Exhibit 99.1
31 JULY 2003
TELEWEST COMMUNICATIONS PLC
INTERIM REPORT 2003
FINANCIAL SUMMARY
- -----------------------------------------------------------------------------------
HALF-YEAR HALF-YEAR
2003 2002 % CHANGE
(POUND)M (POUND)M
TOTAL TURNOVER * 674 674 -
EBITDA ** 220 184 UP 20%
EBITDA MARGIN ** 33% 27% UP 6% PTS
TOTAL OPERATING LOSS (41) (119) DOWN 66%
NET LOSS (208) (239) DOWN 13%
CAPEX 104 241 DOWN 57%
FREE CASH FLOW *** 31 (248) UP(POUND)279M
- -----------------------------------------------------------------------------------
* includes Telewest's proportionate share of UKTV.
** includes Telewest's proportionate share of UKTV and in 2003 is before
exceptional items of(pound)7m.
*** net cash inflow/(outflow) before use of liquid resources and financing.
HIGHLIGHTS
- - POSITIVE FREE CASH FLOW FOR THIRD QUARTER IN A ROW
- - RECORD EBITDA AND MARGIN
- - RECORD ARPU OF(POUND)43.61 FOR THE QUARTER
- - BROADBAND LEADERSHIP REINFORCED WITH LAUNCH OF 2MB SERVICE
- - RESTRUCTURING DISCUSSIONS PROGRESS
COMMENTING ON THE RESULTS, CHARLES BURDICK, MANAGING DIRECTOR OF TELEWEST
COMMUNICATIONS, SAID:
"Through our focus on cost control, customer service and targeted marketing, we
have delivered another set of solid results and positive free cash flow for the
third quarter in a row.
"The heavy investment on our network is behind us and we are now benefiting from
our advanced infrastructure quality requiring lower capital expenditure. We are
also continuing to improve the quality of our customer base, increase the number
of our `triple play' customers and introduce targeted new offers and services,
all of which are driving average customer revenue and reducing churn.
"We expect to build on this in the second half, and July shows our initiatives
starting again to grow sales. The launch of UK cable's first 2Mb broadband
service is reinforcing our leadership position and soon we will also be
launching a wireless self-installation broadband option for existing digital
customers.
"We continue to progress our restructuring. We are working on revised term
sheets reflecting new economics of 98.5% equity for bondholders and 1.5% of the
equity for existing holders. We will update everyone as soon as it is possible.
In the meantime, we are focused on running the business as the results
indicate."
ENQUIRIES TO TELEWEST COMMUNICATIONS PLC
Charles Burdick Managing director 020 7299 5000
Jane Hardman Director of corporate communications 020 7299 5888
Richard Williams Head of investor relations 020 7299 5479
And at
CITIGATE DEWE ROGERSON 020 7638 9571
Anthony Carlisle 07973 611888
Sue Pemberton 07779 572711
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FINANCIAL REVIEW
Except where stated otherwise, all profit and loss items are before exceptional
items, and all comparisons compare the first six months of 2003 to the first six
months of 2002. The Group has incurred (pound)7 million of exceptional legal and
professional costs in respect of the Financial Restructuring during the six
months ended 30 June 2003.
Total turnover (including our share of UKTV, our joint venture with the BBC) for
the six months is (pound)674 million, flat year-on-year. Business Division and
Content Division revenues grew 5% and 2% respectively. Growth in broadband saw
internet and other revenues rise 62%. Overall Consumer Division revenues fell 2%
with lower CATV and residential telephony revenues and the closure of Cable
Guide, our TV listings magazine, in the fourth quarter of 2002, which
contributed (pound)3 million of revenues in the first half of 2002.
Gross margin rose from 67% to 69% for the half-year with improvements in
telephony margins and the growing number of high margin broadband subscribers.
Telephony margins improved from 70% to 73% with selected price increases, growth
in the number of flat rate customers and improved routing of telephony traffic.
Our focus on cost control continues with selling, general and administrative
expenses ("SG&A") for the half year of (pound)235 million, down 8%. In the six
months, headcount was reduced by a further 300 and now stands at 8,900 compared
to 10,200 a year ago. We continue to rationalise our property portfolio,
reducing the number of occupied properties from 230 to 190. As part of this
rationalisation, we recently moved out of our original head office building in
Woking.
EBITDA grew 20% to (pound)220 million for the first six months of 2003 as a
result of the continuing improvements in gross margin and cost control. This
includes our (pound)12 million share of UKTV's EBITDA. EBITDA margin for the
first half of 2003 was a record 33%, up from 27% in the first half of 2002.
EBITDA margin for the Cable Division in the quarter was 36% up from 34% in the
previous quarter.
Excluding (pound)6 million from UKTV, EBITDA for the second quarter was
(pound)108 million, up 8% on the previous quarter.
Net loss for the six months decreased by 16% to (pound)201 million after
(pound)69 million of foreign exchange gains mostly on dollar-denominated debt.
The net loss for the quarter was (pound)17 million.
Capital expenditure in the first six months was reduced 57% to (pound)104
million, which represents 16% of Group turnover, due to reduced network spend
and the lower levels of customer acquisition. Capital expenditure will be higher
in the second half of the year as we plan to return to customer growth, upgrade
our IP capacity and enhance our IT infrastructure.
In the first half, EBITDA (including UKTV) exceeded capital expenditure by
(pound)116 million compared to a shortfall of (pound)57 million in the first
half of 2002.
The Group has generated positive free cash flow of (pound)24 million in the
second quarter. This is the third quarter in a row that the Group has generated
positive free cash flow as we continue to grow EBITDA, significantly reduce
capital expenditure and defer payment of bond interest in advance of our
proposed Financial Restructuring. The phasing of capital expenditure and
fluctuations in working capital will impact short term cash flow generation.
As at 30 June 2003, net debt was (pound)5,214 million. This comprised
(pound)3,408 million of notes and debentures (which are expected to be exchanged
for equity as part of the Financial Restructuring), (pound)203 million of lease
financing, (pound)8 million of other loans and (pound)2,000 million drawn down
on our bank facility, offset by cash balances and term deposits of (pound)405
million. In addition, unpaid and accrued interest on the notes and debentures
subject to the Financial Restructuring was (pound)242 million.
