[Page 1 of 2] Chief Executive's Review
Chief Executive's Review
John Smith
Against the backdrop of growing competition, complexity and the transition to digital, it is extremely encouraging for me to report
another strong year for BBC Worldwide. Our sales in 2007/08 were up 13.1% to £916.3m and our profit is up 17.0% (before prior-year
exceptionals) to £117.7m, year on year. These results, delivered after investing over £30m in new businesses, show that we are fulfilling
our remit to maximise the value in BBC content, creating additional funding which is ploughed back into the BBC.
The challenges being faced by the industry are, of course, our challenges too. On screen and online, the competition for eyeballs is intense,
the advertising sales market is changing rapidly and, as digital distribution grows, those in physical publishing find it harder to maintain market
share and margins. Crucially for BBC Worldwide, the intellectual property (IP) rights supply in the UK is increasingly competitive. The UK
independent production sector has seen significant consolidation in the last two years, with 72% of the market now controlled by just 15 top
players, many of which are now undertaking their own distribution.
What has helped us to succeed in this shifting landscape is the wide range of our business portfolio and the broad spread of geographies in which we operate.
Plus we have a wealth of inspiring stand-out content to offer, stamped with the gold standard of the BBC brand. Our mature businesses – Sales &
Distribution, Magazines and Home Entertainment – have proved to be highly resilient and are still growing, and our new businesses – Channels,
Content & Production, Digital Media and Global Brands - are all making very good progress.
SALES (£m)
| Year | 08 |
07 |
|---|
| Channels | 183.8 |
169.0 |
|---|
| Content & Production | 68.5 |
50.4 |
|---|
| Digital Media | 21.9 |
13.9 |
|---|
| Global Brands | 23.1 |
- |
|---|
| Sales & Distribution | 212.9 |
216.4 |
|---|
| Magazines | 177.9 |
171.3 |
|---|
| Home Entertainment | 228.2 |
189.4 |
|---|
| TOTAL | 916.3 |
810.4 |
|---|
Before
exceptional items
After
exceptional items
PROFIT (£m)
| Year |
08 |
|
07 |
|
08 |
|
07 |
|---|
| Channels | 12.6 |
|
21.1 |
|
12.6 |
|
20.9 |
|---|
| Content & Production | 14.2 |
|
7.1 |
|
14.2 |
|
7.1 |
|---|
| Digital Media | (10.9) |
|
(3.9) |
|
(10.9) |
|
(3.9) |
|---|
| Global Brands | (2.1) |
|
- |
|
(2.1) |
|
- |
|---|
| Sales & Distribution | 46.7 |
|
40.2 |
|
46.7 |
|
40.2 |
|---|
| Magazines | 16.7 |
|
19.8 |
|
16.7 |
|
20.0 |
|---|
| Home Entertainment | 40.5 |
|
16.3 |
|
40.5 |
|
26.8 |
|---|
| TOTAL | 117.7 |
|
100.6 |
|
117.7 |
|
111.1 |
|---|
Looking across the results, I would single out the profits delivered by Sales & Distribution and Home Entertainment as highlights. These well established businesses have again delivered
substantial returns, especially in the US – one of our top priority markets for growth. In addition, within Channels, UKTV has had an excellent
year, with the new channel Dave being a star performer.The success of Dancing with the Stars (the international name for the BBC’s hit show
Strictly Come Dancing) continues, again particularly in the US, resulting in a doubling of profits within our new Content & Production business.
In terms of future growth, we believe that bbc.com (the commercialisation of international traffic to the BBC’s website bbc.co.uk) and the
development of a commercial media player – project name Kangaroo – with partners ITV and Channel 4 (subject to BBC Trust approval), are
strategically important milestones. The BBC Trust’s role in rigorously reviewing proposals like these is important. It ensures we only bring into
the market new services which really add value to the BBC and which adhere to the framework of the four commercial criteria as noted by
Etienne de Villiers in his introduction. The BBC Trust also approved our first major acquisition, a majority stake in the world’s leading
travel information group Lonely Planet, which will help us in our ambition to diversify our content supply, build strong, branded franchises
and deliver more online revenues.
The Lonely Planet acquisition is now managed in a new business called Global Brands, headed by Marcus Arthur, who joined the Board on 31 March 2008, having worked extensively in
our magazines and website businesses. Another global brand – Top Gear – is also part of his responsibilities from 1 April 2008, and others will be
added as their international cross-media potential is identified.
Of course, there have been plenty of hurdles to overcome during the year: achieving robust distribution deals for our new channels
in certain markets, for example, and creating the right infrastructure for bbc.com, plus – as with any company achieving fast growth – the inevitable
need to monitor and control costs. Much of the investment we had planned to make in 2007/08 on bbc.com and Kangaroo will now be made, and will impact
profits, in the new financial year, rather than 2007/08 as we had expected.
It is disappointing that the Children’s business within Home Entertainment has reported increased losses this year when, over the
past two years, its results had been moving in the right direction.The downward pressures on the children’s sector are well known; however,
we have appointed strategy consultants to help us undertake a fundamental review of this business to determine the best way forward.
Overall EBITDA grew to £233.3m (up from £220.0m last year) and I am confident that the company as a whole is in fine shape and that the
investments we have made in new businesses will deliver a good return to the BBC in the latter half of our five-year plan and beyond.
I am delighted to welcome Neil Chugani to the Executive Board as Chief Financial Officer. Neil has extensive media and corporate finance
experience, which will be invaluable to us in the years ahead. I also pay tribute to our outgoing CFO, David King, for his dedicated contribution to
BBC Worldwide over the past 12 years.