Annual Report 2001/02

Chief Executive's Review

Double-digit growth

for the third year running

This has been a year of notable growth and success for BBC Worldwide. We continued to be a growing presence in millions of homes around the world.

During the year, we sold 40,000 hours of BBC programming; extended our global network of television channels to reach more than 460 million homes; sold 100 million magazines and around 30 million book, video, DVD, audio, music and multimedia products. And our high production values and on-screen talent continued to delight audiences everywhere.

Against a background of global media recession in 2001/02, BBC Worldwide grew sales from £587 million in 2000/01 to £660 million – an increase of 12% on the previous year and double-digit growth for the third year running – marking us out as one of the UK’s best-performing media companies.

In terms of the funding that we return to the BBC each year for investment in programming, we topped the £100 million mark for the first time this year – £106 million – double that of five years ago. Profit, before interest and tax, grew to £26 million. The underlying profit excluding BBC World and beeb.com grew by 23% to £43 million.

At the same time, we have improved our efficiency, with earnings before interest, tax, depreciation and amortisation (EBITDA) as a percentage of sales increasing to 21% this year. For the first time this exceeded our long-term target of 20% – well above industry average.

These results have been achieved despite falls in advertising revenues, and an increased loss from BBC World. They endorse the strength of our strategy, which is designed to exploit the BBC’s brands and properties on a global, multi-format basis.

We will continue to grow the BBC brand around the world and drive further growth through joint ventures and acquisitions.

This year we have, again, taken landmark BBC programmes and developed them into best-selling brands and properties. Titles such as The Blue Planet, Walking with Beasts, The Weakest Link, Top of the Pops, Tweenies, and Teletubbies have been top-rated TV programmes in international schedules. From these, we produced best-selling books and videos, sought-after computer games, CD soundtracks, children’s toys, merchandise and popular audio products.

It has been a good year for television exports. Format sales of programmes such as The Weakest Link, now aired in 75 countries, and strong programme sales, particularly in the USA, pushed our television sales to a record £172 million, up 15%. No mean feat when compared with the modest growth in UK television exports announced by the British Television Distributors’ Association (BTDA) for the calendar year 2001.

Our network of global television channels, a key part of our international expansion strategy, also saw dramatic growth. These channels – BBC World, BBC Prime, BBC America, and our joint venture channels, including Animal Planet and People+Arts with Discovery Communications, Inc (DCI), and UKTV with FOXTEL and FremantleMedia in Australia – reached over 460 million homes cumulatively around the world representing growth of 27% in 2001/02. No other British media company has this channel reach.

BBC World’s continuous coverage of the events of September 11 was widely acclaimed. The channel grew its distribution by 22% to over 200 million homes. However, it was heavily impacted by the decline in advertising revenue during the last year. Operating losses increased from £13.2 million in 2001 to £15.3 million in 2002.

It was a year in which we significantly increased global reach, through deals such as those in China for Mandarin versions of Teletubbies and The Weakest Link, the locally produced Mastermind India, shown across South Asia on BBC World, and Ji Mantriji, a specially recreated Hindi version of Yes Minister shown on India’s Star Plus channel.

On the music front, outside the UK, a new deal with Universal Music International saw runaway chart success for Bob the Builder (with double platinum singles and a platinum album in Australia). Meanwhile, we continued to roll out Top of the Pops globally.

Our partnerships have continued to bring benefit both to us and to the BBC. The partnership with DCI has been so successful that in March 2002 the co-production deal was extended for a further 10 years. The year also saw an exciting new partnership with leading Canadian media company, Alliance Atlantis Communications Inc, for the launch of BBC Canada and BBC Kids (in Canada).

In the UK, our commercial UKTV channels, part of our partnership with Flextech Television, grew their distribution – most notably UK Gold and UK Drama. The joint venture made an overall profit in 2001 as well as continuing to generate a cash contribution for BBC Worldwide from programme sales. The year also saw the launch of UK Food within the UKTV family.

In line with our strategy of expanding certain of our businesses through acquisitions, our consumer publishing division acquired Chivers Communications, a major publisher of unabridged books on tape, in July 2001. This increased our audio collection, giving us an additional 3000 readings of classic and contemporary fiction. The business is running ahead of the plan prepared at the time of the deal.

A major part of our strategy is to extend our business through deals and partnerships with third parties. For example, our Magazines business signed a deal with Disney to publish their pre-teen title Big Time, and to launch several new Disney-branded magazines. Galleon, our subscription fulfilment company, also took on subscription fulfilment for Hello! magazine and Private Eye.

In the world of sport, we signed a deal with attheraces. This gives us non-betting international broadcast distribution rights for all race meetings held at the 49 British racecourses contracted to attheraces.

This year, we became the exclusive global library sales agent for US broadcasting giant, CBS. Combined with our own extensive archive, this deal means we can now offer almost two million hours of commercial library footage.

Audiocall continues to provide the telephone voting system for Channel 4’s Big Brother series.

Our performance, across all of our businesses, has received considerable acknowledgement during the year. We won a record 84 industry awards across our portfolio of businesses in recognition of the quality of our work. Our strength and growth in exports also earned us a prestigious Queen’s Award for Enterprise 2002.

Our return to creative talent continued to grow. Around £80 million was paid to actors, writers, musicians, independent producers, music collecting societies, co-producers, sports federations, news agencies and other contributors.

BBC Worldwide’s results were achieved in a year of economic and organisational challenges. We moved to a new business structure based on format and genre, supported by our sales and marketing teams in the international regions. This has helped to deliver efficiencies. In addition, we have worked closely with Hong Kong’s Independent Commission against Corruption in the investigation of a suspected fraud against BBC Worldwide by EMS and a former employee. We also reintegrated our magazine-related website, beeb.com, into our Magazines business as a response to the poor consumer internet marketplace.

Despite these challenges, it has been a year of remarkable achievement. Our role is clear – to market the excellence of the BBC and its programmes around the world and to continue to provide valuable additional funding to complement the licence fee.

Rupert Gavin
Chief Executive
BBC Worldwide Limited