TVA Group reports consolidated results for Q4 2019

MONTREAL, Feb. 27, 2020 /CNW Telbec/ - TVA Group Inc. ("TVA Group," "TVA" or the "Corporation") announced today that it recorded operating revenues in the amount of $164.2 million in the fourth quarter of 2019, a year‑over‑year increase of $13.7 million. Net income attributable to shareholders was $16.0 million for earnings of $0.37 per share, compared with net income attributable to shareholders of $9.5 million for earnings of $0.22 per share in the same quarter of 2018.

Fourth quarter operating highlights:

• Consolidated adjusted EBITDA¹ of $33,568,000, representing a $7,667,000 (29.6%) favourable variance from the same quarter of 2018.
•  $21,345,000 in adjusted EBITDA¹ in the Broadcasting segment, a $4,669,000 (28.0%) favourable variance mainly because of the acquisition of the "Évasion" and "Zeste" channels, a 24.6% increase in the adjusted EBITDA¹ of the other specialty channels, which benefited from a favourable retroactive adjustment in subscription revenues, and a 13.5% increase in the adjusted EBITDA¹ of the TVA Network. 
• $1,983,000 in adjusted EBITDA¹ in the Magazines segment, a $1,260,000 (-38.9%) unfavourable variance mainly because of a decrease in operating revenues, which was partially offset by savings generated by the continuation of various staff and expense rationalization plans introduced in recent quarters.
• $7,828,000 in adjusted EBITDA¹ in the Film Production & Audiovisual Services ("MELS") segment, a $1,846,000 (30.9%) favourable variance due to the improved profitability of all of the segment's operations, including a 17.4% increase in adjusted EBITDA¹ from soundstage, mobile and equipment rental, and an 81.4% decrease in negative adjusted EBITDA¹ from visual effects.
• $2,198,000 in adjusted EBITDA¹ in the new Production & Distribution segment which since April l, 2019 includes the businesses acquired through the acquisition of the Incendo group companies.

"We are very satisfied with our results for the last quarter of our financial year. Despite the many challenges we faced, TVA Group grew its adjusted EBITDA¹ thanks to the various acquisitions made in recent months, the savings yielded by the budget cuts announced in the second quarter, and gains on the subscription fees for our specialty services.

"TVA Group's total market share increased by 0.2 points to 36.8%² in the fourth quarter of 2019. TVA Network's market share increased by 0.2 points, while our specialty channels held their combined market share at 13.5%.²

"In the Broadcasting segment, adjusted EBITDA¹ increased because of, among other things, the addition of the "Évasion" and "Zeste" channels as well as increased subscription revenues at all the other specialty services. In this regard, we are pleased to report that we have renewed most of our distribution agreements and those cable operators have recognized the fair market value of our channels. Now Bell must recognize the fair market value of "TVA Sports" and all the specialty services about which we are currently negotiating. We will continue making representations on this issue to regulatory and government authorities. We welcome the Canadian Radio‑television and Telecommunications Commission decision in favour of TVA Group, which found that Bell had given undue preference to its sports channel. "TVA Sports" and "RDS" are two comparable services and must be treated equitably by Bell in its most popular package" commented France Lauzière, President and CEO of the Corporation.

____________________________

¹ See definition of adjusted EBITDA below.

² Numeris – Quebec Franco, October 1^st to December 31^st, 2019, Mo‑Su, 2a‑2a, t2+

"In the Magazines segment, the various rationalization plans implemented in recent quarters and various operational efficiency initiatives enabled the segment to continue generating positive adjusted EBITDA¹ and a 12.5% profit margin, despite a 23.9% decrease in operating revenues. Our priority is always to leverage our strong brands by maintaining rich, varied content to support their reach and popularity. Once again, we are pleased to report that TVA Publications held its position as the top publisher of French‑language magazines in Quebec with more than 3.6 million² readers of its monthlies, while our English‑language titles are read by more than 5.4 million² people" added Ms. Lauzière.

