MONTREAL – Third quarter revenues at Cogeco Inc. rose by 11.6% to $669 million in the third quarter of fiscal 2018 (ended May 31st) while adjusted earnings rose 12.1% compared to Q3 2017 to $297 million – thanks in large part to a U.S. acquisition completed in the beginning of the calendar year, the company announced Wednesday evening.
Free cash flow increased by 5.3% to $115.5 million, compared to the prior year’s quarter.
Revenue was driven by growth of 15% in the Communications segment as result of the January 2018 acquisition of Harron Communications, cablesystems operating under the MetroCast brand name, which were partly offset by a decrease of 7.8% in the company’s other divisions, due mainly to a soft advertising market at its Quebec radio stations.
Profit for the period, however, was down 14.6% in the quarter “resulting mainly from increases in depreciation and amortization and financial expense, partly offset by the improvement of adjusted EBITDA and a decrease of income taxes,” reads the press release.
The company also released its fiscal 2019 preliminary guidelines, noting it expects fiscal 2019 revenue to grow between 6% and 8%, adjusted EBITDA between 8% and 10% and free cash flow between 17% and 24%.
The company’s recent acquisitions (chunks of spectrum and radio stations) for a total of about $51 million, are not included in these results as they either happened in outside of the quarter or won’t close for a while yet.
For the full nine months of the fiscal year, revenue increased by 6.2%, to reach $1.88 billion, again driven mainly by the MetroCast acquisition, and adjusted EBITDA increased by 5.3%, to reach $825.6 million. Profit for the period was $295.7 million, compared to $242.3 million tallied in the first three quarters of 2017.
“Overall we are satisfied with our performance for the third quarter of fiscal 2018,” said Louis Audet, president and CEO, in the press release. “At Cogeco Communications, results for our Canadian broadband services subsidiary, Cogeco Connexion, have remained stable compared to the third quarter of fiscal 2017, despite the fact that it implemented a new advanced customer management system and had consequently temporarily reduced its marketing and sales activities during the system integration period.”
The company has also been suffering some customer service pain during the switchover, with many filing complaints with the Commission for Complaints for Telecom-television Services.
“The positive results at our American broadband services subsidiary are in line with expectations following the acquisition of the MetroCast cable systems earlier this year,” added Audet. “Major integration steps are now concluded, along with the rebranding to Atlantic Broadband. We are now ready to launch TiVo and Internet speed upgrades to these customers.
“Results at… Cogeco Peer 1, are stabilizing as evidenced by the trend we have been seeing over these last quarters,” Audet added.
“As for our radio business, Cogeco Media, advertising markets continue to be soft. Despite this, our teams are working hard to ensure our business retains the leadership position it enjoys.
“The guidance we are providing for fiscal 2019 points to an exciting year ahead, including a significant increase in free cash flow,” he continued in the release. “This is expected to be achieved while continuing to invest in our operations and upgrading our network to 1 gigabit Internet speeds in approximately 60% of the Canadian footprint and 85% of the American footprint by year end.”
