SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the quarterly period ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the transition period from to
Commission file number 0-26840
Telewest Communications plc
(Exact Name of Registrant as Specified in its Charter)
England and Wales N.A.
(State of Other Jurisdiction of (I.R.S. Employer Identification No.)
Incorporation or Organization)
Genesis Business Park
Albert Drive, Woking
Surrey, GU21 5RW
United Kingdom
(Address of Principal Executive Offices)
Telephone number: 011-44-1483-750-900
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes [X] No [ ].
At August 12, 1998, 927,567,600 ordinary shares of 10p each were outstanding.
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (US GAAP).
TELEWEST COMMUNICATIONS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
3 months 3 months 3 months 6 months 6 months 6 months
Ended Ended Ended Ended Ended Ended
June 30, June 30, June 30, June 30, June 30, June 30,
1998 1998 1997 1998 1998 1997
$'000 (pound)'000 (pound)'000 $'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Cable television 74,267 44,578 38,744 147,871 88,758 76,845
Telephony - residential 84,103 50,482 38,175 164,797 98,918 77,849
Telephony - business 24,330 14,604 10,614 46,825 28,106 19,901
Other (including(pound)1,735 and(pound)925 in
1998 and 1997, respectively, from related parties) 9,644 5,789 3,519 16,818 10,095 6,847
------------------------ ------------------------------------- ------------
192,344 115,453 91,052 376,311 225,877 181,442
------------------------ ------------------------------------- ------------
OPERATING COSTS AND EXPENSES
Programming (including(pound)5,043 and
(pound)6,579 in 1998 and 1997, respectively,
to related parties) (37,762) (22,666) (23,428) (79,840) (47,923) (46,626)
Telephony expenses (28,512) (17,114) (13,061) (52,171) (31,315) (27,440)
Selling, general, and administrative
(including(pound)640 and(pound)481 in 1998
and 1997, respectively, to related parties) (78,584) (47,169) (45,474) (153,898) (92,376) (91,003)
Depreciation (78,893) (47,355) (38,902) (156,736) (94,079) (76,358)
Amortisation of goodwill (10,997) (6,601) (6,608) (21,991) (13,200) (13,202)
------------------------ ------------------------------------- ------------
(234,748) (140,905) (127,473) (464,636) (278,893) (254,629)
------------------------ ------------------------------------- ------------
------------------------ ------------------------------------- ------------
OPERATING LOSS (42,403) (25,452) (36,421) (88,325) (53,016) (73,187)
------------------------ ------------------------------------- ------------
OTHER INCOME / (EXPENSE)
Interest income (including (pound)1,170 and
(pound)1,659 in 1998 and 1997, respectively,
from related parties) 1,626 976 1,748 3,444 2,067 4,110
Interest expense (66,085) (39,667) (32,920) (137,258) (82,388) (63,234)
Foreign exchange losses, net (13,396) (8,041) (172) (2,351) (1,411) (24,299)
Share of results of associated undertakings (7,280) (4,370) (5,345) (18,449) (11,074) (10,323)
Gain on disposal of assets 417 251 352 1,327 797 473
Minority interest in profits of consolidated (70) (42) (93) (113) (68) (210)
subsidiaries, net
------------------------ ------------------------------------- ------------
LOSS BEFORE INCOME TAXES (127,191) (76,345) (72,851) (241,725) (145,093) (166,670)
------------------------ ------------------------------------- ------------
Income tax credit / (expense) (28) (17) (51) 5 3 (115)
------------------------ ------------------------------------- ------------
NET LOSS (127,219) (76,362) (72,902) (241,720) (145,090) (166,785)
------------------------ ------------------------------------- ------------
BASIC AND DILUTED LOSS PER ORDINARY SHARE 14 cents 8 pence 8 pence 26 cents 16 pence 18 pence
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements
2
<PAGE>
TELEWEST COMMUNICATIONS PLC
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------------
UNAUDITED UNAUDITED AUDITED
JUNE 30, JUNE 30, DECEMBER 31,
1998 1998 1997
$'000 (POUND)'000 (POUND)'000
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents 43,807 26,295 29,582
Trade receivables ( net of allowance for
doubtful accounts of(pound)7,464 in 1998 and(pound)6,507 71,885 43,148 36,627
in 1997)
Other receivables 47,725 28,647 26,207
Prepaid expenses 16,134 9,684 7,625
Investments in affiliates , accounted for under
the equity method, and related receivables 82,312 49,407 59,707
Other investments, at cost 42,760 25,666 25,666
Property and equipment ( less accumulated
depreciation of(pound)575,714 in 1998 and(pound)481,451 in
1997) 2,854,173 1,713,189 1,705,520
Goodwill (less accumulated amortization
of (pound)77,496 in 1998 and(pound)64,301 in 1997) 754,215 452,710 465,905
Other assets ( less accumulated amortization of
(pound)14,837 in 1998 and(pound)10,140 in 1997) 73,049 43,847 56,513
=================== ================== ==================
TOTAL ASSETS 3,986,060 2,392,593 2,413,352
=================== ================== ==================
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable 60,258 36,169 26,710
Other liabilities 292,158 175,365 198,664
Debt 2,513,154 1,508,496 1,373,054
Capital lease obligations 130,273 78,195 75,534
------------------- ------------------ ------------------
TOTAL LIABILITIES 2,995,843 1,798,225 1,673,962
------------------- ------------------ ------------------
MINORITY INTERESTS 1,180 708 640
------------------- ------------------ ------------------
SHAREHOLDERS' EQUITY
Convertible preference shares, 10 pence par value;
661,000,000 shares authorized, and 496,066,708
shares issued and outstanding 82,645 49,607 49,607
Ordinary shares, 10 pence par value;
2,010,000,000 shares authorized, and 927,567,600
shares issued and outstanding 154,533 92,757 92,757
Additional paid-in capital 2,220,590 1,332,887 1,332,887
Accumulated deficit (1,465,497) (879,650) (734,560)
------------------- ------------------ ------------------
992,271 595,601 740,691
Ordinary shares held in trust for the
Telewest Restricted Share Scheme (3,234) (1,941) (1,941)
------------------- ------------------ ------------------
TOTAL SHAREHOLDERS' EQUITY 989,037 593,660 738,750
------------------- ------------------ ------------------
=================== ================== ==================
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 3,986,060 2,392,593 2,413,352
=================== ================== ==================
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
3
<PAGE>
TELEWEST COMMUNICATIONS PLC
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
6 MONTHS 6 MONTHS 6 MONTHS
ENDED ENDED ENDED
JUNE 30, 1998 JUNE 30, 1998 JUNE 30, 1997
$'000 (POUND)'000 (POUND)'000
<S> <C> <C> <C>
CASH FLOWS BEFORE OPERATING ACTIVITIES
Net loss (241,720) (145,090) (166,785)
Adjustments to reconcile net loss to net cash
provided by / (used in ) operating activities :
Depreciation 156,736 94,079 76,358
Amortization of goodwill 21,983 13,195 13,202
Amortization of deferred financing costs
and issue discount on senior discount 71,761 43,074 37,178
debentures
Unrealized gain on foreign currency
Translation 2,161 1,297 24,061
Share of net losses of affiliates 18,448 11,073 10,323
Gain on disposal of assets (1,211) (727) (473)
Minority interests in profits 113 68 210
Change in operating assets and liabilities :
Change in receivables (8,963) (5,380) (117)
Change in prepaid expenses (3,430) (2,059) (1,089)
Change in accounts payable 18,356 11,018 (8,648)
Change in other liabilities (21,402) (12,845) (6,363)
------------------ ------------------ ------------------
NET CASH USED IN OPERATING ACTIVITIES 12,832 7,703 (22,143)
------------------ ------------------ ------------------
CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for property and equipment (183,767) (110,304) (207,504)
Additional investments in and loans
to affiliates (6,196) (3,719) (9,113)
Proceeds from disposals of assets 7,254 4,354 922
------------------ ------------------ ------------------
NET CASH USED IN INVESTING ACTIVITIES (182,709) (109,669) (215,695)
------------------ ------------------ ------------------
CASH FLOWS FROM FINANCING ACTIVITIES
Cash paid for credit facility arrangement costs (9,829) (5,900) -
Proceeds from borrowings 183,260 110,000 222,500
Repayment of borrowings (17) (10) -
Capital element of finance lease repayments (8,991) (5,397) (2,063)
------------------ ------------------ ------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 164,423 98,693 220,437
------------------ ------------------ ------------------
NET INCREASE IN CASH AND CASH EQUIVALENTS (5,454) (3,273) (17,401)
Effect of exchange rate changes on cash and
cash equivalents (23) (14) 17
---------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 49,284 29,582 79,116
---------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 43,807 26,295 61,732
===============================================================
</TABLE>
See accompanying notes to the unaudited condensed consolidated financial
statements.
4
<PAGE>
TELEWEST COMMUNICATIONS PLC
UNAUDITED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Convertible Ordinary Shares held Additional Accumulated Total
preference Shares in trust paid-in deficit
shares capital
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C> <C>
Balance as of December 31, 1997 49,607 92,757 (1,941) 1,332,887 (734,560) 738,750
Net loss for the year to date - - - - (145,090) (145,090)
--------------------------------------------------------------------------------------
Balance as of June 30, 1998 49,607 92,757 (1,941) 1,332,887 (879,650) 593,660
======================================================================================
</TABLE>
5
<PAGE>
TELEWEST COMMUNICATIONS PLC
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PREPARATION
The unaudited condensed consolidated financial statements of Telewest
Communications plc ("the Company") and its majority owned subsidiaries
(collectively, the "Telewest Group") have been prepared in accordance
with United States ("US") generally accepted accounting principles ("US
GAAP") and the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally
included in annual financial statements prepared in accordance with US
generally accepted accounting principles have been condensed or omitted
pursuant to those rules and regulations.
The economic environment in which the Company operates is the United
Kingdom ("UK") and hence its reporting currency is Pounds Sterling
("(pound)"). Merely for convenience, the unaudited condensed
consolidated financial statements contain translations of certain Pound
Sterling amounts into US Dollars at $1.666 per (pound)1.00, the 10:00AM
mid-point of the buying and selling rates of the Federal Reserve Bank
of New York on June 30, 1998, (the noon buying rate of the Federal
Reserve Bank of New York on such date was $1.6695 per (pound)1.00). The
presentation of the US Dollar amounts should not be construed as a
representation that the Pound Sterling amounts could be so converted
into US Dollars at the rate indicated or at any other rate.
