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Virgin Media – Nine Months And Third Quarter 2012 Results

Virgin Media Inc. (NASDAQ: VMED; LSE: VMED) announces results for the nine months and quarter ended September 30, 2012.

Solid financial performance

  • Revenue up 3.1% to £3,061m for the nine months
    • Revenue up 2.8% to £1,028m for the quarter
  • OCF 1 up 3.8% to £1,211m for the nine months
    • OCF up 6.1% to £423m for the quarter
    • Operating income of £491m for the nine months; £180m for the quarter
    • Net income of £196m for the nine months; £124m for the quarter
  • FCF 2 down 6.3% to £336m for the nine months; down 11% to £120m for the quarter
    • Net cash provided by operating activities of £808m for the nine months; £365m for the quarter

Multiple sources of high quality revenue growth

  • Net cable customer additions of 39,500 in the quarter, up from 6,300
    • Churn down from 1.7% to 1.4% in the quarter
  • Cable ARPU up 1.8% to £48.73 in the quarter
  • On-going improvement of customer base mix in the quarter
    • TiVo customers increased 205,900 to 1.14m; now 30% of TV base
    • 52,200 increase in the paying TV base 3
    • Superfast broadband customers (30Mb and above) increased 452,900 to 1.8m, now 42% of broadband base
  • Mobile revenue down 3.1% to £137m in the quarter
  • Business division revenue up 9.5% to £169m in the quarter

Capital Return programme continued

  • £113m of stock buybacks executed in Q3; £122m remaining buyback authority this year
  • Tendering for up to $1.6bn of high coupon unsecured debt to reduce interest costs and lengthen debt maturities

Neil Berkett, Chief Executive Officer of Virgin Media, said: "This has been a quarter where continued strong demand for superfast broadband and TiVo has led to lower churn and meaningful cable customer growth. Combined with progress in our business division, we have again delivered solid financial progress with continued revenue and OCF growth, translating into strong Free Cash Flow and shareholder returns."

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 September 30, 2012, unless otherwise stated. Comparisons of financial and operating statistics are to the third quarter of 2011, unless otherwise stated. Where financial information is given for the nine months ended September 30, 2012, any comparisons are to the nine months ended September 30, 2011, unless otherwise stated.

Conference call details

There will be a conference call today for analysts and investors in London at 1pm UK time / 8am ET, which can be accessed live on the Company’s website, www.virginmedia.com/investors. Analysts and investors can also dial in on +1 646 254 3360 in the United States or +44 (0) 20 7784 1036 outside of the US - passcode 7849656# for all participants. The conference call replay will be available approximately two hours after the end of the call until midnight on Tuesday, October 30, 2012. 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: 7849656#.

Forward-looking statements

This release contains certain forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995. Please refer below to “Safe Harbour Statement under the U.S. Private Securities Litigation Reform Act of 1995” for a more detailed discussion regarding these forward-looking statements.

SUMMARY FINANCIAL RESULTS

  3 Months ended   9 Months ended
Sept 30, 2012   Sept 30, 2011 Sept 30, 2012   Sept 30, 2011
£m   £m £m   £m
Revenue
Cable 704.7 685.0 2,089.2 2,033.3
Mobile 136.8 141.2 411.6 410.7
Non-cable 17.6 19.8   55.0 59.8  
Consumer segment - Total 859.1 846.0 2,555.8 2,503.8
Business segment 168.6 154.0   505.0 464.3  
Total Revenue 1,027.7 1,000.0 3,060.8 2,968.1
 
OCF 422.7 398.3 1,211.3 1,166.5
 
Operating income 180.0 128.4 490.5 373.9
 
FCF 120.0 135.5 335.5 358.1
 
Net cash provided by operating activities 364.5 297.0 807.6 854.7
 

SELECTED CONSUMER OPERATIONS STATISTICS

Sept 30, 2012 Sept 30, 2011 Sept 30, 2012 Sept 30, 2011
000's 000's 000's 000's
 
Consumer cable customers 4,851.6 4,790.6 4,851.6 4,790.6
 
Consumer cable products
Broadband 4,209.5 4,072.9 4,209.5 4,072.9
Television 3,778.4 3,762.0 3,778.4 3,762.0
Telephone 4,157.7 4,141.0   4,157.7 4,141.0  
12,145.6 11,975.9 12,145.6 11,975.9
 
Mobile - contract 1,670.9 1,421.4 1,670.9 1,421.4
 
 
3 Months ended 9 Months ended
Sept 30, 2012 Sept 30, 2011 Sept 30, 2012   Sept 30, 2011
000's 000's 000's 000's
 
Consumer cable customer net additions (disconnections) 39.5 6.3 46.0 (9.5 )
 
Net consumer cable product additions (disconnections)
Broadband 56.9 24.3 106.6 61.8
Television 10.7 (5.7 ) 15.3 (16.8 )
Telephone 9.4 (14.0 ) 25.1 (20.8 )
77.0 4.6 147.0 24.2
 
Mobile - contract 29.0 74.8 147.0 210.6
 
Cable ARPU £48.73 £47.86 £48.17 £47.14
 
Mobile ARPU £14.72 £15.22 £14.84 £14.73

OVERVIEW

Sustainable revenue growth

Total revenue increased 2.8% in the quarter to £1,028m due to growth in both consumer and business segments. Gross margin 4 improved by 4.4% to £624m. SG&A remained relatively flat at £202m, resulting in OCF of £423m, up 6.1%. Operating income increased 40% to £180m and net income was £124m, compared to a net loss of £74m in the third quarter last year.

Free Cash Flow was down 11% to £120m reflecting the incremental capital investment in our broadband speed upgrade programme. Net cash provided by operating activities was up 23% to £365m.

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