MONTREAL — Cogeco Inc. released its second quarter 2020 financial results late Tuesday while also announcing it is withdrawing its financial guidance for the fiscal year 2020 due to the economic uncertainty created by the Covid-19 pandemic.
The company says the negative impact of Covid-19 will be felt especially by its radio operations which generate revenue primarily from the retail industry, a sector hit hard by mandated closures. The company has already downsized its radio division.
For the second quarter of 2020, Cogeco reported its revenue remained essentially stable compared to the same period of 2019 and reached $610.8 million. On a constant currency basis, revenue increased by 0.8% mainly due to: an increase of 0.9% in constant currency in the communications segment, mostly as a result of its American services operations’ growth in both residential and business Internet service customers; and stable revenue in the company’s other segment, which includes Cogeco Media, mainly due to a soft radio advertising market and increased competition from other media platforms.
The company’s adjusted EBITDA decreased by 1.8% (1.4% in constant currency) to reach $279.6 million in the second quarter of 2020, mostly attributable to lower adjusted EBITDA in the communications segment and media activities, Cogeco says in the news release.
Cogeco’s profit for the second quarter of 2020 from continuing operations amounted to $113.4 million, compared to $87.6 million for the same period of fiscal 2019. The increase resulted mainly from the decrease in financial expense mostly due to a non-cash gain on debt modification as a result of the reduction of the interest rate by 0.25%, the release says.
Free cash flow decreased by 2.5% and reached $125.1 million in the second quarter of 2020. On a constant currency basis, free cash flow decreased by 2.4%, mainly as a result of the increase in acquisitions of property, plant and equipment and lower adjusted EBITDA, partly offset by the decreases in financial expense and in current income taxes.
Cash flow from operating activities increased by 14.6% to reach $234.6 million in Q2 2020, mainly due to the increase in changes in non-cash operating activities primarily due to changes in working capital and the decrease in financial expense paid, partly offset by lower adjusted EBITDA.
“Cogeco Connexion, our Canadian broadband segment, continues to operate in a highly competitive pricing market,” said Philippe Jetté, president and CEO of Cogeco Inc., in the news release. “While our subscriber numbers are satisfying, we incurred greater investments in promotions and sales and marketing activity.
“Our American broadband segment’s performance for the second quarter was in line with expectations,” added Jetté. “With its continued investments in sales and marketing activities, Atlantic Broadband has seen good subscriber growth.”
On January 10, 2020, Cogeco announced its Atlantic Broadband subsidiary had decided to buy Thames Valley Communications, a broadband services company operating in Southeastern Connecticut, for US$50 million. The transaction was completed on March 10, 2020 and is subject to post-closing adjustments, Cogeco says in the news release.
“Our results at Cogeco Media were in line with expectations,” said Jetté. “Our radio broadcasting subsidiary’s performance in the last quarter was satisfying, despite a continued soft radio advertising market. That said, the radio advertising market in Quebec has been outperforming the market in the rest of Canada during this period.
“As our world is facing an unprecedented crisis, I am heartened to see how our entire organization has come together in the face of this situation,” concluded Jetté. “At this time when access to the Internet, TV, telephony and radio services are of paramount importance, Cogeco has rapidly adapted its operations to continue to serve its customers and the communities it operates in while protecting its employees.”
The company’s news release included a statement regarding the Covid-19 pandemic. Cogeco says it has implemented several operational changes in Ontario and Quebec and the 11 U.S. states where it operates.
“Among these measures, the Corporation has proactively instructed most of its employees to work from home and for those who must work on site or on the road, the Corporation has put in place several measures to ensure the safety of its employees and its customers. We have also converted most customer visits to self installation and remote repairs, transitioned store operations to be handled remotely, increased network capacity and provided customers with temporary relief measures during the crisis. We are satisfied with the complex plan that was rapidly put into place and will continue to be alert to any additional operational changes which we believe are warranted in the circumstances,” the statement says.
