SATELLITE broadcaster BSkyB bounced back into the black as it set its sights on seven million digital subscribers by the end of this year.

The group reported annual pre-tax profits before exceptional items of £259.6m, up on the loss of £22.1m reported a year ago.

BSkyB's improvement came as total revenues broke through the £3bn barrier for the first time, up 15 per cent in the year to June 30 at £3.19bn.

That was fuelled by a rise in the number of digital subscribers, up 744,000 over the year to 6.84 million.

It has also been helped by higher prices, introduced in January, which resulted in a five per cent hike in average annual revenues per digital subscriber at £366.

The figures come less than a week after BSkyB secured a £1bn agreement with the FA Premier League to broadcast top-flight football for the three seasons from 2004/05.

During the financial year, sports costs - representing 45 per cent of total programming spend - rose £60m to £723m, pushing the company's overall programming bill up by 11 per cent to £1.6bn.

Vinay Bedi, of stockbrokers Wise Speke, said: "BSkyB has beaten market expectations by reporting higher revenues and lower costs than were forecast and by reducing debt more quickly than scheduled.

"Its first ever annual profit and the increasing likelihood of dividend payments in the medium-term clearly demonstrates its strong present position and expected future successes.