spectrum mortgage granted over certain spectrum. The loan facility is
subject to certain covenant clauses whereby the Group is required to meet certain key financial ratios.
These ratios are subject to change depending on certain conditions being met. These financial ratios
are calculated in accordance with the new strategy and business plan. Future compliance with the
covenants, including any changes in the ratios, is dependent on and sensitive to the timing and execution
of the Group’s strategy which affects the level of operating cash flows, capital investments and
disposals that are key inputs to the financial ratio calculation. There have been no breaches of covenant
clauses and no breaches are anticipated within the next 12 months.
Bank overdrafts of $6,780,000 (30 June 2018: $3,307,000) have been set off against cash balances.
Interest-bearing borrowings are recognised initially at fair value less attributable transaction costs.
Subsequent to initial recognition, interest-bearing borrowings are stated at amortised cost with
any difference between cost and redemption value being recognised in profit or loss over the period
of the borrowings, using the effective interest method. Arrangement fees are amortised over the
term of the loan facility. Borrowings are classified as current liabilities unless the Group has an
unconditional right to defer settlement of the liability for at least 12 months after the balance date.
14. Borrowings (continued)
Cash and cash equivalents comprise cash balances and call deposits with maturities of three
months or less. Bank overdrafts that are repayable on demand and which form an integral part of
the Group’s cash management are included as a component of cash and cash equivalents for the
purpose of the statement of cash flows.
Lease Liabilities
IN NZD 000
Less than one year
Between one and five years
Future
minimum
lease
payments
728
1,945
2,673
30-Jun-19
Interest
Present value
of minimum
lease
payments
Future
minimum
lease
payments
30-Jun-18
Interest
Present value
of minimum
lease
payments
120
149
269
608
1,796
2,404
727
2,704
3,431
145
275
420
582
2,429
3,011
The Group’s obligations under finance leases are secured by the lessors’ title to the leased assets.
The lease terms are for five years ending in November 2022 and June 2023.
Leases in terms of which the Group assumes substantially all the risk and rewards of ownership are
classified as finance leases. Assets acquired under finance leases are included as non-current assets
in the consolidated balance sheet. The lower of fair value and the present value of the minimum
lease payments is recognised as an asset at the beginning of the lease term and depreciated on a
straight-line basis over the shorter of the lease term or the expected useful life of the leased asset.
A corresponding liability is also established and each lease payment is allocated between the liability
and interest expense so as to produce a constant period rate of interest on the remaining balance of
the liability.
Bonds
On 31 March 2014 the Group issued bonds for a value of $100 million which were fully subscribed.
Terms and conditions of outstanding bonds are as follows:
Nominal interest rate
Market yield
Issue date
Date of maturity
IN NZD 000
Carrying amount
Fair value
Face value
30-Jun-19
30-Jun-18
6.25%
3.58%
6.25%
4.55%
31-Mar-14
31-Mar-14
31-Mar-21
31-Mar-21
99,522
99,250
104,523
104,375
100,000
100,000
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 69
Bonds are recognised initially at fair value less costs of issue. Costs of issue are amortised over the
period of the bonds. Subsequent to initial recognition, bonds are stated at amortised cost with any
difference between cost and redemption value being recognised in profit or loss over the period of
the bonds, using the effective interest method. Bonds are classified in the consolidated balance
sheet as non-current liabilities unless settlement of the liability is due within twelve months after the
balance date.
The difference between carrying amount and fair value has not been recognised in the consolidated
financial statements as the bonds are intended to be held until maturity.
Changes in liabilities arising from financing activities
IN NZD 000
1 July 2018
Advances
received
Repayment
Fees
Reclass
Change in
fair value
30 June 2019
Current liabilities
Borrowings
Finance lease
Derivatives -
Interest rate
Non-current
liabilities
458
582
412
—
—
—
—
—
—
—
—
—
Borrowings
130,822
257,000
(300,000)
(466)
Third party loan
Finance lease
Bonds
Derivatives -
Interest rate
1,803
2,429
99,250
1,475
3,205
—
—
—
(1,086)
(607)
—
—
—
—
272
—
635
26
219
—
(635)
(26)
—
—
—
—
—
—
—
1,093
608
631
87,356
3,287
1,796
99,522
(219)
(1,267)
(11)
237,231
260,205
(301,693)
(194)
—
(1,267)
194,282
IN NZD 000
1 July 2017
Advances
received
Repayment
Fees
Reclass
Change in
fair value
30 June 2018
Current liabilities
Borrowings
Finance lease
Derivatives -
Interest rate
Non-current
liabilities
Borrowings
Third party loan
Finance lease
Bonds
Derivatives -
Interest rate
—
—
2,502
—
—
—
—
—
(2,502)
—
—
—
199,685
97,000
(166,000)
137
—
—
98,978
2,796
2,386
3,182
—
—
—
—
272
(125)
(171)
—
—
458
582
412
—
(458)
(582)
—
(412)
—
—
—
—
—
—
—
(909)
458
582
412
130,822
1,803
2,429
99,250
1,475
303,961
102,568
(168,798)
409
—
(909)
237,231
15. Derivative financial instruments
IN NZD 000
Notes
Assets
Liabilities
30-Jun-19
Notional
amounts
30-Jun-18
Assets
Liabilities
Notional
amounts
Interest rate swaps - cash flow hedges
Interest rate swaps - fair
value through profit and loss
Total interest rate derivatives
Forward foreign exchange
contracts - cash flow hedges
Forward foreign exchange
contracts - dedesignated
Total forward foreign
exchange derivatives
Analysed as:
Current
Non-current
Derivatives used for hedging -
cash flow hedges
At fair value through profit
or loss
17
17
—
235
235
4,557
(855)
60,000
—
10,000
—
117
(1,887)
80,000
—
10,000
(855)
70,000
117
(1,887)
90,000
(4,282)
343,162
14,485
(336)
382,392
1,791
(536)
43,596
1,621
(25)
36,442
6,348
(4,818)
386,758
16,106
(361)
418,834
6,583
(5,673)
456,758
16,223
(2,248)
508,834
5,019
(2,721)
291,656
9,917
(595)
266,054
1,564
(2,952)
165,102
6,306
(1,653)
242,780
6,583
4,557
(5,673)
456,758
(5,137)
403,162
16,223
14,485
(2,248)
508,834
(2,223)
462,392
2,026
(536)
53,596
1,738
(25)
46,442
6,583
(5,673)
456,758
16,223
(2,248)
508,834
Exchange rates
Foreign exchange rates used at balance date for the New Zealand dollar are:
USD
AUD
GBP
EUR
JPY
30-Jun-19
30-Jun-18
0.6714
0.9561
0.5288
0.5896
72.4434
0.6774
0.9147
0.5128
0.5793
74.9807
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 71
Credit risk – derivative financial instruments
The maximum exposure to credit risk on the derivative financial instruments is the value of the derivative
assets’ receivable portion of $6,583,000 (2018: $16,233,000).
Exposure to currency risk
The Group’s exposure to foreign currency risk that has been covered by forward foreign exchange
contracts is as follows:
30-Jun-19
30-Jun-18
IN NZD 000
USD
AUD
Other
USD
AUD
Foreign currency payables
(25,672)
(22,631)
(487)
(27,787)
(20,058)
Dedesignated forward exchange contracts
24,731
18,865
—
21,592
14,850
Net balance sheet exposure
(941)
(3,766)
(487)
(6,195)
(5,208)
Forward exchange contracts
(for forecasted transactions)
138,500
204,662
—
223,652
158,740
Total forward exchange contracts
163,231
223,527
—
245,244
173,590
Other
(882)
—
(882)
—
—
15. Derivative financial instruments (continued)
Sensitivity analysis
A 10% strengthening or weakening of the NZD against the following currencies as at 30 June would have
resulted in changes to equity (hedging reserve) and unrealised gain/losses (before tax) as shown below.
Based on historical movements, a 10% increase or decrease in the NZD is considered to be a reasonable
estimate. This analysis assumes that all other variables, in particular interest rates, remain constant.
The analysis is performed on the same basis for the prior year.
IN NZD 000 Gain/(loss)
As at 30 June 2019
Foreign currency payables
USD
AUD
Foreign exchange hedges
USD
AUD
As at 30 June 2018
Foreign currency payables
USD
AUD
Foreign exchange hedges
USD
AUD
10% rate increase
10% rate decrease
Equity
Profit
or loss
Equity
Profit
or loss
—
—
2,334
2,057
—
—
(2,852)
(2,515)
(12,810)
(17,980)
(30,790)
(2,174)
(1,848)
(369)
16,565
21,975
38,540
2,658
2,258
(451)
—
—
2,526
1,823
—
—
(3,087)
(2,229)
(20,058)
(14,353)
(34,411)
(2,058)
(1,385)
906
24,515
17,544
42,059
2,515
1,692
(1,109)
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 73
Interest rates
During the year ended 30 June 2019, interest rates on borrowings varied in the range of 3.2% to 6.5%
(2018: 3.3% to 6.5%).
