Sky is booming as Britons splash out on improving their pay-TVs

"In an environment where people are choosing more carefully how and where they spend their money, new subscribers joined us at the highest rate for five years," said chief executive Jeremy Darroch.

"We had a strong finish to what was a good year and we're going forward in good shape."

That is reflected in the decision to hike Sky's dividend by a bigger-than-expected 5% to 17.6p a share.

The strongest growth came in high definition, where 534,000 subscribers took up Sky+HD in the six months to June. This more than doubled its base to 1.3 million, making it a mainstream service only three years after it was launched.

HD subscribers pay an extra £10 a month, effectively boosting revenues by more than £100 million a year.

Darroch said: "There has been a lot of signs that people are recommending HD to their friends and showing them that sport and movies really are better in HD. As for the cost most people can see that £10 a month is less than a round of drinks or even a single cinema ticket."

At the other end of the scale Darroch said Sky had seen no rise in the number of customers defaulting when, for example, they can no longer afford to subscribe because they have lost their jobs. Similarly churn, the measure of customers leaving or switching to rival pay-TV, broadband or phone suppliers, was steady at 9.9%.

Headline operating profits rose 4% to £780 million for the year to end-June with the push to sell HD, including subsidising the cost of set-top boxes, costing £130 million during the second half. Revenues were 7% higher at £5.32 billion with subscription revenues up 10%, offsetting a 6% fall in advertising revenues. Darroch said Sky is on target to hit 10 million subscribers by the end of 2010 having gained 462,000 in the past 12 months to take its base to 9.44 million.

Sky's spend on programming rose by 2% to £1.75 billion. Spending on sports rose by £15 million to £944 million as it built up to what it is calling the 2009 Grand Slam Summer of Sport including the Ashes, the Lions tour of South Africa and the World Twenty20 cricket tournament. Movie costs were slightly lower at £278 million with fewer titles coming out of the major studios.

Darroch repeated his view that the investigation by regulator Ofcom into pay-TV should not penalise his business. "We took the risks, we should be able to earn fair rewards," he said.