GVIC Communications Corp.
TSX : GCT
TSX : GCT.C

November 13, 2008 21:00 ET

GVIC Reports Third Quarter Earnings Growth

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Nov. 13, 2008) - GVIC Communications Corp. ("GVIC") (TSX:GCT)(TSX:GCT.C) reported revenue, cash flow and earnings for the period ending September 30, 2008.

Highlights

- Revenue for the third quarter grew 21.0% and cash flow from operations grew 12.1% compared to the same period last year. Cash flow from operations per share for the quarter grew 13.6% compared to the same period last year.

- GVIC's strategic diversification in Western Canadian local newspapers and trade, business and professional information combined with the primacy and essential nature of product content, strong product quality, dominant market positions and focus on operational improvement has resulted in continued revenue and profit growth despite challenging economic conditions.

- For the nine months ended September 30, 2008, cash flow from operations per share increased 25.6% from the same period last year, EBITA per share increased 15.8% and net income per share increased 45.5%.

- GVIC acquired several community newspapers in Western Canada during the quarter. In total, GVIC has completed acquisitions and investments totalling $43.5 million in aggregate purchase price for the nine months ending September 30, 2008.

- GVIC has a strong, secure and flexible financial position with 2.5x debt to EBITA as at quarter end and the majority of its debt comprised of a revolving facility with no scheduled mandatory principal repayments that does not renew until December 31, 2010.



Operating Results

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$000's except share 3 Months 3 Months 9 Months 9 Months
and per share September 30, September 30, September 30, September 30,
amounts 2008 2007 2008 2007
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Revenue $ 59,932 $ 49,551 $ 187,647 $ 159,303
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EBITA $ 10,059 $ 9,561 $ 41,657 $ 35,088
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EBITA margin 16.8% 19.3% 22.2% 22.0%
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EBITA per share $ 0.033 $ 0.032 $ 0.139 $ 0.120
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Cash flow from
operations $ 7,367 $ 6,571 $ 33,843 $ 26,307
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Cash flow from
operations per
share $ 0.025 $ 0.022 $ 0.113 $ 0.090
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Interest expense,
net $ 3,079 $ 3,044 $ 8,807 $ 9,306
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Net income $ 3,433 $ 2,815 $ 23,993 $ 16,011
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Net income per share $ 0.011 $ 0.009 $ 0.080 $ 0.055
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Debt outstanding,
net of cash
reserves and before
deferred financing
charges and other
expenses $ 138,949 $ 131,565 $ 138,949 $ 131,565
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Shareholders' equity $ 262,573 $ 227,600 $ 262,573 $ 227,600
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Average shares
outstanding, net 300,425,031 300,425,031 300,425,031 292,565,098
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For the three months ending September 30, 2008, GVIC earned $7.4 million of consolidated cash flow from operations on revenue of $59.9 million, as compared to $6.6 million on revenue of $49.6 million for the three months ended September 30, 2007. GVIC's EBITA was $10.1 million and net income was $3.4 million for the quarter, as compared to EBITA of $9.6 million and net income of $2.8 million for the same period last year.

For the three months ended September 30, 2008, cash flow from operations per share increased 13.6% to $0.025 from $0.022 for the same period last year, EBITA per share increased 3.1% to $0.033 from $0.032 for the same period last year and net income per share increased 22.2% to $0.011 from $0.009 for the same period last year.

Consolidated cash flow from operations was $33.8 million for the nine months ended September 30, 2008, as compared to $26.3 million for the same period last year. Revenue for the period was $187.6 million compared to $159.3 million for the same period last year, EBITA was $41.7 million compared to $35.1 million last year, and net income was $24.0 million compared to $16.0 million last year.

For the nine months ended September 30, 2008, cash flow from operations per share increased 25.6% to $0.113 from $0.090 for the same period last year, EBITA per share increased 15.8% to $0.139 from $0.120 for the same period last year and net income per share increased 45.5% to $0.080 from $0.055 for the same period last year.

