The Globe and Mail

Go to the Globe and Mail homepage

Jump to main navigationJump to main content

Globe Investor

News Sources

Take control of your investments with the latest investing news and analysis

Press release from Marketwire

GVIC Reports First Quarter Results

Wednesday, May 12, 2010

GVIC Reports First Quarter Results08:00 EDT Wednesday, May 12, 2010VANCOUVER, BRITISH COLUMBIA--(Marketwire - May 12, 2010) - GVIC Communications Corp. ("GVIC" or the "Company") (TSX:GCT) reported cash flow, earnings and revenue for the period ending March 31, 2010.HighlightsGVIC's first quarter results for 2010 showed significant improvements in operations: -- Consolidated revenue increased 4.9% to $57.5 million from $54.8 million for the year prior; -- EBITA increasing 46.8% to $10.2 million from $7.0 million for the same period last year; -- Consolidated cash flow from operations (before changes in non-cash operating accounts and adjusted for non-recurring items) increased 53.2% to $8.1 million from $5.3 million for the year prior; and -- Consolidated cash flow from operations (before changes in non-cash operating accounts and adjusted for non-recurring items) per share increased 53.2% to $0.03 per share from $0.02 per share last year. Summary Results -------------------------------------------------------------------------- (thousands of dollars Three Months Ended Three Months Ended except share and per share amounts) 31-Mar-10 31-Mar-09 -------------------------------------------------------------------------- Revenue $57,488 $54,795 Gross profit $20,909 $17,862 Gross margin 36.4% 32.6% EBITA (1) $10,228 $6,969 EBITA margin (1) 17.8% 12.7% EBITA per share (1) $0.03 $0.02 Interest expense, net $2,539 $2,149 Net income before non-recurring items (1)(2) $5,039 $3,094 Net income before non-recurring items per share (1)(2) $0.02 $0.01 Net income $5,039 $2,099 Net income per share $0.02 $0.01 Cash flow from operations (1)(2) $8,056 $5,257 Cash flow from operations per share (1)(2) $0.03 $0.02 Capital expenditures $1,534 $2,444 Total assets $504,669 $509,892 Debt net of cash outstanding before deferred financing charges and other expenses $112,664 $130,218 Shareholders' equity $283,456 $268,550 Weighted average shares outstanding, net 300,425,031 300,425,031 -------------------------------------------------------------------------- (1) Refer to "Financial Measures" following for disclosure regarding non- GAAP measures used in this table. (2) Three months ended March 31, 2009 amount excludes $1.0 million restructuring expenses. Review of OperationsImproving RevenuesGVIC's revenue grew on a consolidated basis for the first time since the recession began. The improvements in the overall economy and the markets in which GVIC does business as well as concerted sales efforts are driving resumed growth in GVIC's operations.After experiencing revenue declines during the first three quarters of 2009, with the worst results occurring in the summer of 2009, GVIC's revenue began to improve in September and continued strengthening such that GVIC's revenue returned to 97.6% of 2008 levels for the fourth quarter of 2009. Consolidated revenues continued at approximately these levels in January, then grew in February and March, resulting in 2.5% consolidated revenue growth for the quarter on a same-store basis and 4.9% including several small acquisitions and a related consolidation.The trend in revenue performance is encouraging in that the majority of GVIC's businesses are experiencing growth. By March, GVIC's trade and business information operations generating revenue growth included regulatory and compliance, environmental, financial, agriculture, energy, mining, transportation, construction and design, automotive and directories.GVIC's local newspapers' revenue grew in each province within which the Company operates. This includes B.C., Alberta, Saskatchewan, Manitoba, Ontario and Quebec. It is instructive that these local newspapers were growing at approximately 8% in same-store revenue until October of 2008 while the economy was strong and have resumed growth as the economy has recovered. During 2009, despite the uncertainty instilled by the recession and its impact, same-store local newspaper revenues remained at 89% of prior year levels, where 2008 was a record year.These statistics underscore the continued effectiveness of local newspapers for readers and advertisers, and the different attributes that exist between local community newspapers and large metropolitan daily newspapers. GVIC's local newspapers offer a unique selling proposition and competitive advantage through the local information that they provide, of which they are a primary source. This information can be delivered by GVIC in print or online, or perhaps in tablet form in the future. Given that the demand for this information is expected to exist for the long term, GVIC expects to be able to continue to monetize the information and marketing value through advertising and other revenue sources. As 85% of GVIC's local newspaper distribution is free, this also provides for a more durable reach of readership for advertisers over time wherein total market