Deliver Your News to the World

Virgin Media Reports Preliminary Q2 2019 Results


WEBWIRE

Second Quarter Operating Free Cash Flow Up 24%

Delivering New Consumer Strategy with Q2 Launch of FMC Bundles

130,000 Premises Added in Q2; Total Lightning Build now 1.8 Million

Virgin Media Inc. (“Virgin Media”) is the leading cable operator in the U.K. and Ireland, delivering 14.7 million broadband, video and fixed-line telephony services to 6.0 million cable customers and mobile services to 3.2 million subscribers at June 30, 2019.

Operating highlights:

  • Transforming Virgin Media to deliver sustainable operating free cash flow while increasing revenue with our new consumer strategy

- Our four strategic pillars are: (1) fixed-mobile converged (“FMC”) bundles, (2) increased sales efficiency, (3) continuous improvement in base management and (4) driving efficiency through digital transformation
 

  • Our four strategic pillars are: (1) fixed-mobile converged (“FMC”) bundles, (2) increased sales efficiency, (3) continuous improvement in base management and (4) driving efficiency through digital transformation

- Rebased cable ARPU returned to growth and was up 0.5% YoY to £51.35 in Q2, as the pay per view headwind in the prior quarter abated   
- Reported a 5,000 RGU loss and a 6,000 customer decline in a seasonally weak Q2; however 12-month rolling customer churn in the U.K. was flat at 15.0%

  • Added 17,000 telephony and 5,000 broadband subscriptions in Q2, partially offsetting a 27,000 loss in video RGUs due to a shift in focus to higher value TV customers and away from the entry-level

- RGU growth in Q2 was lower than in the prior year which benefited from record video net adds helped by our V6 set-top box upgrade programme and 3P offer
 

  • Demand for high-speed remains robust, 79% of our broadband base subscribed to 100+ Mbps speeds

  • We are leveraging our speed leadership position with a commitment to rollout 1 Gbps products across our 14.5 million U.K. cable footprint by end 2021, starting with at least two cities reaching over a million people by the end of this year

  • Remain committed to offering customers a best-in-class video experience

- In July, we announced a multi-year programming agreement with Sky and launched Amazon’s Prime Video service on our TV platform having been the first in the U.K. to offer BBC iPlayer and Netflix through the box in 2008 and 2013, respectively
- These TV enhancements cement our position as the “Super Aggregator” of content services
 

  • These TV enhancements cement our position as the “Super Aggregator” of content services

-Notifications are underway and so far the customer response has been in-line with expectations

  • Following a soft launch in April, we began marketing our FMC bundles in mid-June, which supported strong Q2 postpaid mobile net adds of 57,000

- FMC % improved by 40 bps sequentially to 19.9%, as the proportion of new customers taking mobile with cable services doubled post launch
- Over the medium-term, we expect improvements in our convergence ratio should drive lower customer churn and higher ARPU  
 

  • Increased our Q2 SOHO RGU base by 12.5% YoY which along with a recent public sector contract win with London Grid for Learning will support future revenue growth

  • Added 130,000 marketable Lightning premises in Q2, taking the total build since launch to 1.8 million 

  • Virgin Media Television remained the largest commercial broadcaster in the Republic of Ireland with a 19% share in viewership across our three free-to-air channels

  • Lutz Schüler became CEO of Virgin Media on June 11, 2019 and subsequently appointed Jeff Dodds as Chief Operating Officer

 

Financial highlights:

  • Revenue of £1,279.3 million in Q2 increased 0.4% YoY on a rebased basis

- Q2 revenue growth in residential cable was offset by declines in Mobile and B2B
 

  • Rebased residential cable revenue growth of 1.0% in Q2 was due to a 1.3% YoY increase in our cable RGU base and a modest increase in cable ARPU, offset by a decrease in non-subscription revenue

  • Rebased Q2 residential mobile revenue decline of 1.9% was due to lower non-subscription revenue

- Lower handset sales due to extended renewal cycles impacted mobile non-subscription revenue, however this was partly offset by a £4.1 million nonrecurring benefit from the sale of rights to future commission payments on customer handset insurance arrangement
 

  • Rebased B2B revenue decline of 1.0% in Q2 was driven by a 2.9% decrease in non-subscription revenue, partially offset by a 16.1% increase in subscription revenue due to growth in SOHO RGUs

- Lower data and installation revenue led to a decline in B2B non-subscription revenue 
 

  • Operating income decreased YoY to £29.3 million in Q2 due to the net effect of (i) a reduction in Segment OCF, as described below, (ii) increased related-party fees and allocations, net, and (iii) higher share-based compensation expense

  • Rebased Segment OCF declined 2.5% in Q2 which reflected the aforementioned revenue growth and a reduction in service costs from ongoing network improvements and the rationalisation of our retail sales channel which was more than offset by (i) increased programming costs, (ii) an £8.6 million increase in network taxes and (iii) higher severance costs in the quarter of £4.9 million

  • Property and equipment (“P&E”) additions decreased by 18.2% YoY to £289.1 million in Q2 

-Reduced customer premises equipment spend in Q2 due to an elevated level of investment in the prior year related to our V6 set-top box and Hub 3 router upgrades and as we focus on higher value customer acquisitions to optimise returns
-Improved efficiency in Project Lightning resulted in a lower cost per premise in Q2 and an overall reduction in new build and upgrade capex. Baseline spend also decreased YoY
 

  • Operating free cash flow increased 24.2% in Q2 driven by a reduction in capital intensity to 22.6%, compared to 27.7% in Q2 2018

  • At June 30, 2019, our fully-swapped third-party debt borrowing cost was 4.7% and the average tenor of our third-party debt (excluding vendor financing) was 6.6 years

-In May, we issued £300 million 5.25% Senior Secured Notes due 2029 and $825 million 5.5% Senior Secured Notes due 2029. The proceeds along with cash in hand were used to redeem (i) £387 million 5.5% Senior Secured Notes due 2025, (ii) $355 million 5.5% Senior Secured Notes due 2025 and (iii) £300 million 6.375% Senior Notes due 2024
-Subsequent to June 30, we tapped the 5.5% USD Notes due 2029 for a further $600 million. The proceeds were used to redeem the outstanding amounts of our (i) 5.5% GBP Senior Secured Notes due 2021 and (ii) 5.25% USD Senior Secured Notes due 2021 
 

  • At June 30, 2019, and subject to the completion of our corresponding compliance reporting requirements, the ratios of Net Senior Secured and Total Net Debt to Annualised EBITDA (last two quarters annualised) were 3.85x and 4.41x, respectively, each as calculated in accordance with our most restrictive covenants

- Vendor financing obligations are not included in the calculation of our leverage covenants. If we were to include these obligations in our leverage ratio calculation, the ratio of Total Net Debt to Annualised EBITDA would have been 5.23x at June 30, 2019
 

  • At June 30, 2019, we had maximum undrawn commitments of £675 million equivalent. When our compliance reporting requirements have been completed and assuming no change from June 30 borrowing levels, we anticipate that all of our unused commitments will be available to be drawn


( Press Release Image: https://photos.webwire.com/prmedia/6/245136/245136-1.jpg )


WebWireID245136





This news content was configured by WebWire editorial staff. Linking is permitted.

News Release Distribution and Press Release Distribution Services Provided by WebWire.