VANCOUVER, BRITISH COLUMBIA--(Marketwired - Aug. 12, 2015) - GVIC Communications Corp. ("GVIC" or the "Company") (TSX:GCT) reported cash flow, earnings and revenue for the period ended June 30, 2015.
Summary Results
The following results are presented on an adjusted basis(1) to include the Company's share of its joint venture operations on a proportionate basis, because this is the basis on which management bases its operating decisions and performance. For a reconciliation to results in accordance with International Financial Reporting Standards (IFRS), refer to the "Reconciliation of IFRS to Adjusted Results" as presented below and in Management's Discussion & Analysis (MD&A).
| (thousands of dollars) except share and per share amounts |
Three months ended June 30, | Six months ended June 30, | ||||||
| 2015 (1) | 2014 (1)(3) | 2015 (1) | 2014 (1)(3) | |||||
| Revenue | $ | 70,948 | $ | 77,579 | $ | 136,750 | $ | 147,550 |
| EBITDA | $ | 9,981 | $ | 14,331 | $ | 17,045 | $ | 24,303 |
| EBITDA margin | 14.1% | 18.5% | 12.5% | 16.5% | ||||
| EBITDA per share | $ | 0.033 | $ | 0.048 | $ | 0.057 | $ | 0.081 |
| Net income attributable to common shareholders before non-recurring items (2) | $ | 2,732 | $ | 5,534 | $ | 2,925 | $ | 7,193 |
| Net income attributable to common shareholders before non-recurring items per share (2) | $ | 0.009 | $ | 0.018 | $ | 0.010 | $ | 0.024 |
| Cash flow from operations (2) | $ | 12,019 | $ | 15,012 | $ | 19,055 | $ | 24,359 |
| Cash flow from operations per share (2) | $ | 0.040 | $ | 0.050 | $ | 0.063 | $ | 0.081 |
| Debt net of cash outstanding before deferred financing charges | $ | 102,941 | $ | 118,388 | $ | 102,941 | $ | 118,388 |
| Dividends paid | $ | 1,802 | $ | 1,802 | $ | 3,605 | $ | 3,605 |
| Dividends paid per share | $ | 0.006 | $ | 0.006 | $ | 0.012 | $ | 0.012 |
| Weighted average shares outstanding, net | 300,425,031 | 300,425,031 | 300,425,031 | 300,425,031 | ||||
| Notes: |
| (1) The adjusted consolidated financial results have been adjusted to include the Company's share of revenue, expenses, assets and liabilities from its joint venture operations on a proportionate accounting basis as this is the basis on which management bases its operating decisions and performance evaluation. IFRS does not allow for the inclusion of the joint ventures on a proportionate basis. These results include additional non-IFRS measures such as EBITDA, cash flow from operations and net income attributable to common shareholders before non-recurring items. |
| The adjusted results are not generally accepted measures of financial performance under IFRS. The Company's method of calculating these financial performance measures may differ from other companies and accordingly, they may not be comparable to measures used by other companies. Refer to the MD&A for a reconciliation of these non-IFRS measures and adjusted results. |
| (2) Net income attributable to common shareholders and cash flow from operations have been adjusted for non-recurring items. |
| (3) 2014 has been presented with certain assets as discontinued operations. |
Transformation Strategy
To address the challenges facing some of the businesses, the Company has been implementing a strategy to transform its business and focus efforts on a narrower spectrum of operating sectors in order to deploy resources and capital in areas where long-term growth opportunities can best be realized, and GVIC has a strong competitive position.
GVIC's core focus is to operate as an information & marketing solutions company pursuing growth in sectors where the provision of essential information & related services provides high customer utility & value. The related "go to market" strategy is being implemented through two operational segments:
- Content and marketing solutions (evolution of media business); and
- Data, analytics and intelligence
Sector Focus
As part of this transformational strategy, the decision was made to focus growth efforts on the following sectors:
- Agriculture. The Company has a very strong, national presence in the agriculture information sector. The Company's agriculture publications, websites, weather models and networks, databases, and trade shows are the leading sources of information for Canadian farmers, ranchers, agri-businesses, and those involved in the Canadian agriculture industry. The agriculture industry is experiencing rapid change and innovation with new technologies and methods such as precision farming, an open grain marketing system and other trends increasing the need for and value of information. The Company is well positioned to capitalize on these trends.