GOING CONCERN
This interim financial information has been prepared on a going concern basis
and does not include any adjustments that would arise as a result of the going
concern basis of preparation being inappropriate. As previously announced, the
Company is in discussions with its bondholders and other major stakeholders with
regard to a Financial Restructuring of its balance sheet as the Directors
consider that the Company will not be able to meet all of its debts as they fall
due. However, the Board of Directors has confidence in the successful conclusion
of the Financial Restructuring (and any required amendments to the Senior
Secured Facility) and, together with and on the basis of cash flow information
that they have prepared, the directors consider that the Group will continue to
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operate as a going concern for a period of at least 12 months from the date of
issue of this interim financial information. Any restructuring will require the
approval of our bankers and various stakeholders. Inherently, there can be no
certainty in relation to any of these matters.
FINANCIAL RESTRUCTURING
The Company continues to engage in negotiations with its bondholders, senior
lenders and certain other major stakeholders and it believes that a final
agreement will be achieved in due course. On 9 June 2003, the Company announced
that it had been notified by the ad hoc committee of its bondholders (the
"Bondholder Committee") that, in order to obtain the support of certain of the
Company's bondholders, the Bondholder Committee had requested certain changes to
the economic and other terms of the preliminary non-binding agreement relating
to its balance sheet restructuring (the "Financial Restructuring") with the
Bondholder Committee as announced on 30 September 2002. On 17 June 2003,
representatives of the Bondholder Committee provided the Company with a new
proposal for the terms of the Financial Restructuring. On 28 July 2003, the
Company announced that it expected the final terms of the Financial
Restructuring to provide that ordinary shareholders will receive 1.5% of the
issued share capital immediately following the Financial Restructuring.
BUSINESS REVIEW
CONSUMER DIVISION
Consumer Division revenues fell 2% to (pound)450 million with declines in CATV
and telephony revenues largely offset by growth in internet and other revenues.
Revenues were also impacted by the closure of Cable Guide in the fourth quarter
of 2002, which contributed (pound)3 million of revenues in the first half of
2002.
Household ARPU for the first half was (pound)42.72, up by 2% on the previous
year. Household ARPU for the second quarter was a record (pound)43.61, up 4% on
the previous quarter reflecting price rises and increasing `triple play'
penetration. Household ARPU remains the highest of any European cable company.
During the second quarter the number of household customers fell by 24,000.
Customer numbers were affected by price rises, particularly in analogue
television where we have moved customers on non-standard packages to standard
priced packages, and also by the disconnection of 7,000 `zero pay' analogue TV
only customers following a database clean-up exercise. Growth has been affected
by lower sales due to our tighter credit control measures, which enable us to
focus on more cash generative customers. These measures have led to decreased
household churn, which continues to improve and now stands at 16.1%.
Churn has also benefited from improved customer service processes enabling more
efficient and responsive handling of customer calls. The percentage of calls
answered within 30 seconds, one of our key indicators, has improved
significantly to 85%. The improvements we have made in customer services have
recently been recognised with Telewest Broadband winning a Customer Focus Award
in the regional heats of this year's high profile National Business Awards. The
award recognises Telewest Broadband's continued commitment to providing
outstanding service to its customers at all times across all of its franchise
areas.
Our focus on more cash generative customers continues to improve the profile of
our customer base as:
- - ARPU for the second quarter of 2003 increased to a record(pound)43.61
- - `Triple play' customers grew by 21,000 in the second quarter to 228,000
- - `Triple play' now accounts for 13% of our customer base compared to just 7%
a year ago
- - 25% of our telephony base now take higher ARPU flat rate telephony products
- - 73% of our TV base now take higher ARPU digital TV
- - Household churn has fallen to 16.1% from 17.6% in the previous quarter
We plan a return to modest customer growth in the second half of the year as we
exploit the value of our bundled products through new product propositions and
increase spend on advertising and marketing promotions. The success of our
initiatives has already been reflected in July's sales figures which are
substantially higher than the average monthly sales achieved in the first half.
Continued operational improvement is expected to result in further sales
efficiency, sustained churn improvement and a return to profitable customer
growth.
4
(I) BROADBAND
Growth in broadband subscribers saw internet and other revenues increase by 62%
to (pound)55 million.
Net broadband additions in the second quarter were 30,000. At the quarter end,
we had 329,000 broadband subscribers, a growth of 10% since March 2003. As a
result of enhanced advertising and promotional activity, subscriber growth has
improved since the quarter end and as at 30 July 2003, we had 341,000 broadband
subscribers of which 30,000 subscribed to our 1Mb service and 5,000 to our 2Mb
service which we launched in May 2003. Telewest remains the clear market leader
within our addressable areas with an approximate 70% market share, reflecting
our continued success in broadband. Just over 69% of our broadband customers
subscribe to the full `triple play' and 93% to one other product.
Broadband ARPU for the second quarter of (pound)22.95 rose by 2% on the first
quarter as a result of the launch of the higher priced 2Mb service. Broadband
remains our product with the lowest churn level at 13.1%.
(II) RESIDENTIAL TELEPHONY
Residential telephony revenues of (pound)237 million were down 6% due to the
lower customer numbers The number of telephony subscribers fell 13,000 in the
second quarter as price rises affected the acquisition of new customers and
because of increased competitive pressure. Subscribers to our flat rate `Talk'
services continued to increase with 16,000 net additions in the quarter. At 30
June 2003, we had 397,000 `Talk' subscribers being 25% of our residential
telephony base.
ARPU per subscriber for the second quarter grew by 3% to (pound)24.68 following
the price rises, whilst telephony churn fell to a record low of 15.7%, despite
the price rises.
On 8 July 2003, we sold our Indirect Access ("IDA") telephony business for
approximately (pound)2 million. We had acquired this business as part of its
acquisition of Eurobell in November 2000. IDA revenues were (pound)9 million in
2002 and (pound)4 million in the first half of 2003.
(IDA customers have never been included in our reported customer numbers)
We welcome the High Court Judgment delivered on 27 June 2003 against those
mobile operators who had appealed decisions of Oftel and the Competition
Commission in the area of mobile call termination/interconnect rates. Following
this judgment and the initial mobile interconnect rate cuts of 25 July, we are
considering retail price changes for calls from our network to mobiles with the
intent of passing the benefits to our consumers whilst stimulating call usage.
(III) CATV
CATV revenues of (pound)158 million were down 9% largely as a result of the
reduction in subscribers.
The number of CATV subscribers fell 23,000 in the second quarter following price
rises, particularly in analogue television where we have moved customers from
non-standard packages to standard priced packages, and also by the disconnection
of 7,000 `zero pay' analogue TV only customers following a database clean-up
exercise. CATV ARPU has risen to (pound)20.97 for the second quarter from
(pound)20.50 in the first quarter.