Review of Operations

GVIC continued to generate strong financial performance during the quarter despite challenging economic conditions in Canada and the United States. For the three months ending September 30, 2008, revenue increased 21.0% and EBITA increased 5.2% compared to the same period last year.

On a normalized basis, EBITA from operations increased 11.9% for the quarter compared to the same period last year after adjusting for $0.6 million of quarter over quarter adjustment to pension accruals and foreign exchange classification (the 11.9% adjusted EBITA from operations growth is consistent with GVIC's 12.1% growth in cash flow from operations for the quarter).

The 21.0% increase in revenue and normalized 11.9% increase in EBITA were a result of both growth from operations and acquisitions.

As previously disclosed, GVIC's first and third quarters are typically weaker than its second and fourth quarters given the seasonality of some of its businesses. In particular, the EBITA growth was proportionately less than would be normal relative to the revenue growth because the JuneWarren energy publications acquired in January 2008 have lower profitability in the third quarter. The PrintWest Communications Ltd. ("PrintWest Communications") operations acquired in May 2008 also have a lower EBITA margin than GVIC's other publications. These acquisitions resulted in a reduction in GVIC's EBITA margin for the third quarter compared to last year.

GVIC's operations performed well in terms of "same-store" revenue and EBITA growth, which was a result of both strong organic revenue growth as well as cost management. Same-store EBITA contributed approximately two-thirds of the 11.9% normalized EBITA growth for the quarter. The acquisitions completed subsequent to the third quarter of 2007 also contributed to the growth.

GVIC's same-store revenue growth from existing operations reflects the primacy and essential nature of the information offered by its local newspapers, trade and business information publications and electronic product offerings, their effectiveness for advertisers, the industry sectors GVIC targets, product quality, strength of market positions, improved sales effectiveness, new product offerings and regional advertising efforts that allow advertisers to benefit from GVIC's larger group of publications and expertise. This growth is being achieved despite softening in some areas of the economy such as the commodities, energy, manufacturing and other sectors.

Management believes that the strength of GVIC's publication and information offerings and mix of geographic market, information niche and product and channel balance combined with low debt levels (see following) have positioned GVIC to endure the challenging economic environment and perform well over both the near and longer term.

Management is monitoring economic conditions and business events in the United States and Canada closely to ensure that operational performance is maximized and that acquisition opportunities are identified that can benefit GVIC. GVIC has strong operating platforms with which to integrate these acquisitions and realize immediate improvements in profitability through cost efficiencies, and expected increases in sales. While these opportunities will be pursued, management intends to maintain prudent debt levels given the greater level of uncertainty in the economy.

Unlike some of the factors affecting publishers of large metropolitan daily newspapers, GVIC's local daily and weekly community newspapers continue to be the primary source of local information for readers, and continue to enjoy high readership levels because of the demand for this information. The local newspapers are also a primary marketing channel for local and regional advertisers. Paid subscription revenue and national advertising represent a small percentage of GVIC's overall revenue. Approximately 85% of GVIC's newspaper distribution is free. Although also a small portion of GVIC's overall revenue, classified sales in our local markets continue to perform well.

GVIC is also investing in a substantially expanded Internet presence for its local newspaper markets, which offers attractive new revenue growth opportunities.

GVIC's trade and business information operations are demonstrating their resilience derived from the essential nature of their content. In difficult economic times, their content is of significant value to business and industry readers who need information with which to be well informed and make prudent decisions in challenging market conditions.

GVIC's trade and business information operations benefit from a depth and breadth of content. GVIC publishes over 200 titles in more than 20 business and industry niches including medical, dental, environmental, occupational health & safety, insurance, construction, communications, real estate, manufacturing, transportation, agriculture, energy, mining, financial, legal, compliance, and securities law, amongst others. The group has a strong mix of channel and format balance, with particular focus being placed on electronic and online information revenue growth.