The Group’s interest rate structure is as follows:
IN NZD 000
Notes
Assets
30-Jun-19
Current
Effective
interest
rate
Non-
current
Effective
interest
rate
30-Jun-18
Current
Non-
current
Cash and cash equivalents
3.01%
4,283
—
3.87%
4,694
—
Liabilities
Borrowings
Financial leases
Bonds
Derivatives
Floating to fixed interest rate
swaps
Fixed to floating interest rate
swaps
14
14
14
6.52%
6.58%
6.13%
(1,093)
(90,643)
(608)
(1,796)
—
(99,522)
5.58%
6.15%
6.18%
(458)
(132,625)
(582)
(2,429)
—
(99,250)
50,000
10,000
20,000
60,000
—
10,000
—
10,000
52,582
(171,961)
23,654
(164,304)
Gains and losses recognised in the hedging reserve in equity (note 16) on interest rate hedges as at
30 June 2019 will be continuously released to profit or loss within finance cost until the repayment of
the bank borrowings.
Sensitivity analysis for interest-bearing instruments
A change of 100 basis points in interest rates on the reporting date, would have increased/(decreased)
equity (hedging reserve) and profit or loss (before tax) by the amounts shown below. Based on
historical movements a 100 basis point movement is considered to be a reasonably possible estimate.
The analysis is performed on the same basis for the prior year. This analysis assumes that all other
variables remain constant.
IN NZD 000 Gain/(loss)
As at 30 June 2019
Variable rate instruments - bank loans
Interest rate hedges - cash flow
As at 30 June 2018
Variable rate instruments - bank loans
Interest rate hedges - cash flow
100 BP Increase
100 BP decrease
Equity
Profit
or loss
Equity
Profit
or loss
—
204
204
(880)
—
(880)
—
(1,260)
698
698
—
(1,260)
—
(204)
(204)
—
(709)
(709)
880
—
880
1,260
—
1,260
15. Derivative financial instruments (continued)
Derivative financial instruments are used to hedge the Group’s exposure to foreign exchange and
interest rate risks. The Group does not hold or issue derivatives for trading purposes. However,
derivatives that do not qualify for hedge accounting are accounted for as trading instruments.
Derivative financial instruments are initially recognised at fair value on the date a derivative contract
is entered into and are re-measured at their fair value at subsequent reporting dates. The method of
recognising the resulting gain or loss depends on whether the derivative is designated as a hedging
instrument and, if so, the nature of the item being hedged.
At inception the Group documents the relationship between hedging instruments and hedged items,
as well as its risk management objective and strategy for undertaking various hedge transactions.
This process includes linking all derivatives designated as hedges to specific assets and liabilities or to
specific firm commitments or forecast transactions. The Group also documents its assessment, both
at hedge inception and on an on-going basis, of whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in cash flows of hedged items.
Derivatives consist of currency forwards and interest rate swaps. The fair value is recognised in
the hedging reserve within equity until such time as the hedged item will affect profit or loss. The
amounts accumulated in equity are either released to profit or loss or used to adjust the carrying
value of assets purchased. For example, when hedging forecast purchase of programme rights in
foreign currency, the gains and losses previously deferred in equity are transferred from equity and
included in the initial measurement of the cost of the programme rights. The deferred amounts are
ultimately recognised in programme rights’ expenses in profit or loss.
Amounts accumulated in the hedging reserve in equity on interest rate swaps are recycled in profit
or loss in the periods when the hedged item affects profit or loss (for example when the forecast
interest payment that is hedged is made). The gain or loss relating to any ineffective portion is
recognised in profit or loss as “interest rate swaps - fair value” in finance costs. The gain or loss
relating to interest rate swaps which do not qualify for hedge accounting is recognised in profit or
loss within the interest expense charge in “Finance costs, net”.
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is
recognised when the forecast transaction is ultimately recognised in profit or loss. When a forecast
transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is
immediately transferred to profit or loss. Changes in the fair value of any derivative instruments that
do not qualify for hedge accounting are recognised immediately in profit or loss.
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 75
16. Equity
Share capital
Number of shares (000)
Ordinary shares
(NZD 000)
Shares on issue at 30 June 2019 and 30 June 2018
389,140
577,403
Ordinary shares are fully paid and have no par value. The shares rank equally, carry voting rights and
participate in distributions.
Loss per share
Basic loss per share
Loss after tax attributable to equity holders of parent (NZD 000)
Weighted average number of ordinary shares on issue (thousands)
Basic loss per share (cents)
Weighted average number of ordinary shares
Issued ordinary shares at beginning of year
Issued ordinary shares at end of year
30-Jun-19
30-Jun-18
(608,158)
389,140
(156.28)
(240,956)
389,140
(61.92)
Number
389,139,785
389,139,785
Number
389,139,785
389,139,785
Weighted average number of ordinary shares
389,139,785
389,139,785
Basic loss per share are calculated by dividing the profit attributable to equity holders of the Company
by the weighted average number of ordinary shares in issue during the year.
Diluted earnings per share
Diluted earnings per share is calculated by adjusting the weighted average of ordinary shares
outstanding to assume conversion of all dilutive potential ordinary shares.
16. Equity (continued)
Reserves
IN NZD 000
Notes
Balance at 1 July
Cash flow hedges
Revaluation
Employee share scheme
Reclassification to profit or loss
Deferred tax
7
Balance at end of year
Hedge
reserve
9,032
(911)
—
(11,932)
3,597
(9,246)
(214)
30-Jun-19
Share based
compensation
reserve
—
—
161
—
—
161
161
Total other
reserves
30-Jun-18
Hedge
reserve
9,032
(9,062)
(911)
161
(11,932)
3,597
(9,085)
(53)
14,258
—
10,873
(7,037)
18,094
9,032
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 77
17. Financial risk management
Financial risk management objectives
The Group undertakes transactions in a range of financial instruments which include cash and cash
equivalents, receivables, payables, derivatives and various forms of borrowings including bonds and
bank loans.
These activities result in exposure to financial risks that include market risk (currency risk, fair value
interest rate risk, cash flow interest rate risk and price risk), credit risk and liquidity risk.
The Group seeks to minimise the effects of currency and interest rate risks by using derivative financial
instruments to hedge these risk exposures. The use of financial derivatives is governed by the Group’s
policies approved by the board of directors, which provides written principles on foreign exchange risk,
interest rate risk, credit risk, the use of financial derivatives and non-derivative financial instruments, and
the investment of excess liquidity. The Group does not enter into or trade financial instruments, including
derivative financial instruments, for speculative purposes.
The Corporate Treasury function reports monthly to the board of directors. The board has an audit and risk
committee which is responsible for developing and monitoring the Group’s risk management policies.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates
will affect the Group’s income or the value of its holdings of financial instruments. The objective of
market risk management is to manage and control market risk exposures within acceptable parameters,
while optimising the return on risk.
The Group buys and sells derivatives in the ordinary course of business, and also incurs financial liabilities, in
order to manage market risks. All such transactions are carried out within the guidelines set by the board.
Generally the Group seeks to apply hedge accounting in order to manage income statement volatility.
a) Foreign exchange risk
The Group is exposed to foreign exchange risk arising from various currency exposures primarily with
respect to the Australian dollar and the United States dollar in relation to purchases of programme
rights and the lease of transponders on the satellite. Foreign exchange risk arises when purchases are
denominated in a currency that is not the entity’s functional currency. The net position in each foreign
currency is managed by using forward currency contracts and foreign currency options and collars to
limit the Group’s exposure to currency risk.
The Group’s risk management policy is to hedge foreign capital expenditure (Capex) and foreign
operating expenditure (Opex) in accordance with the following parameters. Approximately 90% of
anticipated transactions in each major currency qualify as ‘highly probable’ forecast transactions for
hedge accounting purposes.
17. Financial risk management (continued)
Capex
Capex order greater than NZD $250,000
Time of issuing order
Period
Minimum
hedging
100%
Maximum
hedging
100%
Opex
Fixed commitments greater than $750,000
Up to 3 years
Opex
Variable commitments
> 3 years
0–12 months
13–24 months
25–26 months
100%
0%
85%
0%
0%
100%
100%
95%
50%
30%
b) Cash flow and fair value interest rate risk
The Group’s interest rate risk arises from long-term borrowings. Borrowings issued at variable rates
expose the Group to cash flow interest rate risk. Borrowings issued at fixed rates expose the Group to fair
value interest rate risk. Group policy is to maintain its borrowings in fixed rate instruments as follows:
Variable rate borrowings
Period
1–3 years
3–5 years
5–10 years
Minimum
hedging
Maximum
hedging
40%
20%
0%
90%
60%
30%
The Group manages its cash flow interest rate risk by using floating-to-fixed interest rate swaps. Such
interest rate swaps have the economic effect of converting borrowings from floating rates to fixed rates.
Under the interest rate swaps, the Group agrees with other parties to exchange, at specified intervals
(quarterly), the difference between fixed contract rates and floating rate interest amounts calculated by
reference to the agreed notional principal amounts. The Group also enters into fixed-to-floating interest
rate swaps to hedge fair value interest rate risk arising where it has borrowed at fixed rates.
c) Price risk
The Group does not have any price risk exposure.
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 79
Credit risk
Credit risk is the risk of financial loss to the Group if a customer or counterparty to a financial
instrument fails to meet its contractual obligations and arises from cash and cash equivalents, deposits
with banks, derivative financial instruments and the Group’s receivables from customers.
The Group has no significant concentrations of credit risk.
Credit risk with respect to trade receivables is limited due to the large number of subscribers included
in the Group’s subscriber base. In addition, receivables balances are monitored on an on-going basis
with the result that the Group’s exposure to bad debts is not significant. The Group establishes an
impairment loss that represents its estimate of expected credit losses in respect of trade receivables.
The main component of the impairment loss is based on a collective loss component established for
groups of similar assets in respect of losses that have been incurred but not yet identified. The collective
loss allowance is determined based on historical data of payment statistics for similar financial assets.
