TIDMVMED
London, England, April 24, 2013 -Virgin Media Inc. (NASDAQ:
VMED; LSE: VMED) announces results for the quarter ended March 31,
2013.
Strong financial performance
-- Revenue up 3.6% to GBP1,043m
-- OCF1 up 5.8% to GBP399m
OCF before merger-related costs1 up 7.9% to GBP406m
Operating income up 14% to GBP150m
Net income of GBP139m, up from GBP7m
-- FCF2 up 54% to GBP135m
Net cash provided by operating activities up 44% to GBP306m
Improved churn, ARPU and customer mix
-- Cable customer net additions of 8,600
Churn fell to 1.1%; sixth consecutive quarter of
year-on-year
improvement
Triple-play penetration up to 65%; quad-play penetration up to
16%
-- Cable ARPU up 5.2% to GBP49.38
-- Improved customer mix
TiVo customers increased 171,900 to 1.5m; 40% of the TV base
Paying TV customers3 increased 13,700 to 3.3m; 87% of
the TV base
Superfast broadband customers (30Mb and above) increased
337,900
to 2.5m; 58% of the cable broadband base
Contract mobile customers increased 35,100 to 1.7m; 58% of
the
mobile base
-- Business division: new major backhaul contract wins from Sky,
Telefonica and another large UK mobile network operator
Neil Berkett, Chief Executive Officer of Virgin Media, said: "We
have had a good start to the year with accelerated revenue growth,
improved churn, and strong free cash flow growth. The great value
we provide through our Collections packages, which bundle superfast
broadband and our next generation TiVo service, has seen new
customers join and our existing customers stay loyal to us. This
positive momentum in the business positions us well for our planned
merger with Liberty Global."
Note: The notes preceding the Appendices relating to non-GAAP
financial measures and other matters and the Appendices to this
earnings release are considered an integral part of the financial
and operational information in this release. Financial and
statistical information is as at and for the three months ended
March 31, 2013, unless otherwise stated. Comparisons of financial
and operating statistics are to the first quarter of 2012, unless
otherwise stated.
Virgin Media Inc.Investor Relations:Richard Williams, +44
(0)1256 753037richard.williams@virginmedia.co.ukorVani Bassi, +44
(0)1256 752347vani.bassi@virginmedia.co.ukorPhil Rudman, +44
(0)1256 752677phil.rudman@virginmedia.co.ukorMedia:Gareth Mead, +44
(0) 20 7909 3289gareth.mead@virginmedia.co.ukorTavistock:Matt
Ridsdale, +44 (0) 20 7920 3150mridsdale@tavistock.co.ukorLulu
Bridges, +44 (0) 20 7920 3150lbridges@tavistock.co.uk
Conference call details
There will be a conference call today for analysts and investors
at 1pm UK time / 8am ET, which can be accessed live on the
Company's website, www.virginmedia.com/investors. Analysts and
investors can dial in to the call on +1 646 254 3363 in the United
States or +44 (0) 20 3478 5300 outside of the US - passcode
4415845# for all participants. The conference call replay will be
available approximately two hours after the end of the call until
5pm UK time on Wednesday, May 1, 2013. The dial-in replay number
for the US is: +1 347 366 9565 and the international dial-in replay
number is: +44 (0) 20 3427 0598 - passcode: 4415845#.
Liberty Global
On February 5, 2013, Liberty Global, Inc. and Virgin Media Inc.
announced that they had entered into an agreement, subject to
shareholder approvals, pursuant to which Liberty Global, Inc. will
acquire Virgin Media Inc. in a stock and cash merger. For further
information, please see the press release announcing the proposed
merger and other documents filed or to be filed with the SEC as
further detailed below.
This communication does not constitute an offer to sell or the
solicitation of an offer to buy any securities or a solicitation of
any vote or approval. Liberty Global Corporation Limited, a company
that has been established in connection with the transaction, has
filed a registration statement on Form S-4 (Registration No.
333-187100) with the Securities and Exchange Commission (SEC),
which includes a preliminary joint proxy statement of Virgin Media
Inc. and Liberty Global, Inc., and constitutes a prospectus of
Liberty Global Corporation Limited. VIRGIN MEDIA STOCKHOLDERS ARE
ADVISED TO READ THE REGISTRATION STATEMENT AND JOINT PROXY
STATEMENT/PROSPECTUS (INCLUDING ALL AMENDMENTS AND SUPPLEMENTS
THERETO) BECAUSE IT CONTAINS IMPORTANT INFORMATION. A definitive
joint proxy statement/prospectus will be sent to security holders
of Virgin Media and Liberty Global seeking their approval of the
proposed transaction. Investors may obtain a free copy of the
definitive joint proxy statement/prospectus, when available, and
other relevant documents filed by Liberty Global Corporation
Limited, Liberty Global and Virgin Media with the SEC at the SEC's
Web site at http://www.sec.gov. The definitive joint proxy
statement, when available, and such other documents filed by Virgin
Media with the SEC may also be obtained for free from the Investor
Relations section of Virgin Media's web site (www.virginmedia.com)
or by directing a request to Virgin Media Inc., 65 Bleecker Street,
6th Floor, New York, New York 10012, Attention: Investor Relations.
