LONDON, Feb. 28, 2008 (PRIME NEWSWIRE) -- Virgin Media Inc. (Nasdaq:VMED) announces results for the quarter ended December 31, 2007.
Quarterly highlights
* Significant improvement in customer and RGU growth
* 272,100 total RGU(1) net additions (Q3-07: 186,700); best quarter
since merger
* 24,400 on-net customer net additions (Q3-07: 13,000); best
quarter since merger
* On-net churn declined to 1.4% (Q3-07: 1.7%); lowest since merger
* 111,200 total broadband net additions (Q3-07: 122,900)
* 52,300 total telephony net additions (Q3-07: 13,700); highest
since Q2-042
* 61,100 TV net additions (Q3-07: 20,400); best quarter for seven
years(2)
* 47,500 contract mobile net additions (Q3-07: 29,700)
* On-net cable ARPU increased to GBP 42.24 (Q3-07: GBP 41.55)
* Record triple-play penetration of 49.5% (Q3-07: 47.0%)
* OCF of GBP 321m (Q3-07: GBP 342m included certain benefits (as
referred to below))
* Operating loss of GBP 18m (Q3-07: GBP 47m income included certain
benefits (as referred to below))
(1) -- excluding prepay mobile subscribers.
(2) -- pro forma for cable merger in March 2006
Neil Berkett, Acting Chief Executive Officer of Virgin Media, said:
"Our fourth quarter results represent our best operational
performance since the cable merger in early 2006. They demonstrate
that our customers are responding positively to a compelling
consumer proposition combined with the strength of the Virgin brand.
We are achieving good results from our stated strategy of exploiting
our superior network capability to drive broadband growth and
deliver the next generation of personalized on-demand content, as
well as focusing on reducing churn.
I am encouraged by our ARPU performance in what is a competitive
market, partly due to our successful bundling, cross-selling and
up-selling. I am also particularly pleased with the sharp decline in
churn, given the extra focus that we have placed on this area.
With a strong brand, superior products, and improving service and
operations, we believe we are well placed for continued growth and
cash flow generation."
Conference call details
There will be a webcast and conference call for analysts and investors today at 9am ET / 2pm UK time.
The presentation can be accessed live via webcast on the Company's website, www.virginmedia.com/investors.
Analysts and investors can dial in to the presentation by calling +1 866 966 5335 in the United States or + 44 (0) 20 3023 4472 for international access, passcode "Virgin Media Inc." for all participants.
The teleconference replay will be available for one week beginning approximately two hours after the end of the call until Thursday, March 6, 2008. The dial-in replay number for the US is: +1 866 583 1035 and the international dial-in replay number is: +44 (0) 20 8196 1998, passcode: 499513#.
Note to the financial and operational results for the three months ended December 31, 2007
OCF is operating income before depreciation, amortization and other charges and is a non-GAAP financial measure. Please see Appendix E for a reconciliation of non-GAAP financial measures to their nearest GAAP equivalents.
SUMMARY FINANCIAL RESULTS (unaudited)
-------------------------------------
Q4 2007 Q3 2007 Q4 2006
------- ------- -------
GBP m GBP m GBP m
Revenue
Cable
Consumer 621.9 607.7 644.4
Business 163.0 160.0 168.8
------- ------- -------
784.9 767.7 813.2
Mobile 151.6 158.7 151.7
Content 114.1 79.8 116.7
------- ------- -------
Total Revenue 1,050.6 1,006.2 1,081.6
OCF 321.0 341.5 313.0
Operating (loss) income (17.8) 46.7 9.2
Note
OCF and Operating income for Q3 2007 benefited from a number of items
as previously disclosed in our Third Quarter 2007 Results press
release, dated November 7, 2007.
GROUP RESIDENTIAL OPERATIONS
STATISTICS ('000s) Q4 2007 Q3 2007 Q4 2006
---------------------------- -------- -------- --------
Group RGUs
On-net TV 3,478.1 3,417.0 3,353.9
On-net Digital TV 3,253.5 3,167.0 3,005.9
Broadband
On-net 3,413.9 3,307.7 3,058.5
Off-net 287.3 282.3 260.8
-------- -------- --------
3,701.2 3,590.0 3,319.3
Telephone
On-net 4,031.4 3,992.5 4,114.0
Off-net 103.9 90.5 44.5
-------- -------- --------
4,135.3 4,083.0 4,158.5
Mobile
Contract 376.3 328.8 192.1
Total RGUs 11,690.9 11,418.8 11,023.8
======== ======== ========
Net RGU adds
On-net TV 61.1 20.4 38.5
On-net Digital TV 86.5 41.7 83.9
Broadband
On-net 106.2 115.8 78.1
Off-net 5.0 7.1 18.0
-------- -------- --------
111.2 122.9 96.1
Telephone
On-net 38.9 (1.3) (64.3)
Off-net 13.4 15.0 1.1
-------- -------- --------
52.3 13.7 (63.2)
Mobile
Contract 47.5 29.7 71.3
Total Net RGU adds 272.1 186.7 142.7
======== ======== ========
Note
The definition of Total and Group RGUs has been amended to exclude
prepay mobile subscribers. Prepay subscribers were 4,115,000,
4,102,100 and 4,330,700 at the end of Q4 2007, Q3 2007 and Q4 2006,
respectively. Prepay net additions (disconnects) were 13,000, (13,800)
and (60,200) during Q4 2007, Q3 2007 and Q4 2006, respectively.
RESULTS FOR THE THREE MONTHS ENDED DECEMBER 31, 2007
TOTAL REVENUE
Total revenue in the fourth quarter was GBP 1,050.6 million (Q3 2007: GBP 1,006.2m). The increase was mainly due to growth in Consumer and Content revenue, as discussed below.
CABLE SEGMENT REVENUE
Consumer
Consumer revenue in the fourth quarter was GBP 621.9 million (Q3 2007: GBP 607.7m) and represented revenue growth for the first time in three quarters due to customer, RGU and ARPU growth.
On-net cable RGUs increased by 206,200 in the fourth quarter (Q3 2007: 134,900), representing the best performance since the fourth quarter of 2005, based on pro forma combined operating statistics for periods prior to the cable merger in March 2006.
The on-net customer base was 4.8 million at the year-end, with net additions of 24,400 in the quarter. This represents a second sequential quarter of positive customer growth and is the best net additions performance since the cable merger in March 2006.
Cable ARPU grew during the fourth quarter to GBP 42.24 (Q3 2007: GBP 41.55). This represents an improved performance following sequential falls in the previous three quarters. This was due to selected telephony price rises, our success in continuing to bundle, up-sell and cross-sell products, and improved management of retention discounts. We believe approximately 20 pence of the ARPU increase was due to some benefits such as Pay-Per-View sporting events and high telephony usage, which are not expected to recur in the first quarter of 2008.
