NEWFOUNDLAND CAPITAL CORPORATION LIMITED 2 Newfoundland Capital Corporation Limited
MANAGEMENT'S DISCUSSION & ANALYSISThe purpose of the Management's Discussion and Analysis ("MD&A") is to provide readers with additional complementary information regarding the financial condition and results of operations for Newfoundland Capital Corporation Limited (the "Company") and should be read in conjunction with the annual audited consolidated financial statements ("annual financial statements"), prepared as of March 3, 2016, and related notes contained in this 2015 Annual Report.
These documents along with the Company's Annual Information Form, its Management Information Circular and other public information are filed electronically with various securities commissions in Canada through the System for Electronic Document Analysis and Retrieval ("SEDAR") and can be accessed at www.sedar.com. This information is also available on the Company's website at www.ncc.ca.
The Company's annual financial statements for the year ended December 31, 2015 have been prepared in accordance with International Financial Reporting Standards ("IFRS").
All amounts herein are expressed in Canadian dollars. The Board of Directors, upon recommendation of the Audit and Governance Committee, approved the content of this MD&A on March 3, 2016. Disclosure contained in this document is current to this date, unless otherwise stated.
Management's Discussion and Analysis of financial condition and results of operations contains forward- looking statements. These forward-looking statements are based on current expectations. The use of terminology such as "expect", "intend", "anticipate", "believe", "may", "will", and other similar terminology relate to, but are not limited to, our objectives, goals, plans, strategies, intentions, outlook and estimates. By their very nature, these statements involve inherent risks and uncertainties, many of which are beyond the Company's control, which could cause actual results to differ materially from those expressed in such forward-looking statements. The Company has outlined in this MD&A a section entitled "Risks, Uncertainties and Opportunities" that discusses possible events or conditions that are beyond management's control and that could affect future results; these include topics surrounding the economy, the regulatory environment, the dependency on advertising revenues, competition, technological developments and potential contingencies. Readers are cautioned not to place undue reliance on these statements. Unless otherwise required by applicable securities laws, the Company disclaims any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Newfoundland Capital Corporation Limited owns and operates Newcap Radio, which is one of Canada's leading radio broadcasters with 95 licences across Canada. The Company reaches millions of listeners each week through a variety of formats and is a recognized industry leader in radio programming, sales and networking. It is Canada's largest pure-play radio company, employing approximately 1,000 of the best radio professionals across the country. The Company's portfolio of radio assets includes 80 FM and 15 AM licences which can be heard throughout Canada. Most of our stations are globally accessible via the internet and various mobile device applications, allowing listeners the flexibility to tune in to our stations at anytime from anywhere. The shares of the Company trade on the Toronto Stock Exchange under the symbols NCC.A and NCC.B.
The Company's long-term strategy is to maximize returns on existing operations and add new licences through business and licence acquisitions and through the Canadian Radio-television and Telecommunications Commission ("CRTC") licence application process.
The Company's day-to-day operating objective is to grow its existing operations by increasing advertising revenue and remaining focused on controlling discretionary costs to continuously improve EBITDA margins. The Company will continue to explore acquisition and expansion opportunities that fit the Company's acquisition objectives and it will make applications to the CRTC for new licences. The Company's commitment to its talented employees, its customers, its listeners and to the communities it serves remains critical to its success.
3 Newfoundland Capital Corporation Limited
SIGNIFICANT 2015 FINANCIAL HIGHLIGHTSConsolidated revenue was 7% higher than 2014 and consolidated earnings before interest, taxes, depreciation and amortization ("EBITDA" (1)) increased by 10%. Consolidated profit was $23.2 million, higher than profit of
$11.2 million last year for various reasons which are described below. In the Company's core operating segment, Broadcasting, revenue grew by 7% and EBITDA was 11% higher than 2014.
On March 31, 2014, the Company completed the largest business acquisition in its history when it acquired two radio stations in Toronto, Ontario and three radio stations in Vancouver, British Columbia. Revenue and EBITDA have benefited as a result of these new operations which contributed to the full year results in 2015. The comparative year-to-date results include only nine months of operations for these stations.
The following points provide a brief description of the 2015 financial highlights, details of which follow in the
Analysis of Consolidated Results section:
The 7% increase in consolidated revenue was due to incremental revenue in the Broadcasting segment as a result of the addition of the Toronto, Vancouver, and Saint John, New Brunswick stations during 2014 which contributed for the full year in 2015.
The 10% increase in consolidated EBITDA was a result of efforts to increase revenues and reduce spending in organic markets. Also contributing to the increased EBITDA during the year was the incremental impact from the Toronto and Vancouver stations for the full year in 2015 compared to nine months in 2014.
Profit increased to $23.2 million this year compared to $11.2 million last year. In 2014, the Company recognized non-recurring transaction costs of $8.9 million associated with the business acquisitions and an impairment charge of $5.7 million.
The Company declared dividends of $0.15 per share during 2015, consistent with 2014.
The Company repurchased a total of 1,569,800 Class A Subordinate Voting shares for cash consideration of $13.9 million.
The Company amended its credit facilities to reduce interest rates by approximately 0.5% and to extend the maturity date to May 31, 2018.
(1)Refer to page 21 "Non-IFRS Accounting Measure"
RECENT OPERATIONAL HIGHLIGHTSJuly 2014 - completed the acquisition of CHNI-FM (Rock 88.9) in Saint John, New Brunswick for cash consideration of $0.8 million.
March 2014 - acquired five radio stations located in Toronto, Ontario and Vancouver, British Columbia for cash consideration of $111.9 million. The stations acquired consisted of Boom 97.3 and Flow 93.5 in Toronto, and Z95.3, LG104.3 and CISL 650 in Vancouver.
February 2014 - received CRTC approval for a new FM licence in Hinton, Alberta. After receiving an extension from the CRTC in November 2015, the Company expects to have this station on air by February 2017.
January 2014 - received CRTC approval for a new FM licence in Fox Creek, Alberta (a repeater of CFXW- FM Whitecourt, Alberta). This licence was launched in December 2015.
May 2013 - received CRTC approval for a new FM licence to serve Clarenville, Newfoundland and Labrador which is expected to launch in 2016.
Newfoundland Capital Corporation Limited 4
Newfoundland Capital Corporation Limited issued this content on 03 March 2016 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 03 March 2016 23:06:51 UTC
Original Document: http://www.ncc.ca/docs/CombinedMDAandFinancialsMarch32016.pdf