coverage can always be provided.GVIC is pursuing a complementary platform strategy in which the Internet and various information delivery devices are fully utilized, and in which print delivery of quality content augmented with attractive design continues to be fully utilized. While the Internet offers many attractive new opportunities, the print platform well provided continues to offer effective utility to both readers and advertisers. GVIC will seek to drive incremental growth from all platforms where possible, as opposed to unnecessarily expediting a transition from print when in fact it still offers value, albeit as only one of a variety of platforms.To this end, GVIC continued to increase its investment in electronic, wireless and Internet platforms and resources throughout 2009 and 2010 despite the overall focus on cost reduction. Senior management personnel have been hired from outside the newspaper and trade magazine industry to strengthen and complement GVIC's digital team, and a diverse array of digital initiatives are being implemented. This investment and efforts have resulted in a variety of new sources of revenue for the Company's local newspapers, trade information and business information operations.A number of other efforts have been made during 2009 and 2010 to increase sales effectiveness despite the recession. New revenues have been generated in a number of areas including special publishing initiatives, special features, supplements, new community magazines, production and promotion of community events, custom publishing, sponsored industry specific research studies, conferences and tradeshows, new directories, and other new revenue initiatives. Efforts continue to be made to leverage and monetize the diverse and rich content and distribution channels GVIC owns and is developing.Investments to improve printing facilities have also resulted in increased revenues and cash flows as well as improvements in quality. During the quarter GVIC was awarded the contract to print The Globe and Mail for Saskatchewan and Manitoba, which will commence in the fourth quarter.While the North American economy continues to evidence some areas of weakness and caution should be maintained in assessing outlook, a wide variety of consumer, manufacturing and other indicators have been strengthening, which will bode well for GVIC's businesses assuming the generally favourable economic trend continues.Improving ProfitabilityGVIC's consolidated EBITA grew 46.8% to $10.2 million for the first quarter compared to last year. This was a result of both the high level of profitability associated with GVIC's incremental print and digital revenues, as well as the realization of a wide variety of cost reduction initiatives that were implemented during 2009, the majority of which were only fully implemented in the second and third quarters of last year. These initiatives included staff layoffs, reduction in hours for part-time employees, reduction in newsprint consumption, and a wide variety of other measures.In total, GVIC reduced its non-variable expenses in 2009 by more than $14 million on an annualized basis. The Company structured these cost reduction initiatives to reduce operating expenses while maintaining the strength of its businesses and competitiveness as much as possible. This strategy appears to have been effective, as GVIC staff are proving able to respond quickly and successfully in generated revenue growth as the economy recovers, while benefiting from greater operating cost efficiency.Importantly, product and content quality was maintained during the recession, and paid subscription levels have proven resilient as a result for local newspapers, energy, technical and regulatory information and business.Management expects that GVIC's profitability will continue to improve as the economic recovery and new revenue initiatives drive incremental revenue growth while the lower cost base is maintained and further cost efficiencies are pursued.Financial PositionGVIC's consolidated debt net of cash outstanding before deferred financing charges and other expenses was $112.7 million as at March 31, 2010 compared to $114.5 million as at December 31, 2009.The Company used its cash flow from operations to pay down $2.4 million of debt during the quarter, invest $0.7 million in several small acquisitions and fund $1.5 million of capital expenditures, $0.9 million of which were investment capital expenditures made primarily to consolidate and expand several printing facilities and upgrade production technology, which investments are expected to result in attractive direct cash flow improvements and payback, as well as improved quality and colour capacity.GVIC reduced its consolidated debt (net of cash outstanding before deferred financing charges and other expenses) to EBITA ratio to 2.8x trailing 12 months EBITA as at March 31, 2010. During the quarter, GVIC extended the maturity date of its senior revolving loan facility, which has no required principal repayments, until July 1, 2011.OutlookThe economy now appears to be on more stable footings, its recovery is being reflected in the improvement in GVIC's financial