The maximum exposure is the carrying amount as disclosed in note 8.
Derivative counterparties and cash transactions are limited to high credit quality financial institutions.
The Group has policies that limit the amount of credit exposure to any one financial institution.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall
due. Prudent liquidity risk management implies maintaining sufficient cash and cash equivalents, the
availability of funding through an adequate amount of committed credit facilities and the ability to
close out market positions. The Group aims to maintain flexibility in funding by keeping committed credit
lines available.
Management monitors the Group’s cash requirements on a daily basis against expected cash flows
based on a rolling daily cash flow forecast for at least 90 days in advance. In addition the Group
compares actual cash flow reserves against forecast and budget on a monthly basis.
The Group had an undrawn facility balance of $112,000,000 (June 2018: $169,000,000) that can be
drawn down to meet short-term working capital requirements. The facility limit at 30 June 2019 is
$200,000,000 (30 June 2018: $300,000,000).
The table below analyses the Group’s financial liabilities into relevant maturity groupings based on
the remaining period from the balance date to the contractual maturity date. The amounts disclosed
in the table are the contractual undiscounted cash flows, including interest payments in respect of
financial liabilities and the net settled interest rate derivatives that are in a loss position at balance date.
Balances due within 12 months equal their carrying value as the impact of discounting is not significant.
17. Financial risk management (continued)
IN NZD 000
Notes
Carrying
amount
Contractual
cash flows
Less than
one year
1-2 years
2-5 years
At 30 June 2019
Non derivative financial liabilities
Secured bank loans
Other loans
Finance leases
Bonds
Trade and other payables
Derivative financial liabilities
Forward exchange contracts used for
hedging -net outflow/inflow (1)
Interest rate swaps (1)
At 30 June 2018
Non derivative financial liabilities
Secured bank loans
Other loans
Finance leases
Bonds
Trade and other payables
Derivative financial liabilities
Forward exchange contracts used for
hedging -net outflow/inflow (1)
Interest rate swaps (1)
14
14
14
14
13
15
15
14
14
14
14
13
15
15
87,356
(96,672)
4,380
2,404
(4,564)
(2,673)
(2,834)
(1,172)
(728)
(2,834)
(1,172)
(728)
99,522
(110,942)
(6,250)
(104,692)
113,618
(113,618)
(113,618)
—
4,818
(4,905)
(2,107)
(1,912)
855
(603)
(545)
(58)
(91,004)
(2,220)
(1,217)
—
—
(886)
—
312,953
(333,977)
(127,254)
(111,396)
(95,327)
130,822
(140,330)
(4,559)
(4,559)
(131,212)
2,261
3,011
(2,376)
(3,402)
(500)
(728)
(500)
(728)
(1,376)
(1,946)
99,250
(117,188)
(6,250)
(6,250)
(104,688)
102,232
(102,232)
(102,232)
—
—
361
(373)
(184)
1,887
(1,708)
(1,268)
(189)
(440)
—
—
339,824
(367,609)
(115,721)
(12,666)
(239,222)
1. The table excludes the contractual cash flows of the interest rate swaps and forward exchange
contracts which are included in assets.
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 81
The table below analyses the Group’s foreign exchange derivative financial instruments which will
be settled on a gross basis into relevant maturity groupings based on the remaining period at the
balance date to the contractual maturity date. The amounts disclosed in the table are the contractual
undiscounted cash flows. Inflows have been calculated using balance date spot rates.
Contractual
cash flows
foreign
exchange
amount
Exchange
rate
Contractual
cash flows
Less than
one year
1-2
years
3-5
years
(163,231)
(132,549)
(28,118)
(2,564)
(223,527)
(109,106)
(79,829)
(34,592)
IN NZD 000
At 30 June 2019
Forward foreign exchange contracts
Outflow (at FX hedge rate)
USD
AUD
Inflow (at year end market rate)
USD
AUD
0.6714
0.9561
114,011
169,810
137,892
208,508
218,086
106,450
29,251
77,886
2,667
33,750
1,138
2,687
(810)
(739)
At 30 June 2018
Forward foreign exchange contracts
Outflow (at FX hedge rate)
USD
AUD
Inflow (at year end market rate)
USD
AUD
(245,244)
(141,520)
(77,212)
(26,512)
(173,590)
(104,534)
(48,275)
(20,781)
0.6774
0.9147
175,191
258,623
149,240
161,516
176,578
106,333
16,367
9,520
81,424
49,106
5,043
27,958
21,139
1,804
17. Financial risk management (continued)
Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a
going concern in order to provide returns for shareholders and benefits for other stakeholders and to
maintain an optimal capital structure to reduce the cost of capital. The Group’s overall strategy for
capital risk management remains unchanged from 2018.
The capital structure of the Group consists of debt which includes the borrowings disclosed in note 14,
cash and cash equivalents and equity attributable to equity holders of the Parent comprising share
capital, reserves and retained earnings as disclosed in note 16.
The board reviews the Group’s capital structure on a regular basis. The Group has a facility agreement in
place with a syndicate of banks and a retail bond issue as described in note 14.
The gearing ratio at the year-end was as follows:
IN NZD 000
Debt
Cash and cash equivalents
Net debt
Equity
Net debt to equity ratio
Note
14
30-Jun-19
30-Jun-18
193,662
(4,283)
189,379
351,568
54%
235,344
(4,694)
230,650
1,026,687
22%
The Group’s bank loan facility is subject to a number of covenants, including interest and debt cover
ratios, calculated and reported quarterly, with which it has complied for the entire year reported
(2018: complied).
Fair value estimation
The methods used to estimate the fair value of financial instruments are as follows:
Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2: Inputs other than quoted prices included within level 1 that are observable for the asset
or liability, either directly (that is, as prices) or indirectly (that is, derived from prices).
Level 3: Inputs for the asset or liability that are not based on observable market data (that is
unobservable inputs), for example discounted cash flow.
The Group’s financial assets and liabilities carried at fair value are valued on a level 2 basis other than the
investment in 90 Seconds (refer note 10) that is valued on a level 3 basis.
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 83
In NZD 000
Assets measured at fair value
Trading derivatives - de-designated or not hedge accounted
Derivatives used for hedging - cash flow hedges
Investment in 90 Seconds
Total assets
Liabilities measured at fair value
Trading derivatives - de-designated or not hedge accounted
Derivatives used for hedging - cash flow hedges
Total liabilities
Note
30-Jun-19
30-Jun-18
15
15
10
15
15
2,026
4,557
—
6,583
(536)
(5,137)
(5,673)
1,738
14,485
6,334
22,557
(25)
(2,223)
(2,248)
The fair value of financial instruments that are not traded in an active market is determined by using
valuation techniques. These valuation techniques maximise the use of observable market data where it is
available and rely as little as possible on entity specific estimates. If all significant inputs required to fair
value an instrument are observable, the instrument is included in level 2.
The Group uses a variety of methods and assumptions that are based on market conditions existing at
each balance date. Techniques, such as estimated discounted cash flows, are used to determine the fair
value of financial instruments. The fair value of forward exchange contracts is based on market forward
foreign exchange rates at year end. The fair value of interest rate swaps is the estimated amount that
the Group would receive or pay to terminate the swap at the reporting date, taking into account current
interest rates, observable yield curves and the current creditworthiness of the swap counterparties.
17. Financial risk management (continued)
Classification of financial instruments
The following table presents the Group’s financial assets and liabilities according to classifications:
30-Jun-2019
30-Jun-2018
Notes
Carrying
amount
Fair
value
Carrying
amount
4,283
53,134
4,283
53,134
4,694
57,239
Fair
value
4,694
57,239
in NZD 000
Financial assets at amortised cost
Cash and cash equivalents
Trade and other receivables
8
Financial assets at fair value through profit or loss
Short term investment
(FY18 available for sale)
Derivatives designated as hedging
instruments (cash flow hedges)
Derivatives not designated as hedging
instruments
Financial liabilities at amortised cost
Bank loans
Other loans
Finance leases
Bonds
Trade and other payables
Financial liabilities at fair value through OCI
Derivatives designated as hedging
instruments (cash flow hedges)
Derivatives not designated as hedging
instruments (fair value hedges)
10
15
15
14
14
14
14
13
15
15
—
—
6,334
6,334
4,557
4,557
14,485
14,485
2,026
64,000
87,356
4,380
2,404
99,522
113,618
5,137
536
2,026
64,000
85,678
4,260
2,440
104,523
113,618
5,137
536
1,738
84,490
1,738
84,490
130,822
128,580
2,261
3,011
99,250
102,232
2,059
2,907
104,375
102,232
2,223
2,223
25
25
312,953
316,192
339,824
342,401
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 85
Prepaid expenses, contract liabilities, unearned subscriptions, tax payables and employee benefits do
not meet the definition of a financial instrument and have been excluded from the “Trade and other
receivables” and Trade and other payables” categories above.
The fair values of financial assets and financial liabilities are determined as follows:
Cash and short-term deposits, trade and other receivables carried at amortised cost, trade and other
payables, and other current liabilities approximate their carrying amounts largely due to the short-term
maturities of these instruments.
The fair value of quoted notes and bonds is based on price quotations at the reporting date being
a level 1 basis. The fair value of loans from banks and lease liabilities is estimated on a level 3 basis
by discounting future cash flows using rates currently available for debt on similar terms, credit risk
and remaining maturities. The fair value of related party receivables is estimated on a level 3 basis by
discounting future cash flows using rates currently available for deposits on similar terms.