"The Film Production & Audiovisual Services segment's financial results improved in the fourth quarter of 2019, mainly because of the use of our soundstages and equipment by local and international producers, as well as higher volume of activities at all our other services, notably visual effects. At this time of proliferating dissemination platforms and strong demand for content production, MELS is well placed to sell its production services, which are gaining growing recognition beyond our borders. MELS remains a growth driver not only for the Corporation but for Quebec's cultural industries and economy as a whole. As we have said on previous occasions, tax incentives need to be increased in order to attract international producers and enable MELS to reap benefits from the film industry's global growth. 

"Lastly, the new Production & Distribution segment, which includes the operations of the companies in the Incendo group, made a positive contribution to the Corporation's financial results since the acquisition. In addition to diversifying our revenue streams and expanding our international presence, this acquisition will enable us to capitalize on the current strong demand for the production of original content," concluded Ms. Lauzière. 

Fiscal 2019 results

For the fiscal year ended December 31, 2019, the Corporation's consolidated adjusted EBITDA¹ was $72,440,000, compared with $54,517,000 in the previous year, a 32.9% increase. The Broadcasting and Magazines segments grew their adjusted EBITDA¹ by 52.6% and 9.9%, respectively, while the Film Production & Audiovisual Services segment posted a 4.9% decline. Subsequent to the acquisition of the companies in the Incendo group on April 1, 2019, the new Production & Distribution segment generated additional adjusted EBITDA¹ in the amount of $2,838,000.

The $14,777,000 favourable variance in the Broadcasting segment's adjusted EBITDA¹ was caused mainly by the acquisition of the "Évasion" and "Zeste" channels, a 21.1% decrease in the negative adjusted EBITDA¹ of the "TVA Sports" channel, and an 18.5% increase in the adjusted EBITDA¹ of the other specialty services. There was a $926,000 favourable variance in the Magazines segment's adjusted EBITDA,¹ due essentially to the savings generated by the continuation of staff and expense rationalization plans introduced in recent quarters, which outweighed the decrease in operating revenues. MELS' adjusted EBITDA¹ decreased by 4.9%, mainly because of a 22.4% decrease in adjusted EBITDA¹ from soundstage, mobile and equipment rental, partially offset by the increased profitability of all of the segment's other activities, particularly visual effects.

Consolidated operating revenues amounted to $569,910,000 in fiscal 2019, compared with $551,910,000 in the previous year, a 3.3% increase. The Corporation recorded net income attributable to shareholders in the amount of $16,452,000, for earnings per share of $0.38, compared with net income attributable to shareholders of $9,057,000 and earnings per share of $0.21 in 2018.

___________________________

¹ See definition of adjusted EBITDA below.

² Vividata, Winter 2020, Total Canada, 14+, October 1, 2018 to September 30, 2019.

Definition

¹ Adjusted EBITDA (previously adjusted operating income (loss))

In its analysis of operating results, the Corporation defines adjusted EBITDA as net income (loss) before depreciation and amortization, financial expenses, operational restructuring costs and others, income taxes and share of income of associates. Adjusted EBITDA as defined above is not a measure of results that is consistent with International Financial Reporting Standards ("IFRS"). It is not intended to be regarded as an alternative to other financial operating performance measures or to the statement of cash flows as a measure of liquidity. This measure should not be considered in isolation or as a substitute for other performance measures prepared in accordance with IFRS. This measure is used by management and the Board of Directors to evaluate the Corporation's consolidated results and the results of its segments. This measure eliminates the significant level of impairment, depreciation and amortization of tangible and intangible assets and is unaffected by the capital structure or investment activities of the Corporation and its segments. Adjusted EBITDA is also relevant because it is a significant component of the Corporation's annual incentive compensation programs. The Corporation's definition of adjusted EBITDA may not be identical to similarly titled measures reported by other companies.

Earnings call

TVA Group will hold a conference call to discuss its fourth quarter and full‑year 2019 results on February 28, 2020, at 10:00 a.m. EST. There will be a question period reserved for financial analysts. To access the call, please dial 1‑877‑293‑8052, followed by access code for participants 66581#. A tape recording of the call will be available from February 28 to March 28, 2020 by dialling 1‑877‑293‑8133 followed by conference access code 66581# and recording access code 66581#.