As stated above, we plan a return to modest subscriber growth in the second half
of the year. We continue to improve value for our subscribers by adding new
channels to all our digital TV packages with five new basic channels added in
July 2003 in addition to the ten basic channels and nine Sky multiplex movie
channels added in the first quarter. We have also launched a new digital TV
package offering five of the best Asian TV channels combined with our low-rate
international phone service, `Talk International'.
BUSINESS DIVISION
The Business Division's revenues grew 5% to (pound)137 million for the six
months ended 30 June 2003.
Telewest Business' growing success in Corporate and Public Sector markets
continues, with a number of significant sales across its entire product set of
voice, data and internet services. Major contracts have been won with both new
5
and existing customers across the UK including Lloyd's of London, the Savoy
Group and the Labour Party.
In May 2003, Telewest Business received further recognition of its high levels
of service expertise as it was named as one of six companies endorsed by the
Office of Government Commerce to provide broadband services to the public
sector. The Broadband Solutions Framework Agreement will enable public sector
organisations to buy value-for-money broadband services quickly and efficiently,
and provides an excellent opportunity for Telewest Business to increase its
market share in providing services to this important market.
Telewest Business continues to deliver its IPVPN (Internet Protocol Virtual
Private Network) service to public and private sector customers. One such
contract has been signed with Lloyd's of London, in support of their initiative
to deliver voice, data and internet communications for disaster recovery. Our
IPVPN product has also been announced as the winner of this year's 'Network
Project of the Year' category at the Networking Industry Awards.
Carrier Services revenues within the Business Division were (pound)23 million,
compared to (pound)20 million for the same period a year ago after reductions in
the previous two years. Carrier Services offer our national network to other
carriers and operators (such as T-Mobile) for voice and data communications.
CONTENT DIVISION
Content Division revenues totalled (pound)87 million for the six months,
including (pound)34 million from our 50% share of UKTV revenue. Revenues were up
2% on the same period in 2002 as strong growth in advertising offset the
disposal of non-core businesses and the closure of ITV Digital.
Advertising revenues of (pound)40 million (including our 50% share of UKTV) for
the six months were up 14% in a flat overall market. The Content Division grew
its market share with a 3.8% share of the TV advertising market in the UK, up
from 3.4% in the corresponding period in 2002.
Subscription revenues of (pound)35 million (including our 50% share of UKTV) for
the six months were up 2% due to UK pay-TV growth.
CORPORATE
On 28 May 2003, Telewest was informed that Microsoft had sold its entire 23.6%
beneficial shareholding in Telewest to a subsidiary of IDT Corporation.
NOTES:
1. Non-statutory information provided in this document is defined as follows:
o EBITDA, which we consider is a standard measure commonly reported and
widely used by analysts, investors and other interested parties in the
cable television and telecommunications industry, represents group
operating profit before deducting depreciation of fixed assets and
amortisation of goodwill.
o Gross margin is defined as Group turnover less cost of sales before
deducting depreciation.
All commentary in this document is based on the Group's UK GAAP financial
results unless otherwise specified.
2. The following is included in connection with legislation in the United
States, the Safe Harbor 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 Annual Report on
Form 20-F filed with the US Securities and Exchange Commission on 30 June 2003.
6
TELEWEST COMMUNICATIONS PLC
OPERATING STATISTICS - UNAUDITED
- --------------------------------------------------------------------------------------------------------
CONSUMER DIVISION
NET ADDITIONS Net additions
Q2 2003 Q2 2002
- --------------------------------------------------------------------------------------------------------
Household customers (23,854) (13,052)
Blueyonder broadband internet subscribers 30,115 51,494
Telephony subscribers (13,248) (9,510)
Telephone lines (20,675) (26,441)
Cable television subscribers (23,034) (25,117)
- --------------------------------------------------------------------------------------------------------
AS AT 30 JUNE As at 30 June
2003 2002
- --------------------------------------------------------------------------------------------------------
Homes passed 4,894,069 4,913,473
Homes passed and marketed 4,686,974 4,699,336
Dual or triple service subscribers (1) 1,220,545 1,236,853
Cable television only subscribers 99,226 127,052
Residential telephony only subscribers 378,169 395,604
Internet only subscribers 21,928 10,928
Total residential subscribers 1,719,868 1,770,437
Household penetration 36.7% 37.7%
Percentage of triple service subscribers (1) 13.2% 7.3%
Percentage of dual or triple service subscribers (1) 71.0% 69.9%
Average household churn (2) 16.1% N/A
Average monthly revenue per subscriber (3) (POUND)42.72 (pound)41.72
- --------------------------------------------------------------------------------------------------------
BLUEYONDER INTERNET SUBSCRIBERS
Blueyonder broadband 329,336 177,394
Blueyonder SurfUnlimited 193,406 192,902
Blueyonder pay-as-you-go 64,958 113,306
Total internet subscribers 587,700 483,602
- --------------------------------------------------------------------------------------------------------
BLUEYONDER BROADBAND
Average subscriber churn rate (4) 13.1% 9.5%
Average monthly revenue per subscriber (5) (POUND)22.76 (pound)26.46
- --------------------------------------------------------------------------------------------------------
RESIDENTIAL TELEPHONY
Residential telephony subscribers 1,588,358 1,626,005
Talk Unlimited subscribers 397,485 300,325
Residential telephony penetration (6) 33.9% 34.6%
Residential telephone lines 1,675,808 1,745,825
Second line penetration 5.5% 7.4%
Average subscriber churn rate (7) 15.7% 16.8%
Average monthly revenue per line (8) (POUND)22.92 (pound)23.17
Average monthly revenue per subscriber (9) (POUND)24.28 (pound)25.09
- --------------------------------------------------------------------------------------------------------
CABLE TELEVISION
Cable television subscribers 1,250,511 1,333,083
Digital television subscribers 911,191 818,780
Penetration (10) 26.7% 28.4%
Average subscriber churn rate (11) 20.5% 20.7%
Average monthly revenue per subscriber (12) (POUND)20.73 (pound)21.15
- --------------------------------------------------------------------------------------------------------
7
TELEWEST COMMUNICATIONS PLC
OPERATING STATISTICS - UNAUDITED (CONTINUED)
- --------------------------------------------------------------------------------------------------------
AS AT 30 JUNE As at 30 June
2003 2002
- --------------------------------------------------------------------------------------------------------
BUSINESS DIVISION
Business customer accounts 70,782 74,290
Business telephony lines 462,883 459,698
Average business lines per customer account (13) 6.5 6.2
Average annualised monthly revenue per business line (14) (POUND)40.89 (pound)41.99
Annualised revenue per customer account (15) (POUND)3,144 (pound)3,101
- --------------------------------------------------------------------------------------------------------
CONTENT DIVISION
Pay multichannel subscribers 9,975,732 9,459,230
Flextech share of basic viewing (16) 18.8% 20.7%
Share of total TV advertising revenues (17) 3.8% 3.4%
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(1) Dual or triple service subscribers are those subscribers who
take at least two or all three of our cable television,
residential telephony and broadband internet services.
