MONTREAL – Led by ongoing growth at cable division Videotron, Quebecor Media generated total revenues of $3.01 billion in 2006, an increase of $308 million or 11.4% over 2005.
All of the company’s business segments, with the exception of broadcasting (TVA), reported higher revenues. Quebecor Media’s operating income rose $69.2 million (9.4%), to $802.8 million in 2006, mainly as a result of higher operating income in the cable segment ($99.2 million or 24.0%).
"Quebecor Media continued growing its revenues and operating income in 2006," said Pierre Karl Péladeau, president and CEO, in the press release.
"The strong performance was spearheaded by the cable segment, which posted significant increases in revenue and operating income driven by record customer growth for its digital cable television, Internet access and cable telephone services. Upheaval continued in the business environment for the broadcasting and newspapers segments with the growth of new media and proliferation of content distribution platforms, leading to changing consumer habits. Quebecor Media’s strategy in response to these changes has been to turn the new challenges into business opportunities by, among other things, pursuing a convergence strategy."
Videotron’s annual customer growth saw the company add 234,800 new cable telephone customers (to 400,000+), 154,000 new high speed Internet customers (to 805,000+), 149,000 more digital cable customers (to 625,000+), and 66,300 for all cable television services combined (i.e. analog service plus illico Digital TV). It also ended the year with over 12,000 wireless telephony customers.
Despite the growth in revenue, Quebecor Media recorded a net loss of $169.7 million in 2006, compared with net income of $96.5 million in 2005. The $266.2 million drop was "essentially due to the impact of the recognition of a $342.6 million loss on debt refinancing in 2006 (compared with a $60 million loss in 2005). The refinancing operations will significantly reduce Quebecor Media’s financial expenses in comparison with the expenses that would otherwise have been incurred. Recognition of a $148.4 million non-cash charge for goodwill impairment in the broadcasting segment and a $31.6 million non-cash charge for impairment of broadcasting licences also contributed to the unfavourable variance. These unfavourable factors were partially offset by the impact of the $69.2 million increase in operating income and a $60.7 million decrease in financial expenses in 2006," reads the release.
In the fourth quarter of 2006, Quebecor Media’s revenues increased by $91.6 million (12.1%) to $847.8 million. All of Quebecor Media’s business segments reported higher revenues. Quebecor Media’s operating income rose by $26.0 million (12.2%), compared with the fourth quarter of 2005, to $239.4 million, mainly because of a $29.3 million (26.5%) increase in operating income in the cable segment.
Videotron recorded revenues of $1.31 billion in 2006, compared with $1.08 billion in 2005. The $229.2 million (21.2%) increase was due primarily to customer growth, says the company. The division generated operating income of $512.5 million in 2006, a $99.2 million (24%) increase due mainly to the higher revenues, including increases in some rates, which were partially offset by increases in some operating costs, primarily as a result of customer growth.
Videotron’s monthly average revenue per user increased by $9.51 (18.3%) from $51.86 in 2005 to $61.37 in 2006.
The cable segment generated free cash flow from operations of $138.6 million in 2006, compared with $168.6 million in 2005, a $30 million decrease. The positive impact of the increase in operating income was outweighed by a decrease in the net change in non-cash balances related to operations and increased capital expenditures.
In the fourth quarter of 2006, Videotron recorded revenues of $362.9 million, an increase of $63.8 million (21.3%). The segment’s operating income increased by $29.3 million (26.5%) to $139.8 million.
The company’s broadcast division (primarily TVA, along with Sun TV and a few specialty channels) recorded revenues of $393.3 million in 2006, an $8.1 million (2%) decrease. Revenues from broadcasting operations grew by $2.5 million (0.8%), mainly because of higher subscription revenues at the specialty channels (Mystère, ARGENT, Prise 2, LCN, Mentv and Mystery), revenues from broadcast rights and exclusive rights, revenues from commercial production, and advertising revenues at Sun TV. These increases were partially offset by a decrease in the advertising revenues of the TVA Network. Distribution revenues declined by $7.4 million in 2006, primarily as a result of decreased revenues from theatrical and video releases of films. Publishing revenues increased by $1 million (1.3%) in 2006.
The broadcasting segment generated operating income of $42.1 million in 2006, a $10.9 million (20.6%) dip. Operating income from broadcasting operations declined by $8.9 million (16.0%). The increased revenues and the impact of cost-control measures at Sun TV, as well as improved profitability at the specialty channels, did not entirely offset the impact of lower revenues and higher operating expenses at the TVA Network, including content-related costs. Operating income from distribution operations decreased by $2.0 million, mainly because of weaker results from theatrical and video releases than in 2005. Operating income from publishing operations increased by $1.1 million compared with 2005, mainly as a result of reductions in some operating costs, including printing and promotion.
In the fourth quarter of 2006, broadcast revenues amounted to $119.9 million, a slight, $300,000 (0.3%) increase. Operating income increased by $2.1 million (12.5%) to $18.9 million, primarily as a result of more favourable results from publishing operations.