Copies of documents filed by Liberty Global and/or Liberty Global
Corporation Limited with the SEC may also be obtained for free from
the Investor Relations section of Liberty Global's website
(www.lgi.com) or by directing a request to Liberty Global, 12300
Liberty Boulevard, Englewood, Colorado 80112, Attention: Investor
Relations.
Virgin Media and Liberty Global and their respective directors,
executive officers and certain other members of management and
employees may be deemed to be participants in the solicitation of
proxies from their respective stockholders in connection with the
proposed transaction. Information concerning the interests of
Virgin Media's participants in the solicitation, which may be
different than those of Virgin Media's stockholders generally, is
set forth in Virgin Media's proxy statement relating to its 2012
annual meeting of stockholders filed with the SEC on April 30, 2012
and subsequent statements of changes in beneficial ownership on
file with the SEC. Information concerning the interests of Liberty
Global's participants in the solicitation, which may be different
than those of Liberty Global's stockholders generally, is set forth
in Liberty Global's proxy statement relating to its 2012 annual
meeting of stockholders filed with the SEC on April 27, 2012 and
subsequent statements of changes in beneficial ownership on file
with the SEC. Investors may obtain additional information regarding
the interests of such persons in the proposed transaction by
reading the registration statement, the definitive joint proxy
statement/prospectus (when available) and other relevant documents
regarding the proposed transaction filed with the SEC.
Safe Harbour Statement under the Private Securities Litigation
Reform Act of 1995
Various statements contained in this communication may include
"forward-looking statements", both with respect to us and our
industry, that reflect our current views with respect to future
events and financial performance. Words like "believe",
"anticipate", "should", "intend", "plan", "will", "expects", "may",
"estimates", "projects", "positioned", "strategy", and similar
expressions identify these forward-looking statements, which
involve known and unknown risks, uncertainties and other factors
that may cause our actual results, performance or achievements or
industry results to be materially different from those
contemplated, projected, forecasted, estimated or budgeted, whether
expressed or implied, by these forward-looking statements.
These factors include the following factors relating to the
proposed transaction:
-- The ability to obtain governmental and regulatory approvals of the
transaction on a timely basis;
-- Failure to realize the anticipated benefits and synergies of the
transaction, including as a result of a delay in completing
the
transaction or an increase in costs associated with integration
or a
delay or difficulty in integrating the businesses of Virgin
Media and
Liberty Global;
-- Limitation on the ability of Liberty Global Corporation Limited,
Liberty Global and/or Virgin Media to incur new debt in
connection
with the transaction;
-- Any disruption from the proposed transaction making it more difficult
to maintain relationships with customers, employees or
suppliers;
-- The outcome of litigation which may arise in connection with the
transaction;
-- Failure to receive the approval of the stockholders of either Liberty
Global or Virgin Media for the transaction; and
-- The impact of legislative, regulatory and competitive changes and
other risk factors relating to the industry in which Virgin
Media and
Liberty Global operate, as detailed from time to time in the
reports
of Virgin Media and Liberty Global filed with the SEC.
Additional factors are discussed under "Risk Factors", "Special
Note Regarding Forward-Looking Statements" and elsewhere in the
registration statement on Form S-4 of Liberty Global Corporation
Limited (Registration No.333-187100) that has been filed with the
SEC. In addition, factors relating to the ordinary course operation
of our business are discussed under "Risk Factors" and elsewhere in
our annual report on Form 10-K for the year ended December 31,
2012, as filed with the SEC on February 7, 2013. We assume no
obligation to update our forward-looking statements to reflect
actual results, changes in assumptions or changes in factors
affecting these statements. Virgin Media cautions that the
foregoing list of important factors that may affect future results
is not exhaustive.
SUMMARY FINANCIAL RESULTS 3 Months ended
(unaudited)
March 31, 2013 March 31, 2012
GBPm GBPm
Revenue
Cable 725.8 678.3
Mobile 137.8 138.5
Non-cable 15.5 19.0
Consumer segment - Total 879.1 835.8
Business segment 163.4 170.4
Total Revenue 1,042.5 1,006.2
OCF before merger-related costs 406.3 376.5
OCF 398.5 376.5
Operating income 149.8 130.9
FCF 134.5 87.1
Net cash provided by 306.0 212.1
operating activities
SELECTED CONSUMER OPERATIONS 3 Months ended
STATISTICS
(in thousands, except ARPU) March 31, 2013 March 31, 2012
Consumer cable customers 4,902.9 4,826.8
Consumer cable products
Broadband 4,309.6 4,148.6
Television 3,782.1 3,775.3
Telephone 4,179.6 4,147.6
12,271.3 12,071.5
Mobile - contract 1,744.0 1,588.0
Consumer cable customer 8.6 21.2
net additions
Net consumer cable product
additions (disconnections)
Broadband 37.4 45.7
Television (13.4) 12.2
Telephone 0.5 14.9
24.5 72.8
Mobile - contract net additions 35.1 64.1
Cable ARPU GBP49.38 GBP46.95
Mobile ARPU GBP14.60 GBP14.96
OVERVIEW
Strong revenue and FCF growth
Revenue was up 3.6% to GBP1,043m, with gross margin4 up 4.4% to
GBP615m. SG&A increased 1.8% to GBP217m, principally due to
GBP8m of costs related to the planned Liberty Global merger. This
resulted in OCF of GBP399m, up 5.8%. Operating income increased 14%
to GBP150m and net income amounted to GBP139m, up from GBP7m. Free
Cash Flow was up 54% to GBP135m due to higher OCF, lower capital
expenditure and lower interest costs. Net cash provided by
operating activities was up 44% to GBP306m.
