MONTREAL, QUEBEC — (Marketwired) — 10/28/15 — Today, COGECO Inc. (TSX: CGO) (“COGECO” or the “Corporation”) announced its financial results for the fourth quarter and fiscal year ended August 31, 2015, in accordance with International Financial Reporting Standards (“IFRS”).
For the fourth quarter ended August 31, 2015:
For the fiscal year ended August 31, 2015:
“We are satisfied with our financial results for the fourth quarter of fiscal 2015,” declared Louis Audet, President and Chief Executive Officer of COGECO Inc. “We have closed the year with results that are in line with expectations, demonstrating our capacity to grow, while maintaining rigorous cost control discipline.”
“We have been pleased with the results of Cogeco Cable–s subsidiary, Atlantic Broadband, and we are excited to continue our geographic expansion in the United States market with the acquisition of MetroCast Connecticut,” continued Mr. Audet. “In Cogeco Cable–s Enterprise data services segment, we have begun implementing the combination of our Cogeco Data Services and Peer 1 Hosting subsidiaries. I am very pleased to report that we can already see the benefits of this strategic decision through improved results. Once the process is complete, we can expect to continue building and strengthening our ability to attract, retain and grow a customer base that truly values the solutions and services we offer.”
“As for our Cogeco Diffusion subsidiary, we continue to maintain a strong position in the Quebec radio market, enjoying a positive quarter thanks to solid audience ratings and tight cost management,” concluded Louis Audet.
Fiscal 2016 Financial Guidelines
COGECO revised its fiscal 2016 preliminary financial guidelines, as issued on July 14, 2015, to take into consideration the expected operating results from the acquisition of MetroCast Connecticut by Atlantic Broadband, the wholly-owned subsidiary of Cogeco Cable Inc., on August 20, 2015. Please consult the “Fiscal 2016 financial guidelines” section of the Corporation–s 2015 Annual Report for further details.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this press release may constitute forward-looking information within the meaning of securities laws. Forward-looking information may relate to COGECO inc.–s (“COGECO” or the “Corporation”) future outlook and anticipated events, business, operations, financial performance, financial condition or results and, in some cases, can be identified by terminology such as “may”; “will”; “should”; “expect”; “plan”; “anticipate”; “believe”; “intend”; “estimate”; “predict”; “potential”; “continue”; “foresee”, “ensure” or other similar expressions concerning matters that are not historical facts. Particularly, statements regarding the Corporation–s financial guidelines, future operating results and economic performance, objectives and strategies are forward-looking statements. These statements are based on certain factors and assumptions including expected growth, results of operations, performance and business prospects and opportunities, which COGECO believes are reasonable as of the current date. Refer in particular to the “Corporate Objectives and Strategies” and “Fiscal 2016 Financial Guidelines” sections of the Corporation–s 2015 annual Management–s Discussion and Analysis (“MD&A”) for a discussion of certain key economic, market and operational assumptions we have made in preparing forward-looking statements. While Management considers these assumptions to be reasonable based on information currently available to the Corporation, they may prove to be incorrect.
Forward-looking information is also subject to certain factors, including risks and uncertainties that could cause actual results to differ materially from what COGECO currently expects. These factors include risks such as technological changes, changes in markets and competition, increased cord-shaving or cord-cutting of our services, increased programming costs or support structure costs, the successful implementation of our business strategies, regulatory or policy developments, non-renewal of licences or franchises, a failure to renew a critical lease, a failure of supply of equipment or services, a failure in our cable network head-ends, the inability to enhance our information systems, security breaches, malicious or abusive Internet practices, disasters or other contingencies, general and economic conditions, fluctuations in foreign exchange rates, interest rates, capital markets and changes in tax policy, strikes or labor protests, loss of key executives and the Corporation–s controlling shareholder having conflicting interests with shareholders and other stakeholders, many of which are beyond the Corporation–s control. For more exhaustive information on these risks and uncertainties, the reader should refer to the “Uncertainties and Main Risk Factors” section of the Coporation–s 2015 annual MD&A. These factors are not intended to represent a complete list of the factors that could affect COGECO and future events and results may vary significantly from what Management currently foresees. The reader should not place undue importance on forward-looking information contained in this press release and forward-looking statements contained in this press release represent Cogeco Cable–s expectations as of the date of this press release(or as of the date they are otherwise stated to be made) and are subject to change after such date. While Management may elect to do so, the Corporation is under no obligation (and expressly disclaims any such obligation) and does not undertake to update or alter this information at any particular time, whether as a result of new information, future events or otherwise, except as required by law.
