Cogeco Q4 keeps profits stable, helped by internet demand

Cogeco Inc. announced its fourth quarter earnings on Wednesday, increasing its revenues but reporting slightly reduced profits, a drop that CEO Philippe Jetté attributed to the ongoing pandemic which “significantly impacted” advertising revenue at Cogeco’s 23 radio stations in Quebec. Overall, the company reported a 2.2 per cent increase in revenue over the quarter (running from June to August), compared to the same quarter of 2019, hitting $624.2 million, while profits dipped from just over $97.1 million to $96.7 million, a decrease of 0.4 percent. However, the economic upheaval from COVID-19 also yielded some positives, particularly at telecom service division Cogeco Communications. It saw revenue increase by 3.7 percent from $583.7 million to $605.2 million. Profit increased 1.9 percent, from $94.3 million to $96.1 million, due to increased demand for high speed internet in homes, as many Canadians and Americans continued to work at home over the summer months due to COVID-19. The American market, where Cogeco’s U.S. division Atlantic Broadband operates primarily on the east coast, was a particularly strong point here, with Cogeco seeing revenue go up by 4.9 percent year over year, in constant currency. Responding to a question from Canaccord Genuity analyst Matthew Lee during a call with analysts, Jetté said that there was no singular factor that led to that particular increase in revenue, beyond a general increase in subscribers. “Sometimes we will have big bulk agreements…that’s not the case this quarter, it was more spread the various territories. We typically grow internet but it’s been faster than usual…we think it’s in large part due to the pandemic.” Canadian subscriber numbers were a mixed bag — while Cogeco added 8,943 new internet subscribers (compared to just 2,540 in Q4 2019), it lost nearly 8,359 TV customers in the quarter. The company ended the quarter with 619,249 Canadian TV subscribers, down 4.7 per cent from a year earlier, and with 812,016 Canadian internet subscribers, a three-per-cent increase from a year earlier. The loss of TV subscribers isn’t new — Cogeco lost about the same number in Q4 of each year. However, while it was still adding phone customers in late 2019, it started shedding them in 2020, losing about 3,500 in Q4. Cogeco’s U.S. subscriber numbers were much more of a bright spot, with the company adding 20,653 for the quarter, compared to just 7,431 last year, spread across phone, cable, and internet service, but with the majority (around 13,500) as new internet subscribers. With those increases, around one-third of Cogeco’s entire subscriber base is now in the United States. Explaining those subscriber increases, Jetté suggested that Atlantic Broadband had a competitive edge over its DSL competitors in some American markets, offering higher speeds that many competitors couldn’t match. On Wednesday’s call Jetté said that broader economic fallout of COVID-19 (which he said hit the company more in Q3 than Q4) was not a major concern for Cogeco. “Despite the many challenges of the crisis...we have maintained financial discipline resulting in little overall impact on Cogeco communications’ fourth quarter and annual financial results.” Cogeco’s annual numbers were also released alongside Q4, showing a 1.4 per cent increase in the company’s revenue, as compared to its 2019 financial year. Although profits were down by 9.4 percent, this is explained by Cogeco’s sale of IT service provider Peer 1 — profits from Cogeco’s continuing services increased by 9.1 percent from $368.1 million to $401.8 million. Two months into its new financial year, Jetté said that the company is expecting a “promising” 2021 with low single-digit growth in revenue. Among Cogeco’s self-declared strengths for the new year are its acquisition of Quebec ISP and cable company DERYtelecom announced last week. That deal is set to be closed within six months, and DERYtelecom’s relatively rural customer base is a complementary addition to Cogeco’s stable, the company said. Despite ample media attention in recent weeks, Jetté made only brief mention of a hostile takeover bid from Rogers Communications Inc. and New York-based Altice USA Inc. He reiterated the definitive refusal of the takeover bid from Cogeco’s controlling shareholders, the Audet family, pointing to Cogeco’s “unique and enviable position” as the only broadband company with a sizeable presence in both the U.S. and Canada. “As all the facts are out there...there is nothing to add on this matter,“ he said. The $10.3 billion offer (later increased to $11 billion) would have seen Altice USA take control of Cogeco’s operations in the U.S., while selling Cogeco’s Canadian assets to Rogers. When discussing Cogeco’s acquisitions of Quebec companies iTéract and DERYtelecom just two minutes later, Jetté did go on to stress Cogeco’s “reputation of being a responsible and respectful acquirer” of other businesses, though he did not make an explicit comparison to Rogers or Altice. — Reporting by Tim Forster and editing by Anja Karadeglija at akarad@thewirereport.ca

Cogeco Q4 keeps profits stable, helped by internet demand

News | October 28, 2020

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Cogeco Q4 keeps profits stable, helped by internet demand

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