Forward‑looking information disclaimer

The statements in this news release that are not historical facts may be forward‑looking statements and are subject to important known and unknown risks, uncertainties and assumptions which could cause the Corporation's actual results for future periods to differ materially from those set forth in the forward‑looking statements. Forward‑looking statements generally can be identified by the use of the conditional, the use of forward‑looking terminology such as "propose," "will," "expect," "may," "anticipate," "intend," "estimate," "plan," "foresee," "believe" or the negative of these terms or variations of them or similar terminology. Certain factors that may cause actual results to differ from current expectations include seasonality, operational risks (including pricing actions by competitors and the risk of loss of key customers in the Film Production & Audiovisual Services and Production & Distribution segments), programming, content and production cost risks, credit risk, government regulation risks, government assistance risks, changes in economic conditions, fragmentation of the media landscape, risk related to the Corporation's ability to adapt to fast‑paced technological change and to new delivery and storage methods, and labour relation risks.

Investors and others are cautioned that the foregoing list of factors that may affect future results is not exhaustive and that undue reliance should not be placed on any forward‑looking statements. For more information on the risks, uncertainties and assumptions that could cause the Corporation's actual results to differ from current expectations, please refer to the Corporation's public filings, available at www.sedar.com and www.groupetva.ca, including in particular the "Risks and Uncertainties" section of the Corporation's annual Management's Discussion and Analysis for the year ended December 31, 2019 and the "Risk Factors" section in the Corporation's 2019 annual information form.

The forward‑looking statements in this news release reflect the Corporation's expectations as of February 27, 2020, and are subject to change after this date. The Corporation expressly disclaims any obligation or intention to update or revise any forward‑looking statements, whether as a result of new information, future events or otherwise, unless required to do so by the applicable securities laws.

TVA Group

TVA Group Inc., a subsidiary of Quebecor Media Inc., is a communications company engaged in the broadcasting, film production and audiovisual services, international production and distribution of television content, and magazine publishing industries. TVA Group Inc. is North America's largest broadcaster of French‑language entertainment, information and public affairs programming and one of the largest private‑sector producers of French‑language content. It is also the largest publisher of French‑language magazines and publishes some of the most popular English‑language titles in Canada. The Corporation's Class B shares are listed on the Toronto Stock Exchange under the ticker symbol TVA.B. 

The audited consolidated financial statements, with notes, and the annual Management's Discussion and Analysis, can be consulted on the Corporation's website at www.groupetva.ca.

TVA GROUP INC. Consolidated statements of income   (unaudited) (in thousands of Canadian dollars, except per‑share amounts)
	Three-month periods ended December 31				Years ended December 31
		2019		2018		2019		2018
				(restated)				(restated)
Revenues	$	164,196	$	150,466	$	569,910	$	551,910
Purchases of goods and services		92,908		88,552		353,132		353,037
Employee costs		37,720		36,013		144,338		144,356
Depreciation and amortization		10,369		10,591		40,311		38,619
Financial expenses		850		792		3,892		3,285
Operational restructuring costs and others		853		1,515		5,890		1,669
Income before tax expense and share of income of associates		21,496		13,003		22,347		10,944
Tax expense		5,654		3,492		6,150		2,735
Share of income of associates		(193)		(74)		(485)		(684)
Net income	$	16,035	$	9,585	$	16,682	$	8,893
Net income (loss) attributable to:
Shareholders	$	16,030	$	9,525	$	16,452	$	9,057
Non-controlling interest		5		60		230		(164)
Basic and diluted earnings per share attributable to shareholders	$	0.37	$	0.22	$	0.38	$	0.21