All amounts are stated in Canadian dollars unless otherwise indicated. This press release should be read in conjunction with the MD&A included in the Corporation–s 2015 Annual Report, the Corporation–s consolidated financial statements and the notes thereto, prepared in accordance with the IFRS for the year ended August 31, 2015.
RESULTS OVERVIEW
This analysis should be read in conjunction with the Corporation–s 2015 Annual Report available on SEDAR at or on the Corporation–s website at corpo.cogeco.com. Please refer to the Corporation–s 2015 Annual Report for more details on the annual results.
FOURTH-QUARTER OPERATING RESULTS
OPERATING RESULTS
CONSOLIDATED
Fiscal 2015 fourth-quarter revenue increased by $29.6 million, or 5.6%, to reach $554.1 million compared to the prior year primarily due to the improvement in the Cable and Enterprise data services segment.
Fiscal 2015 fourth-quarter operating expenses increased by $14.3 million, or 4.9%, to reach $309.5 million compared to fiscal 2014. The increase in operating expenses is mainly attributable to the Cable and Enterprise data services segment operating results, partly offset by cost reduction initiatives in the radio broadcasting and out-of-home advertising business activities.
As a result of revenue growth exceeding operating expenses growth, adjusted EBITDA increased by $15.2 million, or 6.6%, to reach $244.6 million in the fourth quarter of fiscal 2015.
In the Cable and Enterprise data services segment, fiscal 2015 fourth-quarter revenue improved by $30.3 million, or 6.2%, to reach $520.4 million compared to the prior year driven by growth in its American cable services and Enterprise data services operations, with stable revenue in its Canadian cable services operations. Fiscal 2015 fourth-quarter operating expenses increased by $20.5 million, or 7.9%, at $279.8 million mainly due to favorable foreign exchange rates and organic growth, partly offset by cost reduction initiatives in its Canadian cable services and Enterprise data services operations. As a result, adjusted EBITDA increased by $9.8 million, or 4.2%, to reach $240.6 million.
CABLE AND ENTERPRISE DATA SERVICES SEGMENT CUSTOMER STATISTICS
Diagrams are available at the following address:
Fiscal 2015 fourth-quarter PSU net additions amounted to 48,947 of which 57,746 came from the acquisition of MetroCast Connecticut by Atlantic Broadband on August 20, 2015 compared to net losses of 9,934 for the same period of prior year explained as follows:
VIDEO
Fiscal 2015 fourth-quarter video service customers net additions stood at 16,618, of which 27,256 net additions came from the acquisition of MetroCast Connecticut. The net variance is due to the launch of TiVo digital advanced video services in Canada on November 3, 2014 in Ontario and on March 30, 2015 in Quebec as well as in fiscal 2014 in the United States, partly offset by promotional offers of competitors for the video services, service category maturity and the IPTV footprint growth from competitors.
INTERNET
Fiscal 2015 fourth-quarter Internet service customers grew by 29,413, of which 22,673 net additions came from the acquisition of MetroCast Connecticut. The net variance is due to the enhancement of product offering, the impact of the bundled offer of video, Internet and telephony services, the launch of TiVo–s services, promotional activities and the growth in the business sector.
TELEPHONY
Fiscal 2015 fourth-quarter telephony service customers net additions stood at 2,916, of which 7,817 net additions came from the acquisition of MetroCast Connecticut. The net variance result mainly from the increasing mobile penetration rate in North America and various unlimited offers by mobile operators causing customers to cancel their landline telephony services for mobile telephony services only.
