RNS Number:7915K
Telewest Communications PLC
18 May 2000
Part One
TELEWEST COMMUNICATIONS PLC
1st QUARTER RESULTS 2000
* Telewest Active Digital sales to date of 156,000
* Revenue per customer up 7.6% to #37.31
* 131,000 dial-up internet subscribers, up 373% year-on-year
* Revenues up 27% to #239 million
* EBITDA up 14% to #58 million
Qtr 1 Qtr 1 Change
2000 1999 over 1999
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Revenue #239m #188m +27.3%
EBITDA (earnings before interest, tax
depreciation and amortisation) #58m #50m +14.3%
EBITDA margin (EBITDA as a percentage of
revenue) 24.1% 26.9% -2.8% pts
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Residential Services Revenue #179m #143m +25.2%
Customers 1.6m 1.4m +203,000
Household Penetration 35.8% 34.7% +1.1% pts
Monthly Revenue per
Customer #37.31 #34.67 +7.6%
Customer Churn* 14.7% - -
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Business Services Revenue #56m #40m +41.8%
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Flextech Revenues - acquired 19 April 2000** #41m #39m +3.8%
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* Excluding Cable London
** Included for information purposes only. Not consolidated into Telewest
financial information
Commenting on the first quarter results, Adam Singer, Chief Executive
of Telewest Communications, said:
"The financial performance is good: revenue is up 27% and EBITDA is up
14%. But what I think is noteworthy is that these results have been
achieved during a period when the company has been accelerating the
rollout of its new digital service and launching important broadband
products.
While others have been talking about the promise of the digital era,
we have been delivering the next generation of broadband services to
our customers. We have, to date, signed up 156,000 subscribers for
Telewest Active Digital and we are on track to meet our target of
500,000 customers by year end. That roll-out is on schedule and is
expected to reach 90% of our homes passed by July. At 31 March 2000
we had 131,000 dial-up internet subscribers following the launch of
Surf Unlimited in February. Demand for the product has greatly
exceeded expectations which has caused some initial service issues
which have now been corrected. We have successfully launched a hi-
speed internet access product - blueyonder - which has generated
significant interest. In July we are scheduled to launch our
broadband portal.
Meanwhile, our content division (formerly Flextech) also performed
well. Flextech's relatively traditional pay-TV business is adding
subscribers and advertising revenue as the digital universe expands.
At Flextech Interactive revenues in the first quarter have risen 71%.
In addition, the fixed fees already committed by content providers to
Telewest's Active Digital shopping platform amount to more than #3.5
million on an annualised basis (and this does not include TV
transactions). This may appear a small number in the context of
Telewest, but it shows that in our case e-commerce is already
producing real revenues.
Since the end of the quarter we have been busy integrating Telewest
and Flextech in a manner designed to preserve the culture of both
companies and create a new media entity that is more than the sum of
its parts. Our goal is to create Britain's first "broadbandcaster".
The combination of a state of the art network, top quality branded
broadband content and a focus on interactive product development gives
Telewest the key ingredients for success in the digital age."
BUSINESS REVIEW
Financial
Revenues increased 27.3% to #239 million for the quarter ended 31
March 2000, from #188 million for the same period in 1999. This
increase is attributable to the acquisition on 23 November 1999 of the
remaining 50% interest in Cable London (#21 million) and to increased
market penetration in both residential and business service markets.
In particular, the growth in residential telephony and business
services revenues was 34.2% and 41.8% respectively in the first
quarter of 2000 compared with the corresponding period a year ago.
This strong growth has resulted from increases in minutes of use and
higher average pence per minute charges for voice and data traffic and
the strong performance of our commercial services division.
Operating expenses, before depreciation and amortisation, increased by
32.2% to #181 million in the first quarter of 2000 from #137 million
for the corresponding period in 1999. This increase is attributable
to the Cable London acquisition (#14 million) and to an increase in
selling, general and administrative expenses. This reflects the
increased operating investment, both in terms of staffing levels and
marketing, necessary to roll-out Telewest Active Digital and
Telewest's hi-speed internet service, blueyonder.
