Cogeco pre-COVID Q2 revs steady, adjusts share buyback

Amid the financial uncertainty and upheaval of the COVID-19 global pandemic, Cogeco Inc. will adjust its share repurchasing program, the company's executives told analysts on a Wednesday morning second quarter earnings call. While the company is making the adjustment to the share repurchasing program "as a precautionary measure," CEO Phillipe Jetté reiterated much of what the company's chief financial officer Patrice Ouimet said at the Desjardins’ Industrial, TMT, Diversified and Consumer Conference last month: that the company is in decent shape to weather the crisis. "Although the pandemic is expected to affect revenues and EBITDA in the short term, we do not expect a significant impact on free cash flows, as certain investment initiatives can be reprioritized," Jetté told analysts Wednesday. The company is not suspending the share repurchasing scheme, but will continue to buy back shares at a "lesser pace" than the automatic one the program had in place. The company announced revenues that were essentially flat from the corresponding quarter last year, at $586.5 million, a 0.9 per cent increase from the $584.1 million in revenue the company generated in the second quarter of 2019. The American side of Cogeco's business did slightly better in the quarter than its Canadian counterpart, with 3.7 per cent growth in revenues south of the border, compared with a 1.4 per cent decrease in revenues in Canada in constant currency terms. The American increase resulted "from growth in both residential and business Internet service customers combined with rate increases mostly implemented during the fourth quarter of fiscal 2019, partly offset by a decrease in video service customers," according to the company's financial statement. The Canadian decrease, likewise, was the result of a "decline in video service customers and lower net pricing from consumer sales primarily as a result of the carry-over effect of product bundles being promoted more actively from the fourth quarter of fiscal 2019 to the second quarter of fiscal 2020," the company said. The revenues included a profit of some $114 million for the quarter, a 41.2 per cent increase from the $80.8 million the company generated in the same period last year. The quarter ended Feb. 29, before the COVID-19 crisis began to meaningfully impact the Canadian economy. Cogeco lost some 7,493 Canadian television subscribers in the quarter, more than the 6,928 subscribers they lost in the same period last year, reducing their total to 638,833. The company also added 1,055 Canadian internet subscribers, down from the 6,008 they added in the second quarter of 2019, for a total of 795,950. The company announced on March 27 that it would temporarily lay off 130 employees due to COVID-19 across the Cogeco media divisions' administrative, sales and broadcasting services. In announcing the move, Cogeco spokesperson Nancy Bouffard said the "difficult decision was made in the context of an unprecedented economic crisis that is causing a meltdown of the advertising market which is the source of revenues for our stations.” Elsewhere on the call, the company's executives said that the company's plans for launching a wireless division would be far more impacted by the CRTC's decision-making process, than by ISED's price reduction demands. Jetté also told analysts that the company has benefited from being on both sides of the border during the COVID-19 crisis. "We've seen some directives in some areas of our network where we quickly adapted, and then that directive was actually implemented in other places throughout North America over time," he said on the call. "It's actually nice to have a presence on the Canadian and in the U.S. side, as we can quickly move a new process and new procedures through our network and we can react this way." RBC Capital Markets analyst Drew McReynolds said in a Wednesday afternoon note that the company benefited from another aspect of its cross border footprint: weakness in the Canadian dollar. "In the current environment, we believe Cogeco is well positioned to be a 'safe haven' for investors reflecting relatively high revenue exposure to what should be strong demand for Internet services. In addition, a weakening in the CAD/USD exchange rate is providing a cushion on the translation of American Broadband for reporting purposes," McReynolds wrote. — With reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Adam Langenberg at alangenberg@thewirereport.ca

Cogeco pre-COVID Q2 revs steady, adjusts share buyback

News | April 8, 2020

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Cogeco pre-COVID Q2 revs steady, adjusts share buyback

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