OCF before merger-related costs was GBP406m, up 7.9%.
Accelerated cable revenue growth
Consumer cable revenue increased 7.0% to GBP725.8m, primarily
due to 5.2% cable ARPU growth.
The cable customer base grew by 8,600 compared to 21,200 a year
ago. Gross disconnections fell year-on-year for the sixth quarter
in a row resulting in lower monthly churn, down from 1.2% to
1.1%.
Triple-play customer numbers also grew by 17,500 in the quarter,
increasing triple-play penetration to 65.1%, up from 64.0% a year
ago.
Superfast broadband and TiVo growth
Demand for superfast broadband (30Mb and above) continues to
grow as the number of customers on such speeds increased by
337,900, taking the total to 2.5m or 58% of our broadband base.
Total broadband net additions in the quarter were 37,400. Our
programme to double customers' broadband speeds is on track with
over 85% of our network now upgraded for the new faster speeds.
TiVo is driving strong pay TV performance. We added 171,900 more
TiVo customers during the quarter to reach a total of 1.5m, which
represents 40% of our TV customer base. The number of paying TV
customers increased by 13,700.
We added more HD channels to our total TV line-up this year,
taking our total to 43 channels. In addition we launched 21 new
live channels to Virgin TV Anywhere, our cloud-based entertainment
service.
Mobile - improving contract mix
Mobile revenue was relatively flat at GBP137.8m as improving
contract mix was offset by declining prepay revenue and the impact
of regulatory changes to mobile termination rates ("MTR"). Contract
service revenue increased 0.6% to GBP99.3m, while prepay service
revenue declined by 10% to GBP32.7m. The MTR change reduced the
amount of inbound mobile revenue we received by approximately
GBP6.9m compared to the same quarter last year.
We increased our contract mobile base by 35,100 to 1.7m, while
our prepay base reduced by 75,800 to 1.3m. Quad-play penetration
increased to around 15.9% of our residential cable customer base,
compared to around 15.0% a year ago.
Major new Business contract wins
In our Business segment, significant contracts can cause some
unevenness in revenues from quarter-to-quarter, especially at this
stage of our growth cycle.
Revenue in this particular quarter was down 4.1% to GBP163.4m,
reflecting lower voice and install revenues. Since the start of the
year, we are seeing improved sales momentum compared to the second
half of last year, with the first quarter being the strongest in
the last six quarters.
During the quarter, we signed a significant ten-year deal with
Telefonica UK for the provision of backhaul to 1,500 sites. We have
also secured significant orders under a framework agreement to
support the creation of a UK-wide Aggregation Network for another
large UK mobile network operator. This means that we now have
material backhaul contracts with all the UK mobile network
operators.
Additionally, we've secured a significant five-year backhaul
contract with Sky, a major UK ISP.
We expect to see the revenues from these new contracts benefit
the second half of this year and we remain confident that the
underlying growth rate for business remains strong.
RESULTS FOR THE THREE MONTHS ENDED MARCH 31, 2013
Comparisons of financial and operating statistics are to the
first quarter of 2012, unless otherwise stated.
TOTAL REVENUE
Total revenue was up 3.6% to GBP1,043m due to consumer revenue
growth, partially offset by a fall in business revenue.
OPERATING COSTS AND SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
(SG&A)
Operating costs (exclusive of depreciation) were GBP427.4m, up
2.5% as higher consumer cost of sales and higher network and other
operating costs were partially offset by lower business cost of
sales. Gross margin grew from 58.6% to 59.0%.
SG&A increased by GBP3.8m or 1.8% to GBP216.6m, mainly due
to GBP7.8m of costs incurred in relation to the planned merger with
Liberty Global. These merger costs principally comprised legal,
accounting, printing and filing fees.
OPERATING INCOME BEFORE DEPRECIATION, AMORTIZATION, GOODWILL AND
INTANGIBLE ASSET IMPAIRMENTS AND RESTRUCTURING AND OTHER CHARGES
(OCF)
OCFwas up 5.8% at GBP398.5m due to improved revenue and gross
margin, partially offset by increased SG&A.
OCF before merger-related costs was up 7.9% at GBP406.3m.
OPERATING INCOME
Operating income increased 14% to GBP149.8m mainly due to
improved revenue and gross margin, partially offset by GBP7.8m of
merger-related costs.
Depreciation expense was up 3.4% at GBP248.3m mainly due to
depreciation in respect of new fixed assets, partially offset by
certain fixed assets becoming fully depreciated.
TAX EXPENSE
The income tax expense for the quarter of GBP22.7 million
primarily represents the net reduction in our deferred tax assets
where these have been used to offset to nil our taxable profits for
the quarter.
