BBCW boosts profits by 17%

John Smith, chief executive of BBC Worldwide

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BBC Worldwide grew its profits by 17% to £117.7m in the 12 months to 31 March, despite worsening losses from the children's arm of its home entertainment unit.

Revenues at the BBC's commercial arm jumped 13% from £810.4m in 2006/07 to £916.3m last year, putting the business "on track" with its five year growth plan. The double digit growth was driven by "substantial returns" from the company's sales and distribution and home entertainment units, chief executive John Smith said.

He attributed the growth to a high demand for home entertainment and an increased presence in key international markets like India, Australia and the US through its channels and production arms. International sales accounted for 49% of the total, compared to 46% in the previous year.

However, profits were impacted by a poor performance from the children's arm of BBCW's home entertainment unit. The business increased its losses from £1.6m to £7.2m despite the success of brands like In The Night Garden. The figures represent a backwards slide on the division's performance over the last two years.

Smith said: "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."

BBCW has appointed a strategy consultant to undertake a "fundamental review" of the business and "determine the best way forward," he said.

He also used the results to announce the closure of Audiocall, its telephone services business which was involved in last year's trust scandals after it wrongly withheld payments to charities.

BBCW's profits received an unexpected boost after the delay of around £30m of planned investments, including in project Kangaroo and bbc.com. The investments were expected to diminish 2007/08 profits but were held up by BBC Trust approval processes and slower than expected launches.

Instead the investments will be made in the current financial year and are expected to impact profits, Smith said. He also predicted that the global economic downturn could stunt the current year's sales.

However, Smith remained confident that BBCW will meet expectations outlines in its growth plan. "These two issues aside, I remain confident that the company as a whole is in very good shape, and that the investments we have made across our key growth businesses will deliver new, sustainable, growing profits for the BBC," he said.

"BBCW has achieved another year of double-digit profit growth, while also making significant strategic investments in new businesses to prepare the company for the digital media world.

"The continued international appeal of our content and formats, coupled with high demand for home entertainment and the strengthening in key markets of our channels and production operations, has enabled the company to report very good results."

The 12-month period also saw a string of major acquisitions and launches by BBCW, including a £90m deal for a majority stake in the travel publisher Lonely Planet and the launch of the ad-funded international news site bbc.com.

Etienne de Villiers, BBCW's non-executive chairman, said: "BBCW is on track to achieve its five-year growth plan and return a substantial stream of additional funding to its parent, the BBC, for the long term.

"The company is firing on all cylinders and well placed to deal with the challenges ahead."
 
BBC director general Mark Thompson added: "It generates profits and dividends that the BBC can reinvest in making outstanding programmes and developing online applications for the benefit of all licence fee payers. Increasingly I believe partnerships, like those we have with Virgin Media, or as in the proposed joint venture Kangaroo, will be critical in delivering future success for BBC Worldwide."