2. RESPONSIBILITY FOR INTERIM FINANCIAL STATEMENTS
The condensed consolidated financial statements as of and for the
periods ended June 30, 1997 and 1998 are unaudited; however, in the
opinion of the management, such statements include all adjustments
(consisting only of normal recurring accruals) necessary for a fair
presentation of the results of operations for the interim periods
presented. The results of operations for any interim period are not
necessarily indicative of the results of the full year. The unaudited
condensed consolidated financial statements should be read in
conjunction with the audited consolidated financial statements and
notes thereto included in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997 filed with the Securities and Exchange
Commission (the "1997 Annual Report").
3. NEW ACCOUNTING STANDARDS APPLICABLE TO THE COMPANY
EARNINGS PER SHARE
As noted in the 1997 Annual Report, the Company adopted the provisions
of Statement of Financial Accounting Standards No. 128, ?Earnings per
Share?, effective December 3, 1997. This Statement required that all
prior-period earnings per share calculations including interim
financial statements be restated to conform to the provisions of this
statement. Basic and diluted loss per ordinary share is based on the
weighted average number of ordinary shares outstanding of 927,567,600
for the six month periods ended June 30, 1998 and 1997.
COMPREHENSIVE INCOME
The Company adopted SFAS No. 130 ?Reporting Comprehensive Income ? with
effect from January 1, 1998. Reclassification of financial statements
for earlier periods for comparative purposes was required. SFAS No. 130
establishes standards for the reporting and presentation of
comprehensive income in financial statements. Comprehensive income
encompasses all changes in shareholders' equity except those arising
from transactions with owners. There is no difference between
comprehensive loss and net loss for the six month periods ended June
30, 1998 and 1997.
6
<PAGE>
TELEWEST COMMUNICATIONS PLC
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging activities" which establishes standards of
accounting for these transactions. SFAS No. 133 is effective for the
Company beginning on July 1, 1999. The Company is currently assessing
the effects of SFAS No. 133 but does not expect this standard to have a
significant impact on the Company's financial condition or results of
operations.
4. ACCOUNTING POLICIES - FINANCIAL INSTRUMENTS
The Company uses foreign currency option contracts which permit, but do
not require, the Company to exchange foreign currencies at a future
date with another party at a contracted exchange rate. The Company also
enters into combined foreign currency and interest rate swap contracts
("Foreign Currency Swaps"). Such contracts are used to hedge against
adverse changes in foreign currency exchange rates associated with
certain obligations denominated in foreign currency.
The foreign currency option and the Foreign Currency Swaps are recorded
on the balance sheet in "other assets" or "other liabilities" at their
fair value at the reporting period, with changes in their fair value
during the reporting period being reported as part of the foreign
exchange gain or loss in the consolidated statement of operations. Such
gains and losses are offset against foreign exchange gains and losses
on the obligations denominated in foreign currencies which have been
hedged.
Interest rate swap agreements which are used to manage interest rate
risk on the Company's borrowings are accounted for using the accruals
method. Net income or expense resulting from the differential between
exchanging floating and fixed rate interest payments is recorded on an
accruals basis.
The Company (through a directly wholly owned subsidiary) entered into
certain delayed starting interest rate swap agreements in order to
manage interest rate risk on its senior secured facility. The Company
pays fixed rates of interest and receives floating rates on the
notional principal amount of the swaps. The swap agreements, which
commenced in 1997, originally have a five-year maturity and were at
rates of between 7.835% and 7.975%. The amount of the swaps adjusts
upwards on a semi-annual basis to a maximum of (pound)750 million. In
May 1998, the swaps were adjusted, extending the maturity date of
(pound)500 million by two years and amending the interest rates, so
that the rates are now between 7.175% and 7.91%. As at June 30, 1998,
the aggregate notional principal amount of the swaps was (pound)590
million, and the total drawn under the facility was (pound)602.5
million.
5. DEPRECIATION
In 1997, the treatment of activation costs was reviewed. With effect
from January 1, 1997, activation labour was reclassified from 'Cable
and Ducting' to 'Electronics' to be consistent with the classification
of activation materials, with activation labour now depreciated over 8
years rather than 20 years. The effect of this revision was accounted
for in the second half of 1997, however, had the revision been
accounted for with effect from the beginning of the first quarter of
1997, depreciation expense for the six months ended June 30, 1997 would
have increased by approximately (pound)5.2 million.
6. COMMITMENTS AND CONTINGENCIES
The Company is party to various legal proceedings in the ordinary
course of business which it does not believe will result, in aggregate,
in a material adverse effect on its financial position and its
operating results.
7
<PAGE>
TELEWEST COMMUNICATIONS PLC
NOTES TO THE UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
7. SUBSEQUENT EVENTS
Following the announcement of the proposed acquisition by NTL
Incorporated ("NTL") of Comcast UK Cable Partners Limited ("Comcast"),
the Company initiated the process governing the exercise of its
pre-emption rights in respect of Comcast's 27.45% interest in
Birmingham Cable Corporation Limited ("Birmingham Cable"). In addition,
the Company intends to initiate the process governing the exercise of
its pre-emption rights in respect of Comcast's 50% interest in Cable
London plc ("Cable London") if NTL's proposed acquisition of Comcast is
completed. The Company intends to acquire Comcast's interests in
Birmingham Cable and Cable London, subject to price and the
availability of finance.
The Company also has initiated the process pursuant to which it has
agreed to purchase General Cable's 44.95% interest in Birmingham Cable
for (pound)100 million, subject to the pre-emption rights of Comcast
and the other shareholders of Birmingham Cable to acquire their pro
rata portion of such interest. The Company intends to fund the purchase
of General Cable's interest in Birmingham Cable with the proceeds of
senior increasing rate notes to be issued by the Company (the
"Unsecured Notes") pursuant to the terms of a Securities Purchase
Agreement, dated June 26, 1998 (the "Securities Purchase Agreement")
entered into with an affiliate of a major investment bank (the "Bank").
The Securities Purchase Agreement provides for the Bank to purchase
Unsecured Notes in an amount up to the dollar equivalent of (pound)100
million. Subject to certain limitations set out in the Securities
Purchase Agreement, the commitment to purchase the Unsecured Notes
expires on the earlier of the occurrence of certain events and December
31, 1998. Interest is payable on the Unsecured Notes at a variable
floating rate based on LIBOR plus a spread. The initial maturity date
for the Unsecured Notes is December 31, 1998, but this date may in
certain circumstances be extended to the date falling 364 days after
the issuance of the Unsecured Notes. The Company believes it will be
able to satisfy the funding conditions in relation to the Unsecured
Notes, as and when needed, and to repay the Unsecured Notes when due,
although there can be no assurance that it will be able to do so.
Representatives of the Company, NTL and Comcast are engaged in
discussions with respect to a possible resolution of certain disputes
regarding the Company's proposed acquisition of General Cable but there
can be no assurance that any agreement will be reached, what the terms
of any such agreement may be (including the impact, if any, on the
Company's rights to acquire Comcast's interest in Birmingham Cable and
Cable London and General Cable's interest in Birmingham Cable) or what
the consequences of a failure to so agree could be.
On April 15, 1998, the Company and General Cable announced that they
had agreed the terms of a merger (the "Merger") to be achieved by way
of a recommended offer by the Company for General Cable shares. On June
28, 1998, the Company commenced the offer, which is subject to, among
other things, shareholder approval of certain matters relating to the
Merger (such approval was given at an Extraordinary General Meeting
held on July 28, 1998).
On April 15, 1998, the Company announced the resignation of Stephen
Davidson as Chief Executive and a Director of the Company and the
appointment of David Van Valkenburg as the Interim Chief Executive
Officer and Gary Ames as the Chairman of the Board. The Company also
announced the resignation of Fred Vierra and Lord Griffiths as
Directors of the Company and the appointment of Stephen Brett as a
TINTA nominated Director to replace Mr. Vierra.
8
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The financial information contained in this Report on Form 10-Q is prepared in
accordance with US GAAP. In accordance with UK securities regulations, the
Company also prepares consolidated financial statements in accordance with UK
generally accepted accounting principles ("UK GAAP"). The UK GAAP consolidated
financial statements for the period covered by this Report are contained in
Exhibit 99 to this Report.
The following discussion and analysis of financial condition and results of
operations should be read in conjunction with the financial review contained in
the 1997 Annual Report. Unless otherwise indicated, the following does not give
effect to the proposed Merger.
SAFE HARBOR STATEMENT UNDER THE US PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995: The discussion and analysis below includes certain forward looking
statements that involve risks and uncertainties that could lead to actual
results that are significantly different from those anticipated by the Company.
These risks and uncertainties relate to, among other things, the ability of the
Telewest Group to successfully integrate General Cable and its subsidiary
undertakings (the "General Cable Group") and achieve the anticipated synergies;
the extent consumer preference develops for cable television over other methods
of providing in-home entertainment and for the Telewest Group (and, in the event
of the Merger is completed, the General Cable Group (collectively the "Combined
Group")) as a viable alternative to British Telecommunications plc ("BT") and
others as a provider of telephony service; the ability of the Telewest Group
(and, in the event of the Merger is completed, the Combined Group) to penetrate
markets and respond to changes or increases in competition (including the
introduction of digital services by British Sky Broadcasting plc ("BskyB") or
other operators and digital terrestrial services by British Digital Broadcasting
plc ("BDB")), and adverse changes in government regulation; the ability of the
Telewest Group (and, in the event of the Merger is completed, the Combined
Group) to manage growth and expansion; the ability of the Telewest Group (and,
in the event of the Merger is completed, the Combined Group) to improve
operating efficiencies (including through cost reductions); the ability of the
Combined Group to construct its network in a cost-efficient and timely manner;
the ability of the Telewest Group (and, in the event of the Merger is completed,
the Combined Group) to raise additional financing if there is a material adverse
change in the Telewest Group's (and, in the event of the Merger is completed,
the Combined Group's) anticipated revenues or expenses or to finance new
initiatives; the extent to which programming is available at reasonable costs;
adverse changes in the pricing of telephony interconnection; disruptions in
supply of services and equipment; the ability of Telewest to exercise its
pre-emption rights with respect to Birmingham Cable and Cable London and the
timing of such exercise; Telewest's ability to finance the acquisition of
Comcast's interests in Birmingham Cable and Cable London; and the performance of
affiliated companies (which are not controlled by the Telewest Group (and in the
event the Merger is completed, the Combined Group).