Successful bundling and cross-sell was reflected in continued strong growth in triple-play penetration, which reached a record 49.5% at the year-end. The fourth quarter saw our strongest net growth in cable triple-play subscribers since before the cable merger. Cable RGUs per customer also grew to 2.29 from 2.26 in the quarter.
Gross on-net customer additions in the fourth quarter were 225,100, up from 213,500 in the same quarter last year. We attribute this to improved quality of our products, compelling price points and greater sales efficiency. Gross on-net customer additions were down by 31,400 from the third quarter due partly to fewer installation working days in the fourth quarter Holiday season. Fourth quarter gross additions are typically lower than in the third quarter.
Average monthly churn of 1.4% was down from 1.7% in the same quarter last year. We believe this churn reduction resulted in part from a range of operational improvements that we have made, including integrating billing systems, improving credit controls, increasing the quality of our products, and improving value for money for customers.
Normal seasonal reductions also contributed to the churn reduction from 1.7% in the previous quarter. Gross customer disconnections were 200,700 during the fourth quarter, down 18% from the previous quarter and down 20% from the same quarter last year.
Broadband (On-net)
Broadband net additions of 106,200 (Q3 2007: 115,800) remained strong as we continued to emphasize the speed, quality and reliability of our broadband service to consumers. Broadband remains our premier product where our superior network will differentiate us from our DSL competitors. We are fully focused on maximizing the unique potential of our cable network to improve the consumer experience and are in the process of upgrading our 4Mb customers to 10Mb. We also plan to launch a 50Mb broadband service during the course of this year. This will mean that by the end of the year, we plan to have four tiers of broadband service at 2Mb, 10Mb, 20Mb and 50Mb, with top headline speeds well ahead of our DSL competitors.
Virgin Media now has 3.4 million cable broadband subscribers which, together with 0.3 million off-net broadband subscribers, makes us the largest residential broadband provider in the UK.
Television
Total TV net additions were 61,100 in the quarter, up from 20,400 in the previous quarter. This represented the best quarter for at least seven years, based on pro forma combined operating statistics for periods prior to the cable merger. We believe this result was aided by the attractiveness of our VOD platform. 1.5 million of our TV customers are now using our VOD service on a monthly basis, representing a reach of 47%. Average views per user per month in the fourth quarter were 23 compared to 10 at the start of 2007. Average monthly views were 33 million in the quarter, up 45% on the previous quarter.
TV net additions were also positively affected by a record quarter for driving DVR penetration, partly due to a promotional reduction in DVR pricing. During the quarter, we added 72,200 V+ DVR subscribers to reach an installed base of 262,400. This represents a penetration level of just 8% of our digital subscribers and so the growth opportunity remains strong. In addition, based on our experience, DVR subscribers and VOD users are less likely to churn.
The mix of TV subscribers improved during the quarter, with growth in the percentage of subscribers on our top basic tier. We believe that this growth was positively affected by the addition of the Setanta Sports channels into our top basic tier during the third quarter. We also launched the Setanta Sports News channel to our entire digital TV base in November. This channel is a joint venture between Setanta and us.
In the first quarter of 2008, we have slightly altered some of our acquisition offers to emphasize our higher TV tiers and as a result, although TV net additions are expected to remain strong, we anticipate that they will be lower than in the fourth quarter.
Telephony (On-net)
Telephony net additions of 38,900 (Q3 2007: 1,300 loss) were positive for the first time since the cable merger with the best performance since the second quarter of 2004, based on pro forma combined operating statistics for periods prior to the cable merger. This was driven by our successful bundling of telephony with our broadband and TV products at the point of sale, along with continued cross-selling and reduced churn.
Off-net
Consumer off-net revenue, which is included in total consumer revenue, was GBP 17.1 million (Q3 2007: GBP 17.3m). At the year-end, we had 287,300 off-net broadband subscribers, with an increase of 5,000 in the quarter. We also added 13,400 off-net telephony subscribers during the quarter and now have a base of 103,900.
Business
Business revenue was GBP 163.0 million, up GBP 3.0 million compared to the previous quarter primarily due to growth in both retail projects revenue and wholesale revenue.
Consistent with our strategy, we continue to experience a shift in retail revenues from voice to data. Retail data revenue was GBP 43.4 million in the quarter, up by GBP 0.1 million compared to the previous quarter, and up GBP 2.7 million compared to the same quarter last year. Retail voice revenue was GBP 51.3 million in the quarter, down GBP 2.1 million from the previous quarter and down GBP 4.4 million from the same quarter last year.
Other retail revenue in the quarter was GBP 21.4 million, up GBP 3.7 million from the previous quarter and up GBP 7.5 million from the same quarter last year. The majority of this revenue is from infrastructure projects and most of the increase was derived from our LAN solutions infrastructure contract at Heathrow Airport's new Terminal Five.
Wholesale revenue in the quarter was GBP 46.9 million, up GBP 1.3 million from the previous quarter due to strong performance in the Mobile, Carriers and System Integrators sales channel together with increased voice activity in the quarter, partially offset by a decline in ISP revenue. Wholesale revenue was down GBP 11.6 million from the same quarter last year due mainly to a reduction in our ISP subscriber base and contract decline in Mobile accounts.
Our main focus within Business is selling retail data services and we anticipate growth in this area in 2008 as compared to 2007. We anticipate that revenue from the airport contract will fall in 2008 as the contract ends in the first quarter of 2008. However, this contract was operating at a very low margin and consequently, its completion will not have a significant impact on Cable OCF. We anticipate that wholesale revenue will also fall in 2008 due to continued reduction in our ISP subscriber base and contract decline in Mobile accounts. As a result, total Business revenue for 2008 is expected to be lower than in 2007, although we continue to expect higher retail data revenue.
CABLE SEGMENT OCF
Cable segment OCF in the quarter was GBP 309.5 million, up GBP 6.0 million compared to the previous quarter. Cable OCF in the previous quarter benefited from a number of items, as disclosed in our Third Quarter 2007 Results press release, dated November 7, 2007.
We expect that Cable segment OCF in the first quarter of 2008 will be affected by lower Business revenues as discussed above, plus anticipated higher employee incentive-based and stock-based compensation expense. These expenses, which are largely performance related, are anticipated to be higher in the first quarter of 2008 as compared to the fourth quarter of 2007, reflecting our expectations that a greater percentage of the performance targets will be achieved in 2008 compared with the level achieved in 2007.
MOBILE SEGMENT
Mobile Revenue
Mobile revenue in the quarter was GBP 151.6 million (Q3 2007: GBP 158.7m), comprising GBP 142.0 million service revenue (Q3 2007: GBP 147.3m) and GBP 9.6 million equipment revenue (Q3 2007: GBP 11.4m). The service revenue decline was mainly due to a decrease in revenue from roaming charges, which is seasonally higher in summer months, partially offset by subscriber growth.
