Virgin Media revenue climbs 7%

Virgin Media's revenue reached £964.2m in the three months to the end of June, up 7.1% year on year and beating analysts' expectations according to results out today.

Virgin Media: recorded 7.1% rise in first-quarter revenue to £964.2m
Virgin Media: recorded 7.1% rise in first-quarter revenue to £964.2m

During quarter two, which Virgin Media said is traditionally the weakest quarter for growth, the company added 9,100 net new customers, compared with a 27,800 customer loss a year ago.

Virgin Media’s net loss was £59.9m, up 21.5% from £49.3m last year, which it said was mainly due to higher interest expense, loss on extinguishment of debt, and foreign currency losses.

Operating cash flow, which is broadly equivalent to earnings before interest, tax, depreciation and amortisation, was £370m, up 13% year on year and exceeding analyst expectations, which were around 11%.

Virgin Media said the losses were partially offset by higher operating income and reduced losses on derivative instruments.

During the quarter, Virgin Media added 25,900 net broadband customers, 22,300 net TV customers and 66,300 net contract mobile phone customers. However, it lost 52,700 pre-pay customers and 2,700 cable telephony customers.

The proportion of Virgin Media customers who took broadband, landline telephone and TV during the period increased to 62.7%, and the proportion who took four services, broadband, landline and mobile telephone and TV, rose to 11.3%.

Neil Berkett, chief executive of Virgin Media, said: "Going forward, we’ll continue to differentiate our propositions by proactively exploiting the advantages of our network and our mobile capability.

"Confidence in our long-term ability to deliver strong, free cash flow, along with the recent completion of our refinancing, enables us to announce today an initial Capital Return programme that complements our existing debt-reduction schedule, without compromising our ability to make further strategic investments in the business."

In the second quarter of this year, the company also received income of £7.1m from UKTV, its 50:50 TV channels joint venture with BBC Worldwide. UKTV’s financial results are not consolidated into Virgin Media’s revenue.

Income from discontinued operations, which includes revenue from Virgin Media Television, which was sold to BSkyB in July, was £8.6m, up 50.9% when compared to the same period in 2009.

Virgin Media added 259,000 high-definition TV customers in the quarter, to reach an installed base of 1.2 million. It expects to increase the number of high- definition channels and launch a converged TV and broadband interactive platform in the fourth quarter.

An investors’ note from investment bank Goldman Sachs said Virgin Media reported strong 2Q results: "Including VMtv (treated as discontinued in the quarter), Virgin Media beat company-compiled consensus revenue expectations by 2.7%, operating cash flow expectations by 3.7%, and free cash flow by 3.6%.

"Upside was driven by the return to growth of both the business and mobile divisions, which exceeded revenue expectations by more than 10%.

Goldman Sachs said: "[Virgin Media’s] strong results underscore [its] operating momentum, as its ‘broadband quality’ advantage and improved TV offering attract higher value customers."

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