(2) Average household churn rate for the period is calculated on a
rolling 12-month basis and represents (i) the total number of
residential subscribers who disconnected or who were
disconnected during such period, divided by (ii) the average
number of residential subscribers in such period.
(3) Average monthly revenue per subscriber (often referred to as
"ARPU" or "Average Revenue per User") represents (i) the
average monthly revenue of residential subscribers for such
period, divided by (ii) the average number of residential
subscribers in such period.
(4) Average blueyonder broadband subscriber churn rate for the
period is calculated on a rolling 12-month basis and
represents (i) the total number of blueyonder broadband
subscribers who terminated their services or whose services
were terminated during such period, divided by (ii) the
average number of blueyonder broadband subscribers in such
period.
(5) Average monthly revenue per blueyonder broadband subscriber
for each period represents (i) the average monthly blueyonder
broadband revenue for such period, divided by (ii) the average
number of blueyonder broadband subscribers in such period.
(6) Residential telephony penetration rate at a specified date
represents (i) the total number of residential cable telephony
subscribers at such date divided by (ii) the total number of
homes passed and marketed for residential cable telephony at
such date.
(7) Average residential telephony subscriber churn rate for the
period is calculated on a rolling 12-month basis and
represents (i) the total number of residential cable telephony
subscribers who terminated telephony services or whose
services were terminated during such period, divided by (ii)
the average number of residential cable telephony subscribers
in such period.
(8) Average monthly revenue per residential telephony line for
each period represents (i) the average monthly residential
cable telephony revenue for such period, divided by (ii) the
average number of residential cable telephony lines in such
period.
(9) Average monthly revenue per residential telephony subscriber
for each period represents (i) the average monthly residential
cable telephony revenue for such period, divided by (ii) the
average number of residential cable telephony subscribers in
such period.
(10) Cable television penetration at a specified date represents
(i) the total number of cable television subscribers at such
date, divided by (ii) the total number of homes passed and
marketed for cable television at such date.
(11) Average cable television subscriber churn rate for the period
is calculated on a rolling 12-month basis and represents (i)
the total number of cable television subscribers who
terminated basic services or whose services were terminated
during such period, divided by (ii) the average number of
cable television subscribers in such period.
(12) Average monthly revenue per cable television subscriber for
each period represents (i) the average monthly cable
television revenue for such period, divided by (ii) the
average number of cable television subscribers in such period.
(13) Average number of business lines per customer account at a
specified date represents (i) the number of business cable
telephony lines at such date, divided by (ii) the average
number of business cable telephony customer accounts at such
date.
(14) Average annualised monthly revenue per business line
represents (i) the average monthly business services revenue
for the 12 months to date, divided by (ii) the average number
of business lines in such period.
(15) Average annualised revenue per customer account represents
(i) the average monthly business services revenue for the
12 months to date, divided by (ii) the average number of
business services customers in such period, multiplied by
12 months.
(16) Basic viewing over 24 hours in pay-TV homes.
(17) Includes Flextech's wholly owned channels and UKTV's
advertising revenues.
8
TELEWEST COMMUNICATIONS PLC
UK GAAP
SUMMARISED UNAUDITED CONSOLIDATED PROFIT AND LOSS ACCOUNTS
FOR THE SIX MONTHS ENDED 30 JUNE
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
30 JUNE 30 JUNE 30 JUNE 30 JUNE 31 DEC
2003 2003 2003 2002 2002
BEFORE EXCEPTIONAL TOTAL TOTAL TOTAL
EXCEPTIONAL ITEMS AUDITED
ITEMS (NOTE 7)
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
TURNOVER
Consumer Division:
Cable television 158 - 158 173 336
Telephony 237 - 237 251 495
Internet and other 55 - 55 34 63
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
450 - 450 458 894
Business Division 137 - 137 131 267
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
TOTAL CABLE DIVISION 587 - 587 589 1,161
CONTENT DIVISION
Programming, transactional and interactive revenues 53 - 53 52 106
Share of joint ventures' turnover (UKTV) 34 - 34 33 64
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
TOTAL CONTENT DIVISION 87 - 87 85 170
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
TOTAL TURNOVER 674 - 674 674 1,331
Less: share of joint ventures' turnover (34) - (34) (33) (64)
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
GROUP TURNOVER (note 1) 640 - 640 641 1,267
TOTAL OPERATING COSTS (note 2) (682) (7) (689) (767) (3,119)
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
GROUP OPERATING LOSS (note 1) (42) (7) (49) (126) (1,852)
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
Group Turnover 640 - 640 641 1,267
Operating expenses before depreciation and amortisation (432) (7) (439) (465) (937)
-------------- -------------- ------------ ------------ -----------
EBITDA (note1) 208 (7) 201 176 330
Depreciation and amortisation (note 2) (250) - (250) (302) (2,182)
-------------- -------------- ------------ ------------ -----------
Group operating loss (42) (7) (49) (126) (1,852)
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
SHARE OF OPERATING PROFITS OF JOINT VENTURES 10 - 10 6 10
SHARE OF OPERATING (LOSSES)/PROFITS OF ASSOCIATED UNDERTAKINGS (2) - (2) 1 (1)
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
TOTAL OPERATING LOSS (34) (7) (41) (119) (1,843)
(LOSS)/GAIN ON DISPOSAL OF INVESTMENTS (1) - (1) 33 36
INTEREST RECEIVABLE AND SIMILAR INCOME (note 3) 81 - 81 194 309
AMOUNTS WRITTEN OFF INVESTMENTS - - - - (117)
INTEREST PAYABLE AND SIMILAR CHARGES (note 4) (245) - (245) (347) (603)
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
LOSS ON ORDINARY ACTIVITIES BEFORE TAXATION (199) (7) (206) (239) (2,218)
TAX ON LOSS ON ORDINARY ACTIVITIES (2) - (2) - (1)
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
LOSS ON ORDINARY ACTIVITIES AFTER TAXATION (201) (7) (208) (239) (2,219)
MINORITY INTERESTS - - - - 1
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
LOSS FOR THE FINANCIAL PERIOD (201) (7) (208) (239) (2,218)
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
BASIC AND DILUTED LOSS PER ORDINARY SHARE (pence) (7.0) (0.2) (7.2) (8.3) (77.2)
- -------------------------------------------------------------- -------------- -------------- ------------ ------------ -----------
The financial information presented above reflects the continuing operations of
the business. The consolidated financial information set out on pages 9 to 13,
has been prepared on a going concern basis, applying the accounting policies set
out in Telewest's 2002 Annual Financial Statements; the appropriateness of the
going concern basis is discussed further on page 3. The audited consolidated
financial information set out pages 9 to 13, does not constitute the Company's
statutory accounts for the year ended 31 December 2002 but is derived from those
accounts. Statutory accounts for 2002 were delivered to the Registrar of
Companies following the Company's Annual General Meeting on 12 June 2003. The
auditors have reported on those accounts; their report was unqualified and did
not contain statements under section 237(2) or (3) of the Companies Act 1985.
