Business context and reporting period
Liberty Global plc filed this annual report for the fiscal year ended December 31, 2021. It provides broadband, video, fixed-line and mobile services in Europe. Its consolidated operations include Switzerland, Belgium, Ireland and Slovakia; the VodafoneZiggo and VMO2 businesses are 50%-owned joint ventures accounted for using the equity method. Poland is presented as discontinued operations following an agreed sale.
Comparisons with 2020 are materially affected by the November 2020 Sunrise acquisition and the June 1, 2021 contribution of the U.K. operations to VMO2. Unless noted, amounts below are U.S. dollars.
Financial and operating highlights
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue, continuing operations | $10.31 billion | $11.55 billion |
| Operating income | $1.32 billion | $2.03 billion |
| Adjusted EBITDA | $3.96 billion | $4.70 billion |
| Net earnings (loss) attributable to Liberty Global shareholders | $13.43 billion | ($1.63 billion) |
| Net cash from continuing operating activities | $3.36 billion | $4.02 billion |
| Adjusted free cash flow | $1.29 billion | $922 million |
| Cash capital expenditures | $1.41 billion | $1.29 billion |
Reported revenue fell 10.7%, primarily reflecting the U.K. transaction; organic revenue increased 1.1%. Adjusted EBITDA fell 15.7% reported and 1.2% organically. The filing reports segment margins: Switzerland 36.4% (44.1% in 2020), Belgium 48.3% (48.1%), U.K. 39.7% (40.4%) and Ireland 39.7% (39.3%). Switzerland’s margin was affected by the acquired Sunrise mobile business.
Reported net earnings were dominated by a $10.87 billion pretax gain on the U.K. JV transaction. Other volatile non-operating items included a $1.32 billion foreign-currency transaction gain, $623 million of derivative gains and $735 million of investment fair-value gains. These items are not a dependable indicator of recurring operating performance. Interest expense was $882 million, down from $1.19 billion.
At year-end, debt and finance lease obligations totaled $14.83 billion, including $850 million current; $13.7 billion of principal was not due until 2027 or later. Cash and cash equivalents were $911 million. The company reported $2.80 billion of investments under separately managed accounts and described corporate-level available liquidity of approximately $3.53 billion, subject to tax and legal considerations. Current assets were $5.94 billion and current liabilities $4.08 billion.
The company repurchased shares for $1.58 billion in 2021 and authorized repurchases of up to 10% of shares outstanding at the start of each of 2022 and 2023. It reported no present intention to pay cash dividends.
Material changes versus the prior period
- Revenue and expenses no longer include the U.K. operations after June 1, 2021; Liberty Global recognized its 50% VMO2 investment and a $10.87 billion transaction gain. VMO2 reported $8.52 billion revenue and $2.72 billion Adjusted EBITDA for June–December 2021, but those figures are not consolidated Liberty Global revenue or EBITDA.
- Sunrise was consolidated for a full year in 2021 versus only part of 2020, substantially increasing reported Swiss revenue and costs. Organic Swiss revenue declined 1.1%.
- Net cash from continuing operations declined $653 million. Adjusted free cash flow rose to $1.29 billion, but the company changed its definition in 2021 to include acquisition and disposition costs; it reports those costs as $80.5 million in 2021 and $34.7 million in 2020.
- Debt and finance lease obligations were broadly stable year over year, while 2021 refinancing transactions extended certain maturities and reduced interest expense.
Outlook, commentary, risks and contingencies
Management said COVID-19’s impact on the business remained relatively minimal in 2021 and demand remained strong, while cautioning that future effects are uncertain. It expects 2022 property and equipment additions to be relatively stable compared with 2021 additions excluding the U.K. JV entities. No specific consolidated revenue or earnings guidance is provided in the filing.
Key risks include intense competition and fiber overbuild, inflation and rising energy and operating costs, content costs, supply-chain and silicon shortages, cybersecurity and customer-data exposure, foreign-exchange and interest-rate movements, regulation and restrictions on subsidiary cash access. The company targets subsidiary debt levels generally equivalent to four to five times consolidated Adjusted EBITDA; it reported borrowing groups in covenant compliance at year-end and said it expects adequate resources for the next 12 months.
The sale of UPC Poland, for enterprise value of PLN 7.025 billion (approximately $1.74 billion at the stated exchange rate), was pending regulatory approval and expected to close in the first half of 2022. Proceeds were expected to help repay UPC Holding debt and support general corporate purposes, potentially including share repurchases.
Contingencies include a Proximus claim relating to Telenet’s Belgian network agreement, with damages sought of €1.4 billion; the case was remanded to the Brussels Court of Appeal, and no loss was accrued because a loss was not considered probable. Former counterparties also asserted claims of €106.2 million plus interest relating to the UPC Austria sale; no amount was accrued, and Liberty Global said it would defend the matter. The company noted possible tax-indemnity exposures from past dispositions but did not provide a meaningful range of potential losses.
Most important facts for investors to verify
- Separate the $10.87 billion U.K. transaction gain and other fair-value, derivative and currency items from recurring earnings and cash generation.
- Check the final completion terms and proceeds from the UPC Poland sale, including debt and working-capital adjustments and use of proceeds.
- Review debt maturities, borrowing-group covenants, refinancing access and the restrictions that may limit cash transfers to the parent.
- Assess organic customer, ARPU and EBITDA trends against rising costs and competitive fiber deployment; reported comparisons are affected by major perimeter changes.
- Monitor the Belgian and UPC Austria proceedings, regulatory developments, and the company’s material programming, network and purchase commitments.