NET INCOME
Net income for the quarter was GBP138.9m compared to net income
of GBP7.0m in the first quarter last year. The improvement was
mainly due to increased gain on derivative instruments, reduced
loss on extinguishment of debt and reduced interest expense,
partially offset by GBP7.8m of merger-related costs.
CAPITAL EXPENDITURE
Fixed asset additions (accrual basis)5 were down 5.3% to
GBP220.6m mainly due to reduced spend on customer premise
equipment.
The total purchase of fixed and intangible assets was down 5.3%
to GBP174.4m mainly due to the decrease in fixed asset additions
(accrual basis) and represented 16.7% of revenue.
FREE CASH FLOW
Free Cash Flow was up 54% to GBP134.5m due to increased OCF,
lower purchase of fixed and intangible assets and lower net
interest expense, partially offset by GBP7.8m of merger-related
costs. Net cash provided by operating activities was up 44% at
GBP306m mainly due to higher operating income, lower interest and a
loss on extinguishment of debt in the prior year.
DEBT
As of March 31, 2013, total debt of GBP6,111m consisted of
GBP750m outstanding under our Senior Credit Facility, GBP1,900m of
Senior Notes, GBP2,642m of Senior Secured Notes, GBP583m of
Convertible Senior Notes and GBP236m of capital leases and other
indebtedness. Cash and cash equivalents were GBP319m.
Interest expense in the quarter was GBP89.7m, down 15% due to a
lower level of debt and lower average interest rates.
Notes
Please see Appendix F for a reconciliation of all non-GAAP
financial measures to their nearest GAAP equivalents.
As discussed elsewhere, on February 5, 2013, we entered in to a
Merger Agreement with Liberty Global, Inc., and certain of its
direct or indirect wholly-owned subsidiaries. As the merger has not
yet been consummated, we have not modified our accounting to
consider the potential effects on certain arrangements that may
arise upon consummation, including those relating to long term
debt, derivative financial instruments and stock based compensation
plans.
1 OCF is operating income before depreciation, amortization,
goodwill and intangible asset impairments and restructuring and
other charges. OCF before merger-related costs is operating income
before depreciation, amortization, goodwill and intangible asset
impairments and restructuring and other charges, and merger-related
costs. OCF and OCF before merger-related costs are non-GAAP
financial measures and the most directly comparable GAAP measure is
operating income.2 Free Cash Flow, or FCF, is OCF reduced by
purchase of fixed and intangible assets, as reported in our
statements of cash flows, and net interest expense, as reported in
our statements of operations. FCF is a non-GAAP financial measure
and the most directly comparable GAAP measure is net cash provided
by operating activities.3 Paying TV customer base is our total TV
customer base less those on packages which include a free TV
service provided with a non-TiVo set top box.4 Gross margin is
revenue less operating costs. Gross margin percentage is revenue
less operating costs, divided by revenue.5 Fixed asset additions
(accrual basis) is the purchase of fixed and intangible assets as
measured on an accrual basis, excluding asset retirement obligation
related assets. Fixed asset additions (accrual basis) is a non-GAAP
financial measure and the most directly comparable GAAP measure is
purchase of fixed and intangible assets.
Appendices:
A) Financial Statements
* Condensed Consolidated Statements of Comprehensive Income
* Condensed Consolidated Balance Sheets
* Condensed Consolidated Statements of Cash Flows
B1) Quarterly Segment Revenue and Contribution, OCF and Operating Income
B2) Quarterly Costs and Expenses
C1) Cable Operations Statistics
C2) Non-Cable Operations Statistics
C3) Mobile Operations Statistics
D) Free Cash Flow Calculation (FCF)
E1) Fixed Asset Additions (Accrual Basis)
E2) Capital Lease Activity
F) Use of Non-GAAP Financial Measures and Reconciliations to GAAP
A) FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in GBP millions, except per share data) (unaudited)
Three months ended
March 31,
2013 2012
Revenue GBP 1,042.5 GBP 1,006.2
Costs and expenses
Operating costs (exclusive of depreciation 427.4 416.9
shown separately below)
Selling, general and administrative expenses 216.6 212.8
Restructuring and other charges 0.4 5.4
Depreciation 248.3 240.2
892.7 875.3
Operating income 149.8 130.9
Other income (expense)
Interest expense (89.7) (105.6)
Loss on extinguishment of debt - (58.6)
Gain on derivative instruments 103.6 44.5
Foreign currency loss (2.2) (4.4)
Interest income and other, net 0.1 0.3
Income before income taxes 161.6 7.1
Income tax expense (22.7) (0.1)
Net income GBP 138.9 GBP 7.0
Per share amounts
Net income
Basic earnings per share GBP 0.51 GBP 0.02
Diluted earnings per share GBP 0.46 GBP 0.02
Dividends per share (in U.S. Dollars) $0.04 $0.04
Total comprehensive income GBP 123.8 GBP 11.9
CONDENSED CONSOLIDATED BALANCE SHEETS
(in GBP millions, except par value)
March 31, December 31,
2013 2012 (Note 1)
(unaudited)
Assets