The decline in equipment revenue was due to increased handset promotional activity during the quarter.
Total mobile net additions in the quarter were 60,500 compared to 15,900 in the previous quarter due to growth in both contract and prepay customers.
Contract net additions in the quarter were 47,500 compared to 29,700 in the previous quarter as we continued to successfully cross-sell mobile contracts to our Virgin Media cable customers.
Prepay net additions in the quarter were 13,000 compared to a loss of 13,800 in the previous quarter due to our decision to continue to engage in a more favorable prepay market along with a usual seasonal increase in sales for the Christmas Holiday season. We will continue to exercise economic discipline and responsible investment in respect of the prepay market.
Overall mobile ARPU for the quarter was GBP 10.69 compared to GBP 11.11 in the previous quarter. ARPU was down due to lower prepay usage, partially offset by improved contract mix. Prepay usage was lower due to a decrease in revenue from roaming charges, which is seasonally higher in summer months.
Mobile OCF
Mobile OCF was GBP 17.8 million in the quarter, down from GBP 31.5 million in the previous quarter. As anticipated, this was partly due to an increase in subscriber acquisition costs associated with seasonally higher new customer additions.
CONTENT SEGMENT
Content Revenue
The Content segment consists of VMtv and Sit-up.
Total Content segment revenue, after inter segment elimination, was GBP 114.1 million (Q3 2007: GBP 79.8m), comprising GBP 27.3 million (Q3 2007: GBP 27.0m) from VMtv and GBP 86.8 million (Q3 2007: GBP 52.8m) from Sit-up. VMtv sells channels to and receives subscriptions from the Virgin Media cable segment. As a result, for consolidation purposes, GBP 6.2 million of inter segment revenue has been eliminated in the quarter.
The number of commercial impacts of VMtv's channels for the year increased by 20%, reflecting the strong performance of its channels, positioning us well to take an increased share of the TV advertising market.
On October 1, 2007, VMtv launched Virgin 1 on cable, satellite and Freeview. Our strategy for this channel is to maximize advertising revenues from the Freeview platform and to cross-promote Virgin Media's unique VOD content and functionality, as well as other products and services.
Sit-up revenue was GBP 86.8 million in the fourth quarter, up 6% on the same quarter last year due to increased sales volumes. As expected, Sit-up revenue was seasonally higher than the third quarter due to the Christmas Holiday season. We anticipate revenue in the first quarter of 2008 to be seasonally lower than the fourth quarter.
Content OCF
Content segment OCF in the quarter was a loss of GBP 6.3 million, compared with positive OCF of GBP 6.5 million in the prior quarter, due partly to a seasonal increase in programming costs to drive viewing over the Christmas Holiday season. In addition, Content OCF in the third quarter had included benefits from a number of items, as disclosed in our Third Quarter 2007 Results press release, dated November 7, 2007.
UKTV JOINT VENTURE
Virgin Media owns 50% of the companies that comprise UKTV, a group of joint ventures formed with BBC Worldwide. UKTV produces a portfolio of multi-channel television channels based on the BBC's program library and other acquired programming and which are carried on Virgin Media's cable platform and also on satellite. Some channels are also available on Freeview. UKTV is the second largest pay-TV operator in the UK by viewing share.
Virgin Media accounts for its interest in UKTV under the equity method and recognized a share of UKTV's net income of GBP 0.3 million in the fourth quarter (Q3 2007: GBP 5.9m) and GBP 18.7 million for the full year. Fourth quarter share of net income was lower than in the third quarter due to a seasonal increase in programming costs to drive viewing over the Christmas Holiday season. UKTV's financial results are not consolidated in Virgin Media's revenue, operating income or OCF.
UKTV is funded by a loan from Virgin Media, which was GBP 145.6 million at December 31, 2007. This loan effectively acts as a revolving facility for UKTV. Virgin Media received cash payments from UKTV for the year ended December 31, 2007 totaling GBP 38.3 million. These consisted of GBP 16.4 million of loan capital repayments, and GBP 21.9 million consisting of dividends, interest payments and payments for consortium tax relief from UKTV.
Virgin Media's investment in UKTV is carried on the balance sheet at December 31, 2007 at GBP 367.7 million, which includes the outstanding GBP 145.6 million loan.
OPERATING INCOME BEFORE DEPRECIATION, AMORTIZATION AND OTHER CHARGES (OCF)
OCF was GBP 321.0 million in the fourth quarter (Q3 2007: GBP 341.5m). The decline was due to the decrease in both Content and Mobile OCF partially offset by the increase in Cable OCF as discussed above.
OCF in the third quarter had benefited from a number of items as disclosed in our Third Quarter 2007 Results press release, dated November 7, 2007.
We expect that OCF in the first quarter of 2008 will be affected by lower business revenues as discussed above, plus anticipated higher employee incentive-based and stock-based compensation expense. These expenses, which are largely performance related, are anticipated to be higher in the first quarter of 2008 as compared to the fourth quarter of 2007, reflecting our expectations that a greater percentage of the performance targets will be achieved in 2008 compared with the level achieved in 2007.
OCF is a non-GAAP financial measure. See Appendix E for reconciliations of non-GAAP financial measures to their nearest GAAP equivalents.
Operating Loss and Net Loss from Continuing Operations
Operating loss was GBP 17.8 million (Q3 2007: GBP 46.7m income) with the decrease mainly due to the decrease in OCF discussed above, higher other charges and an increase in depreciation expense. In addition, other (income) charges in the previous quarter had included certain benefits as disclosed in our Third Quarter 2007 Results press release. Other charges were also higher due to increased involuntary employee termination and related costs, primarily in connection with the closure of our venue sales channel, and revisions to estimates concerning lease exit costs for commercial properties included in our restructuring programs.
Operating loss was GBP 17.8 million compared to income of GBP 9.2 million in the fourth quarter of 2006 with the decrease due mainly to increased depreciation and other charges.
In the fourth quarter, interest income and other, net, includes gains on disposal of investments, that were more than offset by losses on disposal of fixed assets. Accordingly, a net charge of GBP 6.1 million has resulted.
Net loss from continuing operations was GBP 163.2 million (Q3 2007: GBP 61.0m) and compares with a net loss from continuing operations of GBP 88.1 million in the fourth quarter of 2006. The increase in net loss compared to the previous quarter and to the same quarter last year was mainly due to reduced operating income, reduced interest income and other, increased interest expense and increased foreign currency transaction losses.
CAPITAL EXPENDITURE
Fixed asset additions (accrual basis) were GBP 140.3 million for the fourth quarter (Q3 2007: GBP 128.2m) and GBP 579.6 million for the full year.
Compared to the fourth quarter of 2006, fixed asset additions (accrual basis) were down GBP 38.3 million.