SUMMARY OF OPERATIONS (SIX MONTH PERIOD ENDED JUNE 30, 1997 AND 1998)
The Company's consolidated revenue increased by (pound)24.4 million or 26.8%
from (pound)91.1 million in the three month period ended June 30, 1997 to
(pound)115.5 million in the three month period ended June 30, 1998 and by
(pound)44.4 million or 24.5% from (pound)181.4 million in the six month period
ended June 30, 1997 to (pound)225.9 million in the six month period ended June
30, 1998 due to the larger customer base created by the Company's continuing
network construction and growing penetration of its existing customer base in
residential and business services.
CABLE TELEVISION REVENUE
Cable television revenue increased by (pound)5.8 million or 15.1% from
(pound)38.7 million in the three months ended June 30, 1997 to (pound)44.6
million in the three months ended June 30, 1998 and by (pound)11.9 million or
15.5% from (pound)76.8 million in the six months ended June 30, 1997 to
(pound)88.8 million in the six months ended June 30, 1998. The increase was
primarily attributable to a 14.5% increase (from 550,311 to 630,147) and a 14.4%
increase (from 542,015 to 620,311) in the average number of customers in the
three and six month periods ended June 30, 1998, respectively, compared to the
corresponding periods in 1997. The increase in the average number of customers
results from an increase in the number of homes passed and marketed from
2,542,992 at June 30, 1997 to 2,822,556 at June 30, 1998 and from improved
penetration.
9
<PAGE>
Penetration improved from 22.1% at March 31, 1998 to 22.8% at June 30, 1998
compared to a slight decrease from 22.2% as at March 31, 1997 to 22.0% as at
June 30, 1997.Penetration increased from 22.0% as at December 31, 1997 to 22.8%
as at June 30, 1998 compared to a reduction from 22.6% as at December 31, 1996
to 22.0% as at June 30, 1997. The increase in penetration resulted primarily
from improved remarket performance and the rollout of more attractive packages .
Churn decreased from 32.9% in the three month period ended June 30, 1997 to
28.8% in the three month period ended June 30, 1998 and increased from 32.2% in
the twelve-month period ended June 30, 1997 to 33.7% in the twelve month period
ended June 30, 1998.This increase in churn was due in part to customer service
related problems resulting from the Company's restructure and redundancy program
and the cable television price increases implemented from November 1,1997.
Average monthly revenue per cable television customer decreased slightly from
(pound)23.18 in the three month period ended June 30, 1997 to (pound)23.11 in
the three month period ended June 30, 1998 and increased slightly from
(pound)23.37 in the six month period ended June 30, 1997 to (pound)23.40 in the
six month period ended June 30, 1998 due to the expansion of pay per view
events, a decrease in promotional discounts offered by the Company and price
increases implemented from November 1, 1997.
TELEPHONY REVENUE
Telephony revenue increased by (pound)16.3 million or 33.4% from (pound)48.8
million in the three month period ended June 30, 1997 to (pound)65.1 million in
the three month period ended June 30,1998 and by (pound)29.2 million or 29.9%
from (pound)97.8 million in the six month period ended June 30, 1997 to
(pound)127.0 million in the six month period ended June 30,1998.
Residential telephony revenue increased by (pound)12.3 million or 32.2% from
(pound)38.2 million in the three month period ended June 30, 1997 to (pound)50.5
million in the three month period ended June 30,1998 and increased by
(pound)21.1 million or 27.1% from (pound)77.8 million in the six month period
ended June 30, 1997 to (pound)98.9 million in the six month period ended June
30,1998. Business telephony revenue increased by (pound)4.0 million or 37.6%
from (pound)10.6 million in the three month period ended June 30, 1997 to
(pound)14.6 million in the three month period ended June 30, 1998 and increased
by (pound)8.2 million or 41.2% from (pound)19.9 million in the six month period
ended June 30, 1997 to (pound)28.1 million in the six month period ended June
30, 1998.
The increase in residential telephony revenue in the three and six month periods
ended June 30, 1998 compared to the corresponding periods ended June 30, 1997
was primarily due to a 24.2% increase (from 708,569 to 880,075) and a 27.2%
increase (from 679,789 to 864,723), respectively, in the average number of
residential lines, combined with a 7.6% increase in the average monthly revenue
per residential line from (pound)17.97 in the three month period ended June 30,
1997 to (pound)19.33 in the three month period ended June 30, 1998 and a 0.7%
increase from (pound)19.09 in the six month period ended June 30, 1997 to
(pound)19.22 in the six month period ended June 30, 1998. The increase in the
average number of residential lines results primarily from an increase in the
number of homes passed and marketed (from 2,496,754 at June 30, 1997 to
2,790,224 at June 30, 1998) and from increased penetration. The increase in the
average monthly revenue per line was attributable to higher line rentals,
increased call volumes and sales of value added services such as call waiting
and voice messaging, which were partly offset by price reductions in per minute
call charges in response to price cutting by BT, the Company's main competitor
in residential telephony. The Company intends to continue reducing per minute
call tariffs and expects the revenue impact of these reductions to be offset in
part through higher line rentals, increased call volumes and sales of value
added services.
Residential telephony penetration increased from 30.1% at March 31, 1998 to
30.6% at June 30, 1998 and increased from 28.2% at March 31, 1997 to 28.9% at
June 30, 1997. Penetration increased from 29.7% at December 31, 1997 to 30.6% at
June 30, 1998 and from 27.5% at December 31, 1996 to 28.9% at June 30, 1997.
Churn increased from 19.1% in the three months ended June 30, 1997 to 21.7% in
the three months ended June 30, 1998 and from 19.20% in the twelve-month period
ended June 30, 1997 to 21.1% in the twelve months ended June 30, 1998. The
increase in churn was due in part to customer service related problems resulting
from the Company's restructure and redundancy program.
The increase in business telephony revenue in the three and six month periods
ended June 30, 1998 compared to the corresponding periods ended June 30, 1997
was primarily attributable to a 44.3% increase (from 78,559 to 113,397) and to a
46.0% increase (from 74,740 to 109,153) in the average number of business
10
<PAGE>
telephony lines in the three and six month periods, respectively, ended June 30,
1998. The increase in business telephony revenue in the three month period ended
June 30, 1998 was also the result of a 1.1% increase in the average monthly
revenue per business line from (pound)45.60 in the three month period ended June
30, 1997 to (pound)46.09 in the three month period ended June 30, 1998. The
increase in business telephony revenue in the six month period ended June 30,
1998 was partially offset by a 0.3% decrease in the average monthly revenue per
business line from (pound)44.67 in the six month period ended June 30, 1997 to
(pound)44.55 in the six month period ended June 30, 1998. The increase in the
average number of business telephony lines was attributable to a 17.6% increase
in the number of business premises passed and marketed (from 113,519 at June 30,
1997 to 133,459 at June 30, 1998) and to an increased focus on marketing
services to larger businesses which generally purchase more lines. The decrease
in the average monthly revenue per line for the six month period was mainly
attributable to price reductions in per minute call charges and increased volume
discounts, together with increased sales of Centrex, a business
telecommunications product which provides more lines to customers but which has
a lower average monthly revenue per line.
Other revenue increased by 64.5% from (pound)3.5 million in the three month
period ended June 30, 1997 to (pound)5.8 million in the three month period ended
June 30, 1998 and by 47.4% from (pound)6.8 million in the six month period ended
June 30, 1997 to (pound)10.1 million in the six month period ended June 30, 1998
and is derived primarily from management services provided to affiliated
companies, internet sales, cable publications and network management services
provided to other operators, and advertising sales.
OPERATING COSTS AND EXPENSES
The Company's consolidated operating costs and expenses (which include direct
costs of programming and interconnection; selling, general and administrative
expenses; depreciation expense and amortization expense) increased by 10.5% from
(pound)127.5 million in the three month period ended June 30, 1997 to
(pound)140.9 million in the three month period ended June 30, 1998 and increased
by 9.5% from (pound)254.6 million in the six month period ended June 30, 1997 to
(pound)278.9 million in the six month period ended June 30, 1998.
Programming fees are the largest component of the Company's operating costs in
providing cable television services. The Company obtains most of its programming
under contracts which provide for payments based upon the number of subscribers.
As a percentage of cable television revenues, programming costs decreased from
60% and 61%, respectively, in the three and six month periods ended June 30,
1997 to 50.8% and 54.0%, respectively, in the three and six month periods ended
June 30, 1998 resulting from the negotiation of more favourable contract terms
and a growing redistribution to higher margin packages.
Interconnection charges are the largest component of the Company's telephony
operating costs in providing telephony services. As a percentage of telephony
revenue, telephony operating costs decreased from 27% and 28%, respectively, in
the three and six month periods ended June 30, 1997 to 26.3% and 24.7%,
respectively, in the three and six month periods ended June 30, 1998.
Interconnection charges in 1998 were reduced by the continuing reduction in
interconnection charges in the UK telephony market, a growing percentage of
interconnection charges handled within the Telewest network and in quarter one
by credits relating to interconnection charges from earlier periods, which have
been recalculated based on the final agreed rates applicable for that period.
Selling, general and administrative expenses, which include, among other items,
salary and marketing costs, decreased as a percentage of revenue from 50% in the
three and six month periods ended June 30, 1997 to 40.9% for both the
corresponding periods in 1998. The improvement is largely due to the rapid
growth in revenues and continued reduction in support costs per customer as the
Company benefits from the economies of scales resulting from its enlarged
operations. Total labor and overhead costs capitalized in the three and six
month period ended June 30, 1998 were (pound)15.3 million and (pound)37.8
million, respectively, compared to (pound)20.8 million and (pound)40.3 million,
respectively, for the corresponding periods in 1997. The Company expects that
its selling, general and administrative expenses will continue to decline as a
percentage of revenue, as revenues increase and the efficiency gains from its
fixed cost base are increasingly exploited, and the full year benefits of a
restructuring and redundancy program, completed at the end of 1997, take effect.
11
<PAGE>
Depreciation expense increased 21.7% from (pound)38.9 million in the three month
period ended June 30, 1997 to (pound)47.4 million in the three month period
ended June 30, 1998 and increased 23.2% from (pound)76.4 million in the six
month period ended June 31, 1997 to (pound)94.1 million in the six month period
ended June 30, 1998. With effect from January 1, 1997, activation labour was
reclassified from 'Cable and Ducting' to 'Electronics' to be consistent with the
classification of activation materials, with activation labour now depreciated
over 8 years rather than 20 years. Although the effect of this revision was
accounted for in the second half of 1997, had the revision been accounted for
with effect from the beginning of the first quarter of 1997, depreciation
expense for the three months ended March 31, 1997 would have increased by
approximately (pound)5.2 million.