Classification
Financial assets are classified in the following categories: those to be measured subsequently at fair
value through other comprehensive income or profit or loss, and those to be measured at amortised
cost. The classification depends on the purpose for which the financial assets were acquired.
Management determines the classification of its financial assets at initial recognition and
re-evaluates this designation at each reporting date.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other
comprehensive income.
Regular way purchases and sales of financial assets are recognised on trade-date, the date on which
the Group commits to purchase or sell the asset. Financial assets are derecognised when the rights
to receive cash flows from the financial assets have expired or have been transferred and the Group
has transferred substantially all the risk and rewards of ownership.
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a
financial asset not at fair value through profit or loss, transaction costs that are directly attributable
to the acquisition of the financial assets. Transaction costs of financial assets carried at fair value
through profit or loss are expensed in profit or loss.
Impairment of financial assets
From 1 July 2018, the Group assess on a forward looking basis the expected credit losses associated
with its debt instruments carried at amortised costs and fair value through other comprehensive
income. The impairment methodology applied depends on whether there has been a significant
increase in credit risk.
For trade receivables, the Group applies the simplified approach permitted by NZ IFRS 9, which
requires expected lifetime losses to be recognised from initial recognition of the receivables
(refer note 8 for further details).
18. Commitments
in NZD 000
Operating leases- future minimum lease payments:
30-Jun-19
30-Jun-18
Year 1
Year 2
Year 3
Year 4
Year 5
Later than year 5
Contracts for transmission services:
Year 1
Year 2
Year 3
Contracts for future programmes:
Year 1
Year 2
Year 3
Year 4
Year 5
Later than five years
Capital expenditure commitments:
Property, plant and equipment
Year 1
Other services commitments:
Year 1
Year 2
Year 3
Year 4
35,357
35,763
15,924
1,668
1,532
2,416
92,660
4,757
2,281
—
7,038
184,958
106,148
33,785
13,593
2,076
1,955
342,515
5,475
5,475
22,494
3,389
535
93
26,511
34,782
34,272
34,607
14,280
—
—
117,941
4,987
4,994
2,514
12,495
211,628
172,462
101,784
33,076
19,776
2,666
541,392
2,661
2,661
11,344
2,055
1,188
233
14,820
Notes to the Financial Statements (continued)Sky / 2019 Annual Report / 87
The Group has entered into a contract with Optus Networks Pty Limited (Optus) to lease transponders
on the D1 satellite which was launched in October 2006 and commissioned in November 2006. The
contract is for a period of 15 years from the time of commissioning with monthly payments in Australian
dollars. This contract is accounted for as an operating lease. Non-cancellable operating lease payments,
including Optus lease payments, are included in operating leases above.
Sky is currently utilising seven transponders, six of which are on a long-term lease. Access to the seventh
transponder was negotiated, effective from 1 April 2011.
In December 2018, Sky entered into a satellite service agreement with Optus for ten years to 2031.
The deal is conditional on Optus procuring fleet enhancements, including the successful launch of a
new satellite to replace the existing D1 satellite.
19. Contingent liabilities
The Group has undrawn letters of credit at 30 June 2019 of $650,000 (30 June 2018: $650,000), relating
to Datacom Employer Services for Sky executive payroll liabilities in the current year.
The Group is subject to litigation incidental to their business, none of which is expected to be material.
No provision has been made in the Group’s financial statements in relation to any current litigation
and the directors believe that such litigation will not have a significant effect on the Group’s financial
position, results of operations or cash flows.
20. Subsequent events
Sky acquired 100% of RugbyPass, on 19 August 2019.
RugbyPass is the world’s largest digital rugby platform combining live streamed broadcasting with
unique and engaging video content and stories for rugby fans around the globe.
RugbyPass was owned by US-based RugbyPass Investors LLC, which is majority owned by
private investment company Cooper and Company.
The purchase price is US$40m, with consideration made up of US$10m cash and issuance of new
Sky shares of US$20m at completion, and the remaining US$10m payable in cash during an agreed
earn out period.
RugbyPass will operate as a wholly owned subsidiary of Sky.
The accounting for the acquisition is not yet complete and a fair value assessment is still to be carried out.
Independent
auditor’s report
To the shareholders of Sky Network Television Limited
We have audited the consolidated financial statements which comprise:
− the consolidated balance sheet as at 30 June 2019;
− the consolidated income statement for the year then ended;
− the consolidated statement of comprehensive income for the year then ended;
− the consolidated statement of changes in equity for the year then ended;
− the consolidated statement of cash flows for the year then ended; and
− the notes to the financial statements, which include significant accounting policies.
Our opinion
In our opinion, the accompanying consolidated financial statements of Sky Network Television Limited
(the Company), including its subsidiaries (the Group), present fairly, in all material respects, the
financial position of the Group as at 30 June 2019, its financial performance and its cash flows for
the year then ended in accordance with New Zealand Equivalents to International Financial Reporting
Standards (NZ IFRS) and International Financial Reporting Standards (IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs
(NZ)) and International Standards on Auditing (ISAs). Our responsibilities under those standards are
further described in the Auditor’s responsibilities for the audit of the consolidated financial statements
section of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our opinion.
We are independent of the Group in accordance with Professional and Ethical Standard 1 (Revised)
Code of Ethics for Assurance Practitioners (PES 1) issued by the New Zealand Auditing and Assurance
Standards Board and the International Ethics Standards Board for Accountants’ Code of Ethics
for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in
accordance with these requirements.
Our firm carries out other services for the Group in the areas of providing treasury related financial
markets risk analysis and commentary, agreed upon procedures on the bank compliance certificate
and regulatory reporting. In addition, certain partners and employees of our firm may subscribe to
Sky services on normal terms within the ordinary course of the trading activities of the Group. These
relationships and other services have not impaired our independence as auditor of the Group.
PricewaterhouseCoopers, 188 Quay Street, Private Bag 92162, Auckland 1142, New Zealand
T: +64 9 355 8000, F: +64 9 355 8001, pwc.co.nz
Sky / 2019 Annual Report / 89
Our audit approach
Overview
An audit is designed to obtain reasonable assurance whether the financial
statements are free from material misstatement.
Overall Group materiality: $6.8 million, which represents approximately 5% of
adjusted profit before tax.
We chose this as the benchmark because, in our view, given the significant
impact the adjustments to earnings had on the loss before tax, it is a more
stable basis for calculating materiality.
We have determined that there are two key audit matters:
− Carrying value of goodwill
− Compliance with financial covenants
Materiality
The scope of our audit was influenced by our application of materiality.
Based on our professional judgement, we determined certain quantitative thresholds for materiality,
including the overall Group materiality for the consolidated financial statements as a whole as set out
above. These, together with qualitative considerations, helped us to determine the scope of our audit,
the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both
individually and in aggregate on the consolidated financial statements as a whole.
Audit scope
We designed our audit by assessing the risks of material misstatement in the consolidated financial
statements and our application of materiality. As in all of our audits, we also addressed the risk of
management override of internal controls including among other matters, consideration of whether
there was evidence of bias that represented a risk of material misstatement due to fraud.
We tailored the scope of our audit in order to perform sufficient work to enable us to provide an opinion
on the consolidated financial statements as a whole, taking into account the structure of the Group, the
accounting processes and controls, and the industry in which the Group operates.
Independent auditor’s report (continued)
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in
our audit of the consolidated financial statements of the current year. These matters were addressed in
the context of our audit of the consolidated financial statements as a whole, and in forming our opinion
thereon, and we do not provide a separate opinion on these matters.
Key audit matter
How our audit addressed the key audit matter
Carrying value of goodwill
As at 30 June 2019, the carrying amount of
goodwill amounted to $0.4 billion (30 June 2018:
$1.1 billion) after an impairment charge of $670
million has been recorded against this balance
during the year.
The carrying value of goodwill is an area of focus
for the audit as it is dependent on future cash
flows and there is risk that if these cash flows do
not meet the Group’s expectations then goodwill
may be further impaired.
The forecasts in the model include future
expected changes in Sky’s business in response
to the disruption in the marketplace and
increased competition, some of which would
be excluded under a value in use methodology.
Consequently, at 30 June 2019 management
considered the recoverable amount using the
fair value less costs of disposal methodology as
being the most appropriate approach to assess
whether or not there is an impairment in the
carrying value of goodwill.
The estimated future cash flows used in the
model were prepared based on the approved
budget for the next financial year and forecast
cash flows for the following four years assuming
that all key programming rights, in particular,
sports rights are retained.
Management determined that the model was
most sensitive to changes in the assumptions
relating to subscriber numbers, average monthly
revenue per residential subscriber (ARPU) and
programming costs. Adverse changes in these
assumptions might lead to a further impairment
in the carrying value of goodwill.
We obtained management’s fair value less costs of
disposal model used to assess the carrying value of
goodwill at 30 June 2019.
Our audit procedures included the following:
− Assessing management’s processes and controls
over preparing the model.
− Assessing the appropriateness of using a fair
value less costs of disposal approach against the
applicable accounting standard.
− Testing the calculation of the valuation model,
including the inputs and the mathematical
accuracy and comparing the resulting balances
to the relevant net assets of the business.
− Performing the following procedures to assess
the following estimates and assumptions made
by management:
− Ensured that the impairment model
used by management to assess the
impairment of goodwill was approved
by the Board.