The total purchase of fixed assets and intangible assets was GBP 112.2 million in the fourth quarter, compared to GBP 137.8 million in the previous quarter and GBP 157.8 million in the same quarter last year. The total purchase of fixed assets and intangible assets was GBP 536.2 million for the full year.
Fixed asset additions (accrual basis) is a non-GAAP financial measure. See Appendix E for reconciliations of non-GAAP financial measures to their nearest GAAP equivalents.
DEBT
As of December 31, 2007, long term debt (net of current portion) was GBP 5,929 million. This consisted of GBP 4,805 million outstanding under our Senior Credit Facility, GBP 1,032 million of Senior Notes, and GBP 92 million of capital leases and other indebtedness. Cash and cash equivalents were GBP 321 million.
During the fourth quarter, we made a voluntary prepayment of GBP 200 million relating to our Senior Credit Facility utilizing available cash reserves.
Cash interest paid (exclusive of amounts capitalized) was GBP 106.1 million in the quarter and GBP 486.9 million for the last twelve months.
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995:
Various statements contained in this document constitute "forward-looking statements" as that term is defined under the Private Securities Litigation Reform Act of 1995. Words like "believe," "anticipate," "should," "intend," "plan," "will," "expects," "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, among others, include: (1) the ability to compete with a range of other communications and content providers; (2) the ability to manage customer churn; (3) the continued right to use the Virgin name and logo; (4) the ability to maintain and upgrade our networks in a cost-effective and timely manner; (5) possible losses in revenues due to systems failures; (6) the ability to provide attractive programming at a reasonable cost; (7) the ability to control unauthorized access to our network; (8) the effect of technological changes on our businesses; (9) the reliance on single-source suppliers for some equipment, software and services and third party distributors of our mobile services; (10) the ability to achieve our business plans; (11) the ability to fund debt service obligations through operating cash flow; (12) the ability to obtain additional financing in the future and react to competitive and technological changes; (13) the ability to comply with restrictive covenants in our indebtedness agreements; and (14) the extent to which our future cash flow will be sufficient to cover our fixed charges.
These and other factors are discussed in more detail under "Risk Factors" and elsewhere in Virgin Media's Form 10-K filed with the SEC on March 1, 2007 and its Form 10-K to be filed with the SEC on or about February 29, 2008. We assume no obligation to update our forward-looking statements to reflect actual results, changes in assumptions or changes in factors affecting these statements.
Non-GAAP Financial Measures
We use non-GAAP 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.
We evaluate operating performance based on several non-GAAP financial measures, including (i) operating income before depreciation, amortization and other charges (OCF), and (ii) fixed asset additions (accrual basis), as we believe these are important measures of the operational strength of our business and our liquidity. Since these measures are not calculated in accordance with GAAP, they should not be considered as substitutes for operating income (loss) and purchase of fixed assets and purchase of intangible assets, respectively.
Please see Appendix E for a discussion of our use of non-GAAP financial measures and reconciliations to their nearest GAAP equivalents.
Appendices:
A) Financial Statements
* Condensed Consolidated Statements of Operations
* Condensed Consolidated Balance Sheets
* Condensed Consolidated Statements of Cash Flows
* Quarterly Condensed Consolidated Statements of Operations
* Additional Quarterly Condensed Cash Flow Information
B) Group Residential Operations Statistics
C) Segmental Analysis
D) Fixed Asset Additions (Accrual Basis)
E) Use of Non-GAAP Financial Measures and Reconciliations to GAAP
Appendices:
-----------
A) FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in GBP millions, except share and per share data)
Three months ended Year ended
December 31, December 31,
-------------------- --------------------
2007 2006 2007 2006
--------- --------- --------- ---------
(unaudited) (unaudited)
Revenue 1,050.6 1,081.6 4,073.7 3,602.2
Costs and expenses
Operating costs (exclusive
of depreciation shown
separately below) 491.6 510.4 1,830.0 1,572.8
Selling, general and
administrative expenses 238.0 258.2 960.2 906.9
Other charges 22.9 15.6 28.7 67.0
Depreciation 235.5 207.9 924.9 799.1
Amortization 80.4 80.3 313.3 246.6
--------- --------- --------- ---------
Total costs and expenses 1,068.4 1,072.4 4,057.1 3,592.4
--------- --------- --------- ---------
Operating (loss) income (17.8) 9.2 16.6 9.8
Other income (expense)
Interest income and other,
net (6.1) 10.4 19.5 34.7
Interest expense (139.7) (124.8) (514.2) (457.4)
Share of (loss) income
from equity investments (0.8) 4.1 17.7 12.5
Foreign currency
transaction (losses)
gains (2.7) 7.7 5.1 (90.1)
(Loss) gain on
extinguishment of debt (2.1) 0.1 (3.2) (32.8)
(Loss) gain on derivative
instruments (1.8) 3.2 (2.5) 1.3
--------- --------- --------- ---------
Loss from continuing
operations before income
taxes, minority interest
and cumulative effect of
changes in accounting
principle (171.0) (90.1) (461.0) (522.0)
Income tax benefit
(expense) 7.8 1.0 (2.5) 11.8
Minority interest -- 1.0 -- 1.0
--------- --------- --------- ---------
Loss from continuing
operations (163.2) (88.1) (463.5) (509.2)
--------- --------- --------- ---------
Discontinued operations
(Loss) gain on disposal
of assets -- (0.2) -- 7.9
--------- --------- --------- ---------
(Loss) income from
discontinued operations -- (0.2) -- 7.9
--------- --------- --------- ---------
Cumulative effect of
changes in accounting
principle -- (33.8) -- (32.6)
--------- --------- --------- ---------