TVA GROUP INC. Consolidated statements of comprehensive income (unaudited) (in thousands of Canadian dollars)
	Three-month periods ended December 31				Years ended December 31
		2019		2018		2019		2018
				(restated)				(restated)
Net income	$	16,035	$	9,585	$	16,682	$	8,893
Other comprehensive items that will not be reclassified to income:
Defined benefit plans:
Re-measurement gain		2,421		710		2,421		710
Deferred income taxes		(644)		(188)		(644)		(188)
		1,777		522		1,777		522
Comprehensive income	$	17,812	$	10,107	$	18,459	$	9,415
Comprehensive income (loss) attributable to:
Shareholders	$	17,807	$	10,047	$	18,229	$	9,579
Non-controlling interest		5		60		230		(164)

TVA GROUP INC. Consolidated statements of equity (unaudited) (in thousands of Canadian dollars)
	Equity attributable to shareholders								Equity attributable to non- controlling interest		Total equity
	Capital stock		Contributed surplus		Retained earnings		Accumulated other comprehensive income — Defined benefit plans
Balance as at December 31, 2017 as previously reported	$	207,280	$	581	$	51,563	$	2,975	$	1,130	$	263,529
Changes in accounting policies		–		–		(1,214)		–		–		(1,214)
Balance as at December 31, 2017 as restated		207,280		581		50,349		2,975		1,130		262,315
Net income (loss)		–		–		9,057		–		(164)		8,893
Other comprehensive income		–		–		–		522		–		522
Balance as at December 31, 2018		207,280		581		59,406		3,497		966		271,730
Net income		–		–		16,452		–		230		16,682
Other comprehensive income		–		–		–		1,777		–		1,777
Balance as at December 31, 2019	$	207,280	$	581	$	75,858	$	5,274	$	1,196	$	290,189

TVA GROUP INC. Consolidated balance sheets (unaudited) (in thousands of Canadian dollars)
	December 31, 2019		December 31, 2018		December 31, 2017
			(restated)		(restated)
Assets
Current assets
Cash	$	3,383	$	18,112	$	21,258
Accounts receivable		160,552		151,715		144,913
Income taxes		2,508		3,325		596
Audiovisual content		88,422		78,483		79,437
Prepaid expenses		3,105		4,081		3,736
		257,970		255,716		249,940
Non-current assets
Audiovisual content		54,678		42,987		43,031
Investments		10,598		11,242		12,851
Property, plant and equipment		175,653		186,583		200,510
Right-of-use assets		8,530		9,694		10,922
Intangible assets		29,311		13,662		15,120
Goodwill		23,703		9,102		7,892
Defined benefit plan asset		−		−		2,873
Deferred income taxes		14,703		14,920		14,453
		317,176		288,190		307,652
Total assets	$	575,146	$	543,906	$	557,592
Liabilities and equity
Current liabilities
Accounts payable and accrued liabilities	$	102,003	$	100,306	$	104,568
Content rights payable		83,244		70,145		69,244
Provisions		1,942		6,356		7,784
Deferred revenues		16,883		16,803		18,728
Current portion of lease liabilities		3,238		3,480		4,298
Income taxes		309		782		6,314
Short-term debt		44,846		52,849		9,844
		252,465		250,721		220,780
Non-current liabilities
Long-term debt		−		−		52,708
Lease liabilities		7,978		10,123		11,226
Defined benefit plan liability		4,489		4,258		−
Other liabilities		13,587		6,627		9,772
Deferred income taxes		6,438		447		791
		32,492		21,455		74,497
Equity
Capital stock		207,280		207,280		207,280
Contributed surplus		581		581		581
Retained earnings		75,858		59,406		50,349
Accumulated other comprehensive income		5,274		3,497		2,975
Equity attributable to shareholders		288,993		270,764		261,185
Non-controlling interest		1,196		966		1,130
		290,189		271,730		262,315
Total liabilities and equity	$	575,146	$	543,906	$	557,592

