The licence fee settlement is good news. It provides some
funding certainty and provides guaranteed, although limited,
real revenue growth to the end of the Charter.
increase in the licence fee, under this settlement, started
after the financial year reviewed in this report - on 1 April
2000. But the year to 31 March 2000 benefited from a half
a per cent real rise in the licence fee, under the previous
settlement, worth £11 million.
to this with our own self help by again pushing down the cost
of licence collection and evasion - now down to 10.4% including
an all-time low evasion rate of 5.4%. It is critical that
those who do pay are not disadvantaged by those who do not,
but we are acutely conscious of the difficulties faced by
some licence payers who are on low incomes. Because of this
we have tailored a range of cash-based easy payment schemes
to help those who find it most difficult to spread their payments
over the year. By the year end, there were 548,000 and 68,000
members of the weekly Cash Easy Entry scheme and Monthly Cash
to these, an estimated 3.5 million people use TV Licence Savings
Stamps as a way of saving for their next licence. 43% of licence
payers use one of the many direct debit schemes and we also
introduced internet licence renewal during the year. Although
take-up of web-based payment has been slow so far, we expect
this to grow in the future.
continue to offer a wide range of payment methods and outlets
- 26,500 outlets are signed up now and we plan to introduce
an electronic card savings scheme during 2000 which will eventually
replace savings stamps.
April 2000 a 50% discount is available for people who are
registered blind and from 1 November 2000 licence payers who
are over 75 will be able to receive a free licence once they
have registered with TV Licensing.
of the BBC’s commercial subsidiaries performed well.
Limited met all of its financial targets and sales, including
joint ventures, exceeded £0.5 billion for the first time this
year. The net cash contribution to the BBC grew to £82 million
and direct investment in BBC programmes to £79 million.
strategy continued across many countries and extended into
new publishing and internet ventures. A proposed new joint
venture in the US with investment bank Veronis Suhler builds
on the existing successful joint venture models with Discovery
and Flextech and will grow Worldwide’s publishing capability
in the US.
Limited had its first full year of trading and commercial
sales rose to £37 million (up 23%). The primary aim of BBC
Resources Limited is to provide a range of craft skills and
resources for BBC programme makers, but an additional aim
is to use surplus capacity to generate extra cash for reinvestment
in BBC programmes. The company was formed the previous year
with a target to earn a 15% pre-tax return within five years.
BBC Resources Limited made an operating profit of £1.3 million
this year on its commercial activities, but there is still
a need to cut costs and restructure the business, so after
a restructuring charge of £8.9 million this resulted in a
loss of £7.6 million. The net cash outflow for the year was
£1.4 million, a major improvement on the £8.2 million outflow
in the previous nine-month period.
The BBC has been pursuing an ambitious efficiency drive for
several years and our aim is to become the UK’s lowest-cost
producer of high-quality programmes. The licence fee settlement
was accompanied by tough savings targets for the next few
years and an expectation of some further asset sales, which
emphasises the importance of our savings programme.
the year, licence collection costs fell from £133 million
to £114 million, the cost of the Corporate Centre was reduced
by £2.4 million or 4% and, across the BBC, efficiency savings
of £70 million were delivered, which again beats the target
we set ourselves. The percentage of income spent on content,
rather than overheads, is now a key financial indicator which
will be reported each year in the Annual Report and Accounts.
The figure for 1999/2000 was 76% and the aim is to achieve
85% within five years. This will increase the spending on
programmes by over £150 million a year, making a real difference
to the BBC’s output mix. Implementation of ‘One BBC’ will
start in the next financial year and will be critical to the
achievement of this target.
