Liberty Global Reports Q4, Full Year 2013
DENVER, Colo. -- Liberty Global plc (“Liberty Global” or the “Company”) (NASDAQ: LBTYA, LBTYB and LBTYK), today announces financial and operating results for the three months (“Q4”) and year ended December 31, 2013. Some of the information below concerning Virgin Media relates to periods prior to our ownership of the business.
Please also note that we sold substantially all of our content business on January 31, 2014 (the “Chellomedia Sale”), and accordingly, we have presented the disposed business as a discontinued operation for all periods presented.
Highlights for the full year compared to the same period in 2012 (unless noted) include:
Mike Fries, Chief Executive Officer stated, “2013 was a watershed year for Liberty Global. With the acquisition of Virgin Media, we significantly enhanced our scale which now encompasses 47 million homes passed and over 24 million unique customers. In January, we completed the Chellomedia Sale for approximately $1 billion in net proceeds, and we also reached an agreement to purchase Ziggo N.V. ("Ziggo"), the largest cable operator in the Netherlands. The Ziggo acquisition will create a nationwide footprint in one of our core markets and enable us to provide Dutch consumers with even better broadband, video and voices services. At the same time, we will be the leading challenger in mobile and B2B.”
“Adjusting to include Virgin Media results for all of 2013, our full-year combined revenue and OCF would have been $17.3 billion and $7.9 billion, respectively. Both figures represent rebased growth of 4%, consistent with our medium-term targets for mid-single digit growth. Our financial results without Virgin Media were even stronger in 2013, as we delivered 5% rebased revenue and OCF growth. Our combined Adjusted FCF was $1.8 billion, which represents a 16% increase compared to 2012, consistent with our mid-teens free cash flow growth objective over the medium term. Looking ahead to 2014, we expect accelerating rebased OCF growth compared to 2013, and we expect to deliver Adjusted FCF of approximately $2.0 billion for the full year.6” “From an operating perspective, we delivered our third consecutive year of more than one million organic subscriber additions, with 1.3 million net new RGUs in 2013, including 413,000 in Q4, which was our strongest quarter of the year. We continue adding value for our customers by expanding our product offerings with our advanced digital TV platforms and substantial increases in our broadband speeds. With Horizon TV rolled out in four countries and TiVo in the U.K., we now serve 2.5 million next-generation video subscribers, representing 19% of our digital TV base. In addition, our core bundles in most markets currently feature broadband internet speeds ranging between 100-150 mbps, along with maximum speeds between 200-500 mbps that even the most advanced DSL services simply cannot match.”
“We ended the year with our balance sheet in great shape while continuing to focus on our levered equity growth strategy. During 2013, we returned over $1.1 billion of capital to shareholders through stock repurchases. In addition, we recently increased our buyback program by $1 billion. Including this increase, we are authorized to purchase an additional $3.5 billion under this program through the end of 2015. With adjusted total liquidity of $7 billion and continued free cash flow generation going forward, we are well positioned to continue driving shareholder value through strong organic growth, stock repurchases and the completion and integration of acquisitions.”
At December 31, 2013, we provided our 24.5 million unique customers with a total of 48.3 million subscription services (RGUs), consisting of 21.8 million video, 14.4 million broadband internet and 12.1 million telephony subscriptions. During 2013, we grew our subscriber base by 39% or 13.4 million RGUs through a combination of acquisitions, including the Virgin Media acquisition in the United Kingdom (“U.K.”), and 1.3 million RGUs from organic growth, including 413,000 additions in the fourth quarter. We also increased our customer base by 4.7 million during 2013 (inclusive of acquisitions) with double- and triple-play bundled customers accounting for approximately 57% of our total customers.
We finished 2013 with a single-play customer base of 10.6 million customers, a number that represents a significant growth opportunity.
Broadband internet and telephony gains drove our 2013 RGU organic growth, as we added 867,000 broadband RGUs (including a record 270,000 in Q4) and 718,000 telephony RGUs (including 192,000 in Q4). We ended 2013 with broadband and telephony penetrations8 of 32% and 27%, respectively, which reflect increases from year-end 2012 penetrations of 29% and 23%, respectively.
We lost 294,000 video subscribers (including 50,000 in Q4) during 2013, an improvement over our attrition rates in recent years. At December 31, 2013, we had 13.2 million digital video subscribers, which equates to 63% digital penetration. On that front, we continued the roll-out of our next-generation video products, having reached a next-generation video base of 2.5 million or approximately 19% of our digital TV base as of the first week of February 2014. This includes 2.0 million TiVo subscribers in the U.K. and 500,000 total Horizon TV subscribers across our Dutch, Swiss, Irish and German markets.
Geographically, our 1.3 million organic subscriber additions in 2013 consisted of 849,000 RGUs in Western Europe, 256,000 RGUs in Central and Eastern Europe (“CEE”) and 186,000 RGUs in Latin America.9 Similar to prior periods, our subscriber performance in Western Europe was largely driven by our German and Belgian operations. In particular, our German operation remained our flagship business, delivering 558,000 RGU additions during 2013 (including 136,000 in Q4). Our Belgian operation, capitalizing in part on new bundling promotions, added 146,000 RGUs during 2013 (including 52,000 in Q4). Our annual subscriber growth in this market represents the strongest result at Telenet since 2009 and reflects a 54% increase over 2012 results. Beyond Europe, our operations in Latin America delivered a strong performance, as we organically added 129,000 RGUs in Chile and 57,000 RGUs in Puerto Rico, which represents a 48% year-over-year increase for both operations combined.