− Considered the reasonableness of
assumptions, including movements
in subscriber numbers, ARPU, foreign
exchange rates, expected revenue and
costs in the next five years, the on-
going level of capex and the long-term
growth rate with reference to Sky’s
performance historically, particularly in
recent periods, analysis of subscriber
tenure and churn, key initiatives being
taken and comparison to available
broker reports.
Sky / 2019 Annual Report / 91
Key audit matter
How our audit addressed the key audit matter
Management also considered the NZX market
capitalisation at balance date.
As a result of the impairment review, the
Directors identified an impairment in the
carrying value of goodwill at 30 June 2019.
Reasonably possible changes in key assumptions
that could result in further impairment are
disclosed in note 12.
− Considered the appropriateness of
changes in assumptions from the
previous year by performing a lookback
procedure against the actual FY19
results and understanding the key
elements of the new five-year business
plan approved by the Board versus the
prior year.
− Engaged our own expert to review the
structure of the model, to recalculate the
weighted average cost of capital used
as the discount rate in the model and to
review external evidence for the rate used
for cost of disposal. The rates used by
management were within a reasonable
range given estimation uncertainty.
− Reviewed management’s assessment of
fair value less costs of disposal based on
market capitalisation at balance date.
− Obtained and evaluated management’s
sensitivity analysis to ascertain the
impact of reasonably possible changes
and also considered alternative possible
scenarios and their potential impact.
We reviewed the disclosures in note 12 to the
financial statements to ensure they are compliant
with the requirements of the accounting standards.
We have no matters to report.
Independent auditor’s report (continued)
Key audit matters (continued)
Key audit matter
How our audit addressed the key audit matter
Compliance with financial covenants
As disclosed in note 14, the Group refinanced its
bank facility in October 2018. The bank facility is
subject to financial covenants where the Group
is required to meet certain key financial ratios.
We obtained an understanding of the relevant
covenants and any conditions included in the bank
facility agreement that may result in a change in
the financial ratios.
The Group disclosed that they have complied
with all covenants during the year. The Group
notes that the financial covenants are subject to
change if certain conditions are not met. It is the
considered view of the Directors that the Group
will be able to comply with the financial covenants.
Due to the sensitivity of the cash flows that
impact the calculation of the key financial ratios
and the effect that a change in the financial
ratios could have on covenant compliance, this is
an area of focus for the audit.
We obtained the Group’s forecast compliance
assessment and:
− agreed the FY20 budget to that approved by
the Board
− recalculated compliance with financial covenants
at each compliance date, and
− performed sensitivity analysis to assess the level
of forecasting risk.
We also assessed the Group’s ability to meet the
financial covenants assuming a change in the
financial ratios if certain conditions were not met
by performing sensitivity analysis on the cash flows
that impact the calculation.
We have no matters to report.
Information other than the consolidated financial statements
and auditor’s report
The Directors are responsible for the annual report. Our opinion on the consolidated financial statements
does not cover the other information included in the annual report and we do not express any form of
assurance conclusion on the other information.
In connection with our audit of the consolidated financial statements, our responsibility is to read the
other information and, in doing so, consider whether the other information is materially inconsistent
with the consolidated financial statements or our knowledge obtained in the audit, or otherwise appears
to be materially misstated. If, based on the work we have performed on the other information that we
obtained prior to the date of this auditor’s report, we conclude that there is a material misstatement of
this other information, we are required to report that fact. We have nothing to report in this regard.
Sky / 2019 Annual Report / 93
Responsibilities of the Directors for the consolidated
financial statements
The Directors are responsible, on behalf of the Company, for the preparation and fair presentation of the
consolidated financial statements in accordance with NZ IFRS and IFRS, and for such internal control as
the Directors determine is necessary to enable the preparation of consolidated financial statements that
are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, the Directors are responsible for assessing the
Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern
and using the going concern basis of accounting unless the Directors either intend to liquidate the Group
or to cease operations, or have no realistic alternative but to do so.
Auditor’s responsibilities for the audit of the consolidated
financial statements
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements,
as a whole, are free from material misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a
guarantee that an audit conducted in accordance with ISAs (NZ) and ISAs will always detect a material
misstatement when it exists. Misstatements can arise from fraud or error and are considered material if,
individually or in the aggregate, they could reasonably be expected to influence the economic decisions of
users taken on the basis of these consolidated financial statements.
A further description of our responsibilities for the audit of the financial statements is located at the
External Reporting Board’s website at:
https://www.xrb.govt.nz/assurance-standards/auditors-responsibilities/audit-report-1
This description forms part of our auditor’s report.
Who we report to
This report is made solely to the Company’s shareholders, as a body. Our audit work has been
undertaken so that we might state those matters which we are required to state to them in an auditor’s
report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the Company and the Company’s shareholders, as a body, for our
audit work, for this report or for the opinions we have formed.
The engagement partner on the audit resulting in this independent auditor’s report is Leopino Foliaki.
For and on behalf of:
Chartered Accountants
21 August 2019
Auckland
Sky / 2019 Annual Report / 95
Information
Corporate governance .......................................................................... 97
Interests register .....................................................................................100
Company and bondholder information ..............................102
Waivers and information .................................................................112
Share market and other information ...................................115
Directory .........................................................................................................116
Sky / 2019 Annual Report / 97
Corporate governance
This section includes the corporate governance information which Sky is required to disclose in its
annual report. Sky has a more detailed corporate governance statement available online at
https://www.sky.co.nz/investor-relations, which provides the required disclosures under the ASX Corporate
Governance Principles and Recommendations and the NZX Corporate Governance Best Practice Code
as at 21 August 2019. That corporate governance statement has been approved by the board.
Board of directors
Committees
The board operates two permanent board
committees, namely the audit and risk committee
and the nomination and remuneration committee.
The members of both committees are Susan
Paterson (Chair), Peter Macourt and Derek Handley.
Independent and
Executive Directors
At 30 June 2019 all of the directors of Sky other
than Martin Stewart were considered to be
independent directors. Martin Stewart is currently
the only executive director on the board, and is
not considered independent as he is also Sky’s
Chief Executive. In determining independence, the
board applies the materiality thresholds set out in
the NZX and ASX Listing Rules. All directors other
than Martin Stewart are considered independent
because they do not have any “Disqualifying
Relationship” (as defined by the NZX Listing
Rules), and none of the factors in NZX
Recommendation 2.4 or ASX Recommendation
2.3 apply to materially diminish independence.
Diversity
Diversity of gender, skill, age, ethnicity, experience
and beliefs are valued by Sky. Sky recognises the
value of diversity and the organisational strength,
problem solving ability and innovative approach
that it brings. The provision of equal opportunities
for all employees is fundamental to the way in
which Sky functions as a business. Sky established
a diversity policy during 2012 (updated in 2015)
and has posted this on Sky’s website at www.sky.
co.nz/investor-relations. The board acknowledges
there is a lot of focus on gender diversity both
on boards and within companies, and as noted
in Sky’s diversity policy, this is one of the diversity
characteristics that is considered when evaluating
new director candidates.
As at 30 June 2019, Sky’s board had two female
directors and four male directors (no overall
change from 30 June 2018).
Sky’s officers (a person who reports to the board or
to a person who reports to the board) include two
female officers and seven male officers1 (30 June
2018 three female officers and ten male officers).
Sky takes a holistic approach to diversity. Sky’s
measurable objectives for achieving diversity
are that:
− Each year, the board actively considers the
composition of the board and any opportunities
for new directors to join the board with diversity
(including gender diversity) being one of the key
criteria when considering new appointments.
− Each year the board compares the number
of female and male employees at Sky to the
previous financial year’s figures to ensure that
Sky is maintaining a strong level of female
participation at all levels of the organisation.
− Each year the board considers the extent of
age diversification at Sky by comparing the
number of employees aged over and under
45 years to the previous financial year’s figures,
in order to ensure Sky is benefiting from a mix
of experience and new ways of thinking.
For the year ended 30 June 2019, the board is
satisfied that Sky achieved its gender diversity
objectives and other measurable diversity
objectives as follows:
− The board considered opportunities for
new directors to join the board with diversity
(including gender diversity) in mind for
new appointments.
1
These figures do not include one female officer and three male officers, which as at 30 June 2019, no longer report to the Chief Executive but
were still contractually employed by Sky.
The chart below represents Sky’s gender and age diversification as at 30 June 2019.
Board level
Officers1
All staff
33%
22%
45%
No of Women 2
Total number 6
2018 – No of women 2
Total number 6
Over 45 – 100%
(2018 – 100%)
No of Women 2
Total number 9
No of Women 512
Total number 1,137
2018 – No of women 3
Total number 13
2018 – No of women 510
Total number 1,159
Over 45 – 89%
(2018 – 85%)
Over 45 – 36%
(2018 – 36%)
Sky also embraces ethnic diversity with a recent staff survey highlighting that there are over
40 nationalities represented on our staff.
1
1
These figures do not include one female officer and three male officers, which as at 30 June 2019, no longer report to the Chief Executive but
were still contractually employed by Sky.
Corporate governance (continued)Sky / 2019 Annual Report / 99
Risk management
Sky’s risk framework is overseen and monitored
by both the board and the audit and risk
committee. Sky maintains a risk register and
the audit and risk committee in conjunction with
management regularly report to the board on
the effectiveness of the management of Sky’s
business risks and whether the risk management
framework and systems of internal compliance
and control are operating efficiently and
effectively in all material respects.