- Energy, and Mining. These are global sectors with strong long-term needs for information, in which Canada is a major player and GVIC has strong brands and market positions. While these sectors experience cyclicality, as is currently the case, this can be mitigated by the continued shift to generate more revenue from information subscription products vs. advertising. Given the pure scale of these sectors, many information product growth opportunities exist.
- Environmental risk & compliance information. ERIS, GVIC's environmental risk information business, is the main provider in Canada of Phase 1 environmental information and recently launched into the U.S. where it is the main competitor to the largest operator in the American market. Phase 1 environmental information is used by buyers and sellers of commercial real estate and financial lenders in evaluating mortgage lending risk, amongst other things. A variety of other growth opportunities exist in environmental risk & compliance information.
- Real estate information. REW.ca, the Company's real estate listing portal in the Lower Mainland in B.C., now has 98% of the residential listings in Vancouver and an estimated 70%-80% of the MLS's web traffic. REW.ca has a significant growth opportunity as a platform for residential, commercial and recreational real estate information and marketing.
- Mutual fund information. Fundata is the market leader in mutual fund listings information in Canada and is expanding through analytics and other products and areas. It provides GVIC with steady and growing cash flow, and offsets some of the cyclical risk of natural resources cash flows.
These spaces are dynamic and their changing and continually evolving needs are expected to increase the demand and value relating to information, intelligence and marketing solutions.
Community Media. The community media business is maturing and print revenue has been declining as a result of the shift to digital media, which continues to impact the Company's results. However, these operations generate significant cash flow and provide scale for the Company. The products still provide value for advertisers, and opportunities exist to leverage the local brands, marketing reach and customer relationships to generate new revenues. Efforts will be made to restructure community media assets to create greater direct value and simplicity for GVIC, or monetize where appropriate value can be realized.
The Company's objective is to grow its business information assets and the portion of cash flow generated by these operations, which have higher growth profiles and valuations, and harvest the cash flow from community media assets and reduce the related financial and operating exposure.
Target Leverage. Management is seeking to reduce senior debt levels to less than $50 million, such that ongoing debt can be supported by the business information operations, and the community media operations can provide free cash flow for investment purposes, further debt reduction and financial flexibility.
Business Information Revenue and Profitability. In 2014, GVIC's business information operations earned $27.8 million of adjusted EBITDA (before corporate costs) on $93.3 million of adjusted revenue (excluding the assets that were sold in January 2015):
| Business Information Operations | |
| Year Ending | |
| ($millions) | December 31, 2014 |
| Revenue | 93.3 |
| EBITDA | 27.8 |
| EBITDA margin | 29.8% |
Almost half of this EBITDA comes from rich data digital information products and services. These rich data digital information products and services have a high level of profitability and recurring revenue streams.
Business information businesses trade at higher valuations, typically 7x-15x+ EBITDA, depending on their attributes.
For the six months ending June 30, 2015, GVIC's business information assets generated $13.0 million of adjusted EBITDA (before corporate costs) on $48.0 million of adjusted revenue. See Note 20 to the Interim Consolidated Financial Statements - Segmented Disclosure.
The Company's business information operations have generated strong organic growth and value historically and continue to perform well. Despite weak commodities markets, the agriculture and natural resources group remain highly profitable. While advertising revenue has fallen in these sectors, electronic subscription and data related sales have been resilient. The environmental risk, mutual fund and digital real estate businesses are all generating strong growth in 2015.
Operational Overview
Business Information
- ERIS continues to ramp up its North American expansion plan. With a full year of U.S. activity, ERIS now offers complete North America wide data. It is undertaking key regional hiring in important American and Canadian centres. It has had strong reception from U.S. customers and is generating significant revenue growth.