9
TELEWEST COMMUNICATIONS PLC
UK GAAP
SUMMARISED UNAUDITED CONSOLIDATED BALANCE SHEETS
AS AT 30 JUNE
- ---------------------------------------------------------------------------------------------------------------------------------
30 JUNE 30 JUNE 31 DEC
2003 2002 2002
AUDITED
(POUND)M (POUND)M (POUND)M
- ---------------------------------------------------------------------------------------------------------------------------------
FIXED ASSETS
Intangible assets 152 1,693 157
Tangible assets 3,263 3,507 3,398
Investment in joint ventures:
Share of gross assets 50 28 45
Goodwill 234 320 241
Share of gross liabilities (146) (131) (146)
Loans to joint ventures 196 216 208
--------- --------- ---------
334 433 348
Investments in associated undertakings and
participating interests 6 101 8
Other investments - - -
--------- --------- ---------
340 534 356
- ---------------------------------------------------------------------------------------------------------------------------------
3,755 5,734 3,911
- ---------------------------------------------------------------------------------------------------------------------------------
CURRENT ASSETS
Stocks 39 76 28
Debtors 186 248 210
Secured cash deposits restricted for more than one year 12 12 12
Cash at bank and in hand 405 341 390
- ---------------------------------------------------------------------------------------------------------------------------------
642 677 640
CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
(includes convertible debt of(pound)891m,(pound)nil
and(pound)282m, Respectively) (5,480) (669) (4,410)
- ---------------------------------------------------------------------------------------------------------------------------------
NET CURRENT (LIABILITIES)/ASSETS (4,838) 8 (3,770)
- ---------------------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS LESS CURRENT LIABILITIES (1,083) 5,742 141
CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE
YEAR (includes convertible debt of(pound)nil,(pound)897m
and(pound)608m, respectively) (916) (5,554) (1,932)
MINORITY INTERESTS 1 - 1
- ---------------------------------------------------------------------------------------------------------------------------------
NET (LIABILITIES)/ASSETS (1,998) 188 (1,790)
- ---------------------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
EQUITY SHAREHOLDERS' (DEFICIT)/FUNDS (1,998) 188 (1,790)
- ---------------------------------------------------------------------------------------------------------------------------------
10
TELEWEST COMMUNICATIONS PLC
UK GAAP
SUMMARISED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE
- ------------------------------------------------------------------------------ --------------- --------------- ---------------
30 JUNE 30 JUNE 31 DEC
2003 2002 2002
AUDITED
(POUND)M (POUND)M (POUND)M
- ------------------------------------------------------------------------------ --------------- --------------- ---------------
NET CASH INFLOW FROM OPERATING ACTIVITIES (note 5) 223 181 391
- ------------------------------------------------------------------------------ --------------- --------------- ---------------
DIVIDENDS RECEIVED FROM ASSOCIATED UNDERTAKINGS - - 1
- ------------------------------------------------------------------------------ --------------- --------------- ---------------
RETURNS ON INVESTMENT AND SERVICING OF FINANCE
Interest received 6 1 7
Interest received from joint ventures 5 4 12
Interest paid (89) (185) (287)
Dividend paid to minority interests in subsidiary undertaking - (1) (1)
Interest element of finance lease payments (10) (9) (18)
- ------------------------------------------------------------------------------ --------------- --------------- ---------------
NET CASH OUTFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE (88) (190) (287)
- ------------------------------------------------------------------------------ --------------- --------------- ---------------
CAPITAL EXPENDITURE
Purchase of tangible fixed assets (111) (263) (448)
Sale of tangible fixed assets 1 - 1
- ------------------------------------------------------------------------------ --------------- --------------- ---------------
NET CASH OUTFLOW FOR CAPITAL EXPENDITURE (110) (263) (447)
- ------------------------------------------------------------------------------ --------------- --------------- ---------------
ACQUISITIONS AND DISPOSALS
Disposal of subsidiary undertakings - 10 14
Disposal of associated undertakings 6 15 59
Investments in associated undertakings and other participating interests - (1) (2)
- ------------------------------------------------------------------------------ --------------- --------------- ---------------
NET CASH INFLOW FROM ACQUISITIONS AND DISPOSALS 6 24 71
- ------------------------------------------------------------------------------ --------------- --------------- ---------------
NET CASH INFLOW/(OUTFLOW) BEFORE USE OF LIQUID RESOURCES AND FINANCING 31 (248) (271)
MANAGEMENT OF LIQUID RESOURCES
Net decrease/(increase) in term deposits 22 (291) (229)
- ------------------------------------------------------------------------------ --------------- --------------- ---------------
FINANCING
Net proceeds from borrowings under new credit facilities - 480 640
Net proceeds from maturity of forward contracts - 105 76
Repayments of loans made to joint ventures (net) 12 6 9
Repayment of SMG equity swap - - (33)
Repayment of other borrowings - (3) (2)
Capital element of vendor finance and finance lease payments (28) (21) (51)
- ------------------------------------------------------------------------------ --------------- --------------- ---------------
NET CASH (OUTFLOW)/INFLOW FROM FINANCING (16) 567 639
- ------------------------------------------------------------------------------ --------------- --------------- ---------------
INCREASE IN CASH IN THE PERIOD 37 28 139
- ------------------------------------------------------------------------------ --------------- --------------- ---------------
11
TELEWEST COMMUNICATIONS PLC
UK GAAP
NOTES TO THE SUMMARISED UNAUDITED CONSOLIDATED ACCOUNTS
FOR THE SIX MONTHS ENDED 30 JUNE
- ---------------------------------- --------- --------- ----------- --------- --------- --------- ----------- ----------
CABLE CONTENT INTER- TOTAL CABLE CONTENT INTER- TOTAL
DIVISIONAL 30 JUNE DIVISIONAL 30 JUNE
2003 2003 2003 2003 2002 2002 2002 2002
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
