Virgin Media 2008 Annual Report Download - page 67

Content segment OCF
For the year ended December 31, 2008, Content segment OCF decreased to a loss of £2.3 million
from £12.5 million income for the same period in 2007. This decrease is mainly due to an increase in
programming costs, particularly in respect of Virgin1, together with the non recurrence in 2008 of gains
totaling £13.0 million relating to the favorable settlement of certain long standing contractual issues in
2007.
Television Channel Joint Ventures
We own 50% of the companies that comprise UKTV, a group of joint ventures formed with BBC
Worldwide. UKTV produces a portfolio of television channels based on the BBC’s program library and
other acquired programming and which are carried on Virgin Media’s cable platform and also satellite.
Some channels are also available on Freeview.
We account for our interest in UKTV under the equity method and recognized a share of net
income of £18.7 million in both the years ended December 31, 2008 and 2007, respectively. At
December 31, 2008, our investment in UKTV was carried on the balance sheet at £353.5 million, which
includes outstanding loans totaling £137.7 million.
UKTV receives financing through loans from Virgin Media, which totaled £137.7 million at
December 31, 2008. These loans effectively act as a revolving facility for UKTV. We received cash
payments from UKTV in the form of loan capital repayments of £8.6 million for the year ended
December 31, 2008. We received dividends, interest payments and payments for consortium tax relief
from UKTV totaling £38.1 million during 2008.
Additionally, we recorded a loss of £4.3 million and £1.0 million in the years ended December 31,
2008 and 2007, respectively, from our investment in our joint venture with Setanta Sports News.
Consolidated Results of Operations for the Years Ended December 31, 2007 and 2006
Revenue
For the year ended December 31, 2007, revenue increased by 13.1% to £4,073.7 million from
£3,602.2 million for the year ended December 31, 2006. This increase was primarily due to the reverse
acquisition of Telewest and the inclusion of its revenues from March 3, 2006, and to the acquisition of
Virgin Mobile and the inclusion of its revenues from July 4, 2006, as compared to their inclusion for
the full year in 2007. Offsetting this has been an underlying decline in revenue in our Cable and
Content segments due to the factors described below in our segmental results of operations for the
years ended December 31, 2007 and 2006.
Expenses
Operating costs. For the year ended December 31, 2007, operating costs, including network
expenses, increased by 16.4% to £1,830.0 million from £1,572.8 million during the same period in 2006.
This increase was primarily attributable to the reverse acquisition of Telewest and to the acquisition of
Virgin Mobile. Operating costs as a percentage of revenue increased to 44.9% for the year ended
December 31, 2007 from 43.7% for the same period in 2006, due to a decline in gross margins in our
Cable segment together with the full year impact in 2007 of the inclusion of the Telewest Content
segment subsequent to the reverse acquisition of Telewest and the new Mobile segment subsequent to
the acquisition of Virgin Mobile, since these segments have lower gross margins than our Cable
segment.
Selling, general and administrative expenses. For the year ended December 31, 2007, selling,
general and administrative expenses increased by 5.9% to £960.2 million from £906.9 million for the
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