Amortization expense remained stable at (pound)6.6 million in both the three
month periods ended June 30, 1997 and 1998 and (pound)13.2 million in both the
six month periods ended June 30, 1997 and 1998.
OTHER INCOME/(EXPENSE)
The Company's share of the net losses of its affiliated companies accounted for
under the equity method, principally Birmingham Cable and Cable London, was
(pound)5.3 million and (pound)4.4 million for the three month periods ended June
30, 1997 and 1998, respectively, and (pound)10.3 million and (pound)11.1 million
for the six month periods ended June 30, 1997 and 1998, respectively.
Financial expenses, net, consist primarily of interest expense of (pound)39.7
million and (pound)82.4 million for the three and six month periods ended June
30, 1998, respectively, ((pound)32.9 million and (pound)63.2 million for the
corresponding periods in 1997) and foreign exchange losses of (pound)8.0 million
and (pound)1.4 million for the three and six month periods ended June 30, 1998,
respectively, ((pound)0.2 million and (pound)24.3 million for the three and six
month periods ended June 30, 1997) offset in part by interest income earned on
short-term investments and loans to affiliated companies of (pound)1.0 million
and (pound)2.1 million for the three and six month periods ended June 30, 1998,
respectively, ((pound)1.7 million and (pound)4.1 million for the corresponding
periods in 1997). Interest expense increased by (pound)6.7 million and
(pound)19.2 million in the three and six month periods ended June 30, 1998,
respectively, primarily as a result of the interest expense on higher
outstanding borrowings relating to the Senior Secured Facility entered into in
May 1996 and higher accrued interest expense on the Senior Discount Debentures
(as defined below) issued by the Company in October 1995. The foreign exchange
gains and losses arise principally from the re-translation of the US Dollar
denominated debentures to Pounds Sterling using the June 30, 1998 exchange rate
and marking the associated hedging instruments to their market value at June 30,
1998. It is the Company's policy to hedge non-Sterling denominated borrowings to
reduce or eliminate exchange rate exposure.
LIQUIDITY AND CAPITAL RESOURCES
On May 22, 1996 the Company entered into a (pound)1.2 billion senior secured
credit facility with a syndicate of banks (the "Senior Secured Facility"). The
Senior Secured Facility is being used to finance the capital expenditure,
working capital requirements and other permitted related activities for the
construction and operation of the wholly owned telephony and television
franchises of the Company; to fund the payment of cash interest on the Senior
Debentures and Senior Discount Debentures; to fund the repayment of existing
secured borrowings of the Company in respect of the London South and South West
Regional Franchise Areas; to fund loans to or investments in affiliated
companies; to fund the acquisition and subsequent construction of local delivery
operators/franchises; and to refinance advances and the payment of interest,
fees and expenses in respect of the Senior Secured Facility.
In connection with the restructuring of the group's activities, including the
slow down of construction activity, the terms of the Senior Secured Facility
were amended in the first quarter of 1998. The amount of the Senior Secured
Facility has been reduced to (pound)1.0 billion and the Company has entered into
a second secured facility ( the "Second Secured Facility") of (pound)100 million
with certain of the banks that are party to the Senior Secured Facility. In
addition, certain changes were made to the financial covenants to accommodate
the Company's anticipated cashflows. The repayment dates for tranche A were
accelerated by three months as discussed below.
The Senior Secured Facility is divided into two tranches, the first ("tranche
A") is available on a revolving basis for up to (pound)300 million, reduced to
(pound)100 million by March 31, 1998, with full repayment by September 30, 1998.
12
<PAGE>
The second tranche ("tranche B") is available on a revolving basis concurrently
with tranche A for an amount up to 6.5 times the trailing, rolling six month
annualized consolidated net operating cash flow, gradually reducing throughout
the period of the facility to 4 times by January 1, 2000. Thereafter, the amount
outstanding under the facility converts to a term loan amortizing over 5 years.
The aggregate drawing at any time under both tranches cannot exceed (pound)1.0
billion. Borrowings under the Senior Secured Facility are secured by assets,
including the partnership interests and shares of subsidiaries of the Company,
and bear interest at 2.25% above LIBOR for tranche A and between 0.5% and 1.875%
above LIBOR (depending on the ratio of borrowings to the trailing, rolling six
month annualized consolidated net operating cash flow) for tranche B. The
Company's ability to borrow under the Senior Secured Facility is subject to,
among other things, its compliance with the financial and other covenants and
borrowing conditions contained therein, and the failure to comply with such
covenants could result in all such amounts outstanding under the facility
becoming due and payable. At June 30, 1998, there were no drawings under tranche
A and (pound)602.5 million was drawn down under tranche B.
The Second Secured Facility is available from July 1, 1999 to June 30, 2001.
Advances under the Second Secured Facility may be drawn only if the Senior
Secured Facility has been drawn down to the fullest extent possible at the
relevant time. The Second Secured Facility is available on a revolving basis to
provide an aggregate under the Senior Secured Facility and the Second Secured
Facility of up to 6 times the trailing, rolling six month annualized
consolidated net operating cash flow through December 31, 1999, gradually
reducing thereafter throughout the period of the facility to 4.5 times by
January 1, 2001. On June 30, 2001, the amount outstanding under the Second
Secured Facility converts to a term loan amortizing over 5 years. Borrowings
under the Second Secured Facility bear interest at a rate equal to LIBOR plus a
margin that increases during the period of the facility from 3.5% per annum
through December 31, 1999, 4.5% per annum from December 31, 1999 through June
30, 2000 and to 5.5% per annum from June 30, 2000 to June 30, 2006. The
provisions as to prepayment, covenants and events of default in respect of the
Second Secured Facility are substantially similar to those for the Senior
Secured Facility.
The Company has entered into certain delayed-starting interest rate swap
agreements in order to manage interest rate risk on the Senior Secured Facility.
The Company pays fixed rates of interest and receives floating rates on the
notional principal amount of the swaps. The swap agreements, which commenced in
1997, originally have a five-year maturity and were at rates of between 7.835%
and 7.975%. The amount of the swaps adjusts upwards on a semi-annual basis to a
maximum of (pound)750 million. In May 1998, the swaps portfolio was adjusted,
extending the maturity date of (pound)500 million by 2 years and amending the
interest rates to a range of between 7.175% and 7.910%. As at June 30, 1998, the
aggregate notional principal amount of the swaps was (pound)590 million and the
total drawn under the Senior Secured Facility was (pound)602.5 million.
On October 3, 1995, the Company raised (pound)734 million through the issue of
$300 million principal amount of 9 5/8% Senior Debentures due 2006 (the "Senior
Debentures") and $1,536 million principal amount at maturity of 11% Senior
Discount Debentures due 2007 (the "Senior Discount Debentures"). Interest on the
Senior Debentures is payable semi-annually and commenced on April 1, 1996.
Interest on the Senior Discount Debentures will be payable semi-annually
commencing on April 1, 2001. The proceeds of the issue were used by the Company
to fund general working capital, capital expenditures, additional investments in
affiliated companies, to repay a credit facility entered into by a direct wholly
owned subsidiary and to purchase the currency hedge arrangements described
below.
The Company's hedge instruments relating to the debentures are a combined
foreign currency and interest rate swap ("Foreign Currency Swap") and a foreign
currency option. The Foreign Currency Swap fully hedges against adverse exchange
rate fluctuations on the principal amount of the Senior Debentures and the
associated interest payments. The foreign currency option provides protection
against exchange rate fluctuations on the Senior Discount Debentures below a
rate of $1.452 : (pound)1 and allows the Company to benefit from positive
exchange rate movements. Both hedging instruments provide protection up to
October 1, 2000, the early redemption date of the Senior Debentures and the
Senior Discount Debentures.
The Company's results may be materially influenced by future exchange rate
movements due to the requirement that the hedge instruments are marked to their
market value at the end of the financial period and the US Dollar denominated
debentures are re-translated to Pounds Sterling using the period end exchange
rate.
13
<PAGE>
The Company had a net cash inflow from operating activities of (pound)7.7
million in the six month period ended June 30, 1998 compared with a net cash
outflow of (pound)22.1 million in the six month period ended June 30, 1997. The
Company incurred a net cash outflow from investing activities of (pound)215.7
million and (pound)109.7 million in the six month periods ended June 30, 1997
and 1998, respectively. The Company's principal investing activities continue to
be the construction of the network and installation activity, albeit at a
reduced rate and the provision of funding to its affiliated companies.
Cash provided by financing activities amounted to 220.4 million and (pound)98.7
million in the six month periods ended June 30, 1997 and 1998, respectively.
Cash provided by financing activities principally related to the drawdown of
(pound)222.5 million under the Senior Secured Facility in the six month period
ended June 30, 1997 and to the drawdown of (pound)110.0 million under the Senior
Secured Facility in the six month period ended June 30, 1998.
At June 30, 1998, the construction of the Company's broadband network had passed
approximately 76.0% of the homes in its owned and operated franchise areas
compared to 70% of homes in its owned and operated franchises at June 30, 1997.
Total capital expenditure in the six month period ended June 30, 1998 was
(pound)115.8 million, substantially lower than in the six month period ended
June 30, 1997 ((pound)232.0 million), due to the Company reducing the pace of
its network construction and expenditure on discretionary capital projects.
The Company is obligated under the terms of its telecommunications licences to
construct its network to pass a specified number of premises by prescribed
dates. If such milestones are not met, the Company may be subject to enforcement
action from regulatory authorities which, if not complied with, could result in
revocation of the Company's telecommunications licences. As a consequence of its
intention to reduce the pace of its network construction, the Company has
negotiated with the Director General appropriate modifications to its current
milestone obligations and formal amendments to its licences were made in May
1998.
Cash and deposit balances at June 30, 1998 were (pound)26.3 million.
The Company currently expects that the anticipated funding requirements (after
taking into account current cash and deposit balances and anticipated revenues)
required to substantially complete the construction of the owned and operated
network, to fund the Company's operations, to upgrade older portions of the
network and to pay interest on the Company's debt will be provided by the Senior
Secured Facility and the Second Secured Facility. There can be no assurance that
the Company will not elect to use alternative funding sources or that the
Company's actual funding requirements will be in line with expectations.
