John Smith

Chief Executive
BBC Worldwide

In 2004, the decision was taken as part of the BBC's Commercial Review to revitalise BBC Worldwide's financial performance by focusing on the bottom line. The plan was to double profits in two years. As our 2006/07 figures show, over three years we have tripled them.

Job done? Far from it. Our latest figures are excellent by any measure, but it is important to judge them in their strategic context. Last year marked the conclusion of the two-phase process that started with the Commercial Review. Phase one involved addressing the reality that we were underperforming and, this year, we completed the turnaround, with PBIT now three times the level of 2003/04. We have significantly improved margins with return on sales now at 12.4% versus 5.6% in 2003/04 and the company's EBITDA margin has now reached 27.4%. Having come of age, phase two of our development will see us investing heavily in establishing ourselves as one of the world's premier global content networks. Given our achievements over the last three years, I have every confidence that this prize is well within our reach.

Last year's surprise proved to be Global TV Sales, which saw sales rising across all regions despite the strong pound. Its profits grew 19.3% to £40.2m, on revenues of £216.4m. Given the extraordinary breadth and depth of our catalogue, I have a strong feeling that Global TV Sales has more growth up its sleeve in the year ahead.

Content & Production and Global Channels, two new businesses created since the Review that we are driving hard, also put in notable performances. Launched in January 2006, Content & Production increased its revenues 46.5% to £52.9m and its profit to £9.5m against £3.2m the previous year. Meanwhile, Global Channels also tripled its profit to £20.9m, achieving revenues of £169.0m.

Magazines delivered £20.0m profit despite a difficult UK market, and I anticipate that in the digital online world the business has a pivotal role to play in establishing us as a major name in the content creation market. In the coming years, we will be working hard to converge our proven skills as TV broadcasters with our proven skills as magazine publishers through many BBC-branded social networking websites built around consumer passions like food and cars. The popularity of our current web por tfolio, including topgear.com and bbcgoodfood.com, exemplify the results that this convergence can produce.

There is work to be done in other areas of our business. Some of the Home Entertainment business portfolio, for example, is facing challenges such as the rising popularity of single-track music downloads and falling margins on DVD sales.

Our social networking sites are only one component in the digital strategy that is set to become the focus of our energies and investment over the coming years. These components are quickly coming together with the development of initiatives such as the commercial media player and bbc.com, and deals with partners such as YouTube. Significant investment in these projects is the main factor behind Digital Media's losses this year and further investment is planned for 2007/08, which will have an inevitable, but temporary, downward impact on profits next year.