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Cogeco Inc
Symbol C : CGO
Shares Issued 14,677,945
Close 2018-07-11 C$ 57.98
Recent Sedar Documents

Cogeco earns $70.12-million in Q3 2018

2018-07-11 18:06 ET - News Release

Mr. Louis Audet reports

COGECO INC. RELEASES ITS RESULTS FOR THE THIRD QUARTER OF FISCAL 2018

Cogeco Inc. has released its financial results for the third quarter ended May 31, 2018, in accordance with international financial reporting standards (IFRS).

For the third quarter of fiscal 2018:

  • Revenue increased by $69.3-million, or 11.6 per cent, to reach $668.9-million driven by growth of 12.7 per cent in the communications segment, partly offset by a decrease of 7.8 per cent in the other segment. On a constant-currency basis, revenue increased by 13.7 per cent driven by growth of 15.0 per cent in the communications segment as result of the acquisition of substantially all the assets of Harron Communications LP cable systems operating under the MetroCast brand name on Jan. 4, 2018, partly offset by a decrease of 7.8 per cent in the other segment, resulting mainly from a soft advertising market in the media activities.
  • Adjusted earnings before interest, taxes, depreciation and amortization increased by $31.9-million, or 12.1 per cent, to reach $296.8-million. On a constant-currency basis, adjusted EBITDA increased by 14.1 per cent mostly attributable to the improvement in the communications segment as a result of the MetroCast acquisition.
  • Profit for the period amounted to $70.1-million, of which $25.0-million, or $1.53 per share, was attributable to owners of the corporation compared with $82.1-million for the third quarter of fiscal 2017, of which $30.0-million, or $1.81 per share, was attributable to owners of the corporation, resulting mainly from increases in depreciation and amortization, and financial expense, partly offset by the improvement of adjusted EBITDA and a decrease of income taxes.
  • Free cash flow increased by $5.9-million, or 5.3 per cent, to reach $115.5-million. On a constant-currency basis, free cash flow increased by 5.2 per cent as a result of the improvement in adjusted EBITDA and a decrease in current income taxes expense, partly offset by increases in financial expense, and acquisitions of property, plant and equipment, intangible, and other assets, resulting mostly from the MetroCast acquisition.
  • (1) The indicated terms do not have standardized definitions prescribed by international financial reporting standards and, therefore, may not be comparable with similar measures presented by other companies. For more details, please consult the non-IFRS financial measures section of the management discussion and analysis.
  • Cash flow from operating activities decreased by $51.7-million, or 21.2 per cent, to reach $191.9-million mainly due to a decrease in changes in non-cash operating activities primarily due to changes in working capital, and increases in income taxes paid and financial expense paid, partly offset by the improvement of adjusted EBITDA.
  • The corporation released its fiscal 2019 preliminary guidelines. On a constant-currency and consolidated basis, the corporation expects fiscal 2019 revenue to grow between 6 per cent and 8 per cent, adjusted EBITDA between 8 per cent and 10 per cent, and free cash flow between 17 per cent and 24 per cent.
  • In June, 2018, Cogeco Communications announced that its subsidiary, Cogeco Connexion, acquired 10 spectrum licences of 2,500 megahertz in non-metropolitan areas of Ontario, from Kian Telecom, for $8-million. The transfer was approved by Innovation, Science & Economic Development (ISED) Canada on June 21, 2018. In May, 2018, Cogeco Connexion, was also the successful bidder on 23 spectrum licences of 2,500 MHz and 2,300 MHz, primarily in its Ontario and Quebec wireline footprints, in the auction for residual spectrum licences organized by ISED Canada for a total price of $24.3-million. Both transactions were completed in June, 2018, and the cost of these spectrum licences will be recorded in the fourth quarter of fiscal 2018, and will not be included in the non-IFRS definition of free cash flow and capital intensity.
  • In April, 2018, Cogeco Media announced the conclusion of an agreement to acquire 10 regional radio stations (nine located in Quebec and one in Ontario) owned by RNC Media Inc. The transaction, valued at $18.5-million, is subject to customary closing adjustments, regulatory approvals and usual closing conditions.
  • At its July 11, 2018, meeting, the board of directors of Cogeco declared a quarterly eligible dividend of 39 cents compared with 34 cents per share paid in the comparable period of fiscal 2017.