- GVIC's energy information group has been impacted by the downturn in the oil & gas sector caused by sharply lower energy prices. The JuneWarren-Nickle's Energy Group is focusing sales efforts on data and information products that can help energy companies identify production and cost savings opportunities, as well as acquisition opportunities as asset values become cheaper. As part of its strategic focus on data and insights tools, GVIC's CanOils oil and gas evaluation and benchmarking database launched a new assets module, which provides users with oil and gas well-based insights.
The Company also believes attractive energy information acquisition opportunities will arise as a result of the downturn in energy market conditions. - The Northern Miner Group was commissioned to produce two major research reports focusing on the Canadian mining industry. This type of report aligns with GVIC's efforts through its Evolve, Enrich, Extend strategy to focus on monetizable "thought leadership" initiatives that further enhance the deep brand equity enjoyed by many GVIC products.
- InfoMine released its new Intelligence Mine product, a global database providing detailed insights into thousands of mining companies and their operations around the world. Sold on a subscription basis, early sales results are promising despite weaker conditions in the mining sector.
- FarmMedia had a soft quarter, as a result of weaker commodity prices, drought conditions in several areas of western Canada, and the loss of business from a large agri-business that cut back marketing spending significantly due to a major potential lawsuit. Efforts are being made to offset these conditions with new growth initiatives.
- FarmMedia successfully launched the first outdoor farm demonstration show in Western Canada in July, called Ag In Motion. The 2015 show is expected to generate over $1 million in revenue. The show builds on the success of the Company's agricultural show in Eastern Canada, Canada's Outdoor Farm Show, which has run for 15 years in Woodstock, Ontario and attracts over 40,000 farmers and attendees annually.
Community Media
- GVIC's community media operations continue to face challenges associated with traditional print advertising. In particular, national and other print advertising sales continue to move to digital. In order to offset this trend, efforts are being made to target new areas of revenue sources to offset the declines. These include digital products, new multi-platform features and supplements, and events, amongst other things.
- GVIC completed the sale of certain of its community media assets on Vancouver Island and in the Lower Mainland of B.C. to Black Press at the end of March 2015. It also acquired certain assets in the Lower Mainland of B.C. from Black Press. Restructuring initiatives are now being implemented in the Lower Mainland markets to increase operating efficiencies and effectiveness. The transactions and restructuring efforts have resulted in improved cash flow.
Profitability Measures. In addition to a wide range of new revenue initiatives and focus on higher-margin revenues, comprehensive cost management and restructuring efforts are being implemented to improve profitability over the remainder of the year.
Near-Term Initiatives
- Operating initiatives are being pursued to continue to develop the Company's operations through its Evolve, Enrich and Extend strategy. New management and staff are being hired to expand GVIC's expertise in the information areas and opportunities it is pursuing. A variety of core products will continue to be re-developed and new products launched to address evolving market needs and opportunities.
- Non-Core Asset Sales. Through its efforts to transform its business, reduce leverage and increase operating strength, the Company has sold $46 million of real estate assets and non-core trade publications over the last two years. Both the real estate and operating assets were sold at attractive valuations. The proceeds were used to reduce leverage and pay the deposit required relating to the previously disclosed CRA reassessment for the taxation years 2008-2013.
Additional dispositions of real estate and non-core operating assets are currently being pursued to reduce Company senior debt levels further to less than $50 million. - Dividend Policy. In order to balance the objectives of both reducing leverage and transforming its growth businesses, the Company has decided to stop paying dividends at this time. This will allow the Company to have greater financial flexibility to invest in the operating sectors that have been identified, including related acquisitions that may result from current depressed market conditions, and other potential investment opportunities. The Company is currently in the late stages of two business information acquisitions. These acquisitions are expected to close in the fall of this year and are highly accretive. The Company will review its dividend policy in the future as deemed prudent from a shareholder value and return perspective.
- Greater Clarity of Segmented Reporting. The Company is transforming its business to focus on achieving long-term growth through a select group of business information sectors going forward, being agriculture, energy, mining, environmental risk & compliance, real estate and financial information. As such, the Company has begun segmenting financial reporting for its operations in two segments: 1) business information and 2) community media. This should provide better understanding of the financial performance of the business information operations and their value. As stated, these businesses typically trade in the 7x-15x+ EBITDA range.