performance and management is cautiously optimistic that the recovery will continue.As a result, GVIC is reviewing transaction opportunities that fit with the Company's business strategy. A core component of GVIC's historical success has been the realization of growth through accretive acquisitions. The Company has been able to prudently acquire and organically grow a significant number of businesses to consistently increase shareholder value with above average returns.During the recession, management focused on paying down debt, maintaining a balance of operating cost reduction and long-term operating strength, and integrating the operations acquired over the past several years. These efforts have produced a stable platform of operations from which to generate continued growth from operations and pursue acquisitions and other opportunities to grow shareholder value using internally generated cash flow.GVIC is encouraged by the opportunities for value creation that are arising from market conditions and intends to pursue transactions that will strengthen the Company's existing operating platforms and allocate capital to attractive growth areas.Shares in GVIC can be traded on the Toronto Stock Exchange under the symbol GCT.About the Company: GVIC Communications Corp. is an information communications company focused on the provision of primary and essential information and related services through print, electronic and online media. GVIC is pursuing this strategy through its core businesses: the local newspaper, trade information and business and professional information markets.Financial MeasuresTo supplement the consolidated financial statements presented in accordance with Canadian generally accepted accounting principles (GAAP), GVIC uses certain non-GAAP measures that may be different from the performance measures used by other companies. These non-GAAP measures include cash flow from operations (before changes in non-cash operating accounts and non-recurring items), net income before non-recurring items and earnings before interest, taxes and amortization (EBITA), which are not alternatives to GAAP financial measures. Management focuses on operating cash flow per share as the primary measure of operating profitability, free cash flow and value. EBITA per share is also an important measure as the Company has low ongoing capital expenditures and amortization largely relates to acquisition goodwill and copyrights and does not represent a corresponding sustaining capital expense. These non-GAAP measures do not have any standardized meanings prescribed by GAAP and accordingly they are unlikely to be comparable to similar measures presented by other issuers.Forward Looking StatementsThis news release contains forward-looking statements that relate to, among other things, the Company's objectives, goals, strategies, intentions, plans, beliefs, expectations and estimates. These forward-looking statements include, among other things, statements under the headings "Improving Revenues", "Improving Profitability", "Financial Position", and "Outlook" and statements relating to the Company's expectations regarding revenues, expenses, cash flows and future profitability, including our expectations to generate sufficient cash flow from operations to meet anticipated working capital, capital expenditures and debt service requirements, to monetize our information and content, that profitability will continue to improve as the economy recovers, that debt will be maintained at manageable levels, and that cost savings will be maintained. These forward looking statements are based on certain assumptions, including continued economic recovery and the realization of cost savings, and are subject to risks, uncertainties and other factors which may cause results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements, and undue reliance should not be placed on such statements.Important factors that could cause actual results to differ materially from these expectations are listed in the Company's Annual Information Form under the heading "Risk Factors" and in the Company's MD&A under the heading "Business Environment and Risks", many of which are out of the Company's control. These factors include, but are not limited to, the ability of the Company to sell advertising and subscriptions related to its publications, foreign exchange rate fluctuations, the seasonal and cyclical nature of the agricultural industry, discontinuation of Department of Canadian Heritage postal subsidies, general market conditions in both Canada and the United States, changes in the prices of purchased supplies including newsprint, the effects of competition in the Company's markets, dependence on key personnel, integration of newly acquired businesses, technological changes, and financing and debt service risk.The forward-looking statements made in this news release relate only to events or information as of the date on which the statements are made. Except as required by law, the Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.FOR FURTHER INFORMATION PLEASE CONTACT: GVIC Communications Corp. Mr. Orest Smysnuik Chief Financial Officer 604-708-3264