For the nine-month period ended May 31, 2018:

  • Revenue increased by $109.1-million, or 6.2 per cent, to reach $1.88 billion. On a constant-currency basis, revenue increased by 8.1 per cent driven by growth of 8.9 per cent in the communications segment mainly as a result of the MetroCast acquisition, partly offset by a decrease of 5.9 per cent in the other segment, resulting mainly from a soft advertising market in the media activities.
  • Adjusted EBITDA increased by $41.5-million, or 5.3 per cent, to reach $825.6-million. On a constant-currency basis, adjusted EBITDA increased by 7.0 per cent, mostly attributable to the improvement in the communications segment as a result of the MetroCast acquisition.
  • Profit for the period amounted to $295.7-million, of which $100.5-million, or $6.13 per share, was attributable to owners of the corporation compared with $242.3-million, of which $86.7-million, or $5.21 per share, was attributable to owners of the corporation for the same period of fiscal 2017. The increase is mainly due to the $89-million ($70-million (U.S.)) reduction in deferred income taxes related to the recent U.S. tax reform and the improvement of adjusted EBITDA, partly offset by increases in depreciation and amortization, integration, restructuring and acquisition costs, and financial expense.
  • Free cash flow decreased by $49.0-million, or 14.5 per cent, to reach $289.5-million. On a constant-currency basis, free cash flow decreased by 15.5 per cent as a result of the increase in acquisitions of property, plant and equipment, intangible, and other assets combined with $18.7-million primarily in acquisition costs as well as additional financial expense mostly related to the MetroCast acquisition. The decrease was partly offset by the improvement of adjusted EBITDA and a decrease in current income taxes expense.
  • Cash flow from operating activities decreased by $207.9-million, or 33.5 per cent, to reach $412.4-million mainly due to increases in income taxes paid, changes in non-cash operating activities primarily due to changes in working capital, financial expense paid and integration, restructuring and acquisition costs, partly offset by the improvement of adjusted EBITDA.

"Over all we are satisfied with our performance for the third quarter of fiscal 2018," declared Louis Audet, president and chief executive officer of Cogeco. "At Cogeco Communications, results for our Canadian broadband services subsidiary, Cogeco Connexion, have remained stable compared with the third quarter of fiscal 2017, despite the fact that it implemented a new advanced customer management system, and had consequently temporarily reduced its marketing and sales activities during the system integration period.

"The positive results at our American broadband services subsidiary are in line with expectations following the acquisition of the MetroCast cable systems earlier this year," stated Mr. Audet. "Major integration steps are now concluded, along with the rebranding to Atlantic Broadband. We are now ready to launch TiVo and Internet speed upgrades to these customers.

"Results at our business ICT services subsidiary, Cogeco Peer 1, are stabilizing as evidenced by the trend we have been seeing over these last quarters," added Mr. Audet. "The team continues to focus on building and offering a relevant suite of solutions and providing expert advice in a constantly evolving and intensely competitive market.

"As for our radio business, Cogeco Media, advertising markets continue to be soft. Despite this, our teams are working hard to ensure our business retains the leadership position it enjoys," continued Mr. Audet. "We were very pleased to announce, on April 24, the conclusion of an agreement to acquire 10 regional radio stations owned by RNC Media Inc. The addition of these stations, following customary closing conditions, offers an excellent opportunity to further strengthen our solid position in the Quebec radio industry.