Financial Position
On an adjusted basis, including the Company's share of the joint venture interests, GVIC's consolidated debt net of cash outstanding before deferred financing charges was 2.7x trailing 12-months EBITDA as at June 30, 2015.
GVIC's consolidated debt (excluding joint ventures), net of cash outstanding before deferred financing charges, was $91.7 million as at June 30, 2015.
Reconciliation of IFRS to Adjusted Results
The following table is a reconciliation of the IFRS results to the adjusted results (which include the Company's proportionate share of its joint venture operations). Refer to the MD&A for further discussion and analysis of these results:
| (thousands of dollars) | Three months ended June 30, 2015 | Three months ended June 30, 2014 | ||||||||||
| except share and per share amounts | Per IFRS |
Differ- ential |
Adjusted (1) |
Per IFRS (2) |
Differ- ential |
Adjusted (1)(2) |
||||||
| Revenue | $ | 60,940 | $ | 10,008 | $ | 70,948 | $ | 67,097 | $ | 10,482 | $ | 77,579 |
| EBITDA (1) | $ | 6,009 | $ | 3,972 | $ | 9,981 | $ | 10,216 | $ | 4,115 | $ | 14,331 |
| EBITDA margin (1) | 9.9% | 14.1% | 15.2% | 18.5% | ||||||||
| EBITDA per share (1) | $ | 0.020 | $ | 0.013 | $ | 0.033 | $ | 0.034 | $ | 0.014 | $ | 0.048 |
| Net (loss) income attributable to common shareholders | $ | (1,219) | $ | (216) | $ | (1,435) | $ | 4,337 | $ | (279) | $ | 4,058 |
| Weighted average shares outstanding, net | 300,425,031 | 300,425,031 | 300,425,031 | 300,425,031 | ||||||||
| (thousands of dollars) | Six months ended June 30, 2015 | Six months ended June 30, 2014 | ||||||||||
| except share and per share amounts | Per IFRS |
Differ- ential |
Adjusted (1) |
Per IFRS (2) |
Differ- ential |
Adjusted (1)(2) |
||||||
| Revenue | $ | 117,013 | $ | 19,737 | $ | 136,750 | $ | 127,388 | $ | 20,162 | $ | 147,550 |
| EBITDA (1) | $ | 9,648 | $ | 7,397 | $ | 17,045 | $ | 17,077 | $ | 7,226 | $ | 24,303 |
| EBITDA margin (1) | 8.2% | 12.5% | 13.4% | 16.5% | ||||||||
| EBITDA per share (1) | $ | 0.032 | $ | 0.025 | $ | 0.057 | $ | 0.057 | $ | 0.024 | $ | 0.081 |
| Net income attributable to common shareholders | $ | 2,274 | $ | (63) | $ | 2,211 | $ | 5,633 | $ | (259) | $ | 5,374 |
| Weighted average shares outstanding, net | 300,425,031 | 300,425,031 | 300,425,031 | 300,425,031 | ||||||||
| Notes: |
| (1) The adjusted consolidated financial results have been adjusted to include the Company's share of revenue, expenses, assets and liabilities from its joint venture operations on a proportionate accounting basis as this is the basis on which management bases its operating decisions and performance evaluation. IFRS does not allow for the inclusion of the joint ventures on a proportionate basis. These results include additional non-IFRS measures such as EBITDA, cash flow from operations and net income attributable to common shareholders before non-recurring items. |
| The adjusted results are not generally accepted measures of financial performance under IFRS. The Company's method of calculating these financial performance measures may differ from other companies and accordingly, they may not be comparable to measures used by other companies. Refer to the MD&A for a reconciliation of these non-IFRS measures and adjusted results. |
| (2) 2014 has been presented with certain assets as discontinued operations. |
The qualitative discussion of the second quarter 2015 results in this President's Message is relevant and applicable for the adjusted results and the IFRS results.
Outlook
Economic conditions have weakened significantly in 2015 in Western Canada, particularly in energy and agriculture, and remain challenging. Structural challenges continue to exist in community media.
