NEWFOUNDLAND CAPITAL CORPORATION LIMITED -
Revenue for the third quarter of $41.0 million was $1.7 million or 4% higher than the same quarter last year and year-to-date revenue of $119.1 million was $9.0 million or 8% higher than 2014. The year-to-date increase was partly attributable to organic growth and partly attributable to the revenue generated by the stations in Toronto, Ontario and Vancouver, British Columbia, which were acquired March 31, 2014, and as such the comparative year-to-date results include only six months of operations for these stations.
-
Earnings before interest, taxes, depreciation and amortization ('EBITDA'(1)) of $12.0 million in the third quarter were $2.0 million or 20% higher than the third quarter last year and year-to-date EBITDA of $31.5 million was $4.8 million or 18% higher than 2014. A majority of the increase was a result of improved EBITDA margins as a result of efforts to increase revenues and reduce discretionary spending in organic markets. Also contributing to the increased EBITDA year-to-date was the incremental impact from including results of the Toronto and Vancouver stations. Organic EBITDA growth was 20% in the quarter and 10% year-to-date.
-
Profit for the period of $6.7 million was $2.4 million or 57% higher than the same quarter last year because of higher revenue as well as lower unrealized losses on marketable securities. Year-to-date profit of $15.2 million was $6.6 million or 77% higher than last year due primarily to the fact that last year's profit was impacted by acquisition-related costs of $8.9 million related to the Toronto and Vancouver business acquisition.
Significant events During the third quarter, the Company's Board of Directors approved a dividend of $0.06 on each of its Class A Subordinate Voting and Class B Common shares. The dividend was paid on September 15, 2015 to shareholders of record at the close of business on August 31, 2015.
During the third quarter, the Company repurchased 1,164,800 Class A Subordinate Voting shares for cash consideration of $10.3 million.
'This was a great quarter for the Company, with strong organic growth, as we strive to maximize the return from our stations' commented Rob Steele, President and Chief Executive Officer. 'The Company's success is supported by encouraging listener ratings along with continued efforts to increase revenues and operate the Company more efficiently.'
Financial Highlights - Third quarter
(thousands of Canadian dollars except share information)
2015
2014
Revenue
$ 41,006
39,301
EBITDA(1)
11,951
9,980
Profit for the period
6,683
4,265
Earnings per share - basic
0.25
0.15
Earnings per share - diluted
0.24
0.15
Share price, NCC.A (closing)
10.78
8.30
Weighted average number of shares outstanding (in thousands)
26,694
28,155
Total assets
359,693
361,849
Long-term debt, including current portion
147,437
145,056
Shareholders' equity
140,277
140,673
(1) Refer to page 11 'Non-IFRS Accounting Measure'
MANAGEMENT'S DISCUSSION AND ANALYSIS
The 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 unaudited condensed interim consolidated financial statements ('interim financial statements') and related notes for the periods ended September 30, 2015 and 2014, as well as the annual audited consolidated financial statements and related notes prepared in accordance with International Financial Reporting Standards ('IFRS') and the MD&A contained in the Company's 2014 Annual Report. The Company's third quarter 2015 interim financial statements and the accompanying notes have been prepared in accordance with International Accounting Standard ('IAS') 34, 'Interim Financial Reporting' as issued by the International Accounting Standards Board ('IASB') and using the accounting policies described therein. These interim financial statements include the accounts of the Company and other entities in which the Company controls in accordance with IAS 27 'Consolidated and Separate Financial Statements' and are reported in Canadian dollars. These documents along with the Company's Annual Information Form, its Management Proxy Circular dated March 6, 2015 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 Board of Directors, upon recommendation of the Audit and Governance Committee, approved the content of this MD&A on October 29, 2015. 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 and forward-looking information within the meaning of Canadian provincial securities laws. These forward-looking statements are based on current expectations. The use of terminology such as 'expect', 'intend', 'anticipate', 'believe', 'may', 'will', 'should', 'would', 'plan' and other similar terminology relate to, but are not limited to, 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. As a result, there is no guarantee that any forward-looking statements will materialize and readers are cautioned not to place undue reliance on these statements. Assumptions, expectations and estimates made in the preparation of forward-looking statements and risks that could cause our actual results to differ materially from our current expectations are discussed in detail in the Risks and Opportunities section of this MD&A. 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.
CORPORATE PROFILE
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.
STRATEGY AND OBJECTIVES
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 costs to maximize earnings before interest, taxes, depreciation and amortization ('EBITDA') margins. Management will continue to explore acquisition and expansion opportunities that fit the Company's 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.
CORPORATE DEVELOPMENTS
The following is a review of the key corporate developments which should be considered when reviewing the 'Consolidated Financial Performance Review' section. The results of the acquired or launched stations have been included in the interim financial statements since the respective acquisition and launch dates.
Recent Developments:
August 2015 - the Company's Board of Directors approved a dividend of $0.06 (August 2014 - $0.06) on each of its Class A Subordinate Voting and Class B Common shares. The dividend was paid on September 15, 2015 to shareholders of record at the close of business on August 31, 2015.
May and July 2015 - The Company repurchased a total of 1,569,800 Class A Subordinate Voting shares for cash consideration of $13.9 million.
December 2014 - the Company's Board of Directors approved a dividend of $0.09 (December 2013 -
$0.09) on each of its Class A Subordinate Voting and Class B Common shares. The dividend was paid on January 30, 2015 to shareholders of record at the close of business on December 31, 2014.
July 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, LG 104.3 and CISL 650 in Vancouver.
February 2014 - received CRTC approval for a new FM licence in Hinton, AB which is expected to be launched in 2016.
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 2014.