Sky has a Risk Management Policy which provides
an overview of its risk management process. The
policy outlines Sky’s strategic risk management
objectives and guidelines and provides a
framework to identify, manage and report on
risks both financial and non-financial. The audit
and risk committee reviews the Risk Management
Policy annually. The board reviewed Sky’s risk
management framework during the reporting
period to 30 June 2019 and is satisfied that Sky
has in place a robust risk assessment process.
Sky’s internal audit function is contracted out to
an independent third party. An annual internal
audit plan is presented and approved by the
audit and risk committee and the audit and risk
committee receives internal audit reports during
the year and monitors completion of action items
that arise.
Material exposure to economic
environmental and social
sustainability risks
Sky identifies and assesses material exposure to
economic, environmental and social sustainability
risks on an annual basis and like all media
companies Sky is exposed to industry disruption
and ongoing structural changes in the way it
carries out its business. A summary of Sky’s
risk management policy, the key economic,
environmental and social sustainability risks it
faces, and how Sky intends to manage those risks
is available on Sky’s website.
Principal risks that could affect results and
performance include:
− Regulatory environment;
− Competition;
− Content protection;
− Business continuity – Interruption to business;
− Investment strategy – Adoption of new
technology;
− Financial risks;
− Reputational risks and brand perception;
− Business transformation; and
− Customer value proposition.
Interests register
Disclosures of interest – general notices
Directors have given general notices disclosing interests in various entities pursuant to section 140(2)
of the Companies Act 1993. Those notices which remain current as at 30 June 2019 are as follows:*
Director Relationship
Entity
Peter Macourt
Virtus Health Limited
Prime Media Limited
Michael Darcey
M247
Premier League Basketball UK
Arqiva Group Limited
British Gymnastics
Derek Handley
Aera Limited
Aera Foundation
Geraldine McBride
My Wave Holdings Limited
My Wave Limited
Fisher & Paykel Healthcare Corporation Limited
Susan Paterson
ONZM
National Australia Bank Limited
Theta Systems Limited
Les Mills Holdings Limited
Goodman (NZ) Limited and associated companies
Arvida Group Limited
Steel and Tube Holdings Limited
New Zealand Golf
The Electricity Authority
The Home of Cycling Charitable Trust
Institute of Directors Auckland Branch
EROAD Limited
Relationship
Director/Chair
Director
Chair
Director
Director
Chair
Director
Trustee
Director
Director
Director
Director
Chair/Director
Director
Director
Director
Chair
Director
Board Member
Chair
Member
Director
* John Fellet retired as a director on 28 March 2019. He had not made any general disclosures.
Disclosures of interest – authorisation of remuneration and other benefits
Sky’s board did not authorise any additional payments of directors’ fees during the year to
30 June 2019.
Disclosures of interest – particular transactions/use of company information
During the year to 30 June 2019, in relation to Sky:
− no specific disclosures were made in the Interests Register under section 140(1) of the
Companies Act 1993; and
− no entries were made in the Interests Register as to the use of company information under
section 145(3) of the Companies Act 1993.
Sky / 2019 Annual Report / 101
Sky DMX Music Limited:
Martin Wrigley and Grant McKenzie have each
given a general disclosure notice disclosing interests
arising from being senior employees of Sky and, in
Martin Wrigley’s case, a shareholder of Sky.
Believe It Or Not Limited:
Grant McKenzie has given notice disclosing
interests arising from being an employee of
Sky. Brendan Lochead has given a general
notice disclosing his interest arising from being
a shareholder of Believe It Or Not Limited and
a director and shareholder of Mad If You Don’t
Limited. Annabelle Lochead has given a general
notice disclosing her interest arising from being the
wife of Brendan Lochead (who is a shareholder
of Believe It Or Not Limited) and a director and
shareholder of Mad If You Don’t Limited.
* John Fellet retired as a director of Outside Broadcasting Limited,
Igloo Limited and Sky Ventures Limited on 21 March 2019. Jason
Hollingworth retired as a director of Screen Enterprises Limited,
Outside Broadcasting Limited, Igloo Limited and Sky Ventures
Limited on 23 April 2019. Michael Watson retired as a director of
Igloo Limited on 21 February 2019. Eric Van Der Plank retired as a
director of Believe It Or Not Limited on 13 June 2019. Mr Fellet,
Mr Hollingworth, Mr Watson and Mr Van Der Plank had each
disclosed interests arising as employees of Sky, and in Mr Fellet’s
case, a director of Sky.
Disclosures of relevant interests in securities
During the year to 30 June 2019, in relation to
Sky’s directors, one disclosure was made in the
Interests Register as to acquiring a relevant
interest in Sky’s shares under section 148 of the
Companies Act 1993:
− Martin Stewart made one disclosure
regarding a contractual entitlement to
receive a total of 800,000 ordinary shares in
instalments of 200,000 on each of the first
four anniversaries of commencement of
employment, with the shares vesting if Sky
exercises its no fault termination right or if
there is a change of control and Mr Stewart
is no longer Chief Executive.
Insurance and indemnities
Sky has in place directors’ and officers’ liability
insurance to cover risks normally covered by such
policies arising out of acts or omissions of Sky
directors or employees in that capacity.
Sky has entered into a deed of indemnity
pursuant to which it has agreed to indemnify
directors, senior management and officers of Sky
against liability incurred from acts or omissions
of such directors, senior management or officers,
subject to certain exceptions which are normal in
such indemnities.
Sky subsidiaries’
interests registers
The directors of Sky’s subsidiaries have given
notices disclosing interests in the various entities
pursuant to section 140 of the Companies Act
1993. Those notices which remain current as at
30 June 2019 are set out below:*
Screen Enterprises Limited:
George McFarlane had given a general notice
disclosing interests arising from being an
employee of Sky.
Company and bondholder information
Directors holding and ceasing office
− Peter Macourt (Chair)
− Michael Darcey
− John Fellet (ceased 28 March 2019)
− Derek Handley
− Geraldine McBride
− Susan Paterson, ONZM
− Martin Stewart (appointed 18 April 2019)
Statement of directors’ interests
For the purposes of NZX Listing Rule 3.7.1(d), the following table sets out the quoted financial products
in which each director had a relevant interest as at 30 June 2019*:
Relevant interests
Peter Macourt
Mike Darcey
Derek Handley
Geraldine McBride
Susan Paterson
Martin Stewart
Shares
—
—
4,000
—
10,000
800,000**
* John Fellet retired from the board on 28 March 2019. On retirement, Mr Fellet held a relevant interest in 246,400 ordinary shares in Sky.
** Power to control the acquisition/disposal of 800,000 ordinary shares as a result of a contractual entitlement to receive such shares in instalments
of 200,000 on each of the first four anniversaries of commencement of employment, with the shares vesting if Sky exercises its no fault
termination right or if there is a change of control and Mr Stewart is no longer Chief Executive.
Sky / 2019 Annual Report / 103
Subsidiaries
At 30 June 2019, Sky had the following subsidiary companies:
Sky DMX Music Limited, Screen Enterprises Limited, Outside Broadcasting Limited, Igloo Limited, Believe
It Or Not Limited, Sky Ventures Limited and Media Finance Limited. During the year to 30 June 2019,
Sky DMX Music Limited operated the Sky DMX music business. Outside Broadcasting Limited provided
mobile on-site broadcasting facilities and services, Believe It Or Not Limited provided quizzes for the
hotel entertainment industry, and Sky Ventures Limited provided investment and sponsorship in the field
of information and broadcast technology, by holding a 13.54% investment in 90 Seconds Pty Limited (a
cloud video production company). This investment was sold in July 2018. Media Finance Limited, Igloo
Limited and Screen Enterprises Limited did not trade during the year.
Directors of subsidiaries
Subsidiary
Director
Sky DMX Music Limited
Grant McKenzie
Martin Wrigley
Steven Hughes
Kenneth Eissing Jr
Screen Enterprises Limited
George MacFarlane
Outside Broadcasting Limited
Martin Stewart
(appointed 21 February 2019)
Jason Hollingworth
(retired 23 April 2019)
Igloo Limited
Martin Stewart
(appointed 21 February 2019)
Jason Hollingworth
(retired 23 April 2019)
John Fellet
(retired 21 February 2019)
Jason Hollingworth
(retired 23 April 2019)
John Fellet
(retired 21 February 2019)
Michael Watson
(retired 21 February 2019)
Believe It Or Not Limited
Anabelle Lochead
Brendan Lochead
Grant McKenzie
Sky Ventures Limited
(previously Cricket Max Limited)
Christopher Shaw
(appointed 13 June 2019)
Eric Van Der Plank
(retired 13 June 2019)
Martin Stewart
(appointed 21 February 2019)
Jason Hollingworth
(retired 23 April 2019)
John Fellet
(retired 21 February 2019)
Media Finance Limited
Martin Stewart
(appointed 21 February 2019)
John Fellet
(retired 21 February 2019)
The remuneration of Sky’s employees acting as directors of subsidiary companies is disclosed in the
relevant banding for employee remuneration or in the case of John Fellet and Martin Stewart, their
remuneration is disclosed below under the heading of “Remuneration of Directors”.
No director of any subsidiary company received directors’ fees or extra benefits by virtue of the fact that
they are acting as directors of subsidiary companies.
