MONTREAL – Cogeco Inc. posted substantial growth in the first quarter of fiscal 2007, driven largely by its cable operations in Ontario, Quebec and Portugal.
In the first quarter of fiscal year 2007 revenue increased by 45.9% and operating income before amortization increased by 45.8% compared to the same period last year.
Cogeco Cable achieved one of the best revenue generating units growth of its Canadian operations history and includes results fro, Cabovisao – Televisao por Cabo, Portugal.
The media sector (Cogeco is the majority owner of TQS and also owns several radio stations) contributed to these results with better radio advertising revenue and TQS’s success with its new programming during the fall season. Net income increased by 47% compared to the same period last year as a result of substantial growth in all sectors.
Revenue and operating income before amortization are up in the media sector. "RYTHME FM revenue echoes our position in the markets, especially in Montreal where we continue to keep our leading position. As for TQS, "Loft Story III" and our fall programming attracted greater audiences, thus increasing our television revenue," said company CEO Louis Audet.
The newly acquired Portuguese operations, Cabovisao, "is on its way to achieving its 2007 financial projections supported by the increase of about 21,300 RGUs," reads the press release. "The Portuguese operations generated revenue of $54.1 million while operating income before amortization amounted to $18.3 million for an operating margin of 33.9%."
During the first quarter, the Canadian operations reported very strong RGU increases, with more than 93,000 net additions compared to about 61,000 for the same period last year. First quarter revenue grew by 17.1% compared to the same period last year, reaching $167.9 million while operating income before amortization improved by 14%, reaching $65.3 million.
For the cable sector, revenue increased by 54.8% and operating income before amortization by 46% compared to the same period last year. Cogeco’s first quarter operating margin was 37.7% compared to 40% last year due to Cabovisao’s lower but rising operating margin.
"We are very pleased with our cable results," said Audet. "The Portuguese and the Canadian operations should continue to perform well and we have revised our guidance to better reflect our expectations."
Management now expects to improve revenue from between $1.01 billion to $1.02 billion to between $1.05 billion to $1.06 billion. Operating income before amortization should reach approximately $356 million to $358 million from the $336 million to $341 million last quarter’s revised projections. Free cash flow should be revised to $5 million to $10 million from the previous projections of $15 million to $20 million due to the increase in capital expenditures to sustain RGU growth in the cable sector.
For fiscal 2007 (which ends August 31, 2007), Cogeco Cable expects to add between 287,000 and 305,000 RGUs (which are basic cable customers, plus digital, plus Internet plus voice), consolidated revenue should reach $925 million, operating income before amortization should reach approximately $355 million, while the operating margin should remain at about 38%.
The media sector is performing as expected and management maintains its initial projections for fiscal 2007, thus revenue should grow by 5% to 7% compared to fiscal 2006 and the operating income before amortization should reach $1 million to $3 million.
As of November 30, 2006, Cogeco had 849,417 basic cable customers in Canada, having added 16,240 newcomers during the three months, an increase of 49% over additions in Q1 2005. As well, with over 372,000 high speed Internet customers, penetration there is at 47%. The company also added 21,200 digital cable customers in the quarter, to 348,500. Cogeco also now has 78,931 telephony customers, rising penetration to 12.9% from just 2.7% a year ago.
The company’s Portuguese operations has 276,900 basic cable customers, 144,355 HSI customers and 229,003 telephone customers, and all segments are growing.
On the media side, revenue in the quarter was $41.3 million, an 11.4% increase over Q1 ’05 but operating costs also rose 10.4% to $38.2 million. Operating income was just over $3 million, a 24.7% increase. Operating margin was 7.4% an increase over last year’s 6.6%