CONSOLIDATED FINANCIAL PERFORMANCE REVIEW
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 in Vancouver, British Columbia. The total cash consideration paid was $111.9 million.
On July 28, 2014, the Company acquired an FM station in Saint John, New Brunswick for cash consideration of $0.8 million.
The financial results of these stations have been included in profit since their respective acquisition dates. Additional details on these business combinations can be found in note 4 of the interim financial statements.
Consolidated Financial Results of Operations
Three months ended September 30 Nine months ended September 30
(thousands of Canadian dollars, except percentages and per share data) | 2015 | 2014 | % Change | 2015 | 2014 | % Change |
Revenue | $ 41,006 | 39,301 | 4% | 119,109 | 110,062 | 8% |
Operating expenses | (29,055) | (29,321) | (1%) | (87,597) | (83,383) | 5% |
EBITDA(1) | 11,951 | 9,980 | 20% | 31,512 | 26,679 | 18% |
Depreciation, amortization and | ||||||
accretion | (1,277) | (1,593) | (20%) | (3,858) | (4,088) | (6%) |
Interest expense | (1,416) | (1,775) | (20%) | (5,042) | (4,496) | 12% |
Other expense | (196) | (765) | (74%) | (324) | (6,670) | (95%) |
Profit before provision for income taxes | 9,062 | 5,847 | 55% | 22,288 | 11,425 | 95% |
Provision for income tax expense | (2,379) | (1,582) | 50% | (7,069) | (2,823) | 150% |
Profit for the period | $ 6,683 | 4,265 | 57% | 15,219 | 8,602 | 77% |
Earnings per share - Basic | $ 0.25 | 0.15 | 0.55 | 0.30 | ||
- Diluted | 0.24 | 0.15 | 0.53 | 0.29 |
(1) EBITDA - Earnings before interest, taxes, depreciation and amortization - refer to page 11 'Non-IFRS Accounting Measure'
ANALYSIS OF CONSOLIDATED FINANCIAL RESULTS
A detailed analysis of the variations in revenue, operating expenses and EBITDA are included in the section entitled Financial Review by Segment.
RevenueIn the third quarter, consolidated revenue of $41.0 million was $1.7 million or 4% higher than the same quarter last year and year-to-date revenue of $119.1 million was $9.0 million or 8% higher than 2014. The year-to-date increase was partly attributable to organic growth and partly attributable to the revenue generated by the stations in Toronto and Vancouver, which were acquired March 31, 2014, and as such the comparative year-to-date results include only six months of operations for these stations.
In the third quarter, consolidated operating expenses of $29.1 million were 1% below the same period last year while year-to-date operating expenses of $87.6 million were $4.2 million or 5% higher than 2014. Operating expenses were higher because of the incremental costs related to the stations acquired in the broadcasting segment on March 31, 2014. Excluding these costs, operating expenses year-to-date were lower than last year by $1.5 million or 2% as a result of reduced discretionary spending and the fact that last year included certain one-time marketing expenses.
In the third quarter, consolidated EBITDA of $12.0 million was $2.0 million or 20% higher than the same period last year and year-to-date EBITDA of $31.5 million was $4.8 million or 18% higher than 2014. A majority of the increase was a result of improved EBITDA margins as a result of efforts to operate more efficiently in organic markets. Also contributing to the increased EBITDA year-to-date was the incremental impact from including results of the Toronto and Vancouver stations. Organic EBITDA growth year-to-date was 10%.
In the quarter, depreciation, amortization and accretion expense was lower than 2014 because in the third quarter of 2014 the Company reassessed the useful lives of certain leasehold assets which gave rise to higher depreciation expense at that time. Year-to-date depreciation, amortization and accretion expense was slightly below 2014. Accretion of other liabilities arises from discounting Canadian Content Development ('CCD') commitments to reflect the fair value of the obligations. Accretion expense was lower than last year because as the CCD liabilities are repaid, accretion expense is accordingly lower.
Interest expense in the third quarter of $1.4 million was $0.4 million or 20% lower than the same quarter last year because of lower effective interest rates. Year-to-date interest of $5.0 million was $0.5 million or 12% higher than last year because the Company increased its debt on March 31, 2014 in order to finance the Toronto and Vancouver acquisition.
Other expense generally consists of gains and losses, realized and unrealized, on the Company's marketable securities and items that are not indicative of the Company's core operating results, and not used in the evaluation of the Company's performance, such as acquisition-related costs and impairment charges. Other expense in the third quarter was $0.2 million compared to $0.8 million in 2014 while year-to-date other expense was $0.3 million compared to $6.7 million the same time last year. Included in other expense for the year-to-date period ended September 30, 2014 was acquisition-related costs of $8.9 million.
In the third quarter, the Company's mark-to-market unrealized losses of $0.2 million on its marketable securities were lower than the $0.6 million unrealized loss in the third quarter last year. Year-to-date unrealized losses were $0.2 million compared to unrealized gains of $0.8 million last year. As a result of the sale of certain marketable securities, realized losses year-to-date were $0.1 million compared to realized gains of $0.8 million in the respective comparative period. Refer to note 4 in the interim financial statements for additional details on the acquisition-related costs and note 10(a) for details on mark-to-market gains and losses.
In the third quarter, the effective tax rate was 26%, slightly lower than the statutory income tax rate of 31% mainly because of the subsidiary rate differential that arises from consolidated entities that are taxed in different jurisdictions with lower tax rates. The year-to-date effective tax rate was 32%, slightly higher than the statutory income tax rate of 31% as a result of two contributing factors. The provincial tax rate in Alberta increased during the year which caused a one-time increase in deferred tax liabilities, particularly those associated with the
|
distributed by
|