CASH FLOW ANALYSIS
Fiscal 2015 fourth-quarter cash flow from operating activities reached $275.7 million compared to $332.2 million last year, a decrease of $56.5 million, or 17.0%, mainly as a result of the following:
Fiscal 2015 fourth-quarter cash flow from operations reached $203.9 million compared to $184.8 million last year, an increase of $19.1 million, or 10.4%, mainly as a result of the following:
BUSINESS COMBINATION IN FISCAL 2015
On August 20, 2015, Atlantic Broadband, a wholly-owned subsidiary of Cogeco Cable Inc., completed the acquisition of substantially all of the net assets of MetroCast Connecticut, which served 27,256 video, 22,673 Internet and 7,817 telephony customers at August 31, 2015. The transaction, valued at US$200 million, subject to a post-closing net working capital adjustment, was financed through a combination of cash on hand, a draw-down on the existing Revolving Facility of US$90 million and US$100 million of borrowings under a new Term Loan A-2 Facility issued under the First Lien Credit Facilities. This acquisition enhances Cogeco Cable–s footprint in the American cable market and provides for further growth potential.
The acquisition was accounted for using the purchase method. The preliminary allocation of the purchase price of MetroCast Connecticut is as follows, pending the finalization of the determination of the fair value of the net assets acquired:
ACQUISITIONS OF PROPERTY, PLANT AND EQUIPMENT, INTANGIBLE AND OTHER ASSETS
Fiscal 2015 fourth-quarter acquisition of property, plant and equipment amounted to $126.0 million compared to $165.7 million in fiscal 2014. The decrease is mainly due to the following factors in the Cable and Enterprise data services segment:
Fiscal 2015 fourth-quarter acquisition of intangible and other assets amounted to $4.8 million compared to $1.0 million in fiscal 2014 as a result of higher reconnect activities, partly offset by lower customer acquisition costs.
FREE CASH FLOW AND FINANCING ACTIVITIES
Fourth-quarter 2015 free cash flow amounted to $73.2 million, an increase of $55.0 million compared to the fourth quarter of fiscal 2014, mainly as a result of the following:
In the fourth quarter of fiscal 2015, a higher Indebtedness level resulted in a cash increase of $223.8 million, as a result of the following:
In the fourth quarter of fiscal 2014, a lower Indebtedness level resulted in a cash decrease of $120.7 million, as a result of the following:
During the fourth quarter of fiscal 2015, a quarterly eligible dividend of $0.255 per share was paid to the holders of subordinate and multiple voting shares, totaling $4.3 million, compared to a dividend paid of $0.22 per share, or $3.7 million in the fourth quarter of fiscal 2014.
FISCAL 2016 FINANCIAL GUIDELINES
CONSOLIDATED
COGECO revised its fiscal 2016 preliminary financial guidelines, as issued on July 14, 2015, to take into consideration the expected financial results from the Cable and Enterprise data services segment.
Fiscal 2016 financial guidelines are as follows:
CABLE AND ENTERPRISE DATA SERVICES SEGMENT
Cogeco Cable revised its fiscal 2016 preliminary financial guidelines, as issued on July 14, 2015, to take into consideration the expected operating results from the acquisition of MetroCast Connecticut by the Corporation–s wholly-owned subsidiary, Atlantic Broadband, on August 20, 2015 as well as the appreciation of the US dollar and British Pound currency against the Canadian dollar.