Net loss (163.2) (122.1) (463.5) (533.9)
========= ========= ========= =========
Basic and diluted loss from
continuing operations
per common share (GBP 0.50) (GBP 0.27) (GBP 1.42) (GBP 1.74)
========= ========= ========= =========
Basic and diluted income
from discontinued
operations per common
share -- -- -- GBP 0.03
========= ========= ========= =========
Basic and diluted loss
from cumulative effect of
changes in accounting
principle per share -- (GBP 0.10) -- (GBP 0.11)
========= ========= ========= =========
Basic and diluted net loss
per common share (GBP 0.50) (GBP 0.37) (GBP 1.42) (GBP 1.82)
========= ========= ========= =========
Dividends per share (in
U.S. Dollars) $ 0.04 $ 0.02 $ 0.13 $ 0.05
========= ========= ========= =========
Average number of shares
outstanding (in millions) 327.4 323.8 325.9 292.9
========= ========= ========= =========
CONDENSED CONSOLIDATED BALANCE SHEETS
(in GBP millions)
December 31, December 31,
2007 2006
------------ ------------
Assets
Current assets
Cash and cash equivalents 321.4 418.5
Restricted cash 6.1 6.0
Accounts receivable - trade, less
allowance for doubtful accounts of
GBP 19.5 (2007) and GBP 51.8 (2006) 455.6 461.2
Inventory 75.4 65.3
Prepaid expenses and other current assets 94.8 87.4
------------ ------------
Total current assets 953.3 1,038.4
Fixed assets, net 5,655.6 6,026.3
Goodwill and other indefinite-lived
intangible assets 2,488.2 2,516.5
Intangible assets, net 816.7 1,120.5
Equity investments 368.7 371.5
Other assets, net of accumulated
amortization of GBP 45.0 (2007) and
GBP 21.8 (2006) 183.6 170.3
------------ ------------
Total assets 10,466.1 11,243.5
============ ============
Liabilities and shareholders' equity
Current liabilities
Accounts payable 372.9 379.6
Accrued expenses and other current
liabilities 406.2 485.5
VAT and employee taxes payable 86.1 82.8
Restructuring liabilities 89.6 126.8
Interest payable 172.5 158.2
Deferred revenue 250.3 268.0
Current portion of long term debt 29.1 141.9
------------ ------------
Total current liabilities 1,406.7 1,642.8
Long term debt, net of current portion 5,929.4 6,017.2
Deferred revenue and other long term
liabilities 238.5 276.2
Deferred income taxes 81.0 77.2
------------ ------------
Total liabilities 7,655.6 8,013.4
------------ ------------
Commitments and contingent liabilities
Shareholders' equity
Common stock - $.01 par value; authorized
1,000.0 shares (2007 and 2006); issued
328.9 (2007) and 326.4 (2006) and
outstanding 327.5 (2007) and 323.9 (2006)
shares 1.8 1.8
Additional paid-in capital 4,335.9 4,303.4
Accumulated other comprehensive income 148.6 116.0
Accumulated deficit (1,675.8) (1,191.1)
------------ ------------
Total shareholders' equity 2,810.5 3,230.1
------------ ------------
Total liabilities and shareholders' equity 10,466.1 11,243.5
============ ============
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in GBP millions)
Year ended
December 31,
-------------------
2007 2006
-------- --------
Operating activities
Net loss (463.5) (533.9)
Cumulative effect of changes in accounting
principle -- 32.6
Income from discontinued operations -- (7.9)
-------- --------
Loss from continuing operations (463.5) (509.2)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 1,238.2 1,045.7
Non-cash interest 2.7 99.1
Non-cash compensation 17.5 36.7
Income from equity accounted investments, net
of dividends received (10.8) (9.5)
Income taxes 14.3 (14.8)
Loss on extinguishment of debt 3.2 32.8
Amortization of original issue discount and
deferred finance costs 23.1 32.4
Unrealized foreign currency transaction (gain)
loss (2.7) 46.5
Other 13.2 (4.0)
Changes in operating assets and liabilities (119.2) 30.4
-------- --------
Net cash provided by operating activities 716.0 786.1
-------- --------
Investing activities
Purchase of fixed and intangible assets (536.2) (554.8)
Principal repayments on loans to equity
investments 16.4 15.7
Acquisitions, net of cash acquired (1.0) (2,423.1)
Other 11.0 8.2
-------- --------
Net cash used in investing activities (509.8) (2,954.0)
-------- --------
Financing activities
New borrowings, net of financing fees 874.5 8,935.6
Proceeds from employee stock option exercises 15.0 38.7
Principal payments on long term debt and capital
leases (1,170.8) (7,100.6)
Dividends paid (21.2) (8.5)
-------- --------
Net cash (used in) provided by financing
activities (302.5) 1,865.2
-------- --------
Effect of exchange rate changes on cash and cash
equivalents (0.8) (14.0)
Decrease in cash and cash equivalents (97.1) (316.7)
Cash and cash equivalents, at beginning of year 418.5 735.2
-------- --------
Cash and cash equivalents, at end of year 321.4 418.5
======== ========
Supplemental disclosure of cash flow information
Cash paid during the year for interest exclusive
of amounts capitalized 486.9 327.1
Income taxes paid 0.6 7.7
QUARTERLY CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in GBP millions, except share and per share data) (unaudited)
Three months ended
-----------------------------------------------------
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2007 2007 2007 2007 2006
-----------------------------------------------------
Revenue 1,050.6 1,006.2 995.0 1,021.9 1,081.6
Costs and
expenses
Operating costs
(exclusive of
depreciation
shown
separately
below) 491.6 454.0 435.1 449.3 510.4
Selling,
general and
administrative
expenses 238.0 210.7 244.6 266.9 258.2
Other charges
(income) 22.9 (8.9) 3.1 11.6 15.6
Depreciation 235.5 225.7 231.6 232.1 207.9
Amortization 80.4 78.0 77.6 77.3 80.3
-----------------------------------------------------
Total costs and
expenses 1,068.4 959.5 992.0 1,037.2 1,072.4
-----------------------------------------------------
Operating (loss)
income (17.8) 46.7 3.0 (15.3) 9.2
Other income
(expense)
Interest income
and other, net (6.1) 10.8 7.8 7.0 10.4
Interest
expense (139.7) (127.9) (128.1) (118.5) (124.8)
Share of (loss)
income from
equity
investments (0.8) 6.0 5.3 7.2 4.1
Foreign
currency
transaction
(losses) gains (2.7) 2.2 2.3 3.3 7.7
(Loss) gain on
extinguishment
of debt (2.1) -- (1.1) -- 0.1
(Loss) gain on
derivative
instruments (1.8) 0.8 (1.0) (0.5) 3.2
