MONTREAL – Quebecor Inc. has posted lower second-quarter net profit due to certain one-time charges, but met or exceeded analyst expectations.
Following the announcement, Scotia Capital Research’s analyst Jeff Fan reiterated the company’s one-year target price of $45 a share on improving EBITDA and cash flow trend going into 2012. Class B shares of the Montreal-based company rose 7%, passing the $30 mark, boosted by the earnings news and plans that Quebecor would buy back roughly 10% of its outstanding stock. Yesterday, TVA Group Inc., a division of Quebecor, also announced it will suspend its dividend payments as the broadcaster spends more to launch several new channels, including Sun News.
The cable, wireless and media company reported net income last quarter of $55.2 million, compared with $60.8 million a year ago. Second-quarter profit was impacted by a $29.9 million amortization charge and $7.9 million charge from restructuring some operations. Revenue rose 6% to $1.05 billion, up $59.4 million from the second quarter of 2010. Quebecor consolidates the financial results of its Quebecor Media Inc. subsidiary, in which it holds a 54.7% interest.
Videotron added 52,700 subscribers in the second quarter for a total 4.419 million at the end of June, led by growth at its mobile service. Mobile customers grew by 45,900 in the three months to 30 June, for a total 203,800. Cable telephony customers rose by 11,800, and Internet subscribers increased by 2,900. It’s cable TV base fell by 7,900, as analog disconnections offset growth of 26,700 new digital subscribers.
In his intraday report on Quebecor, Fan writes that the second quarter sub additions and financials were better than their expectations.
“QBR announced a share buyback program, which we believe is significant because of the company’s recognition that its stock is undervalued and reflects a shareholder-friendly use of cash,” states Fan.
He notes that Q2’s $353 million consolidated EBITDA was better than their $328 million estimate and consensus of $343 million. “The upside was primarily due to the core cable business. Cable EBITDA growth improved to +1.5% versus -2% in Q1 (after wireless migration cost). Capex was lower vs. our estimate and we believe Q2 likely was the peak capex quarter due to near completion of the wireless network covering ~95% of QBR’s cable footprint.”
Quebecor’s 7,000 core cable RGU adds were “in line with our estimate and 46k wireless adds was better than our +35k estimate and up from +29k last quarter,” he writes.
"Quebecor posted revenue and operating income growth in the second quarter of 2011," said Pierre Karl Peladeau, president and CEO of Quebecor in the press release. He attributed the results to the company’s investment and development strategy and noted revenues grew in all business segments despite aggressive competition in many of those segments.
"In a fiercely competitive industry, Videotron continues to stand out and grow its customer base. Videotron had a total of 4,419,400 revenue-generating units as of June 30, 2011, an increase of 52,700 from the end of the previous quarter, 75.1% more than the increase in the corresponding period of 2010. Videotron added 45,900 subscriber connections to its mobile services network in the second quarter of 2011, exceeding targets. By June 30, 2011, Videotron’s 4G network was available to more than six million people.
"Introducing a new product entails significant capital expenditures and the revenues generated during the first months following a launch are not always sufficient to cover the higher expenses. Nevertheless, our debt ratios have been advantageously maintained since we embarked on our capital expenditures program for the mobile telephone network. In addition, the telecommunications segment increased its operating income by $9.7 million (3.7%) in the second quarter of 2011.”