- ---------------------------------- --------- --------- ----------- --------- --------- --------- ----------- ----------
1 SEGMENTAL ANALYSIS
Group Turnover 587 58 (5) 640 589 59 (7) 641
Operating expenses before(pound)7m
exceptional items in 2003,
depreciation and amortisation (389) (48) 5 (432) (419) (53) 7 (465)
- ---------------------------------- --------- --------- ----------- --------- --------- --------- ----------- ----------
EBITDA before exceptional items 198 10 - 208 170 6 - 176
Exceptional items (7) - - (7) - - - -
- ---------------------------------- --------- --------- ----------- --------- --------- --------- ----------- ----------
EBITDA after exceptional items 191 10 - 201 170 6 - 176
Depreciation and amortisation (245) (5) - (250) (298) (4) - (302)
- ---------------------------------- --------- --------- ----------- --------- --------- --------- ----------- ----------
GROUP OPERATING LOSS (54) 5 - (49) (128) 2 - (126)
- ---------------------------------- --------- --------- ----------- --------- --------- --------- ----------- ----------
30 JUNE 30 JUNE 31 DEC
2003 2002 2002
AUDITED
(POUND)M (POUND)M (POUND)M
- -------------------------------------------------------------------------------------- ------------ -------------- ---------------
2 TOTAL OPERATING COSTS
COST OF SALES:
Consumer programming expenses 62 65 128
Business and consumer telephony expenses 100 113 218
Content Division cost of sales 35 31 70
- -------------------------------------------------------------------------------------- ------------ -------------- ---------------
PRIME COST OF SALES (COST OF SALES BEFORE DEPRECIATION) 197 209 416
Depreciation of tangible fixed assets (Includes exceptional write down(pound)87m
in 31 Dec 2002) 238 242 577
- -------------------------------------------------------------------------------------- ------------ -------------- ---------------
435 451 993
- -------------------------------------------------------------------------------------- ------------ -------------- ---------------
ADMINISTRATION EXPENSES
Selling, general and administrative expenses (Includes exceptional items(pound)7m in
30 June 2003 and(pound)22m in 31 Dec 2002) 242 256 521
Amortisation of goodwill and intangible assets (Includes exceptional impairment
charge(pound)1,486m in 31 Dec 2002) 12 60 1,605
- -------------------------------------------------------------------------------------- ------------ -------------- ---------------
254 316 2,126
- -------------------------------------------------------------------------------------- ------------ -------------- ---------------
TOTAL OPERATING COSTS (Includes exceptional items(pound)7m in 2003 and
(pound)1,595m in 31 Dec 2002) 689 767 3,119
- -------------------------------------------------------------------------------------- ------------ -------------- ---------------
3 INTEREST RECEIVABLE AND SIMILAR INCOME
Interest receivable 12 8 19
Exchange gains on foreign currency translation 69 186 290
- -------------------------------------------------------------------------------------- ------------ -------------- ---------------
TOTAL INTEREST RECEIVABLE AND SIMILAR INCOME 81 194 309
- -------------------------------------------------------------------------------------- ------------ -------------- ---------------
4 INTEREST PAYABLE AND SIMILAR CHARGES
Share of interest of associated undertakings and joint ventures 4 6 9
On bank loans 71 61 135
Finance costs of Notes and Debentures 162 169 325
Finance charges payable in respect of finance leases and hire purchase contracts 8 9 17
Exchange losses on foreign currency translation - 93 74
Other (Includes exceptional items(pound)31m in 31 Dec 2002) - 9 43
- -------------------------------------------------------------------------------------- ------------ -------------- ---------------
TOTAL INTEREST PAYABLE AND SIMILAR CHARGES (Includes exceptional items(pound)31m
in 31 Dec 2002) 245 347 603
- -------------------------------------------------------------------------------------- ------------ -------------- ---------------
12
TELEWEST COMMUNICATIONS PLC
UK GAAP
NOTES TO THE SUMMARISED UNAUDITED CONSOLIDATED ACCOUNTS (CONTINUED)
FOR THE SIX MONTHS ENDED 30 JUNE
- -------------------------------------------------------------------------------- ------------ -------------- -------------
30 JUNE 30 JUNE 31 DEC
2003 2002 2002
AUDITED
(POUND)M (POUND)M (POUND)M
- -------------------------------------------------------------------------------- ------------ -------------- -------------
5 RECONCILIATION OF OPERATING LOSS TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Group operating loss (49) (126) (1,852)
Depreciation of tangible fixed assets 238 242 490
Exceptional impairment of tangible fixed assets - - 87
Amortisation of goodwill and intangible assets 12 60 119
Exceptional impairment of goodwill - - 1,486
(Increase)/decrease in stocks and programming inventory (11) (10) 7
Decrease/(increase) in debtors 16 (15) 24
Increase in creditors 17 30 30
- -------------------------------------------------------------------------------- ------------ -------------- -------------
NET CASH INFLOW FROM OPERATING ACTIVITIES 223 181 391
- -------------------------------------------------------------------------------- ------------ -------------- -------------
6 NET DEBT
Net debt, other than short-term creditors and accruals
- -------------------------------------------------------------------------------- ------------ -------------- -------------
Convertible Notes 891 897 890
Other Notes and Debentures 2,517 2,657 2,529
Bank facility 2,000 1,807 2,000
Other loans 8 42 9
Vendor financing and obligations under finance leases and hire
purchase contracts 203 246 231
- -------------------------------------------------------------------------------- ------------ -------------- -------------
TOTAL DEBT 5,619 5,649 5,659
Less cash at bank and in hand (405) (341) (390)
- -------------------------------------------------------------------------------- ------------ -------------- -------------
NET DEBT (before restricted cash deposits) 5,214 5,308 5,269
- -------------------------------------------------------------------------------- ------------ -------------- -------------
7 EXCEPTIONAL ITEMS
During the six months ended 30 June 2003, the Group incurred (pound)7 million of
exceptional legal and professional costs in respect of its balance sheet
restructuring.