Cable television margins increased 1 percentage point to 50% for the
first quarter 2000 from 49% for the fourth quarter, 1999 and by 6
percentage points from 44% for the first quarter of 1999. This
follows price increases introduced on 1 February 2000 offset in part
by increased programming costs for larger digital packages as compared
to analogue packages.
The telephony business continues to be impacted by growth in mobile
penetration and internet related calls which are significantly
altering call usage patterns and generate lower margins. Average
minutes of use were up significantly compared with last year although
telephony margins for the first quarter of 2000 were down 2 percentage
points to 68% from 70% for the fourth quarter of 1999 and by 5
percentage points from 73% for the first quarter of 1999.
EBITDA increased by 14.3% to #58 million in the first quarter 2000
from #50 million in the first quarter 1999. Adjusting for the impact
of Cable London, EBITDA for the first quarter 2000 increased 3.2% to
#58 million from #56 million in the first quarter 1999. EBITDA
margins decreased 2.8 percentage points from 26.9% in the first
quarter 1999 to 24.1% for the corresponding period in 2000.
Residential Services
Telewest's household penetration was up 1.1 percentage points to 35.8%
at 31 March 2000 from 34.7% at 31 March 1999, which represents
approximately 1.6 million homes and 4.0 million consumers. Monthly
revenue per household increased by 7.6% to #37.31 in the quarter ended
31 March 2000 compared with the corresponding period a year ago. This
is a result of an increasing proportion of homes subscribing to both
television and telephony products, up to 62% at 31 March 2000, retail
price increases introduced on 1 February 2000 and higher subscriber
revenues generated by Telewest Active Digital packages.
Customer or household relationship churn which has been reported for
the first time this quarter is currently 14.7% on a rolling 12 month
basis (excluding Cable London, which was acquired on 23 November
1999). The measurement of household churn allows us to be compared to
our competitors in the UK. This measures the rate at which customers
disconnect from all Telewest services eliminating double-counting
caused by customers moving between single and dual service levels and
more accurately reflecting the customer loyalty we are achieving. We
will continue to report the product churn numbers separately.
As at 31 March 2000, Telewest's television product penetration was
25.6%, a 1.1 percentage points increase over television product
penetration at 31 March 1999. Telewest Active Digital sales to date
total 156,000, of which 87% or 136,000 have been installed, and of
which 51% are subscribers new to Telewest. The roll-out of Telewest
Active Digital is progressing to schedule and this service should be
available to over 90% of all Telewest homes passed by the end of June
2000.
Telewest's range of interactive services continues to grow with
agreements now signed with 80 content partners. Norwich Union,
Interflora and CNN are some of the brands which have been added to the
list of household names that already include W H Smith, Woolworths,
Abbey National and Ladbrokes. Telewest expects to continue adding to
the list and develop the range and depth of its service. Telewest
believes that this is an exciting new revenue opportunity and has
already secured annualised fixed fees of #3.5 million, under signed
contracts from content providers. Telewest's video-on-demand trial is
underway and is progressively being scaled up to include all Telewest
Active Digital subscribers in the South East franchise area.
Residential telephony product penetration increased to 32.3% at 31
March 2000, up 1.8 percentage points on a year earlier. With second
line penetration at 12.2%, this represented over 1.6 million
residential telephone lines as at 31 March 2000.
Surf Unlimited, the UK s first unmetered internet access service, was
launched in February 2000. At 31 March 2000, dial up internet
subscribers increased to 131,000, an increase of 373% compared to a
year earlier.
Blueyonder, Telewest's hi-speed internet service for home personal
computers, was launched in March 2000. Initial consumer interest has
been positive and the development of Telewest's broadband portal
continues on schedule for launch in July 2000.
In April 2000, OFTEL confirmed Telewest as one of the selected
operators for ADSL trials under Option 2, full local loop unbundling
of BT s network. Telewest is well placed to commence Option 2 trials.
It already provides broadband interactive services over its cable
networks and its customer services and IT infrastructure should enable
cost effective delivery over ADSL.