Management continues to believe there are meaningful opportunities to realize value from GVIC's expanded operations through increased cost efficiencies, improved sales effectiveness and focus on publication quality, amongst other things. While some of these improvements have been realized and contributed to GVIC's strong operating results, many of the opportunities are still to be achieved.

New Acquisitions

During the third quarter of 2008, GVIC acquired several Western Canadian community newspapers for $2.5 million located in Alberta, Saskatchewan and Manitoba. These acquisitions fit with GVIC's strategy of growing through the local newspaper, trade and business and professional information sectors. During the nine months ended September 30, 2008, GVIC has completed acquisitions and investments totalling $43.5 million in aggregate purchase price.

GVIC's local newspaper group offers distribution of approximately 1.5 million copies across B.C., Alberta, Saskatchewan and Manitoba. GVIC's trade publication group consists of the largest agricultural publication group in Western Canada, the Business In Vancouver Media Group, and the Business Information Group - one of Canada's largest trade information operations. GVIC's business & professional information group includes Specialty Technical Publishers which publishes regulatory & compliance information, Eco Log which is an electronic environmental information and report service, CD Pharma Interactive Medical Productions which develops electronic interactive continuing medical education programs for doctors, Fundata which provides investment fund related electronic and print information and analytics to the Canadian and global investment community and a wide variety of Canadian newspapers and media, and a variety of directories, specialty websites and electronic information published by the Business Information Group.

Improved Financial Position

During the quarter GVIC repaid $1.6 million of debt and funded $6.3 million of acquisitions and sustaining capital investments with cash flow from operations. GVIC's net consolidated debt to EBITA ratio was approximately 2.5x as at September 30, 2008, based on the trailing 12 months EBITA for all of GVIC's operations, regardless of the date acquired. This lower level of leverage has reduced GVIC's interest rate paid on borrowings and overall interest expense.

As previously disclosed, in December 2007 GVIC converted its senior debt facility into a revolving facility with the ability to re-borrow up to a certain level with no scheduled mandatory principal repayments. GVIC has an operating loan facility in addition to the revolving facility.

Overall, GVIC has a strong, secure and flexible financial position with the majority of its debt comprised of the revolving facility that does not renew until December 31, 2010.

Subsequent to quarter end, GVIC repaid its $12.0 million of subordinated bonds with an increase in the Company's revolving senior debt facility and amounts due to an affiliated company. This is expected to reduce annual interest expense by approximately $0.9 million.

GVIC's profitability and leverage levels are such that sufficient free cash flow is being generated to internally fund additional accretive acquisitions while maintaining prudent debt levels, and pursue other initiatives where appropriate that will enhance shareholder value. While realizing improvements from operations is a top priority, GVIC is continuing to pursue acquisition opportunities in the information communications sectors.

Market conditions are such that attractive buying opportunities are expected to arise, and GVIC is well positioned operationally and financially to benefit.

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 expanding across North America through both internal growth and the strategic acquisition of information communications companies that provide essential information and related services through print, electronic and online media. GVIC is pursuing this strategy through two core business segments: 1) the business and professional information markets and 2) the newspaper and trade information markets.

Forward Looking Statements

Certain statements in this press release are not historical and may constitute forward-looking statements reflecting financial performance. Investors are cautioned that all forward-looking statements involve risks and uncertainties. Forward-looking statements are based on management's estimates, beliefs and opinions on the date the statements are made. GVIC assumes no obligation to update forward-looking statements if circumstances should change. Additional information on these and other potential factors that could affect GVIC's financial results are detailed in documents filed from time to time with the applicable Canadian securities regulatory authorities.

The Toronto Stock Exchange has neither approved nor disapproved the form or content of this release.

Contact Information

  • GVIC Communications Corp.
    Mr. Orest Smysnuik
    (604) 872-8565