Remuneration of directors
The total remuneration and value of other benefits received by directors of Sky during the year 1 July
2018 to 30 June 2019 was as follows:
Name
John Fellet
(ceased 28 March 2019)
Martin Stewart
(appointed 18 April 2019)
Derek Handley
Peter Macourt (Chair)
Geraldine McBride
Susan Paterson
Mike Darcey
Board Fees
Audit and Risk
Committee
Nomination and
Remuneration
Committee
Other
Total
Remuneration
—
—
100,000
170,000
100,000
100,000
100,000
570,000
—
—
12,000
12,000
—
20,000
—
44,000
—
—
5,000
5,000
—
12,000
—
1,478,946
1,478,946
625,000
—
—
—
—
—
625,000
117,000
187,000
100,000
132,000
100,000
22,000
2,103,946
2,739,946
The current fees paid to Sky directors are set out in the table above. Directors do not receive any
performance or equity based remuneration or superannuation or retirement benefits. This reflects the
role of the directors which is to provide oversight and guide strategy, whereas the role of management
is to operate the business and execute Sky’s strategy.
Chief executive remuneration
Martin Stewart was appointed as CEO of Sky on 21 February 2019. He was also appointed as a director
on 18 April 2019.
John Fellet who was an employee of Sky for 26 years and the CEO of Sky for 17 years retired from his
position as CEO on 21 February 2019. He retired as a director on 28 March 2019.
The CEO remuneration is a mix of base salary, bonus and share entitlements and is externally
benchmarked annually.
Details for the past five years are as follows:
2019
2018
2017
2016
2015
Martin Stewart
John Fellet
John Fellet
John Fellet
John Fellet
John Fellet
Base salary
625,000
STI
LTI
—
—
911,050
178,133
389,763
1,413,057
1,406,130
1,375,262
1,333,750
156,249
405,694
144,743
414,868
204,243
423,745
227,579
347,767
Total Remuneration
625,000
1,478,946
1,975,000
1,965,741
2,003,250
1,909,096
The CEO shares in a bonus pool (with other senior executives who participate in the scheme) which
is designed to drive long-term value creation. The proportion of the bonus pool attributable to the
CEO depends on the board’s assessment of his performance against a range of KPI’s including
development of the long term strategy, leadership, product offerings and pricing, supplier arrangements,
organisational efficiencies, and subscriber numbers.
Company and bondholder information (continued)Sky / 2019 Annual Report / 105
Both Martin Stewart and John Fellet participated
in this bonus scheme during the year to 30 June
2019. Mr Stewart’s overall on-target bonus
is 50% of his base salary. Mr Stewart is also
entitled to 800,000 shares in Sky, in instalments
of 200,000 on each of the first four anniversaries
of commencement of his employment, with
the shares vesting if Sky exercises its no fault
termination right or if there is a change of control
and Mr Stewart is no longer Chief Executive.
Sky’s executive bonus scheme is currently
under review with assistance from external
advisers, and Sky intends to implement a new
or revised STI and LTI scheme in the 2020
financial year.
The bonus is paid in cash in September each
year. A bonus amount is calculated based on
financial performance for the prior financial
year ended 30 June and this is added to a pool
of deferred bonus payments, with one third of
the total bonus pool paid being out in the year,
and two thirds of the pool being deferred. This
deferral of part of the annual bonus is to provide
a long-term component to the scheme as the
extent to which it is paid will be dependent on
the future performance of the business. There
is no entitlement to the deferred bonus on
resignation or retirement of an executive. The
board may consider the individual circumstances
in determining how much if any of the deferred
bonus will be paid on retirement.
The annual bonus calculation is based on
two factors:
− the absolute rate of return on capital
employed; and
− the year on year movement in the rate of
return on capital employed.
The absolute rate of return on capital employed
is calculated as earnings before interest, tax and
depreciation (EBITDA) divided by the cumulative
capital investment over the previous five years.
The scheme also looks at the year on year change
in this rate of return and a fixed dollar amount
is paid for each percentage point change in
the rate of return. This fixed dollar amount is
two times the dollar amount paid in the rate of
return calculation. If the rate of return decreases
compared to the previous year this element of
the calculation will result in a negative value being
deducted from the bonus pool causing the pool
to reduce and the bonus payments to reduce. The
pool was reweighted down by $528,000 in 2018
due to a reduced number of participants.
Company and bondholder information (continued)
Substantial security holders
According to notices given to Sky under the Securities Markets Act 1988, and the Financial Markets
Conduct Act 2013 the following persons were substantial security holders in Sky as at 30 June 2019
and 25 July 2019 (as indicated below):
Entity
Kiltearn Partners LLP
Jupiter Asset Management Limited and its related bodies corporate
The Kiltearn Global Equity Fund
Harris Associates L.P
Allan Gray Australia Pty Ltd and its related bodies corporate
Accident Compensation Corporation
Entity
Kiltearn Partners LLP
Jupiter Asset Management Limited and its related bodies corporate
The Kiltearn Global Equity Fund
Accident Compensation Corporation
Harris Associates L.P
Securities as at
30 June 2019
48,362,124
32,241,838
31,285,645
23,784,700
23,706,947
20,088,702
Securities as at
25 July 2019
48,362,124
38,525,000
31,285,645
24,047,060
23,784,700
The total number of issued voting securities of Sky as at 30 June 2019 and 25 July 2019 was
389,139,785.
Company and bondholder information (continued)Sky / 2019 Annual Report Twenty largest shareholders as at 25 July 2019
Name
HSBC Nominees (New Zealand) Limited
JP Morgan Chase Bank NA NZ Branch
Citibank Nominees (New Zealand) Limited
Accident Compensation Corporation
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
BNP Paribas Nominees (NZ) Limited
National Nominees New Zealand Limited
TEA Custodians Limited Client Property Trust Account
JP Morgan Nominees Australia Limited
ANZ Wholesale Australasian Share Fund
BNP Paribas Nominees Pty Ltd
National Nominees Limited
HSBC Nominees A/C NZ Superannuation Fund Nominees Limited
FNZ Custodians Limited
Dorchester Trustee Limited & DDS Trustee Services Limited
New Zealand Permanent Trustees Limited
Public Trust RIF Nominees Limited
ANZ Wholesale NZ Share Fund
Forsyth Barr Custodians Limited
Holding
168,220,883
33,395,902
27,786,104
24,297,060
21,686,026
11,618,385
10,332,933
6,561,837
4,906,093
3,905,795
3,035,632
2,608,230
1,819,047
1,536,423
1,270,025
825,579
768,668
618,045
606,424
539,253
/ 107
Percentage
(2 d.p.)
43.23
8.58
7.14
6.24
5.57
2.99
2.66
1.69
1.26
1.00
0.78
0.67
0.47
0.39
0.33
0.21
0.20
0.16
0.16
0.14
Twenty largest bondholders as at 25 July 2019
Name
FNZ Custodians Limited
Custodial Services Limited
Investment Custodial Services Limited
JB Were (NZ) Nominees Limited
New Zealand Methodist Trust Association
Westpac Banking Corporate NZ Financial Markets Group
ANZ Custodial Services New Zealand Limited
Forsyth Barr Custodians Limited
Tappenden Holdings Limited
Bank of New Zealand - Treasury Support
Zhenji Rong & Yizhen Wu
University of Otago Foundation Trust
Henry & William Williams Memorial Trust Incorporated
ASB Nominees Limited
Invercargill Licensing Trust
Xu Li & Zhen Zhen
Haitao Li
F S Investments Limited
Tony Lachlan Wallace & Alison Kay Wallace & Grant Lachlan Wallace
Geoffrey Christopher David Groom
Holding
18,859,000
13,541,000
10,980,000
6,406,000
5,000,000
2,671,000
1,454,000
1,126,000
1,000,000
900,000
572,000
500,000
377,000
360,000
330,000
308,000
298,000
250,000
250,000
206,000
Percentage
(2 d.p.)
18.86
13.54
10.98
6.41
5.00
2.67
1.45
1.13
1.00
0.90
0.57
0.50
0.38
0.36
0.33
0.31
0.30
0.25
0.25
0.21
Company and bondholder information (continued)Sky / 2019 Annual Report / 109
Distribution of ordinary shares and shareholdings as 25 July 2019
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
TOTAL
No. of
shareholders
Percentage
(to 2 d.p.)
2,199
2,604
814
803
67
6,487
33.90
40.14
12.55
12.38
1.03
100.00
No. of
shares
1,280,594
6,967,055
6,387,146
23,025,317
351,479,673
389,139,785
Percentage
(to 2 d.p.)
0.33
1.79
1.64
5.92
90.32
100.00
Non marketable parcels of shares
As at 25 July 2019, 781 shareholders in Sky had non-marketable parcels of shares for the purposes of
ASX Listing Rule 4.10.8.
Other information
For the purposes of ASX Listing Rule 4.10.14, 4.10.18 and 4.10.21, as at 25 July 2019:
− Sky had no restricted securities or securities subject to voluntary escrow on issue;
− there was no on-market buy back; and
− Sky was not subject to section 611 of the Corporations Act 2001.
Voting rights attached to shares
Each share entitles the holder to one vote.
Distribution of bonds and bondholdings as at 25 July 2019
SKTO20 Bonds
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
TOTAL
No. of
bondholders
Percentage
(to 2 d.p.)
-
124
249
703
85
1,161
-
21.45
60.55
7.32
10.68
No.
of bonds
-
620,000
2,406,000
25,538,000
71,436,000
Percentage
(to 2 d.p.)
-
0.62
2.4
25.54
71.44
100.00
100.00
100,000,000
Voting rights attached to bonds
Each bondholder is entitled to one vote for every dollar of principal outstanding on their bonds at
meetings of bondholders. Bondholders do not have the right to attend or vote at shareholders’ meetings.