Current assets
Cash and cash equivalents GBP 318.6 GBP 206.3
Restricted cash 1.9 1.9
Accounts receivable - trade, 428.0 443.8
less allowances for doubtful
accounts of GBP10.5(2013) and GBP9.0 (2012)
Derivative financial instruments 7.3 6.1
Prepaid expenses and other current assets 101.5 103.2
Deferred income taxes 57.8 58.1
Total current assets 915.1 819.4
Fixed assets, net 4,485.3 4,512.2
Goodwill and other indefinite-lived assets 2,017.5 2,017.5
Derivative financial instruments 655.9 461.6
Deferred financing costs, net 58.7 61.5
of accumulated amortization
of GBP54.3 (2013)and GBP50.6 (2012)
Deferred income taxes 2,622.9 2,641.7
Other assets 51.0 51.2
Total assets GBP 10,806.4 GBP 10,565.1
Liabilities and shareholders' equity
Current liabilities
Accounts payable GBP 292.9 GBP 349.3
Accrued expenses and other 338.4 319.6
current liabilities
Derivative financial instruments 7.1 8.1
VAT and employee taxes payable 98.4 85.5
Interest payable 94.7 67.7
Deferred revenue 294.0 316.7
Current portion of long term debt 81.6 77.1
Total current liabilities 1,207.1 1,224.0
Long term debt, net of current portion 6,029.3 5,852.0
Derivative financial instruments 44.2 101.9
Deferred revenue and other 174.1 168.8
long term liabilities
Total liabilities 7,454.7 7,346.7
Commitments and contingent liabilities
Shareholders' equity
Common stock - $0.01 par value; authorized 1.5 1.4
1,000.0 (2013 and 2012) shares;issued
and outstanding 270.5 (2013)
and 269.3 (2012) shares
Additional paid-in capital 3,677.2 3,658.9
Accumulated other comprehensive income (20.9) (5.8)
Accumulated deficit (306.1) (436.1)
Total shareholders' equity 3,351.7 3,218.4
Total liabilities and shareholders' equity GBP 10,806.4 GBP 10,565.1
Note 1 - The December 31, 2012, condensed consolidated balance
sheet includes an increase of GBP60.8m to our previously reported
deferred income tax assets, total assets, total liabilities and
shareholders' equity to adjust an understatement that was
identified subsequent to the filing of our Annual Report on Form
10-K for the year ended December 31, 2012. We have assessed this
non-cash adjustment and concluded that it is not material to the
consolidated financial statements for the year ended December 31,
2012. There is no impact on the condensed consolidated statements
of comprehensive income or condensed consolidated statements of
cash flows for the three months ended March 31, 2012 or March 31,
2013.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in GBP millions) (unaudited)
Three months ended,
March 31,
2013 2012
Operating activities:
Net income GBP 138.9 GBP 7.0
Adjustments to reconcile income from
continuing operations to net cash
provided by operating activities:
Depreciation 248.3 240.2
Non-cash interest 38.1 17.9
Share based compensation 7.5 7.6
Loss on extinguishment of debt, net - 10.5
of cash prepayment premiums
Unrealized gains on derivative instruments, (104.9) (46.5)
net of cash settlements
Unrealized foreign currency loss (gain) 0.5 (0.7)
Income taxes 22.7 1.4
Changes in operating assets (45.1) (25.3)
and liabilities,
net of effect from business disposals
Net cash provided by operating activities 306.0 212.1
Investing activities:
Purchase of fixed and intangible assets (174.4) (184.1)
Proceeds from sale of fixed assets 1.5 0.9
Acquisitions, net of cash acquired - (0.6)
Disposal of equity investments, net - (2.5)
Net cash used in investing activities (172.9) (186.3)
Financing activities:
New borrowings, net of financing costs - 315.9
Repurchase of common stock - (157.3)
Proceeds from employee stock 9.6 (2.1)
option exercises,
net of taxes reimbursed
Principal payments on long term debt (1.5) (314.1)
Principal payments on capital leases (22.6) (21.3)
Proceeds from settlement of cross - 2.3
currency interest rate swaps
Dividends paid (7.1) (7.0)
Net cash used in financing activities (21.6) (183.6)
Effect of exchange rate changes 0.8 (1.5)
on cash and cash equivalents
Increase (decrease) in cash 112.3 (159.3)
and cash equivalents
Cash and cash equivalents, 206.3 300.4
beginning of period
Cash and cash equivalents, end of period GBP 318.6 GBP 141.1
Supplemental disclosure of
cash flow information
Cash paid during the period for interest GBP 53.2 GBP 90.9
Income taxes paid GBP 0.0 GBP 0.0
B1) QUARTERLY SEGMENT REVENUE AND CONTRIBUTION, OCF AND
OPERATING INCOME
(in GBP millions) (unaudited)
Three months ended
March 31, March 31,
2013 2012
Revenue
Consumer segment
Cable GBP 725.8 GBP 678.3
Mobile 137.8 138.5
Non-cable 15.5 19.0
Total 879.1 835.8
Business segment
Business 163.4 170.4
Total revenue GBP 1,042.5 GBP 1,006.2
Segment contribution
Consumer segment GBP 521.9 GBP 486.7
Business segment 85.5 91.2
Total segment contribution 607.4 577.9
Other operating and corporate costs (208.9) (201.4)
OCF(1) 398.5 376.5
Depreciation (248.3) (240.2)
Restructuring and other charges (0.4) (5.4)
Operating income GBP 149.8 GBP 130.9
(1) OCF is a non-GAAP financial measure. See Appendix F for a
discussion of the use of OCF as a non-GAAP financial measure and
the reconciliation of OCF to GAAP operating income.
