MONTREAL — Quebecor Inc. reported Thursday consolidated revenue of $1.03 billion in the second quarter of 2017 and its largest quarterly year-over-year increase in adjusted operating income in almost five years.
The company’s adjusted operating income was $395.3 million for the second quarter of 2017, up 9.7% from the $360.3 million in adjusted operating income it reported in Q2 2016.
Quebecor’s net income attributable to shareholders was $132.4 million ($1.09 per basic share) in Q2 2017, compared with $9.8 million ($0.08 per basic share) in the same period of 2016. This increase of $122.6 million ($1.01 per basic share) was primarily due to the favourable impact of an $87.8 million gain on Quebecor subsidiary Videotron’s sale of Advanced Wireless Services (AWS-1) spectrum to Rogers Communications on June 20, Quebecor said in a press release announcing its Q2 2017 financial results. Videotron sold its AWS-1 spectrum licence in Toronto to Rogers for a cash consideration of $184.2 million, and the sale was recognized in Quebecor’s second quarter of 2017.
More recently, on July 24, Videotron sold seven 2500MHz and 700MHz wireless spectrum licences outside Quebec to Shaw Communications for a cash consideration of $430 million. However, that spectrum sale will not be recognized until Quebecor’s third quarter of 2017.
Quebecor’s adjusted income from continuing operating activities was $83.2 million ($0.69 per basic share) in the second quarter of 2017, up 19.0% from $69.9 million ($0.57 per basic share) in the same quarter of 2016.
The company’s Telecommunications segment grew its revenues to $820.1 million (up $39.7 million or 5.1%) in the second quarter of 2017, and its adjusted operating income increased to $388.8 million (up $26.3 million or 7.3%) in Q2 2017. During the second quarter, Videotron significantly increased its revenues from mobile telephony (up $26.8 million or 21.8%), Internet access (up $13.9 million or 5.7%), business solutions (up $4.6 million or 17.1%) and the Club illico over-the-top video service (up $2.4 million or 32.4%).
Videotron’s average monthly revenue per user (ARPU) increased to $153.28 in the second quarter of 2017, up $10.27 or 7.2% from its $143.01 ARPU in the second quarter of 2016. Subscriber connections to Videotron’s mobile telephony service increased by 32,400 (3.5%) and subscriptions to Club illico grew by 13,100 (4.0%) in the second quarter of 2017, the company reported in its press release.
Quebecor’s Media segment increased its adjusted operating income to $15.3 million (up $8.4 million or 121.7%) in the second quarter of 2017, mainly as a result of higher advertising and subscription revenues at its broadcasting business, the company said.
However, the company’s Sports and Entertainment segment reported an adjusted operating loss of $5.5 million in the second quarter of 2017, which is an unfavourable variance of $1.4 million when compared to the segment’s $4.1 million loss reported in Q2 2016.
“Driven once again by the excellent performance of its Telecommunications segment but also by a marked improvement in the operating profitability of the Media segment, Quebecor generated significant increases in adjusted operating income and adjusted income from continuing operating activities in the second quarter of 2017,” commented Pierre Karl Péladeau, president and CEO of Quebecor, in the press release.
Péladeau noted that the company’s two major spectrum transactions in recent months have generated cash inflows of $614.2 million and total gains on disposal of assets of $330.8 million, of which $243.0 million will be recognized in the third quarter of 2017.
“Having sold those assets, Videotron intends to continue its investments; its plans include expanding and densifying its 4G network, eventual roll-out of a 5G network, and upgrading its IP wireline network. Those investments will cement Videotron’s competitive posture in the wireless and wireline markets in Québec and Eastern Ontario. Videotron continues to stand out in the mobile telephony market. According to the latest annual report from J.D. Power Canada, Videotron had the best-quality wireless network in eastern Canada for the third consecutive year,” Péladeau said.
“Quebecor’s Telecommunications segment posted another solid performance,” commented Manon Brouillette, president and CEO of Videotron. “It grew its adjusted operating income by 7.3%, the largest quarterly increase in the past 15 quarters. Videotron’s revenue generating units increased by 147,400 (2.6%) during the 12-month period ended June 30, 2017, including an increase of 124,400 subscriber connections (15.0%) to the mobile telephony service. Despite the fact that some customers temporarily interrupt their service during the traditional moving season in Québec, the number of revenue-generating units held steady in the second quarter of 2017, compared with a 16,900-unit drop in the same quarter of 2016. These results were accompanied by a notable improvement in the mobile service’s ARPU to $53.32 in the second quarter of 2017, up 5.6% from the same time last year.
“Our Club illico service also posted large gains, increasing its subscriber base by 71,300 (26.8%) in the last 12 months to a total of 337,600 at the end of the second quarter of 2017, attesting to the enthusiastic consumer response to Club illico’s diverse, high-quality offerings. Business solutions again made a positive contribution to the revenue increase as a result of our strategic acquisitions and our forward-looking investments of recent years in this high-growth-potential market,” Brouillette added.
Julie Tremblay, president and CEO of Quebecor’s Media Group, said: “In the Media segment, the broadcasting business was responsible for the 121.7% increase in the segment’s adjusted operating income, contributing a $7.5 million favourable variance compared with the second quarter of 2016. The positive results reflect the impact of higher advertising revenues at the TVA Sports specialty service and at TVA Network, combined with higher subscription revenues at TVA Sports. TVA Network and TVA Sports posted year-over-year growth in advertising revenues for the third and fourth consecutive quarters, respectively. The numbers show the positive impact of our programming strategy, the value of our content and the effectiveness of our multiplatform offerings. It is noteworthy that in the spring of 2017, TVA Sports posted the best Québec ratings since 2008 for the Stanley Cup finals, which were carried by a rival network from 2008 to 2014, attracting an average total audience of 962,000 viewers and a 36.6% market share.”
Quebecor Media’s TVA Group subsidiary reported its second quarter 2017 financial results last week. Parent company Quebecor Inc. has an 81.53% stake in Quebecor Media.
“In our film production and audiovisual services business, revenues and adjusted operating income were up because of higher volume generated by major new productions. In our magazine publishing business, we are maintaining cost-control discipline: the segment reported stable adjusted operating income in the second quarter of 2017 despite lower revenues,” Tremblay concluded.
On the financial front, Quebecor Media repurchased a portion of CDP Capital’s interest in its share capital on July 6, 2017. “It remains our goal to make Quebecor the sole shareholder in Quebecor Media when we complete the share repurchase process begun in 2012,” said Jean‑François Pruneau, senior vice-president and chief financial officer of Quebecor.
“Thanks to its solid business plan and the beneficial impact of its investments in lines of business with high growth and profitability potential, the Corporation remains in an excellent position to create shareholder value,” concluded Quebecor president and CEO Péladeau.
For the full details of Quebecor’s consolidated financial results for the second quarter of 2017, click here.