13
TELEWEST COMMUNICATIONS PLC
UK GAAP
SUMMARISED UNAUDITED QUARTERLY CONSOLIDATED PROFIT AND LOSS ACCOUNTS
FOR THE QUARTERS ENDED
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
30 JUNE 31 MAR 31 DEC 30 SEPT 30 JUNE
2003 2003 2002 2002 2002
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
TURNOVER
Consumer Division:
Cable television 79 79 81 82 88
Telephony 120 117 122 122 125
Internet and other (31 Dec 2002 before exceptional item of(pound)16m) 29 26 23 22 18
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
228 222 226 226 231
Business Division 68 69 68 68 67
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
TOTAL CABLE DIVISION 296 291 294 294 298
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
Content Division
Programming, transactional and interactive 26 27 27 27 26
revenues
Share of joint ventures' turnover (UKTV) 17 17 16 15 16
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
TOTAL CONTENT DIVISION 43 44 43 42 42
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
TOTAL TURNOVER (see 1 below) 339 335 337 336 340
Less: share of joint ventures' turnover (17) (17) (16) (15) (16)
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
GROUP TURNOVER 322 318 321 321 324
TOTAL OPERATING COSTS before exceptional items (342) (340) (375) (382) (389)
EXCEPTIONAL ITEMS (see 2 below) (4) (3) (1,611) - -
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
GROUP OPERATING LOSS (after exceptional items) (24) (25) (1,665) (61) (65)
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
Group Turnover (31 Dec 2002 before exceptional VAT adjustment) 322 318 321 321 324
Operating expenses (before exceptional items, depreciation and
amortisation) (214) (218) (223) (227) (234)
---------- ------------ ------------ ------------ ----------
EBITDA (before exceptional items) 108 100 98 94 90
Exceptional items (4) (3) (38) - -
---------- ------------ ------------ ------------ ----------
EBITDA (after exceptional items) 104 97 60 94 90
Depreciation and amortisation (128) (122) (152) (155) (155)
Exceptional item - impairment of tangible assets - - (87) - -
Exceptional item - impairment of goodwill - - (1,486) - -
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
Group operating loss (after exceptional items) (24) (25) (1,665) (61) (65)
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
LOSS FOR THE FINANCIAL PERIOD (after exceptional items) (21) (187) (1,821) (158) (73)
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
BASIC AND DILUTED LOSS PER ORDINARY SHARE (pence) (0.7) (6.5) (63.3) (5.6) (2.5)
- ---------------------------------------------------------------------- ---------- ------------ ------------ ------------ ----------
1 - Total turnover in 31 Dec 2002 is stated before an exceptional item of
(pound)16m.
2 - Exceptional items: in 30 June 2003 (pound)4m and 31 Mar 2003 (pound)3m and
in 31 Dec 2002 (pound)1,611m comprised of (pound)1,595m charged to operating
costs and (pound)16m charged to turnover.
14
TELEWEST COMMUNICATIONS PLC
UK GAAP
SUMMARISED UNAUDITED QUARTERLY CONSOLIDATED ACCOUNTS
FOR THE QUARTERS ENDED
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
30 JUNE 31 MAR 31 DEC 30 SEPT 30 JUNE
2003 2003 2002 2002 2002
(POUND)M (POUND)M (POUND)M (POUND)M (POUND)M
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
TOTAL OPERATING COSTS
COST OF SALES:
Consumer programming expenses 30 32 32 31 32
Business and consumer telephony expenses 49 51 53 52 58
Content Division cost of sales 18 17 22 17 15
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
PRIME COST OF SALES (COST OF SALES BEFORE DEPRECIATION) 97 100 107 100 105
Depreciation of tangible fixed assets 122 116 123 125 125
Exceptional write down of tangible fixed assets - - 87 - -
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
219 216 317 225 230
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
ADMINISTRATION EXPENSES:
Selling, general and administrative expenses 117 118 116 127 129
Exceptional selling, general and administrative expenses 4 3 22 - -
Amortisation of goodwill and intangible assets 6 6 29 30 30
Exceptional impairment of goodwill - - 1,486 - -
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
127 127 1,653 157 159
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
TOTAL OPERATING COSTS 346 343 1,970 382 389
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
INTEREST RECEIVABLE AND SIMILAR INCOME
Interest receivable 6 6 6 5 5
Exchange gains on foreign currency translation 117 - 46 58 104
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
TOTAL INTEREST RECEIVABLE AND SIMILAR INCOME 123 6 52 63 109
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
INTEREST PAYABLE AND SIMILAR CHARGES
Share of interest of associated 3 1 2 1 2
undertakings and joint ventures
On bank loans 35 36 38 36 32
Finance costs of Notes and Debentures 81 81 72 84 85
Finance charges payable in respect of 4 4 4 4 6
finance leases and hire purchase contracts
Exchange losses on foreign currency translation - 48 (13) (6) 22
Other (31 Dec 2002 includes exceptional items(pound)31m) (1) 1 32 2 6
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
TOTAL INTEREST PAYABLE AND SIMILAR CHARGES 122 171 135 121 153
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
NET DEBT
Net debt, other than short-term creditors and accruals
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
Convertible Notes 891 901 890 893 897
Other Notes and Debentures 2,517 2,591 2,529 2,560 2,657
Bank facility 2,000 2,000 2,000 1,969 1,807
Other loans 8 8 9 35 42
Vendor financing and obligations under finance 203 207 231 221 246
leases and hire purchase contracts
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
TOTAL DEBT 5,619 5,707 5,659 5,678 5,649
Less cash at bank and in hand (405) (390) (390) (351) (341)
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
NET DEBT 5,214 5,317 5,269 5,327 5,308
- ------------------------------------------------------------- ------------ ------------ ------------ ------------ ------------
15
TELEWEST COMMUNICATIONS PLC
- --------------------------------------------------------------------------------
INDEPENDENT REVIEW REPORT BY KPMG AUDIT PLC TO TELEWEST COMMUNICATIONS PLC
Introduction
We have been instructed by the Company to review the financial information set
out on pages 9 to 15 and we have read the other information contained in the
interim report and considered whether it contains any apparent misstatements or
material inconsistencies with the financial information.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the Company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Company for
our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing the preceding annual accounts except where they
are to be changed in the next annual accounts in which case any changes, and the
reasons for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4: Review of interim financial information issued by the Auditing Practices
Board. A review consists principally of making enquiries of Group management and
applying analytical procedures to the financial information and underlying
financial data and, based thereon, assessing whether the accounting policies and
presentation have been consistently applied unless otherwise disclosed. A review
is substantially less in scope than an audit performed in accordance with
Auditing Standards and therefore provides a lower level of assurance than an
audit. Accordingly we do not express an audit opinion on the financial
information.
Going concern
In arriving at our review conclusion, we have considered the adequacy of the
disclosures made in the financial information on pages 9 to 15 concerning the
uncertainty as to the ability of the Group to continue to meet its debts as they
fall due, which is dependent upon the successful conclusion of the financial
restructuring currently underway. In view of the significance of this
uncertainty, we consider that it should be brought to your attention, but our
review conclusion is not modified in this respect.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 30 June 2003.