B2) QUARTERLY COSTS AND EXPENSES
(in GBP millions) (unaudited)
Three months ended
March 31, March 31,
2013 2012
Costs and expenses
Operating costs
Consumer cost of sales GBP 266.2 GBP 255.5
Business cost of sales 58.2 61.6
Network and other operating costs (1) 103.0 99.8
Total operating costs GBP 427.4 GBP 416.9
Selling, general and administrative expenses
Employee and outsourcing costs (2) GBP 114.9 GBP 116.0
Marketing costs (3) 48.6 52.6
Facilities (4) 15.4 14.4
Other (5) 37.7 29.8
Total selling, general and GBP 216.6 GBP 212.8
administrative expenses
(1) Network and other operating costs includes costs associated
with the provision of the network and operating platforms including
associated employee, outsourcing and facilities costs and certain
other operating expenses.(2) Employee and outsourcing costs
includes remuneration and benefits, temporary and contract staff,
training and stock-based compensation costs together with costs of
all major outsourced business activities.(3) Marketing costs
includes advertising, brand costs, agency fees, support and
research, public relations and internal communications costs.(4)
Facilities costs include building costs, service costs, repairs and
maintenance and utilities costs.(5) Other costs include billing,
collections and bad debt, IT, legal and professional, license,
insurance, and other indirect costs.
C1) CABLE OPERATIONS STATISTICS (excl Non-cable and Mobile
Operations)
(data in 000's except percentages, products and ARPU)
Three months ended
March 31, March 31,
2013 2012
Customers
Opening Customers 4,894.3 4,805.6
Gross adds 176.1 189.3
Gross disconnects (167.5) (168.1)
Net customer adds (disconnects) 8.6 21.2
Closing Customers 4,902.9 4,826.8
Monthly Cable customer churn % 1.1% 1.2%
Products
Opening products 12,246.8 11,998.7
Net product adds 24.5 72.8
Closing products 12,271.3 12,071.5
Net product adds (disconnects)
Telephone 0.5 14.9
Television (13.4) 12.2
Broadband 37.4 45.7
Total Net product adds (disconnects) 24.5 72.8
Products
Telephone 4,179.6 4,147.6
Television 3,782.1 3,775.3
Broadband 4,309.6 4,148.6
Total products 12,271.3 12,071.5
Products / Customer 2.50 2.50
Bundled Customers
Dual products 984.7 1,062.0
Triple products 3,191.8 3,091.3
Percentage of dual or triple products 85.2% 86.0%
Percentage of triple products 65.1% 64.0%
Cable ARPU (1) GBP 49.38 GBP 46.95
ARPU calculation:
Consumer cable revenue (millions) GBP 725.8 GBP 678.3
Average customers 4,898.8 4,816.6
(1) Cable monthly ARPU is calculated on a quarterly basis by
dividing total revenue generated from the provision of telephone,
television and internet services to customers who are directly
connected to our network in that period together with revenue
generated from our customers using our virginmedia.com website,
exclusive of VAT, by the average number of customers directly
connected to our network in that period divided by three. The
average number of customers is calculated by adding the number of
customers at the start of the quarter and at the end of each month
of the quarter and dividing by four.
C2) NON-CABLE OPERATIONS STATISTICS
(data in 000's)
Three months ended
March 31, March 31,
2013 2012
Customers
Opening Customers 192.8 248.2
Net customer disconnects (11.9) (15.2)
Closing Customers 180.9 233.0
Products
Opening products
Telephone 130.5 163.3
Broadband 192.8 248.2
323.3 411.5
Net product disconnects
Telephone (7.7) (8.0)
Broadband (11.9) (15.2)
(19.6) (23.2)
Closing products
Telephone 122.8 155.3
Broadband 180.9 233.0
303.7 388.3
C3) MOBILE OPERATIONS STATISTICS
(data in 000's except revenue and ARPU)
Three months ended
March 31, March 31,
2013 2012
Contract Customers(1)(2)
Opening Contract Customers 1,708.9 1,523.9
Net contract customer adds 35.1 64.1
Closing Contract Customers(1) 1,744.0 1,588.0
Prepay Customers(2)
Opening Prepay Customers 1,328.6 1,513.4
Net prepay customer disconnects (75.8) (93.4)
Closing Prepay Customers 1,252.8 1,420.0
Total Closing Customers(2) 2,996.8 3,008.0
Mobile Revenue
Contract service revenue (millions) (3) GBP 99.3 GBP 98.7
Prepay service revenue (millions) (3) 32.7 36.4
Equipment revenue (millions) 5.8 3.4
GBP 137.8 GBP 138.5
Mobile ARPU(4) GBP 14.60 GBP 14.96
ARPU calculation:
Service revenue (millions) GBP 132.0 GBP 135.1
Average customers 3,013.4 3,009.7
(1) Contract customers represents the number of contracts
relating to either a mobile service or a mobile broadband
contract.(2) Mobile customer information is for active customers.
