Personal Finance

Liberty Global Hampered By Slow Start to 2017 in U.K.

A person at a laptop, overlaid with a stylized diagram of a global data network

Liberty Global plc (NASDAQ: LBTYK) was expecting 2017 to be a big growth year as it consolidated its power in European telecommunications and brought new products to market. And that vision may still take place, it's just taking a little longer than planned.

First-quarter results released this week showed there are some signs of improvement, and 2017 should still be a growth year. But not every market was growing as quickly as planned, highlighted by the U.K.'s tepid growth in the quarter.

A person at a laptop, overlaid with a stylized diagram of a global data network

Image source: Getty images.

Liberty Global plc results: The raw numbers

Metric Q1 2017 Q1 2016 Year-Over-Year Change
Sales $3.52 billion $4.28 billion (17.9%)
Operating cash flow $1.60 billion $1.99 billion (19.5%)
Free cash flow ($332.6 million) ($104.9 million) N/A

Data source: Liberty Global earnings release. Includes only European operations.

What happened with Liberty Global plc this quarter?

The results above look bad on the surface, but they're due more to accounting changes than to a deterioration in the business. Here's a look at some of the highlights to keep in mind from the quarter:

  • Most of the decline in revenue was driven by the deconsolidation of Liberty Global's joint venture in the Netherlands, VodafoneZiggo. Without this financial change, revenue was up 2% on a rebased basis.
  • Organic customer additions in Europe were 244,300, which included a loss of just 15,000 revenue-generating units on the video side. Mobile and broadband have seen consistent growth the last few years, but video has been where the entire industry has struggled.
  • Rebased revenue growth in the U.K. and Ireland, which accounted for 43% of total group revenue, grew 2% on a rebased basis. And rebased operating cash flow growth was just 1%.
  • Germany had rebased revenue growth of 6%, and a 5% increase in operating cash flow growth.
  • Management is targeting $2 billion in share buybacks by the end of 2017.

What management had to say

Management said conditions in the U.K. and Belgium were weaker than expected, causing the reduction in operating cash flow guidance from 6% to 7% to a new expectation of 5% for 2017. While this is a surprise reduction, management did say they expect second-half performance to improve as new products -- like a 4K set-top box and 4G quad-play offering -- hit the market.

Looking forward

A steady increase in the customer base is helping drive Liberty Global's results, and with 4K TV and more bundled offerings coming, there will be more opportunities for growth. Short-term, the reduction in operating cash flow guidance is a bit worrisome, but it sounds like it's more of a delay in expected growth than a fundamental flaw in the business model.

Liberty Global has the right set of products for the modern economy; with its customer base expanding, 2017 should be another solid year for shareholders, despite the small reduction in expected growth.

10 stocks we like better than Liberty Global

When investing geniuses David and Tom Gardner have a stock tip, it can pay to listen. After all, the newsletter they have run for over a decade, Motley Fool Stock Advisor , has tripled the market.*

David and Tom just revealed what they believe are the 10 best stocks for investors to buy right now... and Liberty Global wasn't one of them! That's right -- they think these 10 stocks are even better buys.

Click here to learn about these picks!

*Stock Advisor returns as of May 1, 2017

Travis Hoium has no position in any stocks mentioned. The Motley Fool recommends Liberty Global. The Motley Fool has a disclosure policy .

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

In This Story


Other Topics


Latest Personal Finance Videos

    The Motley Fool

    Founded in 1993 in Alexandria, VA., by brothers David and Tom Gardner, The Motley Fool is a multimedia financial-services company dedicated to building the world's greatest investment community. Reaching millions of people each month through its website, books, newspaper column, radio show, television appearances, and subscription newsletter services, The Motley Fool champions shareholder values and advocates tirelessly for the individual investor. The company's name was taken from Shakespeare, whose wise fools both instructed and amused, and could speak the truth to the king -- without getting their heads lopped off.

    Learn More