Cogeco Cable expects fiscal 2016 revenue growth to be driven by all its operating segments. In the Canadian and American cable services operations, revenue growth should stem primarily from targeted marketing initiatives to improve penetration rates of Internet services in the residential and business sectors and telephony services in the business sector while the penetration of residential telephony and video services should decrease in Canada, reflecting service category maturity and intense competition. We expect the penetration of digital video and Internet services to continue to benefit from customers– ongoing interest in TiVo–s digital advanced video services in Canada and the United States. The Canadian and American cable services operations should also benefit from the impact of rate increases in most of its services in Canada and the United States and from PSU growth in the United States. In the Enterprise data services operations, revenue growth should stem primarily from network connectivity, colocation services, managed hosting, cloud services and managed IT services due to the increasing market demand, the completion of the remaining pods of the Barrie, Ontario data centre facility as well as the construction of the first pod in fiscal 2015 of a new data centre facility in Montreal, Quebec as well as network expansions and new customer installations. Furthermore, we believe the recent operational, financial and organizational restructuring of this segment brings greater efficiencies in our operational and sales structures, and the development of a new, more focused go-to-market strategy targeting our customers– needs and will favourably position the Enterprise data services operations.
Adjusted EBITDA progression should stem from revenue growth exceeding operating expenses as a result of cost reduction initiatives from improved systems and processes and cost reductions resulting from the operational, financial and organizational restructuring in the Enterprise data services operations in fiscal 2015, partly offset by marketing initiatives and retention strategies to support the revenue growth. Operating margin should remain in the same range as in fiscal 2015 due to the improvement in the Canadian cable services operations, offset by the higher proportion on the consolidated results of the American cable services and Enterprise data services operations.
Free cash flow should increase compared to fiscal 2015 projections as a result of the improvement of the adjusted EBITDA, partly offset by additional capital expenditures. Accordingly, generated free cash flow should reduce Indebtedness, net of cash and cash equivalents, thus improving the Corporation–s net leverage ratios. The capital intensity ratio should decrease compared to fiscal 2015.
Fiscal 2016 financial guidelines are as follows:
NON-IFRS FINANCIAL MEASURES
This section describes non-IFRS financial measures used by COGECO throughout this MD&A. It also provides reconciliations between these non-IFRS measures and the most comparable IFRS financial measures. These financial measures do not have standard definitions prescribed by IFRS and therefore, may not be comparable to similar measures presented by other companies. These measures include “cash flow from operations”, “free cash flow” and “adjusted EBITDA”.
For further details on the reconciliation of these measures, please refer to the “Non-IFRS financial measures” section of the Corporation–s 2015 annual MD&A.
ADDITIONAL INFORMATION
Additional information relating to the Corporation, including its Annual Information Form, is available on the SEDAR website at or on the Corporation–s website at corpo.cogeco.com.
ABOUT COGECO
COGECO Inc. (corpo.cogeco.com) is a diversified holding corporation which operates in the communications and media sectors. Through its Cogeco Cable Inc. subsidiary, COGECO provides its residential and business customers with video, Internet and telephony services through its two-way broadband fibre networks. Cogeco Cable Inc. operates in Canada under the Cogeco Cable Canada name in Quebec and Ontario, and in the United States under the Atlantic Broadband name in western Pennsylvania, south Florida, Maryland/Delaware, South Carolina and eastern Connecticut. Through Cogeco Peer 1, Cogeco Cable Inc. provides its business customers with a suite of information technology services (colocation, network connectivity, managed hosting, cloud services and managed IT services), through its 21 data centres, extensive FastFiber Network and more than 50 points-of-presence in North America and Europe. Through its subsidiary Cogeco Diffusion, COGECO owns and operates 13 radio stations across most of Quebec with complementary radio formats serving a wide range of audiences as well as Cogeco News, its news agency. COGECO also operates Cogeco Metromedia, an out-of-home advertising company specialized in the public transit sector. COGECO–s subordinate voting shares are listed on the Toronto Stock Exchange (TSX: CGO). The subordinate voting shares of Cogeco Cable Inc. are also listed on the Toronto Stock Exchange (TSX: CCA).
Contacts:
Source:
COGECO Inc.
Patrice Ouimet
Senior Vice President and Chief Financial Officer
514-764-4700
Information:
Media
Rene Guimond
Vice-President, Public Affairs and Communications
514-764-4700
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