KPMG Audit Plc
Chartered Accountants
London, England
31 July 2003
16
TELEWEST COMMUNICATIONS PLC
US GAAP
SUMMARISED UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED 30 JUNE
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
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
2003 2003 2002 2003 2003 2002
$M (POUND)M (POUND)M $M (POUND)M (POUND)M
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
REVENUE
Cable television 131 79 88 261 158 173
Consumer telephony 198 120 125 392 237 251
Internet and other 48 29 18 91 55 34
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
TOTAL CONSUMER DIVISION 377 228 231 744 450 458
Business Services Division 114 69 77 230 139 143
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
TOTAL CABLE DIVISION 491 297 308 974 589 601
Content Division 43 26 26 87 53 52
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
TOTAL REVENUE 534 323 334 1,061 642 653
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
OPERATING COSTS AND EXPENSES
Consumer programming expenses (49) (30) (32) (102) (62) (65)
Business and consumer telephony expenses (81) (49) (58) (165) (100) (113)
Content expenses (30) (18) (15) (58) (35) (31)
Depreciation (169) (102) (129) (327) (198) (246)
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
Cost of sales (329) (199) (234) (652) (395) (455)
Selling, general and administrative expenses (200) (121) (129) (400) (242) (258)
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
(529) (320) (363) (1,052) (637) (713)
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
OPERATING PROFIT/(LOSS) 5 3 (29) 9 5 (60)
OTHER INCOME/(EXPENSE)
Interest income 10 6 7 20 12 7
Interest expense (197) (119) (131) (403) (244) (252)
Foreign exchange gains, net 193 117 63 114 69 84
Share of net (losses)/profits of affiliates - - (5) 3 2 (1)
Other, net - - 34 (2) (1) 34
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
PROFIT/(LOSS) BEFORE INCOME TAXES 11 7 (61) (259) (157) (188)
Income tax benefit 2 1 2 3 2 4
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
NET PROFIT/(LOSS) 13 8 (59) (256) (155) (184)
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
Basic and diluted profit/(loss) per
ordinary share $0.00 (pound)0.00 (pound)(0.02) $(0.09) (pound)(0.05) (pound)(0.06)
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
Operating profit/(loss) 5 3 (29) 9 5 (60)
Add: depreciation 169 102 129 327 198 246
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
EBITDA (AFTER NON-CASH SHARE-BASED
COMPENSATION CREDIT) 174 105 100 336 203 186
Less: non-cash share-based compensation
credit - - (1) - - (1)
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
EBITDA (BEFORE NON-CASH SHARE-BASED
COMPENSATION CREDIT) 174 105 99 336 203 185
- --------------------------------------------- ---------- ------------ --------------- -------------- -------------- ---------------
The consolidated financial information as set out on pages 17 to 19, which is
unaudited, has been prepared on the basis of the accounting policies set out in
Telewest's Annual Report, other than where changes are necessary to implement
new accounting standards. The economic environment in which the Company operates
is the United Kingdom and hence its reporting currency is Pounds Sterling
("(pound)"). Merely for convenience, the financial statements contain
translation of certain Pounds Sterling amounts into US Dollars ("$") at $1.6529
per (pound)1.00, the noon buying rate of the Federal Reserve Bank of New York on
30 June 2003. 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.
17
TELEWEST COMMUNICATIONS PLC
US GAAP
SUMMARISED UNAUDITED CONSOLIDATED BALANCE SHEETS
AS AT 30 JUNE
- --------------------------------------------------------------- ---------------- -------------- ------------
30 JUNE 30 JUNE 31 DEC
2003 2003 2002
$M (POUND)M (POUND)M
- --------------------------------------------------------------- ---------------- -------------- ------------
ASSETS
Cash and cash equivalents 669 405 390
Secured cash deposits restricted for more than one year 20 12 12
Receivables and prepaid expenses 314 190 215
- --------------------------------------------------------------- ---------------- -------------- ------------
Total current assets 1,003 607 617
Investments 603 365 376
Property and equipment 4,137 2,503 2,598
Goodwill and other intangibles 739 447 447
Inventory 65 39 28
Other assets 56 34 40
- --------------------------------------------------------------- ---------------- -------------- ------------
TOTAL ASSETS 6,603 3,995 4,106
- --------------------------------------------------------------- ---------------- -------------- ------------
LIABILITIES
Debt 8,962 5,422 5,450
Other liabilities 1,813 1,097 1,030
- --------------------------------------------------------------- ---------------- -------------- ------------
TOTAL LIABILITIES 10,775 6,519 6,480
MINORITY INTERESTS (2) (1) (1)
SHAREHOLDERS' DEFICIT (4,170) (2,523) (2,373)
- --------------------------------------------------------------- ---------------- -------------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' DEFICIT 6,603 3,995 4,106
- --------------------------------------------------------------- ---------------- -------------- ------------
18
TELEWEST COMMUNICATIONS PLC
US GAAP
SUMMARISED UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED 30 JUNE
- -------------------------------------------------------------------------------- --------------- -------------- --------------
30 JUNE 30 JUNE 30 JUNE
2003 2003 2002
$M (POUND)M (POUND)M
- -------------------------------------------------------------------------------- --------------- -------------- --------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss (256) (155) (184)
Adjustments to reconcile net loss to net cash provided by/(used in) operating
activities:
Depreciation 327 198 246
Amortisation of deferred financing costs and issue discount on Senior Discount
Debentures 91 55 55
Deferred tax credit (3) (2) (4)
Unrealised gains on foreign currency translation (114) (69) (84)
Non-cash share-based compensation credit - - (1)
Share of net (profits)/losses of affiliates (3) (2) 1
Loss on disposal of assets 2 1 -
Changes in operating assets and liabilities, net of effect of acquisition of
subsidiaries:
Change in receivables 53 32 (5)
Change in prepaid expenses (23) (14) 18
Change in other assets (20) (12) 7
Change in accounts payable 26 16 (39)
Change in other liabilities 145 88 (23)
- -------------------------------------------------------------------------------- --------------- -------------- --------------
NET CASH PROVIDED BY/(USED IN) OPERATING ACTIVITIES 225 136 (13)
NET CASH USED IN INVESTING ACTIVITIES (152) (92) (229)
NET CASH (USED IN)/PROVIDED BY FINANCING ACTIVITIES (48) (29) 569
- -------------------------------------------------------------------------------- --------------- -------------- --------------
NET INCREASE IN CASH AND CASH EQUIVALENTS 25 15 327
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 644 390 14
- -------------------------------------------------------------------------------- --------------- -------------- --------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD 669 405 341
- -------------------------------------------------------------------------------- --------------- -------------- --------------
19