Prepay customers are defined as active customers if they have made
an outbound call or text in the preceding 30 days. Contract
customers are defined as active customers if they have entered into
a contract with Virgin Mobile for a minimum 30-day period and have
not been disconnected.(3) Amounts reported for contract service
revenue have been reduced by GBP1.2m for the three months ended
March 31, 2012 to reflect credits applied to contract customer
accounts that had been reported against prepay service revenue. A
corresponding increase has been included in prepay service
revenue.(4) Mobile ARPU is calculated on a quarterly basis by
dividing service revenue (contract and prepay) for the period by
the average number of active customers (contract and prepay) for
the period, divided by three. The average number of customers is
calculated by adding the number of customers at the start of the
quarter and at the end of each month of the quarter and dividing by
four.
D)FREE CASH FLOW CALCULATION
(in GBP millions) (unaudited)
FCF is defined as OCF reduced by purchase of fixed and
intangible assets, as reported in our statements of cash flows, and
net interest expense, as reported in our statements of
comprehensive income. See Appendix F for a discussion of the use of
FCF as a non-GAAP financial measure and the reconciliation of FCF
to GAAP net cash provided by operating activities.
Three months ended
March 31, March 31,
2013 2012
.
Operating income before depreciation, GBP 398.5 GBP 376.5
amortization,goodwill
and intangible
asset impairments andrestructuring
and other charges (OCF)
Purchase of fixed and intangible assets (174.4) (184.1)
Interest expense (net) (89.6) (105.3)
Free Cash Flow (FCF) GBP 134.5 GBP 87.1
E1)FIXED ASSET ADDITIONS (ACCRUAL BASIS)
(in GBP millions) (unaudited)
Virgin Media is not a member of NCTA (National Cable
Telecommunications Association) and is providing this information
solely for comparative purposes. See Appendix F for a discussion of
the use of Fixed Asset Additions (Accrual Basis) as a non-GAAP
financial measure and the reconciliation of Fixed Asset Additions
(Accrual Basis) to GAAP purchase of fixed and intangible
assets.
Three months ended
March 31, March 31,
2013 2012
NCTA Fixed Asset Additions
Customer premises equipment (CPE) GBP 80.6 GBP 96.2
Scaleable infrastructure 64.4 62.9
Commercial 39.3 41.7
Line extensions 2.2 2.5
Upgrade/rebuild 7.5 7.3
Support capital 25.6 21.5
Total NCTA Fixed Asset Additions 219.6 232.1
Non NCTA Fixed Asset Additions 1.0 1.0
Total Fixed Asset Additions (Accrual Basis) 220.6 233.1
Fixed assets acquired under capital leases (29.7) (23.5)
Changes in liabilities related to:
Fixed Asset Additions (Accrual Basis) (16.5) (25.5)
Total Purchase of Fixed and Intangible Assets GBP 174.4 GBP 184.1
Comprising:
Purchase of Fixed Assets 174.4 184.1
Purchase of Intangible Assets - -
GBP 174.4 GBP 184.1
E2)CAPITAL LEASE ACTIVITY
(in GBP millions) (unaudited)
Three months ended
March 31, March 31,
2013 2012
Opening capital lease liability GBP 229.0 GBP 258.0
Additions 29.7 23.5
Principal payments on capital leases (22.6) (21.3)
Closing capital lease liability GBP 236.1 GBP 260.2
Interest expense on capital leases GBP 3.1 GBP 4.4
F)USE OF NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS TO
GAAP
Virgin Media uses certain financial measures with a view to
providing investors with a better understanding of the operating
results and underlying trends to measure past and future
performance and liquidity. These measures which are not calculated
and presented in accordance with U.S. generally accepted accounting
principles ("GAAP") are defined as follows:
-- OCF is operating income before depreciation, amortization,
goodwill and intangible asset impairments and restructuring and
other
charges.
-- OCF before merger-related costs is operating income before
depreciation, amortization, goodwill, intangible asset
impairments,
restructuring and other charges and merger-related costs.
Merger-related costs are defined as incremental costs arising
directly
as a result of activities relating to the proposed merger with
Liberty
Global, Inc., as announced on February 5, 2013.
-- Free Cash Flow (FCF) is OCF reduced by purchase of fixed and
intangible assets, as reported in our statements of cash flows,
and
net interest expense, as reported in our statements of
comprehensive
income. Our definition of FCF excludes the impact of working
capital
fluctuations and restructuring costs.
-- Fixed Asset Additions (Accrual Basis) is the purchase of fixed
and intangible assets as measured on an accrual basis, excluding
asset
retirement obligation related assets.
Our management considers OCF is an important indicator of our
operational strength and performance during the relevant periods.