Following the announcement of the proposed acquisition by NTL of Comcast, the
Company initiated the process governing the exercise of its pre-emption rights
in respect of Comcast's 27.45% interest in Birmingham Cable. In addition, the
Company intends to initiate the process governing the exercise of its
pre-emption rights in respect of Comcast's 50% interest in Cable London if NTL's
proposed acquisition of Comcast is completed. The Company intends to acquire
Comcast's interests in Birmingham Cable and Cable London, subject to price and
the availability of finance.
The Company also has initiated the process pursuant to which it has agreed to
purchase General Cable's 44.95% interest in Birmingham Cable for (pound)100
million, subject to the pre-emption rights of Comcast and the other shareholders
of Birmingham Cable to acquire their pro rata portion of such interest. The
Company intends to fund the purchase of General Cable's interest in Birmingham
Cable with the proceeds of the Unsecured Notes to be issued by the Company
pursuant to the terms of the Securities Purchase Agreement entered into with the
Bank. The Securities Purchase Agreement provides for the Bank to purchase
Unsecured Notes in an amount up to the dollar equivalent of (pound)100 million.
Subject to certain limitations set out in the Securities Purchase Agreement, the
commitment to purchase the Unsecured Notes expires on the earlier of the
occurrence of certain events and December 31, 1998. Interest is payable on the
Unsecured Notes at a variable floating rate based on LIBOR plus a spread. The
initial maturity date for the Unsecured Notes is December 31, 1998, but this
date may in certain circumstances be extended to the date falling 364 days after
the issuance of the Unsecured Notes. The Company believes it will be able to
satisfy the funding conditions in relation to the Unsecured Notes, as and when
needed, and to repay the Unsecured Notes when due, although there can be no
assurance that it will be able to do so.
14
<PAGE>
Representatives of the Company, NTL and Comcast are engaged in discussions with
respect to a possible resolution of certain disputes regarding the Company's
proposed acquisition of General Cable but there can be no assurance that any
agreement will be reached, what the terms of any such agreement may be
(including the impact, if any, on the Company's rights to acquire Comcast's
interest in Birmingham Cable and Cable London and General Cable's interest in
Birmingham Cable) or what the consequences of a failure to so agree could be.
On April 15, 1998, the Company and General Cable announced that they had agreed
the terms of the Merger to be achieved by way of a recommended offer by the
Company for General Cable shares. On June 28, 1998, the Company commenced the
offer, which is subject to, among other things, shareholder approval of certain
matters relating to the Merger (such approval was given at an Extraordinary
General Meeting held on July 28, 1998).
On April 15, 1998, the Company announced the resignation of Stephen Davidson as
Chief Executive and a Director of the Company and the appointment of David Van
Valkenburg as the Interim Chief Executive Officer and Gary Ames as the Chairman
of the Board. The Company also announced the resignation of Fred Vierra and Lord
Griffiths as Directors of the Company and the appointment of Stephen Brett as a
TINTA nominated Director to replace Mr. Vierra.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
15
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
None.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company's 1998 Annual General Meeting was held on May 8,1998. At the Annual
General Meeting, each of the following resolutions was approved, in accordance
with the Company's Articles of Association, by a show of hands of those
shareholders (or persons holding proxies) voting in person at the Annual General
Meeting:
Resolution 1. Adoption of the Directors' Report and Accounts of the
Company for the year ended December 31, 1997
Resolutions 2-12* Appointment of the following Directors:
Stephen M. Brett
Anthony W.P. Stenham
A. Gary Ames
Robert W. Shaner
Lord Borrie QC
Charles J. Burdick
David R. Van Valkenburg
James O. Robbins
David J. Evans
Resolution 13 Granting authority to the Directors to allot shares up to an
aggregate nominal value of(pound)30,918,920, with such
authority to expire (unless previously renewed, varied or
revoked by the Company in a general meeting) on the earlier
of August 7, 1999 or the conclusion of the 1999 Annual
General Meeting.
Resolution 14 Granting authority to the Directors to allot shares up to an
aggregate nominal value of(pound)4,637,838 for cash without
first offering such shares pro rata to existing shareholders
as otherwise required by the Companies Act 1985, with such
authority to expire on the earlier of August 7, 1999 or the
conclusion of the 1999 Annual General Meeting.
Resolution 15 Appointment of KPMG Audit plc, as auditors, to serve from
the conclusion of the 1998 Annual General Meeting until the
1999 Annual General Meeting and authorization for the Board
of Directors of the Company to fix the remuneration of the
auditors.
Resolution 16 Granting authority to the Directors to make market purchases
of up to 46,378,380 of its share on the London Stock
Exchange at a minimum price per share (exclusive of
expenses) of 10p and a maximum price per share (exclusive of
expenses) up to an amount equal to 105% of the average of
the middle market quotations per share as derived from the
London Stock Exchange Daily Official List for the five
16
<PAGE>
business days before the day on which the purchase is made,
with such authority to expire (unless previously renewed,
varied or revoked by the Company in a general meeting) on
earlier of August 7, 1999 or the conclusion of the 1999
Annual General Meeting.
* After the Proxy Statement in respect of the Company's 1998 Annual General
Meeting was mailed to the shareholders (proposing that Fred Vierra, Stephen
Davidson and Lord Griffiths (each then a Director of the Company) be reappointed
to serve as a Director), but before the date of such meeting, Messrs. Vierra,
Davidson and Griffiths resigned as Directors and Stephen Brett was appointed to
replace Mr. Vierra as a Director. Mr Brett was then proposed at the Annual
General Meeting to be reappointed in place of Mr. Vierra.
At the Annual General meeting, in accordance with the Company's
Articles of Association and UK practice, there was not a tabulation of the exact
number of votes cast (in person or by proxy) for, against or withheld with
respect to any resolution, or the number of abstentions and brokers non-votes as
to each such resolution.
ITEM 5. OTHER INFORMATION.
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a. Exhibits
2.1 Agreement relating to the Merger of General Cable and
the Company, dated March 29, 1998, among the Company,
General Cable, Compagnie Generale des Eaux S.A. and
GUHL. (Incorporated by reference to the Company's
Registration Statement on Form S-3 filed with the
Securities and Exchange Commission on April 15,
1998).
10.51 Subscription Agreement, dated April 15, 1998, by and
among TINTA, U S WEST, Cox and the Company.
(Incorporated by reference to the Company's Schedule
13D filed with the Securities and Exchange Commission
on April 20, 1998).
10.52 Letter, dated April 15, 1998, from the Company to
General Cable PLC. (Incorporated by reference to the
Company's Schedule 13D filed with the Securities and
Exchange Commission on April 20, 1998).
10.53 Letter, dated April 15, 1998, from CGE and General
Utilities to the Company. (Incorporated by reference
to the Company's Schedule 13D filed with the
Securities and Exchange Commission on April 20,
1998).
10.54 Letter, dated April 14, 1998, from TCI, U S WEST, Cox
and SBC to the Company. (Incorporated by reference to
the Company's Schedule 13D filed with the Securities
and Exchange Commission on April 20, 1998).
10.55 Form of Amended and Restated Relationship Agreement,
dated as of _____, 1998, by and among the Company,
the MediaOne Affiliates, TINTA, the TINTA Affiliate,
Cox, the Cox Affiliate, SBC International, Inc. and
the SBC Affiliate. (Incorporated by reference to the
Company's Registration Statement on Form S-3 filed
with the Securities and Exchange Commission on June
29, 1998).
10.56 Form of Amendment No. 1 to the Registration Rights
Agreement, dated _______, 1998, by and among the
Company, the TINTA Affiliate, the MediaOne
Affiliates, the SBC Affiliate, Southwestern Bell
International Holdings (UK-2) Corporation, the Cox
Affiliate, GUHL and Vivendi. (Incorporated by
reference to the Company's Registration Statement on
Form S-3 filed with the Securities and Exchange
Commission on June 29, 1998).
27 Telewest Communications plc financial data schedule.
17
<PAGE>
99.1 Telewest Communications plc Press Release issued on
August 6, 1998 with respect to the results of
operations of the Company for the six month period
ended June 30, 1998 (including unaudited
consolidated financial statements prepared in
accordance with UK GAAP).
b. Reports on Form 8-K
None.
18
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
TELEWEST COMMUNICATIONS PLC
By: /S/ CHARLES J. BURDICK
------------------------------------
Name: Charles J. Burdick
Title: Group Finance Director
(duly authorized signatory
and principal financial officer)
August 13, 1998
19
<PAGE>
EXHIBITS
EXHIBIT
2.1 Agreement relating to the Merger of General Cable and the Company,
dated March 29, 1998, among the Company, General Cable, Compagnie
Generale des Eaux S.A. and GUHL. (Incorporated by reference to the
Company's Registration Statement on Form S-3 filed with the Securities
and Exchange Commission on April 15, 1998).
10.51 Subscription Agreement, dated April 15, 1998, by and among TINTA, U S
WEST, Cox and the Company. (Incorporated by reference to the Company's
Schedule 13D filed with the Securities and Exchange Commission on April
20, 1998).
10.52 Letter, dated April 15, 1998, from the Company to General Cable PLC.
(Incorporated by reference to the Company's Schedule 13D filed with the
Securities and Exchange Commission on April 20, 1998).
10.53 Letter, dated April 15, 1998, from CGE and General Utilities to the
Company. (Incorporated by reference to the Company's Schedule 13D filed
with the Securities and Exchange Commission on April 20, 1998).
10.54 Letter, dated April 14, 1998, from TCI, U S WEST, Cox and SBC to the
Company. (Incorporated by reference to the Company's Schedule 13D filed
with the Securities and Exchange Commission on April 20, 1998).
10.55 Form of Amended and Restated Relationship Agreement, dated as of _____,
1998, by and among the Company, the MediaOne Affiliates, TINTA, the
TINTA Affiliate, Cox, the Cox Affiliate, SBC International, Inc. and
the SBC Affiliate. (Incorporated by reference to the Company's
Registration Statement on Form S-3 filed with the Securities and
Exchange Commission on June 29, 1998).
10.56 Form of Amendment No. 1 to the Registration Rights Agreement, dated
_______, 1998, by and among the Company, the TINTA Affiliate, the
MediaOne Affiliates, the SBC Affiliate, Southwestern Bell International
Holdings (UK-2) Corporation, the Cox Affiliate, GUHL and Vivendi.
(Incorporated by reference to the Company's Registration Statement on
Form S-3 filed with the Securities and Exchange Commission on June 29,
1998).
27 Telewest Communications plc financial data schedule.
99.1 Telewest Communications plc Press Release issued on August 6, 1998 with
respect to the results of operations of the Company for the six month
period ended June 30, 1998 (including unaudited consolidated financial
statements prepared in accordance with UK GAAP).
