MONTREAL – Cogeco Inc. kicked off its fiscal 2014 with a 20.7% increase in profits thanks to growth in its cable division, and told investors that it is currently testing a new “evolved video distribution platform”.
When asked if the new initiative is designed to cut costs, generate revenue, or assist with customer retention, president and CEO Louis Audet was quick to respond with “all of the above.”
“We anticipate that, in the fullness of time, the equipment to support this new advanced video platform will in fact be more advantageous than some of the proprietary technology that we are locked to in the cable industry, historically”, he said Tuesday morning during a conference call with analysts. “…Having an all-digital network and operating it as an all-digital network and with fibre deeper in to the network does to lead to operating cost savings… and yes, we would seek it to be a retention tool in so far as its superior nature would induce people to stay with us, and, being a superior product, we would expect it to attract new customers.”
Audet added that the platform is in test mode now “with a small number of friendlies” and that a launch date has not yet been announced.
Profit for the first quarter ended November 30, 2013 reached $56.8 million, up from $47.1 million in the same period last year, mostly attributable to the improvement in operating income before depreciation and amortization stemming from organic growth in its cable segment and last year’s acquisitions of Atlantic Broadband and Peer 1 Networks. That amount was partly offset by additional depreciation and amortization and financial expense related to these acquisitions.
Quarterly revenue increased 41% from $366.6 million last year to $517 million, while operating income before depreciation and amortization increased 42.8% compared to the first quarter of fiscal 2013, reaching $224.0 million. Free cash flow for the quarter was $72.6 million, compared to $18.3 million year-over-year.
In its cable segment, first quarter revenue increased 44.9% to $475 million, due mostly to the operating results of the company’s recent acquisitions. Primary service units (PSUs), which represent the sum of its television, high-speed Internet and telephony service customers, topped 2.46 million of which 1.98 million are in Canada and 489,430 are in the United States.
In Canada, PSUs dropped by 4,620 in the quarter compared to an increase of 15,788 PSU for the comparable period of the prior year, mainly as a result of service category maturity and a more competitive environment for all services.
Cogeco’s Canadian television customers totalled 827,649 at quarter end, down approximately 9,000 from same period last year; its high-speed Internet customers increased by just over 10,000 to 668,257; and its telephony service customers dropped by about 4,000 to 479,596 due to the completion of a promotion.
Audet described the company's quarterly results as “one of continued growth and solid performances on all fronts with which we are quite pleased.” He added that the company’s guidance for 2014 is unchanged.