-----------------------------------------------------
Loss from
continuing
operations
before income
taxes,
minority
interest and
cumulative
effect of
changes in
accounting
principle (171.0) (61.4) (111.8) (116.8) (90.1)
Income tax
benefit
(expense) 7.8 0.4 (7.2) (3.5) 1.0
Minority
interest -- -- -- -- 1.0
-----------------------------------------------------
Loss from
continuing
operations (163.2) (61.0) (119.0) (120.3) (88.1)
-----------------------------------------------------
Discontinued
operations
Loss on
disposal of
assets -- -- -- -- (0.2)
-----------------------------------------------------
Loss from
discontinued
operations -- -- -- -- (0.2)
-----------------------------------------------------
Cumulative
effect of
changes in
accounting
principle -- -- -- -- (33.8)
-----------------------------------------------------
Net loss (163.2) (61.0) (119.0) (120.3) (122.1)
========= ========= ========= ========= =========
Basic and
diluted loss
from continuing
operations per
common share (GBP 0.50) (GBP 0.19) (GBP 0.37) (GBP 0.37) (GBP 0.27)
Basic and
diluted loss
from
discontinued
operations per
common share -- -- -- -- --
Basic and
diluted loss
from cumulative
effect of
changes in
accounting
principle per
share -- -- -- -- (GBP 0.10)
-----------------------------------------------------
Basic and
diluted net
loss per
common share (GBP 0.50) (GBP 0.19) (GBP 0.37) (GBP 0.37) (GBP 0.37)
========= ========= ========= ========= =========
Average number
of shares
outstanding
(in millions) 327.4 326.4 325.5 324.2 323.8
========= ========= ========= ========= =========
ADDITIONAL QUARTERLY CONDENSED CASH FLOW INFORMATION
(in GBP millions) (unaudited)
Three months ended
------------------------------
Dec 31, Sep 30, Jun 30, Mar 31,
2007 2007 2007 2007
------------------------------
Operating activities
Net loss (163.2) (61.0) (119.0) (120.3)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 315.9 303.7 309.2 309.4
Non-cash interest 25.4 37.5 (18.0) (42.2)
Non-cash compensation 3.4 (0.2) 7.1 7.2
Income from equity accounted
investments, net of dividends
received 1.7 (3.3) (3.6) (5.6)
Income taxes 1.6 -- 7.2 5.5
Amortization of original issue
discount and deferred finance costs 5.8 5.7 5.7 5.9
Other 15.1 (2.8) 1.8 (0.4)
Changes in operating assets and
liabilities 62.2 (55.9) (72.0) (53.5)
------------------------------
Net cash provided by operating
activities 267.9 223.7 118.4 106.0
-------------------------------
Investing activities
Purchase of fixed and intangible
assets (112.2) (137.8) (133.6) (152.6)
Principal repayments on loans to
equity investments 1.9 8.3 1.1 5.1
Acquisitions, net of cash acquired -- -- -- (1.0)
Other 4.6 4.3 1.5 0.6
------------------------------
Net cash used in investing
activities (105.7) (125.2) (131.0) (147.9)
------------------------------
Financing activities
New borrowings, net of financing fees -- -- 874.6 (0.1)
Proceeds from employee stock option
exercises 3.6 7.4 3.6 0.4
Principal payments on long term debt
and capital leases (204.0) (12.1) (947.2) (7.5)
Dividends paid (6.4) (6.5) (5.0) (3.3)
------------------------------
Net cash used in financing
activities (206.8) (11.2) (74.0) (10.5)
------------------------------
Effect of exchange rate changes on cash
and cash equivalents 2.0 (0.4) (1.4) (1.0)
(Decrease) increase in cash and cash
equivalents (42.6) 86.9 (88.0) (53.4)
Cash and cash equivalents, at beginning
of period 364.0 277.1 365.1 418.5
------------------------------
Cash and cash equivalents, at end of
period 321.4 364.0 277.1 365.1
==============================
Supplemental disclosure of cash flow
information
Cash paid during the period for
interest exclusive of amounts
capitalized 106.1 85.8 140.0 155.0
Income taxes paid 0.6 -- -- --
B) GROUP RESIDENTIAL OPERATIONS STATISTICS
(data in 000's)
Q4-07 Q3-07 Q2-07 Q1-07 Q4-06
------------------------------------------------
Group RGUs(1)
Opening RGUs 11,418.8 11,232.1 11,168.9 11,023.8 10,881.1
Data Cleanse(2) -- -- 4.2 -- --
Adjusted Opening
RGUs 11,418.8 11,232.1 11,173.1 11,023.8 10,881.1
Net RGU adds 272.1 186.7 59.0 145.1 142.7
------------------------------------------------
Closing Group
RGUs(1) 11,690.9 11,418.8 11,232.1 11,168.9 11,023.8
================================================
Group RGUs(1)
Telephone
On-net 4,031.4 3,992.5 3,993.8 4,050.6 4,114.0
Off-net 103.9 90.5 75.5 65.1 44.5
------------------------------------------------
4,135.3 4,083.0 4,069.3 4,115.7 4,158.5
On-net TV 3,478.1 3,417.0 3,396.6 3,390.0 3,353.9
On-net DTV 3,253.5 3,167.0 3,125.3 3,081.1 3,005.9
Broadband
On-net 3,413.9 3,307.7 3,191.9 3,146.4 3,058.5
Off-net 287.3 282.3 275.2 270.5 260.8
------------------------------------------------
3,701.2 3,590.0 3,467.1 3,416.9 3,319.3
Mobile
Contract 376.3 328.8 299.1 246.3 192.1
------------------------------------------------
Total RGUs(1) 11,690.9 11,418.8 11,232.1 11,168.9 11,023.8
================================================
Net RGU adds(1) & (2)
Telephone
On-net 38.9 (1.3) (56.9) (63.4) (64.3)
Off-net 13.4 15.0 10.4 20.6 1.1
------------------------------------------------
52.3 13.7 (46.5) (42.8) (63.2)
On-net TV 61.1 20.4 2.2 36.1 38.5
On-net DTV 86.5 41.7 40.0 75.2 83.9
Broadband
On-net 106.2 115.8 45.8 87.9 78.1
Off-net 5.0 7.1 4.7 9.7 18.0
------------------------------------------------
111.2 122.9 50.5 97.6 96.1
Mobile
Contract 47.5 29.7 52.8 54.2 71.3
------------------------------------------------
Total Net RGU adds(1) 272.1 186.7 59.0 145.1 142.7
================================================
Notes
(1) The definition of Total and Group RGUs has been amended to
exclude prepay mobile subscribers and adjustments have been made
to opening and closing balances and net RGU adds accordingly,
with effect from Q4-06. The operating statistics relating to
prepay mobile are included within Mobile Operations Statistics,
below.
(2) Data cleanse activity in Q2-07 resulted in an increase of 4,200
RGUs, comprised of an increase of approximately 4,400 Television
and 100 Telephone RGUs and a decrease of approximately 300
Broadband RGUs. Net RGU adds above exclude the data cleanse
increases/decrease.