Business Services
Business services revenues for the quarter ended 31 March 2000
totalled #56 million, up 42% on the corresponding period a year ago.
As at 31 March 2000 Telewest had over 60,000 business customer
accounts and over 300,000 business telephony lines.
Business services revenues include #13 million of revenues for the
first quarter 2000 relating to Telewest's commercial services unit
which provides national network services to third parties. The
commercial services unit was established in January 1999 and had #2
million revenues for the first quarter of 1999.
In the third quarter 2000 Telewest intends to launch a hi-speed
internet service specifically tailored to meet the needs of the small
and medium sized enterprise. This service will be supported by a
broadband portal leveraging Telewest's investment in its hi-speed
internet network and should provide a platform from which to develop
an Application Service Provision business.
Flextech (Content Division)
Our merger with Flextech was completed on 19 April 2000 and
accordingly, the results for Flextech do not form part of these
results. Set out below is a summary of the key operational statistics
for Flextech in the first quarter 2000. In the future, the results
and activities of Flextech will be reported as Telewest's content
division.
Flextech's turnover, including its share of joint ventures' revenue,
increased by 3.8% to #41 million in the first quarter of 2000 compared
with the corresponding period a year earlier. This growth has been
driven by a 23% increase in the UK multi-channel market to 8.0 million
homes at 31 March 2000 up from 6.5 million homes a year earlier,
offset in part by lower unit revenues from digital homes which
increased by 2.8 million homes to 3.4 million at 31 March 2000 from
0.6 million a year earlier.
Advertising revenues (including Flextech's share of joint ventures
advertising revenue) increased 17% to #14 million in the first quarter
2000, from #12 million in the same period a year ago. Flextech
interactive revenues increased 71% to #0.6 million in the first
quarter 2000. Flextech's EBITDA loss reduced to #1.5 million in the
three months ended 31 March 2000 from #3.2 million in the three months
ended 31 March 1999.
In addition to this EBITDA loss, Flextech sold, in January 2000, a
12.5% interest in TV Travelshop to Kuoni for cash proceeds of #6.6
million recognising a pre-tax profit on disposal of #10 million.
Corporate Developments
On 25 January 2000, Telewest raised net cash proceeds of #534 million
from the issue of $450 million 11 3/8% Senior Discount Notes due 2010,
#180 million 9 7/8% Senior Notes due 2010 and $350 million 9 7/8%
Senior Notes due 2010. Approximately #126 million of these proceeds
were used to repay the indebtedness of Cable London and the remainder
has been or will be used for general corporate purposes, including
operating and capital requirements associated with the roll-out of
Telewest Active Digital and blueyonder and the temporary or permanent
repayment of additional debt.
On 6 March 2000, Telewest and Andersen Consulting announced the
formation of a new company to develop interactive broadband
applications. The joint venture intends to provide consultancy
services and to develop, customise and license innovative solutions
for the rapidly emerging broadband industry.
Management Structure
Following the Flextech merger, the senior management team was
reorganised to reflect Telewest's emergence as a vertically integrated
communications and media group. Mark Luiz became Chief Executive,
Content Division and replaces Brent Harman who is returning to
Australia. Philip Jansen assumed responsibility for our residential
services division as Managing Director, Consumer Services and Adam
Smith became Managing Director, Business Services.
As announced on 11 April 2000, Tony Illsley, previously Chief
Executive, decided to leave the group to pursue other interests.
MediaOne also appointed Simone Brych-Nourry, their third shareholder
representative, to the Board in accordance with their existing
shareholder rights, effective 18 May 2000. Simone Brych-Nourry has
been Chief Counsel of MediaOne International since December 1994.
Outlook
Telewest is now a leading provider of broadband services in the UK.
With product development initiatives progressing to schedule, the
necessary increase in operating capacity complete, the Flextech
content business integration well on track and a new senior management
team in place, Telewest believes it is well positioned.