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE BODY OF THE ACCOMPANYING 10-Q AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> POUNDS STERLING
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1998
<EXCHANGE-RATE> 1.666
<CASH> 26,295
<SECURITIES> 0
<RECEIVABLES> 71,795
<ALLOWANCES> 7,464
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 2,288,903
<DEPRECIATION> 575,714
<TOTAL-ASSETS> 2,392,593
<CURRENT-LIABILITIES> 0
<BONDS> (1,508,496)
0
(49,607)
<COMMON> (92,757)
<OTHER-SE> (451,296)
<TOTAL-LIABILITY-AND-EQUITY> (2,392,593)
<SALES> 0
<TOTAL-REVENUES> 225,877
<CGS> 0
<TOTAL-COSTS> 79,238
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 82,388
<INCOME-PRETAX> (145,093)
<INCOME-TAX> 3
<INCOME-CONTINUING> (145,090)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (145,090)
<EPS-PRIMARY> 0.16
<EPS-DILUTED> 0.16
</TABLE>
EXHIBIT 99.1
FOR IMMEDIATE RELEASE 6TH AUGUST 1998
TELEWEST COMMUNICATIONS PLC
INTERIM RESULTS 1998
EBITDA (POUND)54.3M +231.4%
REVENUE (POUND)225.9M +24.5%
CATV MARGIN 46.0% +6.7% POINTS
TELEPHONY MARGIN 75.3% +3.4% POINTS
HOUSEHOLD PENETRATION 34.5% +0.5% POINTS
<TABLE>
<CAPTION>
- ----------------------------- -------------------- ------------------------------ ------------------------------
QUARTER ENDING JUN. 98 JUN. 97 DEC. 97
- ----------------------------- -------------------- ------------------------------ ------------------------------
<S> <C> <C> <C> <C> <C>
TELEVISION
Customers 642,303 559,963 (+14.7%) 605,988 (+6.0%)
Penetration 22.8% 22.0% (+0.8% points) 22.0% (+0.8% points)
Churn 33.7% 32.2% (+1.5% points) 34.0% (-0.3% points)
Av. Rev. per cust (pound)23.40 (pound)23.37 (+0.1%) (pound)23.40 (+0.0%)
RESIDENTIAL TELEPHONY
Customers 853,121 720,508 (+18.4%) 810,358 (+5.3%)
Penetration 30.6% 28.9% (+1.7% points) 29.7% (+0.9% points)
Churn 21.1% 19.2% (+1.9% point) 20.0% (+1.1% points)
Av. Rev. per line (pound)19.22 (pound)19.09 (+0.7%) (pound)19.19 (+0.2%)
BUSINESS TELEPHONY
Lines 116,634 82,601 (+41.2%) 100,989 (+15.5%)
Av. Lines per cust. 4.2 3.6 (+16.7%) 4.0 (+5.0%)
Av. Rev. per line (pound)44.55 (pound)44.67 (-0.3%) (pound)43.62 (+2.1%)
Av. Rev. per cust. (pound)183.70 (pound)152.91 (+20.1%) (pound)158.05 (+16.2%)
INTERNET
Dial-up customers 19,810 8,806 (+125.0%) 16,713 (+18.5%)
- ----------------------------- -------------------- ------------------------------ ------------------------------
</TABLE>
TELEWEST TODAY ANNOUNCED ITS INTERIM RESULTS.
Commenting on the results Charles Burdick, Group Finance Director, said:
"I am very pleased with the strong results for the first half of 1998. Total
revenues are almost 25 per cent higher than the corresponding period last year,
while earnings before interest, tax and depreciation (EBITDA) are up by more
than 230 per cent and are already above the full 1997 result.
"Our household penetration has risen to 34.5 per cent; sales of business
telephone lines and revenues per business customer are, respectively, 41 per
cent and 20 per cent higher; and we have further improved the margins of both
telephony and cable television.
"We have reduced selling, general and administrative costs as a proportion of
revenues to 41 per cent, compared to over 50 per cent in 1997. We have also
achieved a 50 per cent reduction in capital expenditure while completing our
national network and continuing to develop our local broadband systems.
<PAGE>
"The company ended the second quarter of 1998 with (pound)1.51 billion of debt
split between (pound)0.6bn of Senior Bank debt and (pound)0.91bn of bond debt.
We are fully funded and operating comfortably within our restructured bank
facilities.
"We are currently looking at financing options with regard to the exercise of
our pre-emption rights resulting from the Comcast/NTL merger and the purchase of
Comcast's Birmingham Cable and Cable London shareholdings."
David Van Valkenburg, Chief Executive of Telewest, said:
"The second quarter of 1998 has been an exciting period for Telewest. Our
interim results show we are well placed to sustain our leading position in the
cable market.
"Cable TV and telephony penetration have reached record levels, we have launched
new services for the residential and business markets and we have earned more in
the first six months of this year than we did in the whole of 1997.
These achievements are a credit to everyone at Telewest.
"Our new Millennium packages are growing in popularity and we see evidence that
the wider choices we are offering are what customers want from their pay-TV
service. Penetration in the North East region has grown by 5.5 percentage points
since we introduced the Millennium package a year ago. This indicates the
near-term opportunity to increase penetration throughout our regions as we
re-market all our customer base with Millennium.
"Front Row has exceeded all our expectations. One in five of our customers is
regularly using the service. We have brought forward our plans to expand Front
Row from a four to eight-channel service and to accelerate the introduction of
remote-control ordering facilities in all our franchises.
"While churn in cable TV declined in the second quarter, both TV and telephony
churn are receiving our close attention. There are encouraging signs that we
have tackled the product-related causes of churn. Our efforts are now focused on
bolstering the support systems our people need to serve our customers most
effectively.
"In the business market, volumes continued to rise sharply in terms of
customers, lines per customer, and revenue per customer. In particular we have
been very successful in selling digital products to our business customers.
"The completion of our national network means we are ready to expand our range
of products and services. The network will allow us to design more sophisticated
solutions for corporate customers and be more innovative in our pricing and
packaging of voice and data services. We will also be creating a new business
unit to target the substantial opportunities in the provision of wholesale
services for other operators.
"Looking ahead, we expect to start trials of digital services later this year
and to launch services in 1999. In addition to digital broadcast and
subscription television channels, we will dedicate 40 - 50 channels to near
video on demand services, offer Internet access through the TV and give
consumers access to a wide range of interactive services.
"We will also be launching high speed Internet services in the first half of
1999. Our cable modems will connect users to the Internet at up to 100 times the
speed of a normal telephone line. We are currently exploring joint venture
possibilities with content providers and other cable operators to maximise this
opportunity.
"Finally, on 15th April 1998 we announced that the boards of Telewest and
General Cable PLC had agreed the terms of a proposed merger and that we intend
to exercise our options to acquire the interests held by Comcast UK Cable
Partners Ltd in Birmingham Cable and Cable London (subject to, inter alia, price
and availability of finance). Together these transactions will, when
implemented, create the largest UK cable operator and one better positioned to
capitalise on the excellent progress made to date."
2
<PAGE>
NOTES:
ALL REFERENCES TO FINANCIAL INFORMATION ABOVE ARE UK GAAP.
THE FOLLOWING IS INCLUDED IN CONNECTION WITH LEGISLATION IN THE UNITED STATES OF
AMERICA, 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 1997 ANNUAL REPORT
AND REGISTERED STATEMENTS FILED IN JUNE 1998.
Enquiries to: TELEWEST COMMUNICATIONS PLC
David Van Valkenburg, Chief Executive
Tel: 01483 750900
Charles Burdick, Group Finance Director
Tel: 01483 750900
Stephen Powers, Media Relations Manager
Tel: 01483 295281/0467 392804
and at :
Dewe Rogerson
Anthony Carlisle
0171 638 9571
3
<PAGE>
TELEWEST COMMUNICATIONS PLC
Operating Statistics - Owned and operated on an equity basis
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
2ND QUARTER 1998 NET ADDITIONS
NET ADDITIONS NET ADDITIONS NET ADDITIONS NET ADDITIONS
Q2 1998 YTD 98 Q2 1997 YTD 1997
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CABLE TELEVISION
- ----------------
HOMES MARKETED 27,720 62,372 103,615 207,039
CATV CUSTOMERS 24,426 36,315 18,235 31,821
RESIDENTIAL TELEPHONY
- ---------------------
HOMES MARKETED 29,398 65,070 119,243 242,020
RESIDENTIAL TELEPHONY CUSTOMERS 21,536 42,763 50,931 100,131
RESIDENTIAL TELEPHONY LINES 31,334 59,491 56,282 109,168
BUSINESS TELEPHONY
- ------------------
BUSINESS TELEPHONY CUSTOMERS 966 2,023 1,668 2,291
BUSINESS TELEPHONY LINES 6,619 15,645 8,061 14,778
- -----------------------------------------------------------------------------------------------------------------------
AS AT 30 JUNE AS AT 30 JUNE
1998 1997
- -----------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION
- ----------------
HOMES MARKETED 2,822,556 2,542,992
CATV CUSTOMERS 642,303 559,963
CATV PENETRATION 22.8% 22.0%
QUARTERLY CHURN RATE (ANNUALISED) 28.8% 32.9%
ROLLING 12 MONTH CHURN RATE 33.7% 32.2%
RESIDENTIAL TELEPHONY
- ---------------------
HOMES MARKETED 2,790,224 2,496,754
RESIDENTIAL TELEPHONY CUSTOMERS 853,121 720,508
RESIDENTIAL TELEPHONY PENETRATION 30.6% 28.9%
RESIDENTIAL TELEPHONY LINES 895,659 736,177
QUARTERLY CHURN RATE PER LINE (ANNUALISED)
21.7% 19.1%
ROLLING 12 MONTH CHURN RATE 21.1% 19.2%
BUSINESS TELEPHONY
- ------------------
BUSINESS TELEPHONY CUSTOMERS 27,498 23,173
BUSINESS TELEPHONY LINES 116,634 82,601
AVERAGE NUMBER OF LINES PER CUSTOMER 4.2 3.6
INTERNET
- --------
DIAL-UP CUSTOMERS 19,810 8,806
CABLE TELEVISION AND RESIDENTIAL TELEPHONY
CUSTOMERS 528,614 422,484
CABLE TELEVISION ONLY CUSTOMERS 113,689 137,479
RESIDENTIAL TELEPHONY ONLY CUSTOMERS 324,507 298,024
INTERNET ONLY CUSTOMERS 1,825 2,454
TOTAL CUSTOMERS 968,635 860,441
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
4
<PAGE>
TELEWEST COMMUNICATIONS PLC
Operating Statistics - Owned and operated and affiliated franchises
* On an equity basis
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
2ND QUARTER NET ADDITIONS
NET ADDITIONS NET ADDITIONS NET ADDITIONS NET ADDITIONS
Q2 1998 YTD 1998 Q2 1997 YTD 1997
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CABLE TELEVISION
- ----------------
HOMES MARKETED 30,355 66,041 114,776 233,044
CATV CUSTOMERS 24,880 38,127 19,445 36,854
RESIDENTIAL TELEPHONY
- ---------------------
HOMES MARKETED 32,102 68,452 130,503 268,184
RESIDENTIAL TELEPHONY CUSTOMERS 23,527 48,318 55,835 109,647
RESIDENTIAL TELEPHONY LINES 33,795 66,006 61,423 119,129
BUSINESS TELEPHONY
- ------------------
BUSINESS TELEPHONY CUSTOMERS 1,192 2,381 1,764 2,508
BUSINESS TELEPHONY LINES 8,164 18,297 8,988 16,535
- ---------------------------------------------------------------------------------------------------------------------
AS AT 30 JUNE AS AT 30 JUNE
1998 1997
- ---------------------------------------------------------------------------------------------------------------------
CABLE TELEVISION
- ----------------
HOMES MARKETED 3,162,623 2,859,879
CATV CUSTOMERS 725,479 636,453
RESIDENTIAL TELEPHONY
- ---------------------
HOMES MARKETED 3,130,779 2,811,225
RESIDENTIAL TELEPHONY CUSTOMERS 943,000 795,747
RESIDENTIAL TELEPHONY LINES 988,547 812,650
BUSINESS TELEPHONY
- ------------------
BUSINESS TELEPHONY CUSTOMERS 30,712 25,806
BUSINESS TELEPHONY LINES 134,970 95,104
AVERAGE NUMBER OF LINES PER CUSTOMER 4.4 3.7
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
Note:
* The affiliated franchises include Telewest's interests in Cable London plc
(50.0% interest), Birmingham Cable Corporation (27.5% interest) and The Cable
Corporation (16.5% interest).
