News 2005
Interim results six months to 30 September 2005
17/11/2005
Unaudited | Six months ended 30 September 2005 (£ million) | Six months ended 30 September 2004 (£ million) | Change over period |
|---|---|---|---|
Total revenue | 274.6 | 256.7 | 7% |
Service revenue | 250.8 | 230.7 | 9% |
Operating profit | 45.5 | 35.7 | 27% |
Basic EPS (pence) | 10.8 | 7.8 | 38% |
Operating free cashflow1 | 53.3 | 46.1 | 16% |
Operating free cashflow margin1 | 19.4% | 18.0% | 1.4pp |
Net Debt | 192.7 | 264.1 | (27%) |
(1)Definitions and calculation of EBITDA and operating free cashflow are shown on pages 8 and 9.
FINANCIAL HIGHLIGHTS
Sector-leading revenue growth
- Total revenue up 7.0% to £274.6m (H1 FY05: £256.7m)
- Service revenue up 8.7% to £250.8m (H1 FY05: £230.7m); up 17.9% ex-Ofcom impact
- Rolling 12 month ARPU of £12% (H1 FY05: £137, Q1 FY06: £123), with sustained rising trend in ARPUs month on month
- 90-day active customers up 15% to 4,153,400 (H1 FY05: 3,603,700)
- Net 90-day active customer additions of 121,500 (H1 FY05: 362,200)
- Blended SAC per connection of £34 - includes new contract customer SAC. Prepay
SAC of £29 (H1 FY05: £26)
Increasing Margins and Strong Cashflow Generation
- Operating costs per customer down 35%
- EBITDA1, up 23% to £54.0m (H1 FY05: £43.8m); Operating profit, up 27% to £45.5m (H1 FY05: £35.7m)
- EBITDA margin of 19.7% (H1 FY05: 17.1%); Ex-Ofcom and one-off items, EBITDA
margin of 19.7% (H1 FY05: 16.5%)
- Operating margin of 16.6% (H1 FY05: 13.9%); Ex-Ofcom and one-off items, operating margin of 16.6% (H1 FY05: 13.1%)
- High capital efficiency with capital expenditure at 1.9% of revenue (H1 FY05: 2.2%)
- Operating free cashflow1 up 16% to £53.3m (H1 FY05: £46.1m)
- Net debt reduced to £192.7m (H1 FY05: £264.1m)
- Interim dividend of 3.4p per share
Confident outlook for FY 2006
Charles Gurassa, Chairman, commented:
“Virgin Mobile has delivered another very good performance for the half year. Our service revenue growth is once again sector-leading and our low capital expenditure business model continues to translate into very healthy cash generation. This strong cash generation enables us to pay a 3.4p per share interim dividend and to continue to invest in growing our customer base in the prepay and contract market in the UK.”
Tom Alexander, Chief Executive, commented:
“The past six months have been operationally very productive with the launch and expansion of our contract proposition and establishing a new platform for our next phase of growth. This should provide the basis for consistent double-digit service revenue growth in FY 2007. We have built on our excellent results from the previous year, continuing to develop the best customer service in the sector and innovative products. And with our efficient cost control and increased profitability, we look forward to the future with confidence.”
OUTLOOK
Please see “Forward-looking statements” below.
Once again, we have delivered sector-leading service revenue growth. During the first half, excluding the impact of the Ofcom interconnection rate cuts in September 2004, our underlying service revenue growth was 17.9% and this performance underpins the confidence in our ability to continue to outperform the competition.
We expect our momentum to be sustained by increasing our prepay customer base, continuing positive ARPU trends, and building on the initial success of our contract proposition. We have been embarking upon a phased rollout of the contract product in line with our stated strategy, and we expect to accelerate monthly connection volumes in the second half. With this momentum, we are on track to deliver mid-teens percentage growth in service revenues for the full year.
We now plan to take additional steps to invest in the next phase of growth. We will reinvest a portion of EBIT growth into accelerating the acquisition of contract customers in the second half. Our core prepay business will keep on delivering healthy margin growth reflecting the exceptional operating leverage inherent within the Virgin Mobile business model. We will continue to drive down the cost of serving each customer while retaining our commitment to best in class customer service, and cost growth is expected to stay close to 0% for the FY 2006 (excluding the one-off costs in the prior year). In addition there will be no further impact from the Ofcom interconnection rate cuts on the year on year margin comparison in the second half. We remain committed to our previously stated full year target of up to 1pp EBIT margin dilution (on the FY 2005 figure of 15.9%) as we invest in the future growth of the business.
We delivered another strong cashflow performance in the first half. While our operating free cashflow margin expanded strongly to 19.4% during the last half, we reiterate our guidance that operating free cashflow margin will be broadly stable compared to FY 2005 due to investment in acquiring contract customers during H2 FY06.
Our high operating free cashflow has enabled us to reduce our net debt to 1.95x EBITDA. While we expect the net debt position to continue to decrease, this decline will occur at a slower pace due to the impact of contract investment on working capital and our initial tax payments in H2 FY06. Our strong first half has allowed us to announce a planned interim dividend payment of 3.4p per share, with a payout ratio for the full year targeted at 50% of net income.
View the full Interim Results Announcement in PDF format (148 Kb).
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