Enquiries to Telewest Communications plc
Charles Burdick, Group Finance Director 01483 750900
Parm Sandhu, Director, Investor Relations 01483 587061
and at
Brunswick
Alison Hogan 020 7404 5959
Notes:
The following is included in connection with legislation in the United
States, the Safe Harbour Statement under the US Private Securities
Litigation Reform Act of 1995 The foregoing includes certain forward
looking statements that involve various risks and uncertainties which
could lead to actual results significantly different than those
anticipated by Telewest. For a discussion of certain of these risks
and uncertainties see the Company's Registration Statement on Form F-4
filed with the US Securities and Exchange Commission on 6 March 2000.
Unless otherwise specified, all references to financial information
are on a UK GAAP basis.
Telewest Communications plc
Operating Statistics - Owned and operated
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Actual Pro forma (1)
RESIDENTIAL SERVICES Net additions Net additions
Q1 2000 Q1 1999
Homes Marketed 3,770 27,417
Customer Homes Added 6,791 25,576
Cable Television Subscribers (16,466) 31,391
Telephony Subscribers 16,362 28,242
Telephone Lines 21,614 50,827
Internet Subscribers 71,109 5,454
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As at 31 March As at 31 March
2000 1999
Actual Pro forma (1)
Cable television and residential
telephony subscribers* 979,796 890,425
Cable television only subscribers 159,298 187,114
Residential telephony only subscribers * 453,263 446,899
Total residential customers 1,592,357 1,524,438
* Includes subscribers also subscribing for internet services.
Homes marketed 4,447,594 4,395,131
Household penetration 35.8% 34.7%
Customer churn (excluding Cable London) 14.7% -
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Cable television subscribers 1,139,094 1,077,539
Active Digital Subscribers 103,828 -
Cable television penetration 25.6% 24.5%
Churn rate 26.6% 27.5%
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Residential telephony subscribers 1,433,059 1,337,324
Residential telephony penetration 32.3% 30.5%
Residential telephone lines 1,607,624 1,442,444
Second line penetration 12.2% 7.9%
Churn rate per line 20.7% 21.2%
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Total internet subscribers 131,415 27,775
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BUSINESS SERVICES Actual Pro forma (1)
Net additions Net additions
Q1 2000 Q1 1999
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Business customer accounts 2,871 1,473
Business telephony lines (1,923) 20,792
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As at 31 March As at 31 March
2000 1999
Actual Pro forma (1)
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Business customer accounts 61,218 47,137
Business telephony lines 305,167 254,553
Average number of lines per
customer account 5.0 5.4
Annualised revenue per customer account #3,471 #3,718
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Telewest Communications plc
As at 31 March 2000
Telewest Franchises (2) Cable London Franchises (3)
31 March 31 March
1999 2000 1999 2000
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Number of franchises 37 37 4 4
Residential customers 1,389,737 1,457,429 134,701 134,928
Residential dual
customers 828,434 908,171 61,991 71,625
Percentage of dual
customers 59.6% 62.3% 46.0% 53.1%
Monthly revenue per
customer #34.68 #36.98 #39.21 #41.98
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CABLE TELEVISION
Homes passed 4,222,421 4,271,666 397,455 437,622
Homes passed and
marketed 4,013,298 4,059,341 381,833 388,253
Subscribers 981,044 1,037,235 96,495 101,859
Penetration rate (5) 24.4% 25.6% 25.3% 26.2%
Average monthly revenue
per subscriber (6) #21.89 #20.72 #23.36 #19.80
Average churn rate (7) 27.1% 26.2% 31.9% 31.2%
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RESIDENTIAL TELEPHONY
Homes passed 4,043,943 4,093,182 397,455 437,622
Homes passed and
marketed 3,998,888 4,050,061 381,833 388,253
Subscribers 1,237,127 1,328,365 100,197 104,694
Penetration rate (8) 30.9% 32.8% 26.2% 27.0%
Lines 1,333,225 1,490,917 109,219 116,707
Average monthly
revenue per line (9) #20.30 #21.57 #27.92 #28.74
Average churn rate
per line (10) 20.6% 20.4% 28.9% 24.1%
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BUSINESS SERVICES
Business customer
accounts 43,701 57,158 3,436 4,060
Business lines 234,454 277,472 20,099 27,695
Average business lines
per customer (11) 5.4 4.9 5.8 6.8
Average monthly revenue
per business line (12) #59.49 #50.30 #57.56 #49.69
