NTL Cuts Quarterly Loss

First quarter net loss fell by 62.6% to £65.4M ($120.3M) compared with a net loss of £174.7M ($280M) for the same period in 2003

May 5, 2004

7 Min Read

NEW YORK -- ntl Incorporated (NASDAQ: NTLI - News) Revenue growth and margin expansion plans remain on track:

  • Grew combined segment profit by 26 per cent to GBP 196.8m*, driven by higher revenues and margins in ntl: Home and increased profitability across all divisions

  • Increased consolidated revenues by 7 per cent to GBP 585m and ntl: Home revenues by 10 per cent to GBP 398.4m

  • Added 61,500 net customers and 142,300 RGUs in ntl: Home

  • Achieved break-even operating income for the first time in the company's history

  • Reduced net loss by 63 per cent to (GBP 65.4m)

ntl Incorporated (NASDAQ: NTLI - News) announced today its first quarter 2004 results. Commenting on the results, Simon Duffy, Chief Executive Officer of ntl, said:

"The first quarter results demonstrate a strong start to the year with increased profitability across all divisions compared to Q1 2003, with both revenue and segment profit margins on track for continued, steady growth.

Combined segment profit grew by 25.8 per cent (before SBCE) over Q1 2003, mainly driven by 10.0 per cent revenue growth in ntl: Home, which added 61,500 net customers and 142,300 RGUs in the quarter. The growth in combined segment profit enabled ntl to deliver its first ever quarterly operating income.

The highly competitive value of ntl's bundled product offerings, together with on-going marketing activities and additional product developments, has contributed to ntl: Home's customer base growing by 7.7 per cent over Q1 2003 to 2,923,200, and triple play penetration increasing by approximately 5 percentage points to 21.6 per cent in Q1 2004.

Following a year of restructuring, ntl: Business returned to revenue growth in the first quarter compared to Q4 2003. This performance, when coupled with additional investments in its sales force, has positioned ntl: Business for further profitable revenue growth later in 2004.

The first quarter increase in profitability is particularly encouraging since it occurred at the same time as we continued to invest in initiatives to drive additional revenue growth and margin expansion in 2005 and beyond. These initiatives include upgrading 545,000 homes served by our London network, thereby enhancing our broadband and television capability; developing our digital television platform to enable full interactivity and video-on-demand; investing in both the ntl: Home and ntl: Business sales forces; rationalising the number of customer provisioning and care centres, which currently employ 3,500 staff; migrating the existing 28 billing and CRM systems to one through the Harmony programme; streamlining corporate overhead functions which currently employ over 2,000 staff.

In April, ntl completed the bond and bank debt refinancing which has extended the maturity of our remaining debt and lowered its average cost. When combined with the success of the 2003 rights offering, completion of our capital restructuring has reduced annual bond and bank debt interest expense by 37 per cent to approximately GBP 235 million.

The progress made in the first quarter of 2004 positions ntl well for continued revenue growth and sustainable margin expansion over the balance of the year."

Group Highlights

Quarter ended March 31, 2004


First quarter consolidated revenues increased by 7.0 per cent to GBP 585.0 million ($1,076.1 million) from GBP 546.5 million ($875.9 million) for the same period of 2003.

The revenue increase was mainly associated with the net addition of 367,900 broadband customers and 131,700 telephony customers in ntl: Home, where revenues increased by GBP 36.3 million or 10.0 percent to GBP 398.4 million. ntl: Broadcast increased revenues by GBP 7.1 million over the prior period, primarily due to equipment sales associated with an expanding public safety business. These increases were partly offset by lower revenues in ntl: Business as the 2003 restructuring of this division resulted in fewer but more profitable customers.

Combined segment profit

First quarter combined segment profit increased by 25.8 per cent (before SBCE) to GBP 196.8 million ($362.1 million) from GBP 156.5 million ($250.8 million) for the same period of 2003.

This increase reflects improved profitability across all the divisions, as a tight focus on costs and increased efficiency allowed approximately 100 per cent of the revenue growth to contribute to margin expansion. This improvement was led by increased revenues and higher margins in ntl: Home where segment profit increased by GBP 24.0 million over Q1 2003. ntl: Business increased segment profit by GBP 5.1 million reflecting reduced employee costs and a refocus on selling higher-margin products. In addition, savings totalling GBP 8.0 million (before SBCE) were realised in ntl: Shared Services compared with the prior period, primarily due to the renegotiation of the IBM contract for IT services, together with reduced property and facility costs.

Operating income and net loss

ntl achieved break-even operating income of GBP 2.2 million ($4.0 million) for the first time in its history, compared to a GBP 54.1 million ($86.7 million) operating loss for the first quarter of 2003. The improvement mainly results from the GBP 40.3 million (before SBCE) expansion in segment profitability.

First quarter net loss decreased by 62.6 per cent to GBP 65.4 million ($120.3 million) compared with a net loss of GBP 174.7 million ($280.0 million) for the same period in 2003. The reduction in net loss is largely attributable to our improved operating performance and a decrease in interest expense associated with the completion of the balance sheet restructuring initiatives.

In April, ntl completed the refinancing of its outstanding senior credit facility and Diamond and Triangle notes. As a result of the repayment of these facilities prior to their scheduled maturity, costs of GBP 164.2 million ($302.2 million) will be written off in the second quarter 2004. Of this expense, GBP 5.8 million ($10.7 million) will impact cashflow.

Fixed asset additions (accrual basis)

To provide comparable data to the US Cable industry, and in accordance with NCTA (National Cable & Telecommunications Association) reporting guidelines*, ntl has allocated fixed asset additions (accrual basis) to the standard NCTA reporting categories.

First quarter fixed asset additions were GBP 68.5 million ($125.9 million) of which approximately 54 per cent related to ntl: Home projects and 25 per cent related to ntl: Shared Services.

Overall, about 80 per cent of ntl's NCTA fixed asset additions were growth oriented in Q1 2004, with the largest component related to customer premise equipment (CPE), in support of ntl: Home's continued customer growth. Although the level of CPE spend in Q1 2004 is below the prior year, associated activity levels for the current quarter were actually greater due to a lower CPE cost per gross RGU addition. This is primarily due to achieving greater efficiencies in the installation process, successfully negotiating lower set-top box and cable modem prices, and the impact of lower capitalised overhead rates.

Support capital includes GBP 9.8 million ($18.0 million) associated with ntl's Harmony billing system integration programme together with other IT costs. Harmony costs remain at similar levels as compared to Q1 2003, but efficiencies in other IT-related spend have contributed to the year-over-year savings.

We expect to spend between GBP 350.0 million ($644.0 million) and GBP 370.0 million ($680.8 million) on fixed asset additions for the full year 2004.

Cash and cash equivalents

At March 31, 2004 cash and cash equivalents were GBP 199.2 million ($366.5 million). During the first quarter GBP 234.8 million ($431.9 million) of cash on hand was used to pay down the senior, revolving credit facility prior to the refinancing that was completed on April 13, 2004.

NTL Inc.

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