RESIDENTIAL CABLE OPERATIONS STATISTICS (excluding Off-net and Mobile)
(data in 000's except percentages, RGU/Customer and ARPU)
Q4-07 Q3-07 Q2-07 Q1-07 Q4-06
------------------------------------------------
Customers
Opening Customers 4,750.3 4,737.3 4,807.6 4,854.5 4,891.5
Gross customer adds 225.1 256.5 191.9 184.3 213.5
Total Customer
disconnections (200.7) (243.5) (262.2) (231.2) (250.5)
Net customer adds 24.4 13.0 (70.3) (46.9) (37.0)
------------------------------------------------
Closing Customers 4,774.7 4,750.3 4,737.3 4,807.6 4,854.5
Monthly customer
churn % 1.4% 1.7% 1.8% 1.6% 1.7%
Cable RGUs
Opening Cable RGUs 10,717.2 10,582.3 10,587.0 10,526.4 10,474.1
Data Cleanse(1) -- -- 4.2 -- --
Adjusted Opening
Cable RGUs 10,717.2 10,582.3 10,591.2 10,526.4 10,474.1
Net Cable RGU adds 206.2 134.9 (8.9) 60.6 52.3
------------------------------------------------
Closing Cable RGUs 10,923.4 10,717.2 10,582.3 10,587.0 10,526.4
Net Cable RGU Adds(1)
Telephone 38.9 (1.3) (56.9) (63.4) (64.3)
Television 61.1 20.4 2.2 36.1 38.5
DTV 86.5 41.7 40.0 75.2 83.9
Broadband 106.2 115.8 45.8 87.9 78.1
------------------------------------------------
Total Net Cable RGU
Adds 206.2 134.9 (8.9) 60.6 52.3
Cable Revenue
Generating Units
(RGUs)
Telephone 4,031.4 3,992.5 3,993.8 4,050.6 4,114.0
Television 3,478.1 3,417.0 3,396.6 3,390.0 3,353.9
DTV 3,253.5 3,167.0 3,125.3 3,081.1 3,005.9
Broadband 3,413.9 3,307.7 3,191.9 3,146.4 3,058.5
------------------------------------------------
Total Cable RGUs 10,923.4 10,717.2 10,582.3 10,587.0 10,526.4
Cable RGU / Customer 2.29 2.26 2.23 2.20 2.17
Bundled Customers
Dual Cable RGU 1,423.3 1,506.0 1,563.0 1,657.7 1,725.7
Triple Cable RGU 2,362.6 2,230.5 2,141.0 2,061.2 1,972.8
Percentage of dual
or triple Cable
RGUs 79.3% 78.7% 78.2% 77.4% 76.2%
Percentage of triple
Cable RGUs 49.5% 47.0% 45.2% 42.9% 40.6%
Cable ARPU (GBP)(2) 42.24 41.55 42.16 42.75 42.82
ARPU calculation:
On-net revenues
(GBP) 604,700 590,500 603,100 620,000 626,700
Average customers 4,771.7 4,737.1 4,768.0 4,834.9 4,878.8
Homes Marketable
On-net(3)
Telephone 12,313.8 12,353.5 12,349.5 12,348.2 12,431.4
Television - Total 12,586.8 12,701.5 12,697.4 12,696.2 12,509.7
Television - DTV 11,993.8 12,050.5 12,046.5 12,045.2 11,986.3
Broadband 12,058.2 11,807.0 11,803.0 11,801.7 11,819.6
Total homes 12,586.8 12,701.5 12,697.4 12,696.2 12,509.7
Penetration of Homes
Marketable On-net
Telephone 32.7% 32.3% 32.3% 32.8% 33.1%
Television - Total 27.6% 26.9% 26.8% 26.7% 26.8%
Television - DTV 27.1% 26.3% 25.9% 25.6% 25.1%
Broadband 28.3% 28.0% 27.0% 26.7% 25.9%
Total Customer 37.9% 37.4% 37.3% 37.9% 38.8%
Notes
(1) Data cleanse activity in Q2-07 did not result in a change in
customer numbers but did result in an increase of 4,200 RGUs
comprised of an increase of approximately 4,400 Television and
100 Telephone RGUs and a decrease of approximately 300 Broadband
RGUs. Net RGU adds above exclude the data cleanse
increases/decrease.
(2) 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.
(3) Homes marketable on-net represents management's estimate of homes
passed by our cable network that are capable of taking our
respective products.
CABLE SEGMENT OFF-NET OPERATIONS STATISTICS
(data in 000's)
Q4-07 Q3-07 Q2-07 Q1-07 Q4-06
---------------------------------
Off-net RGUs
Opening RGUs
Telephone(1) 90.5 75.5 65.1 44.5 43.4
Broadband 282.3 275.2 270.5 260.8 242.8
---------------------------------
372.8 350.7 335.6 305.3 286.2
Net RGU adds
Telephone(1) 13.4 15.0 10.4 20.6 1.1
Broadband 5.0 7.1 4.7 9.7 18.0
---------------------------------
18.4 22.1 15.1 30.3 19.1
Closing RGUs
Telephone(1) 103.9 90.5 75.5 65.1 44.5
Broadband 287.3 282.3 275.2 270.5 260.8
---------------------------------
391.2 372.8 350.7 335.6 305.3
Note
(1) Off-net Telephone RGUs in Q4-06 have been restated from previously
reported numbers.
MOBILE OPERATIONS STATISTICS
(data in 000's except ARPU)
Q4-07 Q3-07 Q2-07 Q1-07 Q4-06
-------------------------------------------
Mobile Customers(1)
Opening Customers
Prepay 4,102.1 4,115.9 4,215.2 4,330.7 4,390.9
Contract 328.8 299.1 246.3 192.1 120.8
-------------------------------------------
4,430.9 4,415.0 4,461.5 4,522.8 4,511.7
Net customer adds
Prepay 13.0 (13.8) (99.3) (115.5) (60.2)
Contract 47.5 29.7 52.8 54.2 71.3
-------------------------------------------
60.5 15.9 (46.5) (61.3) 11.1
Closing Mobile
Customers (1)
Prepay 4,115.1 4,102.1 4,115.9 4,215.2 4,330.7
Contract 376.3 328.8 299.1 246.3 192.1
-------------------------------------------
4,491.4 4,430.9 4,415.0 4,461.5 4,522.8
Mobile monthly ARPU
(GBP)(2) 10.69 11.11 10.70 10.07 10.59
ARPU calculation:
Service revenue (GBP) 142,000 147,300 142,300 136,000 141,800
Average customers 4,429.2 4,417.9 4,434.7 4,499.3 4,465.4
Notes
(1) Mobile customer information is for active customers. Prepay
customers are defined as active customers if they have made an
outbound event in the preceding 90 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.
(2) Mobile monthly ARPU is calculated on service revenue for the
period divided by the average number of active customers for
the period, divided by three.
C) SEGMENTAL ANALYSIS
(in GBP millions) (unaudited)
Three months ended
------------------------------------------
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2007 2007 2007 2007 2006
------------------------------------------
Revenue
Cable segment
Consumer 623.2 608.4 620.2 638.1 645.4
Business 163.1 160.1 155.9 163.1 169.0
------------------------------------------
Total 786.3 768.5 776.1 801.2 814.4
Inter segment revenue (1.4) (0.8) (1.0) (0.9) (1.2)
------------------------------------------
784.9 767.7 775.1 800.3 813.2
------------------------------------------
Mobile segment
Virgin Mobile 151.6 158.7 146.3 141.0 151.4
Inter segment revenue -- -- -- -- 0.3
------------------------------------------
151.6 158.7 146.3 141.0 151.7
------------------------------------------
Content segment
Virgin Media TV 33.5 33.2 32.0 35.2 40.5
Sit-up 86.8 52.8 47.7 51.3 82.0
------------------------------------------
Total 120.3 86.0 79.7 86.5 122.5
Inter segment revenue (6.2) (6.2) (6.1) (5.9) (5.8)
------------------------------------------
114.1 79.8 73.6 80.6 116.7
------------------------------------------
------------------------------------------
Total revenue 1,050.6 1,006.2 995.0 1,021.9 1,081.6
------------------------------------------
Segment OCF(1)
Cable segment OCF 309.5 303.5 282.5 266.8 296.8
Mobile segment OCF 17.8 31.5 32.7 26.7 14.2
Content segment OCF (6.3) 6.5 0.1 12.2 2.0
------------------------------------------
OCF (Total) 321.0 341.5 315.3 305.7 313.0
------------------------------------------
Note:
(1) Segment OCF includes inter segment revenue and costs as
applicable. OCF (Total) is a non-GAAP financial measure - see
Appendix E.
