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Press release from Marketwire

GVIC Reports Second Quarter Results

Thursday, August 12, 2010

GVIC Reports Second Quarter Results19:35 EDT Thursday, August 12, 2010VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 12, 2010) - GVIC Communications Corp. ("GVIC" or the "Company") (TSX:GCT) reported cash flow, earnings and revenue for the period ending June 30, 2010.Summary Results -------------------------------------------------------------------------- (thousands of dollars except share and Three Months Three Months Six Months Six Months per share Ended Ended Ended Ended amounts) 30-Jun-10 30-Jun-09 30-Jun-10 30-Jun-09 -------------------------------------------------------------------------- Revenue $ 67,159 $ 63,513 $124,647 $118,308 Gross profit $ 26,448 $ 25,389 $ 47,356 $ 43,057 Gross margin 39.4% 40.0% 38.0% 36.4% EBITA (1) $ 14,344 $ 12,453 $ 24,568 $ 19,422 EBITA margin (1) 21.4% 19.6% 19.7% 16.4% EBITA per share (1) $ 0.048 $ 0.041 $ 0.082 $ 0.065 Interest expense, net $ 2,252 $ 2,811 $ 4,789 $ 4,960 Net income before non-recurring items (1)(2)(3) $ 9,290 $ 8,758 $ 14,329 $ 11,852 Net income before non-recurring items per share (1)(2)(3) $ 0.031 $ 0.029 $ 0.048 $ 0.039 Net income $ 8,988 $ 8,407 $ 14,027 $ 10,506 Net income per share $ 0.030 $ 0.028 $0.047 $ 0.035 Cash flow from operations (1)(2)(3) $ 12,285 $ 9,737 $ 20,339 $ 14,994 Cash flow from operations per share (1)(2)(3) $ 0.041 $ 0.032 $ 0.068 $ 0.050 Capital expenditures $ 1,303 $ 2,824 $ 2,837 $ 5,268 Total assets $498,713 $502,490 $498,713 $502,490 Debt net of cash outstanding before deferred financing charges and other expenses $110,160 $123,964 $110,160 $123,964 Shareholders equity $292,724 $276,772 $292,724 $276,772 Weighted average shares outstanding, net 300,425,031 300,425,031 300,425,031 300,425,031 -------------------------------------------------------------------------- 1. Refer to "Financial Measures" following for disclosure regarding non- GAAP measures used in this table. 2. Three months ended June 30, 2010 and 2009 amounts exclude $0.3 million and $0.4 million restructuring expense, respectively. 3. Six months ended June 30, 2010 and 2009 amounts exclude $0.3 million and $1.4 million restructuring expense, respectively. HighlightsGVIC's results for the second quarter of 2010 showed continued improvements in operations: -- Consolidated revenue for the three months ended June 30, 2010 increased 5.7% to $67.2 million from $63.5 million for the year prior. Consolidated revenue for the six months ended June 30, 2010 increased 5.4% to $124.6 million from $118.3 million for the year prior; -- EBITA for the second quarter ended June 30, 2010 increased 15.2% to $14.3 million from $12.5 million for the same period last year. EBITA for the six months ended increased 26.5% an increase of $5.1 million over the same period in the prior year; -- GVIC's consolidated cash flow from operations (before changes in non- cash operating accounts and excluding restructuring expenses) increased 26.2% to $12.3 million for the three months ended June 30, 2010 from $9.7 million for the same period last year. Cash flow from operations (before changes in non-cash operating accounts and excluding restructuring expenses) increased 35.6% to $20.3 million from $15.0 million for the six months ended June 30, 2010 as compared to the same period last year; and -- GVIC's consolidated cash flow from operations (before changes in non- cash operating accounts and excluding restructuring expenses) per share for the quarter increased 26.2% to $0.041 per share from $0.032 per share for the same period last year and for the six months ended June 30, 2010 increased 35.6% to $0.068 per share from $0.050 per share last year. Review of OperationsImproving RevenuesGVIC's revenue continued to grow on a consolidated basis in the second quarter. The continued improvements in the overall economy and the markets in which GVIC does business as well as focused and effective 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 then grew 4.9% in the first quarter of 2010 and 5.7% in the second quarter. The growth is a result of both same-store revenue improvement and several small acquisitions and related consolidation.The trend in revenue performance has been encouraging in that the majority of GVIC's businesses are experiencing growth.GVIC's trade and business information operations continued to strengthen, generating revenue growth across a wide variety of sector niches. While business and trade advertising tends to lag economic recovery more than local newspapers because advertisers tend to plan their marketing campaigns and budgets on more of an annual basis, overall results indicate continued improvements in the business and confidence of GVIC's customers.GVIC's local newspapers' revenue continued to grow on a same-store basis in the second quarter across the Western Canadian provinces. It is instructive to note 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 all of the uncertainty instilled by the recession and its impact, same-store local newspaper revenues remained at 89% of 2008 levels, which was a record year.During the quarter, 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 is being implemented. This investment and effort has 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. 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 ProfitabilityAs stated, GVIC's consolidated EBITA grew 15.2% to $14.3 million for the second 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. Newsprint prices increased 5% per tonne during the quarter, which partially offset these cost savings (although the net impact was not significant).Direct expenses for the second quarter increased compared to last year as a result of the increase in same-store sales and inclusion of expenses from the small acquisitions and related consolidation, offset by the non-variable cost savings relating to direct expenses.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 Position and Other DevelopmentsGVIC's consolidated debt net of cash outstanding before deferred financing charges and other expenses was $110.2 million as at June 30, 2010 compared to $114.5 million as at December 31, 2009.The Company used its cash flow from operations to pay down a net amount of $3.7 million of long-term debt during the quarter, repay $5.0 million of the Company's preferred shares, invest $1.5 million in acquisitions and fund $1.3 million of capital expenditures, $0.5 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 2.7x trailing 12 months EBITA as at June 30, 2010. During the first quarter of 2010, GVIC extended the maturity date of its senior revolving loan facility, which has no required principal repayments, until July 1, 2011.Subsequent to quarter end, GVIC sold some of its community newspaper operations in British Columbia that were struggling due to economic and market conditions, and acquired other community newspaper operations in Alberta that were more profitable. These transactions are expected to result in an incremental reduction in GVIC's revenue and a net increase in consolidated profitability.OutlookThe economic recovery and concerted efforts by staff and management to advance performance continue to be reflected in the improvement in GVIC's operating results. 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.Management continues to focus 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 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 the economic 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 Other Developments", and "Outlook" and statements relating to the Company's expectations regarding revenues, expenses, cash flows and future profitability, including our expectations to the revenue and profitability impact from new transactions, that profitability will continue to improve as the economy recovers, and that cost savings will be maintained and further efficiencies pursued. 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