However, the balance of better prospects in some of the Company's key markets and businesses, comprehensive new revenue initiatives as well as cost management are expected to result in improved performance going forward, assuming market conditions do not worsen further.
The Company is taking care to make sure it invests in and focuses on transforming its products and services to ensure that it continues to offer high value to customers in its various markets, and does not reduce resources overly through cost reduction and weaken the businesses in terms of long-term viability.
Importantly, the Company has made substantial progress towards its objectives of both strengthening its financial position and narrowing its spectrum of operating sectors in order to redeploy capital and resources to higher-growth and higher-value products and services.
Focused efforts are being made to complete the desired restructuring objectives outlined in terms of reduced long-term debt levels and better corporate and operating simplicity.
As indicated, GVIC is pursuing its transformational growth efforts through a comprehensive Evolve, Enrich and Extend strategy. The strategy focuses on providing richer content, data and information, related analytics and business and market intelligence, as well as more comprehensive and sophisticated marketing solutions. The strategy is intended to provide growing levels of sales from high-margin products with high levels of recurring revenue, while requiring low levels of sustaining capital investment in order to generate strong free cash flow and return on capital.
Once leverage is reduced to lower operating levels, management will seek an ongoing balance of maintaining debt at those levels and delivering increased value to shareholders through operations and acquisitions.
Shares in GVIC are 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 community media, trade information and business and professional information markets.
Financial Measures
To supplement the consolidated financial statements presented in accordance with International Financial Reporting Standards (IFRS), GVIC uses certain non-IFRS measures that may be different from the performance measures used by other companies. These non-IFRS measures include cash flow from operations (before changes in non-cash operating accounts and non-recurring items), net income attributable to common shareholders before non-recurring items, net income from continuing operation attributable to common shareholders before non-recurring items, earnings before interest, taxes, depreciation and amortization (EBITDA) and all 'adjusted' measures which are not alternatives to IFRS financial measures. Management focuses on operating cash flow per share as the primary measure of operating profitability, free cash flow and value. EBITDA per share is also an important measure as the Company has low ongoing capital expenditures and depreciation and amortization largely relates to acquisition goodwill and copyrights and does not represent a corresponding sustaining capital expense. These non-IFRS measures do not have any standardized meanings prescribed by IFRS and accordingly they are unlikely to be comparable to similar measures presented by other issuers.
The adjusted consolidated financial results reported have been adjusted to include the Company's share of revenue, expenses, assets and liabilities from its joint venture operations on a proportionate accounting basis as this is the basis on which management bases its operation decisions and performance evaluation. IFRS does not allow for the inclusion of the joint ventures on a proportionate basis. These results include additional non-IFRS measures such as EBITDA, cash flow from operations and net income attributable to common shareholders before non-recurring items.
The adjusted results are not generally accepted measures of financial performance under IFRS. The Company's method of calculating these financial performance measures may differ from other companies and accordingly, they may not be comparable to measures used by other companies. Refer to the MD&A for a reconciliation of these non-IFRS measures and adjusted results.
Forward-Looking Statements
This 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 relating to the Company's expectations regarding revenues, expenses, cash flows and future profitability and the effect of GVIC's strategic initiatives, including its expectations to grow its business information operations, to generate incremental revenues, to implement cost reduction measures, to sell non-core assets, to produce products and services that provide growth opportunities, to organic development and new business acquisitions, to improve profitability, to grow cash flow per share, to pay dividends and to reduce debt levels and as to its expectations as to the level of investment in capital expenditures. These forward looking statements are based on certain assumptions, including continued economic growth and recovery and the realization of cost savings in a timely manner and in the expected amounts, 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 include failure to implement or achieve the intended results from GVIC's strategic initiatives, the failure to implement or realize cost savings in a timely manner or in the expected amounts, the failure to negotiate or complete the sale of assets, the failure to identify, negotiate and complete the acquisition of new businesses, the failure to develop new products, and the other risk factors 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 other risk 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 the Department of Canadian Heritage's Canada Periodical Fund's Aid to Publishers, 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, tax risk 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.
Contact Information:
Mr. Orest Smysnuik
Chief Financial Officer
604-708-3264