MONTREAL – Cogeco Cable said late Wednesday that it has written down its IPTV overlay project in Canada to the tune of $32.2 million in its third quarter, and will offer TiVo to its customers in Quebec and Ontario starting next year.
In its third quarter financial results, Cogeco said that it recognized an impairment of $32.2 million of property, plant and equipment, capitalized wages and borrowing costs related to an Internet Protocol Television (IPTV) solution project on which its Canadian operations had worked. “As a result of the unexpected performance issues encountered with the platform, it had to be abandoned by Cogeco Cable Canada”, reads the company press release.
Subsequently, in order to enhance its competitiveness, Cogeco Cable said its partnership with TiVo Inc., a global leader in next-generation television services that enable viewers to consume content across all screens in and out-of-the home, will be launched by mid-fiscal 2015. Cogeco Cable's subsidiary Atlantic Broadband launched TiVo earlier this year “with great customer acceptance”, the release continued.
For the third quarter ended May 31, 2014, Cogeco Cable saw revenue increase 6.9% to $496.4 million, up from $464.5 million last year, driven by growth of 3.5% in the Canadian cable services segment, of 12.2% in the American cable services segment and of 15.3% in the Enterprise services segment. Revenue increased organically from all operating units combined with favorable foreign exchange rates in its foreign operations. Profit for the third quarter, however, plunged 26.1% to $35.5 million from $48.1 million in the same period last year.
Primary service units (PSUs), which represent the sum of its television, high-speed Internet and telephony service customers, were 2.45 million of which 1.96 million are in Canada and 495,674 are in the United States.
In Canada, PSUs dropped by 5,633 in the quarter, compared to a decrease of 1,013 PSUs year-over-year, mainly as a result of service category maturity and a much more competitive environment for all services.
At quarter end, Cogeco’s Canadian television customers totalled 807,831; high-speed Internet customers reached 676,802; and telephony service customers were 471,811.
At parent Cogeco Inc., third quarter revenue increased by 6.3% to $536.1 million mainly driven by growth in the Cable segment through the organic growth from all operating segments as well as favorable foreign exchange rates in its foreign operations. Adjusted EBITDA increased by 5.5% to $233.1 million.
Profit for the third quarter fell 28.7% to $35.6 million, of which $11.5 million is attributable to owners of the Corporation, compared to profit of $50.0 million for the same period in fiscal 2013, of which $17.2 million is attributable to owners of the Corporation. The decline for the quarter is attributable to the impairment of property, plant and equipment explained above, partly offset by the improvement of the adjusted EBITDA. Third quarter free cash flow reached $91.5 million, up from $44.7 million in the comparable quarter of the prior year.
"I am happy to report that Cogeco has generated solid financial results for its third quarter of 2014. The cable segment continues to grow and most of our performance indicators are on target with our objectives”, said president and CEO Louis Audet, in a statement. “These solid results demonstrate that with strong cost controls and a dynamic marketing strategy, Cogeco Cable continues to grow in this highly competitive industry.
"Moreover, I am delighted that we were able to build on the success achieved by the TiVo video platform at our Atlantic Broadband subsidiary by extending our partnership to bring this world leading platform to our Canadian customers at our Cogeco Cable Canada subsidiary. We expect to launch by mid-fiscal 2015. Excluding the impact of the impairment related to the prior attempt at developing an alternate IPTV video platform, we expect to meet our fiscal 2014 guidance.”
As a result of revised projections in the Cable segment, Cogeco revised its consolidated projection for the 2014 fiscal year. Profit for the year should decrease from $240 million to $215 million and consequently, profit for the year attributable to owners of the Corporation should amount to $70 million compared to $77 million for the revised projections issued on April 9, 2014.