Employee remuneration
The number of employees or former employees of Sky and its subsidiaries (excluding directors of
Sky but including employees of Sky holding office as directors of subsidiaries, other than the
Chief Executive2) whose remuneration and benefits was within specified bands for the year to
30 June 2019 is as follows:
These figures include severance payments made during the financial year.
Remuneration $
100,000 – 110,000
110,001 – 120,000
120,001 – 130,000
130,001 – 140,000
140,001 – 150,000
150,001 – 160,000
160,001 – 170,000
170,001 – 180,000
180,001 – 190,000
190,001 – 200,000
200,001 – 210,000
210,001 – 220,000
220,001 – 230,000
230,001 – 240,000
240,001 – 250,000
260,001 – 270,000
280,001 – 290,000
300,001 – 310,000
370,001 – 380,000
410,001 – 420,000
470,001 – 480,000
500,001 – 510,000
520,001 – 530,000
550,001 – 560,000
590,001 – 600,000
880,001 – 890,000
1,180,001 – 1,190,000
1,760,001 – 1,770,000
No. of employees
70
56
31
33
17
8
12
9
6
8
2
1
5
3
6
1
1
1
1
1
1
2
2
2
1
1
1
1
2
The remuneration of Sky’s Chief Executive Martin Stewart (and former Chief Executive John Fellet) is not included in the above table as he
is also a director of Sky. Their renumeration is disclosed under the heading “Remuneration of Directors” on page 73.
Company and bondholder information (continued)Sky / 2019 Annual Report / 111
Donations
During the year 1 July 2018 to 30 June 2019, Sky made cash donations totalling $214,000.
Sky’s subsidiaries did not make any donations.
Auditors
The auditors of Sky and its subsidiaries were PricewaterhouseCoopers. The amount paid to
PricewaterhouseCoopers by Sky in the year to 30 June 2019 for statutory audit services and for other
assurance services was:
in NZD 000
Sky
Statutory audit services
Other non-assurance services
369
33
Sky’s subsidiaries did not pay PricewaterhouseCoopers any fees.
Waivers and information
Current and ongoing waivers
The following is a summary of all waivers granted in favour of Sky which were relied upon by Sky in the year
to 30 June 2019.
These were:
1. A waiver to permit Sky to lodge its half yearly and final reports in the form of an NZX Appendix
1 instead of an ASX Appendix 4D and ASX Appendix 4E, on the condition that Sky provides any
additional information required by the ASX Appendices as an annexure to the NZX Appendix 1;
2. A waiver from ASX Listing Rule 6.10.3 to the extent necessary to permit Sky to set the “specified
time” to determine whether a security holder is entitled to vote at a shareholders’ meeting in
accordance with the requirements of relevant New Zealand legislation;
3. A waiver from ASX Listing Rule 15.7 to permit Sky to provide announcements simultaneously to both
ASX and NZX;
4. A waiver from ASX Listing Rule 14.3 to the extent necessary to allow Sky to receive director
nominations between the date three months and the date two months before the annual meeting;
5. Confirmation that the rights attaching to Sky shares set out in Sky‘s constitution are appropriate
and equitable for the purpose of ASX Listing Rule 6.1 and comply with ASX Listing Rule 2.1;
6. Confirmation that ASX will accept financial accounts prepared in accordance with New Zealand
GAAP and New Zealand Auditing Standards, and denominated in New Zealand dollars; and
7. Confirmation that Sky can provide substantial holder information provided to it under the
New Zealand Securities Markets Act 1988 (now the Financial Markets Conduct Act 2013).
8. The class rulings and waivers issued by the NZX in relation to the new NZX Listing Rules dated
1 January 2019 and transition to those rules.
Sky / 2019 Annual Report / 113
Admission to the official list of the Australian Stock Exchange
In connection with Sky’s admission to the official list of the ASX, the following information is provided:
1. Sky is incorporated in New Zealand.
2. Sky is not subject to Chapters 6, 6A, 6B and 6C of the Australian Corporations Act 2001 dealing
with the acquisition of shares (such as substantial holdings and takeovers).
3. Limitations on the acquisition of the securities imposed by New Zealand law are as follows:
a.
In general, Sky securities are freely transferable and the only significant restrictions or
limitations in relation to the acquisition of securities are those imposed by New Zealand laws
relating to takeovers, overseas investment and competition.
b. The New Zealand Takeovers Code creates a general rule under which the acquisition of more
than 20% of the voting rights in Sky or the increase of an existing holding of 20% or more of
the voting rights in Sky can only occur in certain permitted ways. These include a full takeover
offer in accordance with the Takeovers Code, a partial takeover offer in accordance with the
Takeovers Code, an acquisition approved by an ordinary resolution, an allotment approved
by an ordinary resolution, a creeping acquisition (in certain circumstances) or compulsory
acquisition if a shareholder holds 90% or more of Sky shares.
c. The New Zealand Overseas Investment Act 2005 (and associated regulations) regulates
certain investments in New Zealand by overseas persons. In general terms, the consent of the
New Zealand Overseas Investment Office is likely to be required where an ‘overseas person’
acquires shares or an interest in shares in Sky that amount to more than 25% of the shares
issued by Sky or, if the overseas person already holds 25% or more, the acquisition increases
that holding.
d. The New Zealand Commerce Act 1986 is likely to prevent a person from acquiring Sky shares
if the acquisition would have, or would be likely to have, the effect of substantially lessening
competition in a market.
Sky / 2019 Annual Report / 115
Annual meeting
The next annual meeting of Sky Network
Television Limited will be held at The Generator,
12 Madden Street, Auckland, on Thursday 17
October 2019, commencing at 10.30 am.
Share market and
other information
New Zealand
Sky’s ordinary shares are listed on the main board
of the NZX and trade under the symbol SKT. Sky’s
bonds are listed on the NZDX and trade under
the symbol SKT020. Sky’s International Security
Identification Number issued for the Company by
the NZX is NZSKTE0001S6.
NZX Limited
Level 1, NZX Centre
11 Cable Street
Wellington 6011, New Zealand
Mailing address:
PO Box 2959
Wellington 6140, New Zealand
Tel: +64 4 472 7599 Fax: +64 4 496 2893
Website: nzx.com
Australia
Sky’s ordinary shares are also listed
on the ASX and trade under the symbol SKT.
ASX Limited
Exchange Centre
20 Bridge Street, Sydney
NSW 2000, Australia
Mailing address:
PO Box H224
Australia Square, Sydney
NSW 1215, Australia
Tel: +61 2 9338 0000 Fax: +61 2 9227 0885
Website: asx.com.au
Directory
Registrars
Shareholders should address questions relating to share certificates, notify changes of address or
address any administrative questions to Sky’s share registrar as follows:
New Zealand ordinary share registrar
Computershare Investor Services Limited
Level 2, 159 Hurstmere Road
Takapuna, North Shore City 0622
New Zealand
Mailing address:
Private Bag 92119
Auckland Mail Centre
Auckland 1142, New Zealand
Tel: +64 9 488 8700 Fax: +64 9 488 8787
Email: enquiry@computershare.co.nz
Australian branch register
Computershare Investor Services Pty Limited
Yarra Falls, 452 Johnston Street
Abbotsford, VIC 3067
GPO Box 2975
Melbourne VIC 3000, Australia
Freephone: 1800 501 366 (within Australia)
Tel 61 3 9415 5000 (outside Australia)
Fax +61 3 9473 2500
Email: enquiry@computershare.co.nz
Bondholder trustee
The New Zealand Guardian Trust Company Limited
Level 6, 191 Queen Street
Auckland 1010, New Zealand
Mailing address:
PO Box 274, Shortland Street
Auckland 1140, New Zealand
Tel: 0800 683 909 Fax: +64 9 377 7470
Email: ct-auckland@nzgt.co.nz
Sky / 2019 Annual Report / 117
Directors
Peter Macourt, Chair
Michael Darcey
Derek Handley
Geraldine McBride
Susan Paterson ONZM
Martin Stewart (appointed 18 April 2019), Chief Executive
Officers
Martin Stewart
Director and Chief Executive Officer
Sophie Moloney
Chief Legal, People and Partnerships Officer and Company Secretary
Blair Woodbury
Chief Financial Officer
Steve Bayliss
Chief Marketing Officer
Travis Dunbar
Director of Entertainment Programming
Chris Major
Tex Teixeira
Grant Frear
Director of External Affairs
Director of Sport and Broadcasting
Interim Chief of Technology
Martin Wrigley
Director of Operations
New Zealand registered office
10 Panorama Road, Mt Wellington,
Auckland 1060, New Zealand
Tel: +64 9 579 9999 Fax: +64 9 579 8324
Website: sky.co.nz
Australian registered office
c/- Allens Arthur Robinson Corporate Pty Limited
Level 4, Deutsche Bank Place,
126 Philip Street, Sydney, NSW 2000, Australia
Tel: +61 2 9230 4000 Fax: +61 2 9230 5333
Auditors to Sky
PricewaterhouseCoopers
PricewaterhouseCoopers Tower,
188 Quay Street, Auckland 1010, New Zealand
Tel: +64 9 355 8000 Fax: +64 9 355 8001
Solicitors to Sky
Buddle Findlay
PricewaterhouseCoopers Tower,
188 Quay Street, Auckland 1010, New Zealand
Tel: +64 9 358 2555 Fax: +64 9 358 2055
Sky / 2019 Annual Report