Average annualised revenue
per customer (13) #3,703 #3,240 #3,920 #4,371
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Telewest Communications plc
As at 31 March 2000
Telewest Group Franchises (4)
31 March
1999 2000
Pro forma (1)
Number of franchises 41 41
Residential customers 1,524,438 1,592,357
Residential dual customers 890,425 979,796
Percentage of dual customers 58.4% 61.5%
Monthly revenue per customer #34.96 #37.31
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CABLE TELEVISION
Homes passed 4,619,876 4,709,288
Homes passed and marketed 4,395,131 4,447,594
Subscribers 1,077,539 1,139,094
Penetration rate (5) 24.5% 25.6%
Average monthly revenue per subscriber (6) #22.02 #20.63
Average churn rate (7) 27.5% 26.6%
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RESIDENTIAL TELEPHONY
Homes passed 4,441,398 4,530,804
Homes passed and marketed 4,380,721 4,438,314
Subscribers 1,337,324 1,433,059
Penetration rate (8) 30.5% 32.3%
Lines 1,442,444 1,607,624
Average monthly revenue per line (9) #20.87 #22.10
Average churn rate per line (10) 21.2% 20.7%
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BUSINESS SERVICES
Business customer accounts 47,137 61,218
Business lines 254,553 305,167
Average business lines per customer (11) 5.4 5.0
Average monthly revenue per business line (12) #59.34 #50.24
Average annualised revenue per customer (13) #3,718 #3,471
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Telewest Communications plc
Owned and Operated Franchises
As at 31 March 2000
(1) Operating statistics on a proforma basis assume the Cable London
acquisition had taken place on 1 January 1999.
(2) Represents the 37 cable franchises owned and operated by the Telewest
Group following the General Cable merger and the Birmingham acquisitions
(collectively the "Telewest Franchises").
(3) Consists of the four cable franchises owned and operated by Cable London
(collectively, the "Cable London Franchises"). Prior to 23 November 1999,
these franchises were owned approximately 50% by Telewest and
approximately 50% by NTL (Triangle) LLC as successor to Comcast, a wholly
owned subsidiary of NTL, Inc. They are now owned 100% by the Telewest
Group.
(4) Represents the Telewest Franchises and the Cable London Franchises, (the
"Telewest Group franchises").
(5) Cable television penetration rate at a specified date represents (i) the
total number of cable television customers at such date, divided by (ii)
the total number of homes passed and marketed for cable television at
such date.
(6) Average monthly revenue per subscriber for each period represents (i) the
average monthly cable television revenue for such period, divided by (ii)
the average number of cable television subscribers in such period.
(7) Average cable television churn rate for the period represents (i) the
total number of cable television customers who terminated basic service
or whose service was terminated during such period, divided by (ii) the
average number of cable television customers in such period.
(8) Residential telephony penetration rate at a specified date represents (i)
the total number of residential cable telephony customers at such date,
divided by (ii) the total number of homes passed and marketed for
residential cable telephony at such date.
(9) Average monthly revenue per residential line for each period represents
(i) the average monthly residential cable telephony revenue for such
period, divided by (ii) the average number of residential cable telephony
lines in such period.
(10) Average residential telephony churn rate per line for the period
represents (i) the total number of residential cable telephony lines
terminated by customers of the company providing the lines during such
period, divided by (ii) the average number of residential cable telephony
lines in such period.
(11) Average number of business lines per customer at a specified date
represents (i) the number of business cable telephony lines at such date,
divided by (ii) the number of business cable telephony customer accounts
at such date.
(12) Average monthly revenue per business line for each period represents (i)
the average monthly business cable telephony revenue for such period,
divided by (ii) the average number of business cable telephony lines in
such period.
(13) Average annualised revenue per customer account for each period
represents (i) the average monthly business services revenue for each
period divided by (ii) the average number of business services customer
accounts in such period, multiplied by twelve months.
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