"The guidance we are providing for fiscal 2019 points to an exciting year ahead, including a significant increase in free cash flow. This is expected to be achieved while continuing to invest in our operations and upgrading our network to one-gigabit Internet speeds in approximately 60 per cent of the Canadian footprint and 85 per cent of the American footprint by year-end," concluded Mr. Audet.

An analyst conference call will be held on Thursday, July 12, 2018, at 11 a.m. Eastern Daylight Time. Media representatives may attend as listeners only.

Please use the following dial-in numbers to have access to the conference call by dialling five minutes before the start of the conference:

Canada/U.S. access number:  1-877-291-4570

International access number:  1-647-788-4919

In order to join this conference, participants are only required to provide the operator with the company name, that is, Cogeco Inc. or Cogeco Communications Inc.

                                 FINANCIAL HIGHLIGHTS
   (in thousands of dollars, except percentages, per share data and  number of shares)
                                                                        
                                             Three-months ended             Nine-months ended
                                    May 31, 2018   May 31, 2017   May 31, 2018   May 31, 2017 
Operations
Revenue                                $ 668,927      $ 599,654    $ 1,878,225    $ 1,769,159
Adjusted EBITDA                          296,769        264,831        825,631        784,141
Integration, restructuring and
acquisition costs                                                        2,260              -
Profit for the period                     70,129         82,082        295,672        242,273
Profit for the period attributable
to owners of the corporation              24,976         30,043        100,475         86,673
Cash flow 
Cash flow from operating activities      191,884        243,584        412,369        620,267
Acquisitions of property, plant and
equipment, intangible, and other
assets                                   112,250        100,742        336,331        285,122
Free cash flow                           115,502        109,639        289,462        338,433
Financial condition  
Cash and cash equivalents                                               63,559        212,283
Short-term investments                                                       -         54,000
Total assets                                                         7,202,277      5,499,376
Indebtedness                                                         3,959,874      2,633,159
Equity attributable to owners
of the corporation                                                     686,119        578,556
Per-share data  
Earnings per share
Basic                                       1.53           1.81           6.13           5.21
Diluted                                     1.51           1.80           6.08           5.17
Dividends                                   0.39           0.34           1.17           1.02

(1) The indicated terms do not have standardized definitions prescribed by the international
    financial reporting standards (IFRS) and, therefore, may not be comparable with similar
    measures presented by other companies. For more details, please consult the "non-IFRS
    financial measures" section of the MD&A.
(2) Key performance indicators presented on a constant-currency basis are obtained by translating
    financial results of the current periods denominated in U.S. dollars and British pound
    currency at the foreign exchange rates of the comparable periods of the prior year. For the
    three- and the nine-months periods ending May 31, 2017, the average foreign exchange rates
    used for translation were $1.3479 (U.S.) per $1 and 1.7036 British pounds per $1, and $1.3318
    (U.S.) per $1 and 1.6744 British pounds per $1, respectively.
(3) For the three- and nine-month periods ended May 31, 2018, integration, restructuring and
    acquisition costs were related to the MetroCast acquisition completed on Jan. 4, 2018.
(4) For the three- and nine-month periods ended May 31, 2018, acquisitions of property, plant and
    equipment, intangible, and other assets in constant-currency amounted to $115.7-million and
    $347.6-million, respectively.
(5) At May 31, 2018, and Aug. 31, 2017.
(6) Indebtedness is defined as the aggregate of bank indebtedness, balance due on a business
    combination and principal on long-term debt.
(7) Per multiple and subordinate voting shares.

About Cogeco Inc.

Cogeco is a diversified holding corporation which operates in the communications and media sectors. Through its Cogeco Communications subsidiary, Cogeco provides its residential and business customers with Internet, video and telephony services through its two-way broadband fibre networks. Cogeco Communications operates in Canada under the Cogeco Connexion name in Quebec and Ontario, and in the United States under the Atlantic Broadband name in 11 states along the East Coast, from Maine to Florida.

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