5
<PAGE>
TELEWEST COMMUNICATIONS PLC
Owned and Operated Franchises
As at 30 June 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
London and Midlands and Scotland and North West Total
Sount East South West North East
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
CABLE TELEVISION
- ----------------
HOMES MARKETED 630,203 838,017 757,473 596,863 2,822,556
CATV CUSTOMERS 149,808 185,740 178,507 128,248 642,303
CATV PENETRATION 23.8% 22.2% 23.6% 21.5% 22.8%
RESIDENTIAL TELEPHONY
- ---------------------
HOMES MARKETED 624,210 838,140 731,783 596,091 2,790,224
RESIDENTIAL TELEPHONY CUSTOMERS
160,580 278,555 230,664 183,322 853,121
RESIDENTIAL TELEPHONY PENETRATION
25.7% 33.2% 31.5% 30.8% 30.6%
RESIDENTIAL TELEPHONY LINES 175,602 289,383 238,958 191,716 895,659
BUSINESS TELEPHONY
- ------------------
BUSINESS TELEPHONY CUSTOMERS 6,583 9,105 6,410 5,400 27,498
BUSINESS TELEPHONY LINES 31,669 42,493 20,759 21,713 116,634
AVERAGE NUMBER OF LINES PER
CUSTOMER 4.8 4.7 3.2 4.0 4.2
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
TELEWEST COMMUNICATIONS PLC
Owned and Operated Franchises
As at 30 June 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
London South North Scotland South North Midlands Total
South West Esat East West
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CABLE TELEVISION
- ----------------
HOMES MARKETED 364,964 382,232 225,079 532,394 265,239 596,863 455,785 2,822,556
CATV CUSTOMERS 81,224 85,153 55,711 122,796 68,584 128,248 100,587 642,303
CATV PENETRATION 22.3% 22.3% 24.8% 23.1% 25.9% 21.5% 22.1% 22.8%
RESIDENTIAL TELEPHONY
- ---------------------
HOMES MARKETED 358,947 382,355 222,882 508,901 265,263 596,091 455,785 2,790,224
RESIDENTIAL TELEPHONY CUSTOMERS 76,583 121,904 76,346 154,318 83,997 183,322 156,651 853,121
RESIDENTIAL TELEPHONY PENETRATION 21.3% 31.9% 34.3% 30.3% 31.7% 30.8% 34.4% 30.6%
RESIDENTIAL TELEPHONY LINES 85,729 128,809 78,004 160,954 89,873 191,716 160,574 895,659
BUSINESS TELEPHONY
- ------------------
BUSINESS TELEPHONY CUSTOMERS 5,034 5,229 1,790 4,620 1,549 5,400 3,876 27,498
BUSINESS TELEPHONY LINES 25,478 23,266 5,071 15,688 6,191 21,713 19,227 116,634
AVERAGE NUMBER OF LINES PER
CUSTOMER 5.1 4.5 2.8 3.4 4.0 4.0 5.0 4.2
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
TELEWEST COMMUNICATIONS PLC
Affiliated Franchises
As at 30 June 1998
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Cable London Birmingham Cable The Cable Corporation Total Affiliates
ACTUAL EQUITY ACTUAL EQUITY ACTUAL EQUITY ACTUAL EQUITY
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
CABLE TELEVISION
HOMES MARKETED 358,497 179,249 415,099 114,152 282,827 46,666 1,056,423 340,067
CATV CUSTOMERS 87,604 43,802 116,893 32,146 43,809 7,228 248,306 83,176
CATV PENETRATION 24.4% 24.4% 28.2% 28.2% 15.5% 15.5% 23.5% 24.5%
RESIDENTIAL TELEPHONY
HOMES MARKETED 358,497 179,249 415,099 114,152 285,782 47,154 1,059,378 340,555
RESIDENTIAL TELEPHONY CUSTOMERS
88,094 44,047 128,247 35,268 64,027 10,564 280,368 89,879
RESIDENTIAL TELEPHONY PENETRATION
24.6% 24.6% 30.9% 30.9% 22.4% 22.4% 26.5% 26.4%
RESIDENTIAL TELEPHONY LINES 94,110 47,055 128,247 35,268 64,027 10,564 286,384 92,887
BUSINESS TELEPHONY
BUSINESS TELEPHONY CUSTOMERS 3,202 1,601 4,523 1,243 2,234 369 9,959 3,213
BUSINESS TELEPHONY LINES 16,568 8,284 20,022 5,506 27,548 4,545 64,138 18,335
AVERAGE NUMBER OF LINES PER
CUSTOMER 5.2 5.2 4.4 4.4 12.3 12.3 6.4 5.7
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
UK GAAP
- -----------------------------------------------------------------------------------------------------------------------
UNAUDITED SUMMARISED CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE SIX MONTHS ENDED 30 JUNE 1998
NOTE 6 MONTHS 6 MONTHS YEAR
ENDED ENDED ENDED
30 JUNE 30 JUNE 31 DECEMBER
1998 1997 1997
(POUND)000 (POUND)000 (POUND)000
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
TURNOVER
CABLE TELEVISION 88,758 76,845 159,918
TELEPHONY - RESIDENTIAL 98,918 77,849 166,645
TELEPHONY - BUSINESS 28,106 19,901 43,882
OTHER (INTERNET, AD SALES ETC) 10,095 6,847 16,053
225,877 181,442 386,498
====================================================
OPERATING LOSS (39,816) (59,985) (127,764)
SHARE OF RESULTS OF ASSOCIATED UNDERTAKINGS (3,457) (5,418) (11,126)
OTHER INTEREST RECEIVABLE AND SIMILAR income (includes 2,968 5,266 14,662
the group share of interest receivable in associated
undertakings of (pound)104,(pound)683 and (pound)5,565 respectively)
INTEREST PAYABLE AND SIMILAR CHARGES 3 (101,317) (82,206) (185,681)
LOSS ON ORDINARY ACTIVITIES BEFORE TAX (141,622) (142,343) (309,909)
TAX ON LOSS ON ORDINARY ACTIVITIES 3 (115) (521)
LOSS ON ORDINARY ACTIVITIES AFTER TAX (141,619) (142,458) (310,430)
MINORITY INTERESTS (68) (210) (293)
LOSS FOR THE FINANCIAL PERIOD (141,687) (142,668) (310,723)
====================================================
LOSS PER EQUITY SHARE (PENCE) (10.0) (10.0) (21.8)
====================================================
- -----------------------------------------------------------------------------------------------------------------------
1 EARNINGS/ (LOSS) BEFORE INTEREST, TAXES,
DEPRECIATION, AND AMORTISATION ("EBITDA")
- -----------------------------------------------------------------------------------------------------------------------
OPERATING LOSS (39,816) (59,985) (127,764)
ADD: DEPRECIATION 94,079 76,358 177,341
EBITDA 54,263 16,373 49,577
=====================================================
2 OPERATING COSTS
PROGRAMMING EXPENSES 47,923 46,626 93,441
TELEPHONY EXPENSES 31,315 27,440 50,145
SELLING, GENERAL, AND ADMINISTRATIVE EXPENSES 92,376 91,003 193,335
DEPRECIATION 94,079 76,358 177,341
265,693 241,427 514,262
=====================================================
3 INTEREST PAYABLE AND SIMILAR CHARGES
SHARE OF INTEREST OF ASSOCIATED UNDERTAKINGS 7,721 5,588 15,751
ON BANK LOANS AND OVERDRAFTS AND OTHER LOANS
WHOLLY REPAYABLE WITHIN 5 YEARS 41 8,207 16,941
WHOLLY OR PARTLY REPAYABLE IN MORE THAN 5 YEARS 24,398 5,282 14,741
FINANCE COSTS OF SENIOR DISCOUNT DEBENTURES 40,548 34,344 71,661
FINANCE COSTS OF SENIOR DEBENTURES 11,370 11,318 22,657
FINANCE CHARGES PAYABLE IN RESPECT OF FINANCE
LEASE AND HIRE PURCHASE CONTRACTS 2,490 1,976 4,702
EXCHANGE LOSSES ON FOREIGN CURRENCY TRANSLATION, NET 5,218 15,023 30,954
OTHER 9,531 468 8,274
101,317 82,206 185,681
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
The consolidated financial statements as set out on pages 9, 10 and 11 which are
unaudited, have been prepared on the basis of the accounting policies set out in
the Group's 1997 Annual Report. The balance sheet, profit and loss account and
cash flow information at 31 December 1997 is derived from the statutory accounts
for 1997 which have been delivered to the Registrar of Companies. The auditors
have reported on those accounts: their report was unqualified and did not
contain a statement under section 237(2) or (3) of the Companies Act 1985.