One BBC, the APOLLO programme, which aims to upgrade business
and financial systems on to SAP software, will be rolled out,
now that the pilot implementation in Scotland is complete.
same time, we will reduce the number of business units from
150 to around 50 and simplify internal trading to reduce significantly
the number of transactions and, therefore, the processing
Only one new digital channel was launched during the year
- BBC Knowledge - and the UK’s first digital text service
was also launched. Our total spend on digital services in
the year was £208 million. Included in this is £32 million
for online content, which pays for nearly one million web
pages achieving 177 million page hits per calendar month by
March 2000. The total spend in the three years to date on
all the BBC’s digital services was £426 million or 6.5% of
income over the period. Spend on individual
services can be seen along with other key financial indicators.
In addition to the extra spending on digital services, spend
on analogue services rose 7.6% to £1,914 million. Despite
this, the BBC’s very healthy cash balance actually rose £25
million in the year to a year-end balance of £259 million.
together with the deposits from the TV Licence Savings Stamps
scheme, means that a cash balance of £423 million was invested
in the money markets at the year end and effective treasury
management during the year contributed £23 million in interest
of increase in BBC cash £m Cash at start of year 234 Home
services income 2,310 Licence fee collection costs (114) Spend
on digital services (208) Spend on analogue services * (1,914)
Other spend (82) Purchase of fixed assets (net of depreciation)
(2) Reduction in working capital 11 Interest, net of tax 8
Multi-currency loan to finance proposed US joint venture 16
Cash at end of year 259 * Net of BBC Worldwide Limited investment
in programmes of £79 million.
balance will be used up over the next 24 months as the BBC
invests more in BBC One and Two, and increases its commitment
to the new digital channels, to BBC Online and to broadcasting
in Scotland, Wales and Northern Ireland.
does not borrow in the public service businesses except to
finance temporary timing differences between cash inflows
and outflows. The two commercial subsidiaries operate within
loan facilities from the BBC which are covered by covenants
designed to ensure no risk to the licence payer. The World
Service manages its own cash flow by matching expenditure
with the draw-down of grants from the Foreign and Commonwealth
of increase in BBC cash
at start of year
fee collection costs
on digital services
on analogue services*
of fixed assets (net of depreciation)
in working capital
net in tax
loan to finance proposed US joint venture
at end of year
of BBC Worldwide Limited investment in programmes of £79
Tax is only paid on commercial profits and on rent, royalties
and interest earned. The tax charge in the year was £15 million.
BBC has no shareholders and does not aim to make a profit.
Operating surpluses and deficits simply represent timing differences
between income and expenditure. This year the effect of changes
to the taxation of pension funds and a reduction in the BBC
Pension Fund surplus has caused an extra pension cost across
the Group of £27 million compared with the previous year.
Overall spend on fixed assets was £122 million, with the majority
of this investment being in support of the expansion in services
and projects designed to improve efficiency. The most significant
in digital/widescreen production and playout facilities;
of the IT infrastructure.
Year 2000 remediation spend of £68 million over the last two
years was written off as incurred, and the BBC suffered no
problems related to the year change.
and accommodation improvements
We have launched an ambitious property programme designed
to rationalise the BBC’s 422 properties, and upgrade and open
up to the public the main sites. We are seeking a partner
to form an entity which will own and manage this programme,
starting with the White City site at the turn of the year.
refurbishment of Broadcasting House has been ongoing; this
is opening the interior to introduce a flexible, open-plan
way of working, which is more space efficient, and is replacing
worn-out infrastructure, plant and equipment. This work will
continue as part of the overall property programme.
The tight financial discipline the BBC has been introducing
over recent years is paying off, with financial targets regularly
being beaten and, this year, a rising cash balance despite
the growth in digital spending.
fee settlement gives real revenue growth and a degree of certainty
which allows the BBC to plan properly for the next phase of
technological change, but along with it the BBC has to deliver
increasing self help in the form of efficiency improvements,
commercial success and some asset sales.
will involve significant challenges: implementing One BBC
and APOLLO, simplifying the internal market and starting the
property rationalisation programme. It will be hard work,
but a sound financial platform exists as a solid underpinning
for this period of major change.
Director of Finance and Business Affairs