In terms of mobile, Virgin Media accounted for approximately 3.0 million of our 4.1 million total mobile subscriber10 base at December 31, 2013. On an organic basis, our Belgian and German mobile businesses were our best performers, as we added over 225,000 and 100,000 subscribers, respectively, during the year.
Our reported consolidated revenue increased by 71% to $4.5 billion and 46% to $14.5 billion for the three months and year ended December 31, 2013, respectively, as compared to the corresponding prior year periods. The growth in both periods was primarily driven by the inclusion of Virgin Media for approximately seven months and, to a lesser extent, strong RGU growth fueled by broadband internet additions and positive foreign currency (“FX”) movements related to the depreciation of the U.S. dollar against many of our underlying currencies. When adjusting to neutralize the impact of acquisitions and FX, we achieved year-over-year rebased revenue growth of 2% and 4% for the fourth quarter and fullyear 2013 periods, respectively.
Geographically, we generated rebased top-line growth of 7% in Chile and 4% in Western Europe during 2013, while our rebased revenue was flat in CEE as compared to the prior year. Our Western European operations, which accounted for over 80% of our consolidated revenue, were led by our operations in Belgium and Germany. In particular, our Belgian business posted record rebased revenue growth of 10% on the back of strong mobile and triple-play growth. Our German operations reported rebased revenue growth of 7% during 2013, despite the loss of certain public broadcaster carriage fees in 2013 as compared to the recognition of $32 million of these fees during 2012. In addition, our Swiss operation delivered 4% rebased growth during 2013, which was its strongest annual performance since 2008.
Rounding out our five largest Western European operations, our U.K. business posted rebased revenue growth of 1% on a reported basis (2% for the full year including the pre-acquisition period), while our Dutch business, faced with a tough competitive situation, experienced a rebased top-line decline of 2% in 2013. At Virgin Media, solid reported growth in our cable subscription revenue, helped by a price increase in February 2013, was offset by continued pressure on Virgin Media's mobile and business (“B2B”) products.
Our 2013 rebased revenue growth for Liberty Global excluding Virgin Media was 5%, while Virgin Media on a full-year stand-alone basis grew 2% (as noted above). Combining Liberty Global for the full 2013 period and Virgin Media for the pre-acquisition period, our rebased revenue growth for 2013 would have been approximately 4%.
Operating Cash Flow
For the three months and year ended December 31, 2013, our reported OCF increased 65% to $2.1 billion and 40% to $6.7 billion, respectively, as compared to the corresponding 2012 periods. The underlying reasons for our OCF growth were consistent with the aforementioned revenue drivers including the contribution from Virgin Media. Our rebased OCF growth was 2% and 3% for the three months and year ended December 31, 2013, respectively. Our rebased growth in both periods was hampered by more than $25 million of positive non-recurring items realized by Virgin Media in Q4 2012 and, with respect to the full-year rebased growth rate, an increase in net integration costs driven by the Virgin Media acquisition.
Geographically, our Chilean and Western European operations generated rebased OCF growth during 2013 of 15% and 4%, respectively, while our CEE operations posted a decline of 3%, hindered by flat revenue as a result of strong competition. Our strong performance in Chile was a function of strong revenue and OCF growth in the core cable operations and a significant decline in the OCF deficit generated by the mobile business. Turning to Western Europe, we delivered 2013 rebased OCF growth of 11%, 9%, 8% and 7% in our Irish, German, Belgian and Swiss operations, respectively.
Offsetting these strong performances, our British and Dutch operations reported rebased OCF declines of 1% and 5%, respectively, with Virgin Media only included for approximately seven months. On a fullyear basis, our British business delivered rebased OCF growth of 3%, which includes among other items, the impact of higher programming costs and the negative impact of the previously mentioned non-recurring items in Q4 2012. Although in Q4 we had our second consecutive sequential quarter of improved local currency OCF in the Netherlands, we believe the Dutch market will remain challenging in 2014.
When combining Liberty Global and Virgin Media for the entire 2013 period, our combined rebased OCF growth would have increased to 4%, with Virgin Media generating 3% (as noted above) and Liberty Global (excluding Virgin Media) producing 5% rebased growth. Our consolidated OCF margins11 for the fourth quarter and year ended December 31, 2013 were 46% and 47%, respectively, as compared to 48% and 49% for the corresponding prior year periods. The annual margin decline for both periods was due primarily to the inclusion of Virgin Media. Excluding Virgin Media for both periods, our OCF margin would have been 49% for Q4 2013 and 48% for full-year 2013.
As compared to the corresponding prior year periods, operating income increased by 1% for each of the three-month and full-year periods ended December 31, 2013, to $518 million and $2.0 billion, respectively. For both periods, our OCF growth was largely offset by certain impacts of the Virgin Media transaction, including increases in depreciation and amortization expense, share-based compensation and impairment, restructuring and other operating items. With respect to our full-year 2013 operating income, our results were also positively impacted by the release of a $146 million litigation provision.
Net Earnings (Loss) Attributable to Liberty Global Shareholders For the three months and year ended December 31, 2013, we reported net losses attributable to Liberty Global shareholders (“Net Loss”) of $121 million or $0.31 per basic and diluted share and $964 million or $2.87 per basic and diluted share, respectively. This compares to a Net Loss of $331 million or $1.27 per basic and diluted share for the three months ended December 31, 2012 and, including the positive impact of a $924 million gain on the disposition of our Austar interest in Q2 2012, net earnings attributable to Liberty Global shareholders of $323 million or $1.21 per basic and diluted share for the year ended December 31, 2012.
Liberty Global Inc. (Nasdaq: LBTY)