D) FIXED ASSET ADDITIONS (ACCRUAL BASIS)
(in GBP millions) (unaudited)
Three months ended
--------------------------------------
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2007 2007 2007 2007 2006
--------------------------------------
NCTA Fixed Asset Additions
CPE 53.3 49.1 58.9 62.5 59.0
Scaleable infrastructure 33.7 28.4 35.7 33.5 44.9
Commercial 17.1 17.1 18.5 15.4 18.5
Line extensions 0.6 0.1 -- -- 0.9
Upgrade/rebuild 6.4 2.1 4.0 3.5 0.8
Support capital 24.9 25.1 29.6 38.0 49.5
--------------------------------------
Total NCTA Fixed Asset
Additions 136.0 121.9 146.7 152.9 173.6
Non NCTA Fixed Asset Additions 4.3 6.3 9.5 2.0 5.0
Total Fixed Asset Additions --------------------------------------
(Accrual Basis) 140.3 128.2 156.2 154.9 178.6
Changes in liabilities related
to Fixed Asset Additions
(Accrual Basis) (28.1) 9.6 (22.6) (2.3) (20.8)
Total Purchase of Fixed Assets --------------------------------------
and Intangible Assets 112.2 137.8 133.6 152.6 157.8
======================================
Comprising:
Purchase of Fixed Assets 104.5 137.7 133.5 151.0 147.8
Purchase of Intangible Assets 7.7 0.1 0.1 1.6 10.0
--------------------------------------
112.2 137.8 133.6 152.6 157.8
======================================
Note
Virgin Media is not a member of NCTA and is providing this information
solely for comparative purposes. Fixed Asset Additions (Accrual Basis) are
from continuing operations. See Appendix E 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 Assets and Purchase of Intangible Assets.
E) USE OF NON-GAAP FINANCIAL MEASURES AND RECONCILIATIONS TO GAAP
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.
(i) Operating income before depreciation, amortization and other
charges (OCF)
Operating income before depreciation, amortization and other
charges, which we refer to as OCF or OCF (Total), is not a
financial measure recognised under GAAP. OCF represents our
earnings before interest, taxes, depreciation and amortization,
other charges, share of income from equity investments, loss on
extinguishment of debt, loss on derivative instruments and
foreign currency transaction gains (losses). Our management,
including our chief executive officer, who is our chief operating
decision maker, considers OCF as an important indicator of our
operational strength and performance. OCF excludes the impact of
costs and expenses that do not directly affect our cash flows.
Other charges, including restructuring charges, are also excluded
from OCF as management believes they are not characteristic of
our underlying business operations. OCF is most directly
comparable to the GAAP financial measure operating income (loss).
Some of the significant limitations associated with the use of
OCF as compared to operating income (loss) 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.
We believe OCF is helpful for understanding our performance and
assessing our prospects for the future, and that it provides
useful supplemental information to investors. In particular, this
non-GAAP financial measure reflects an additional way of viewing
aspects of our operations that, when viewed with our GAAP results
and the reconciliation to operating income (loss) shown below,
provides a more complete understanding of factors and trends
affecting our business. Because non-GAAP financial measures are
not standardized, it may not be possible to compare OCF with
other companies' non-GAAP financial measures that have the same
or similar names.
Reconciliation of operating income before depreciation,
amortization and other charges (OCF) to GAAP operating income
(loss)
(in GBP millions) (unaudited) Three months ended
--------------------------------------
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2007 2007 2007 2007 2006
--------------------------------------
Operating income before
depreciation, amortization
and other charges (OCF) 321.0 341.5 315.3 305.7 313.0
Reconciling items
Depreciation and amortization (315.9) (303.7) (309.2) (309.4) (288.2)
Other (charges) income (22.9) 8.9 (3.1) (11.6) (15.6)
--------------------------------------
Operating (loss) income (17.8) 46.7 3.0 (15.3) 9.2
======================================
(ii) Fixed Asset Additions (Accrual Basis)
Our primary measure of expenditures for fixed assets is Fixed
Asset Additions (Accrual Basis). Fixed Asset Additions (Accrual
Basis) is defined as the purchase of fixed assets and intangible
assets as measured on an accrual basis. Our business is
underpinned by significant investment in network infrastructure
and information technology. Our management therefore 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.
Fixed Asset Additions (Accrual Basis) is most directly
comparable to the GAAP financial measure purchase of fixed and
intangible assets, as reported in the Statement of Cash Flows.
The significant limitations associated with the use of Fixed
Asset Additions (Accrual Basis) as compared to purchase of fixed
assets and purchase of intangible assets is that Fixed Asset
Additions (Accrual Basis) excludes timing differences from
payments of liabilities related to purchase of fixed assets and
purchase of intangible assets. We exclude these amounts from
Fixed Asset Additions (Accrual Basis) because timing differences
from payments of liabilities are more related to the cash
management treasury function than to our management of fixed
asset purchases for long-term operational performance and
liquidity. We compensate for the limitation by separately
measuring and forecasting working capital.
Reconciliation of Fixed Asset Additions (Accrual Basis) to GAAP
purchase of fixed assets and purchase of intangible assets
(in GBP millions) (unaudited) Three months ended
--------------------------------------
Dec 31, Sep 30, Jun 30, Mar 31, Dec 31,
2007 2007 2007 2007 2006
------ ------ ------ ------ ------
Fixed Asset Additions (Accrual
Basis) 140.3 128.2 156.2 154.9 178.6
Changes in liabilities related
to Fixed Asset Additions
(Accrual Basis) (28.1) 9.6 (22.6) (2.3) (20.8)
------ ------ ------ ------ ------
Total Purchase of Fixed Assets
and Intangible Assets 112.2 137.8 133.6 152.6 157.8
====== ====== -===== ====== ======
Comprising:
Purchase of fixed assets 104.5 137.7 133.5 151.0 147.8
Purchase of intangible assets 7.7 0.1 0.1 1.6 10.0
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112.2 137.8 133.6 152.6 157.8
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