This measure excludes the impact of costs and expenses that do not
directly affect our cash flows. Other charges, including
restructuring charges, are also excluded from this measure as
management believes they are not characteristic of our underlying
business operations. Our management considers OCF before
merger-related costs is an important indicator of our underlying
operational strength and performance during the relevant periods,
after costs incurred solely as a result of the proposed merger with
Liberty Global, Inc. have been excluded. Our management considers
FCF as a helpful measure in assessing our liquidity and prospects
for the future. We believe FCF is useful to investors as a basis
for comparing our performance and coverage ratios and is an
additional way of viewing aspects of our operations that provide a
more complete understanding of factors and trends affecting our
business. Our management considers Fixed Asset Additions (Accrual
Basis) an important component in evaluating our liquidity and
financial condition since purchases of fixed assets are a necessary
component of ongoing operations.
Some of the significant limitations associated with the use of
OCF and OCF before merger-related costs as compared to operating
income are that OCF does not consider the amount of required
reinvestment in depreciable fixed assets and ignores the impact on
our results of operations of items that management believes are not
characteristic of our underlying business operations. FCF should
not be understood to represent our ability to fund discretionary
amounts, as we have various contractual obligations which are not
deducted to arrive at FCF. We compensate for this limitation by
separately measuring and forecasting working capital. The
significant limitations associated with the use of Fixed Asset
Additions (Accrual Basis) as compared to purchase of fixed and
intangible assets is that Fixed Asset Additions (Accrual Basis)
excludes timing differences from payments of liabilities, including
finance leases, related to purchase of fixed and intangible assets.
We exclude these amounts from Fixed Asset Additions (Accrual Basis)
because timing differences from payments of liabilities, including
the use of finance leases, are more related to the cash management
treasury function than to our management of fixed asset purchases
for long term operational performance and liquidity.
OCF and OCF before merger-related costs are most directly
comparable to the GAAP financial measure operating income. FCF is
most directly comparable to the GAAP financial measure net cash
provided by operating activities. Fixed Asset Additions (Accrual
Basis) is most directly comparable to the GAAP financial measure
purchase of fixed and intangible assets, as reported in our
statements of cash flows. Since these measures are not calculated
in accordance with GAAP, they should not be considered as
substitutes for operating income, net cash provided by operating
activities and purchase of fixed and intangible assets,
respectively. Because non-GAAP financial measures are not
standardized, it may not be possible to compare our OCF, OCF before
merger-related costs, FCF or Fixed Asset Additions (Accrual Basis)
with other companies' non-GAAP financial measures that have the
same or similar names.
The presentation of this supplemental information is not meant
to be considered in isolation or as a substitute for other measures
of financial performance reported in accordance with GAAP. These
non-GAAP financial measures reflect an additional way of viewing
aspects of our operations that, when viewed with our GAAP results
and the accompanying reconciliations to corresponding GAAP
financial measures, provide a more complete understanding of
factors and trends affecting our business. We encourage investors
to review our financial statements and publicly-filed reports in
their entirety and to not rely on any single financial measure.
The following tables present the reconciliations of OCF, OCF
before merger-related costs, FCF and Fixed Asset Additions (Accrual
Basis) to their nearest measure of financial performance in
accordance with GAAP.
Reconciliations of OCF and OCF before merger-related costs to
GAAP operating income
(in GBP millions) (unaudited)
Three months ended
March 31, March 31,
2013 2012
Operating income before depreciation, 406.3 376.5
amortization,
goodwill andintangible asset impairments,
restructuring and other charges
andmerger-related
costs (OCF before merger-related costs)
Less:
Merger-related costs (7.8) -
Operating income before depreciation, 398.5 376.5
amortization, goodwill andintangible
asset impairments, restructuring
and other charges (OCF)
Reconciling items:
Depreciation and amortization (248.3) (240.2)
Restructuring and other charges (0.4) (5.4)
Operating income 149.8 130.9
Reconciliations of Free Cash Flow (FCF) to GAAP net cash
provided by operating activities
(in GBP millions) (unaudited)
Three months ended
March 31, March 31,
2013 2012
Free Cash Flow (FCF) GBP 134.5 GBP 87.1
Reconciling items (see Note below):
Purchase of fixed and intangible assets 174.4 184.1
Changes in operating assets and liabilities (45.1) (25.3)
Non-cash compensation 7.5 7.6
Non-cash interest 38.1 17.9
Realized foreign exchange (losses) gains (1.7) (5.1)
Realized losses on derivatives (1.3) (2.0)
Restructuring and other charges (0.4) (5.4)
Income taxes - 1.3
Debt redemption premium cost - (48.1)
Net cash provided byoperating activities GBP 306.0 GBP 212.1
Reconciliation of Fixed Asset Additions (Accrual Basis) to GAAP
purchase of fixed and intangible assets
(in GBP millions) (unaudited)
Three months ended
March 31, March 31,
2013 2012
Fixed Asset Additions (Accrual Basis) GBP 220.6 GBP 233.1
Fixed assets acquired under capital leases (29.7) (23.5)
Changes in liabilities related (16.5) (25.5)
to fixedasset additions
Total Purchase of Fixed and
Intangible Assets GBP 174.4 GBP 184.1
Comprising:
Purchase of fixed assets 174.4 184.1
Purchase of intangible assets - -
GBP 174.4 GBP 184.1
This information is provided by Business Wire
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