9
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
TELEWEST COMMUNICATIONS PLC
UK GAAP
UNAUDITED SUMMARISED CONSOLIDATED BALANCE SHEET AT 30 JUNE 1998
30 JUNE 30 JUNE 31 DECEMBER
1998 1997 1997
(POUND)000 (POUND)000 (POUND)000
- -----------------------------------------------------------------------------------------------------------------------
<S> <S> <S> <C>
FIXED ASSETS 1,790,807 1,720,546 1,809,213
CURRENT ASSETS
Stocks 91 72 32
Debtors 81,479 68,242 70,457
Cash at bank and in hand 26,295 61,732 29,582
107,865 130,046 100,071
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR (197,523) (210,395) (334,756)
NET CURRENT LIABILITIES (89,658) (80,349) (234,685)
TOTAL ASSETS LESS CURRENT LIABILITIES 1,701,149 1,640,197 1,574,528
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR
(1,573,948) (1,203,004) (1,305,708)
MINORITY INTERESTS (708) (557) (640)
------------------------------------------------------
CAPITAL AND RESERVES 126,493 436,636 268,180
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
10
<PAGE>
TELEWEST COMMUNICATIONS PLC
UK GAAP
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
Unaudited summarised consolidated statements
of cash flows
6 Months ended Y/ending
June 30 31 Dec 97
- ---------------------------------------------------------------------------------------------------------
1998 1997 1997
(pound)'000 (pound)'000 (pound)'000
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NET CASH INFLOW FROM OPERATING ACTIVITIES 40,861 (2,493) 68,624
----------------------------------------------
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received 1,833 2,988 3,599
Interest paid (32,501) (20,044) (63,479)
Interest element of finance lease payments (2,490) (2,594) (4,702)
----------------------------------------------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING
OF FINANCE (33,158) (19,650) (64,582)
----------------------------------------------
CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT
Purchase of tangible fixed assets (110,304) (207,504) (436,100)
Sale of tangible fixed assets 4,354 922 6,066
----------------------------------------------
NET CASH OUTFLOW FROM CAPITAL EXPENDITURE AND FINANCIAL
INVESTMENT (105,950) (206,582) (430,034)
----------------------------------------------
ACQUISITIONS AND DISPOSALS
Investment in associated undertakings and
other participating interests (3.719) (9,113) (9,633)
----------------------------------------------
NET CASH OUTFLOW FROM ACQUISITIONS AND DISPOSALS (3,719) (9,113) (9,633)
----------------------------------------------
MANAGEMENT OF LIQUID RESOURCES
Decrease in fixed deposits (net) 8,710 21,523 53,288
FINANCING
Cash paid for credit facility arrangement costs (5,900) 0 0
Proceeds from borrowings 110,000 222,500 392,500
Repayment of borrowings (10) 0 (2,375)
Capital element of finance lease payments (5,397) (2,063) (3,971)
----------------------------------------------
NET CASH INFLOW FROM FINANCING 98,693 220,437 386,154
----------------------------------------------
INCREASE IN CASH 5,437 4,122 3,817
- ---------------------------------------------------------------------------------------------------------
</TABLE>
11
<PAGE>
TELEWEST COMMUNICATIONS PLC
US GAAP
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------
UNAUDITED SUMMARISED CONSOLIDATED
STATEMENTS OF OPERATIONS 3 Months 3 Months 3 Months 6 Months 6 Months 6 Months
ENDED ENDED ENDED ENDED ENDED ENDED
30 JUNE 30 JUNE 30 JUNE 30 JUNE 30 JUNE 30 JUNE
1998 1998 1997 1998 1998 1997
$000 (POUND)000 (POUND)000 $000 (POUND)000 (POUND)000
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REVENUE
Cable television 74,267 44,578 38,744 147,871 88,758 76,845
Telephony - residential 84,103 50,482 38,175 164,797 98,918 77,849
Telephony - business 24,330 14,604 10,614 46,825 28,106 19,901
Other 9,644 5,789 3,519 16,818 10,095 6,847
----------- ----------- ------------ ----------- ----------- -----------
192,344 115,453 91,052 376,311 225,877 181,442
=========== =========== ============ =========== =========== ===========
OPERATING LOSS (42,403) (25,452) (36,421) (88,325) (53,016) (73,187)
Interest income 1,626 976 1,748 3,444 2,067 4,110
Interest expense (66,085) (39,667) (32,920) (137,258) (82,388) (63,234)
Foreign exchange gain/(losses), net (13,396) (8,041) (172) (2,351) (1,411) (24,299)
Share of losses of affiliates (7,280) (4,370) (5,345) (18,449) (11,074) (10,323)
Minority interest in profits of
consolidated subsidiaries, net (70) (42) (93) (113) (68) (210)
Other, net 417 251 352 1,327 797 473
----------- ----------- ------------ ----------- ----------- -----------
LOSS BEFORE INCOME TAXES (127,191) (76,345) (72,851) (241,725) (145,093) (166,670)
Income tax expense (28) (17) (51) 5 3 (115)
----------- ----------- ------------ ----------- ----------- -----------
NET LOSS (127,219) (76,362) (72,902) (241,720) (145,090) (166,785)
=========== =========== ============ =========== =========== ===========
LOSS PER ORDINARY SHARE
(DOLLARS/POUNDS) (0.14) (0.08) (0.08) (0.26) (0.16) (0.18)
=========== =========== ============ =========== =========== ===========
1 EARNINGS/(LOSS) BEFORE INTEREST, TAXES,
DEPRECIATION AND AMORTISATION ("EBITDA")
Operating loss (42,403) (25,452) (36,421) (88,325) (53,016) (73,187)
Add: depreciation and amortisation of 89,891 53,956 45,510 178,727 107,279 89,560
goodwill
----------- ----------- ------------ ----------- ----------- -----------
EBITDA 47,488 28,504 9,089 90,402 54,263 16,373
=========== =========== ============ =========== =========== ===========
2 OPERATING COSTS AND EXPENSES
Programming (37,762) (22,666) (23,428) (79,840) (47,923) (46,626)
Telephony (28,512) (17,114) (13,061) (52,171) (31,315) (27,440)
Selling, general and administration (78,584) (47,169) (45,474) (153,898) (92,376) (91,003)
Depreciation (78,893) (47,355) (38,902) (156,736) (94,079) (76,358)
Amortisation of goodwill (10,997) (6,601) (6,608) (21,991) (13,200) (13,202)
----------- ----------- ------------ ----------- ----------- -----------
(234,748) (140,905) (127,473) (464,636) (278,893) (254,629)
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The consolidated financial statements as set out on pages 12 and 13 which are
unaudited, have been prepared on the basis of the accounting policies set out in
the Group's 1997 Annual Report. The balance sheet, profit and loss account and
cash flow information at 31 December 1997 is derived from the statutory accounts
for 1997 which have been delivered to the Registrar of Companies. The auditors
have reported on those accounts: their report was unqualified and did not
contain a statement under section 237(2) or (3) of the Companies Act 1985.
The economic environment in which the Company operates is the United Kingdom
("UK") and hence its reporting currency is Pounds Sterling ("(pound)"). Merely
for convenience, the financial statements contain translations of certain Pounds
Sterling amounts into US Dollars at $1.666 per (pound)1.00, the Noon Buying Rate
of the Federal Reserve Bank of New York on June 30, 1998. The presentation of
the US Dollar amounts should not be construed as a representation that the
Pounds Sterling amounts could be so converted into US Dollars at the rate
indicated or at any other rate.
12
<PAGE>
TELEWEST COMMUNICATIONS PLC
US GAAP
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
1998 1998 1997
$000 (POUND)000 (POUND)000
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ASSETS
Cash and cash equivalents 43,807 26,295 29,582
Receivables and prepaid expenses 135,744 81,479 70,459
Investments 125,072 75,073 85,373
Property and equipment 2,854,173 1,713,189 1,705,520
Goodwill 754,215 452,710 465,905
Other assets 73,049 43,847 56,513
=============== =============== =================
TOTAL ASSETS 3,986,060 2,392,593 2,413,352
=============== =============== =================
LIABILITIES
Debt 2,513,154 1,508,496 1,373,054
Other liabilities 482,689 289,729 300,908
--------------- --------------- -----------------
TOTAL LIABILITIES 2,995,843 1,798,225 1,673,962
MINORITY INTERESTS 1,180 708 640
SHAREHOLDERS' EQUITY 989,037 593,660 738,750
--------------- --------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY 3,986,060 2,392,593 2,413,352
--------------- --------------- -----------------
UNAUDITED SUMMARISED CONSOLIDATED STATEMENTS OF CASH FLOWS
6 months 6 months 6 months
ended Ended ended
30 June 30 June 30 June
1998 1998 1997
$000 (pound)000 (pound)000
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (241,720) (145,090) (166,785)
Adjustments to reconcile net loss to net cash used in
operating activities
Depreciation 156,736 94,079 76,358
Amortisation of goodwill 21,983 13,195 13,202
Amortisation of deferred financing costs and issue
discount on senior discount debentures 71,761 43,074 37,178
Unrealised (gains)/loss on foreign currency translation 2,161 1,297 24,061
Share of losses of affiliates 18,448 11,073 10,323
Gain on disposals of assets (1,211) (727) (473)
Minority interests in profits of consolidated 113 68 210
subsidiaries, net
Changes in operating assets and liabilities
Change in receivables (8,963) (5,380) (117)
Change in prepaid expenses (3,430) (2,059) (1,089)
Change in accounts payable 18,356 11,018 (8,648)
Change in other liabilities (21,402) (12,845) (6,363)
--------------- --------------- -----------------
NET CASH PROVIDED BY / (USED) IN OPERATING ACTIVITIES 12,832 7,703 (22,143)
NET CASH USED IN INVESTING ACTIVITIES (182,709) (109,669) (215,695)
NET CASH PROVIDED BY FINANCING ACTIVITIES 164,423 98,693 220,437
--------------- --------------- -----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (5,454) (3,273) (17,401)
Effect of exchange rate changes on cash and cash equivalents (23) (14) 17
Cash and cash equivalents at beginning of period 49,284 29,582 79,116
--------------- --------------- -----------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 43,807 26,295 61,732
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
- ENDS -