TVA GROUP INC. Consolidated statements of cash flows   (unaudited) (in thousands of Canadian dollars)
	Three-month periods ended December 31				Years ended December 31
		2019		2018		2019		2018
				(restated)				(restated)
Cash flows related to operating activities
Net income	$	16,035	$	9,585	$	16,682	$	8,893
Adjustments for:
Depreciation and amortization		10,369		10,591		40,311		38,619
Share of income of associates		(193)		(74)		(485)		(684)
Deferred income taxes		1,567		(17)		1,423		(1,350)
Gain on disposal of assets		−		−		−		(3,936)
Impairment of assets		−		−		−		2,000
Others		(31)		1,101		10		1,169
		27,747		21,186		57,941		44,711
Net change in non-cash operating assets and liabilities		(21,959)		(15,386)		(6,469)		(14,778)
Cash flows provided by operating activities		5,788		5,800		51,472		29,933
Cash flows related to investing activities
Additions to property, plant and equipment		(4,819)		(2,552)		(14,169)		(12,936)
Additions to intangible assets		(985)		(1,006)		(4,627)		(3,916)
Business acquisitions		−		(24)		(35,477)		(4,755)
Disposal of property, plant and equipment and intangible assets		−		−		−		3,723
Others		−		−		293		(405)
Cash flows used in investing activities		(5,804)		(3,582)		(53,980)		(18,289)
Cash flows related to financing activities
Net change in bank overdraft		(1,029)		−		−		−
Repayment of term loan		(44,825)		(2,822)		(52,939)		(9,900)
Net change in revolving credit facility		44,863		−		44,863		−
Repayment of lease liabilities		(959)		(1,321)		(4,040)		(4,890)
Others		−		−		(105)		−
Cash flows used in financing activities		(1,950)		(4,143)		(12,221)		(14,790)
Net change in cash		(1,966)		(1,925)		(14,729)		(3,146)
Cash at beginning of period		5,349		20,037		18,112		21,258
Cash at end of period	$	3,383	$	18,112	$	3,383	$	18,112
Interest and taxes reflected as operating activities
Net interest paid	$	571	$	701	$	2,969	$	2,927
Income taxes paid (net of refunds)		1,208		856		4,854		12,325

TVA GROUP INC.
Segmented information

(unaudited)
(in thousands of Canadian dollars)

At the beginning of the second quarter of 2019, the Corporation reorganized its business segments to better reflect changes in its operations and management structure following the acquisition of the companies in the Incendo group on April 1, 2019. Accordingly, the new Production & Distribution segment was created.

As well, since February 13, 2019, following the acquisition of the companies in the Serdy Média inc. and Serdy Vidéo inc. groups, the activities of the "Évasion" and "Zeste" specialty channels have been included in the Broadcasting segment's results, while postproduction activities have been included in the Film Production & Audiovisual Services segment's results.

The Corporation's operations now consist of the following segments:

• The Broadcasting segment, which includes the operations of TVA Network, specialty services, the marketing of digital products associated with the various televisual brands, and commercial production services;
• The Magazines segment, which through its subsidiaries, notably TVA Publications inc. and Les Publications Charron & Cie inc., publishes magazines in various fields including the arts, entertainment, television, fashion and decorating; markets digital products associated with the various magazine brands; and provides custom publishing services;
• The Film Production & Audiovisual Services segment, which through its subsidiaries Mels Studios and Postproduction G.P. and Mels Dubbing Inc., provides soundstage, mobile and equipment rental services, as well as dubbing, postproduction and visual effects;
• The Production & Distribution segment, which through the companies in the Incendo group, produces and distributes television shows, movies and television series for the world market.

TVA GROUP INC. Segmented information (continued) (unaudited) (in thousands of Canadian dollars)
	Three-month periods ended December 31				Years ended December 31
		2019		2018		2019		2018
				(restated)				(restated)
Revenues
Broadcasting	$	122,611	$	113,259	$	436,161	$	417,597
Magazines		15,858		20,827		64,191		77,708
Film Production & Audiovisual Services		23,590		19,049		71,259		68,447
Production & Distribution		6,795		−		13,371		−
Intersegment items		(4,658)		(2,669)		(15,072)		(11,842)
		164,196		150,466		569,910		551,910
Adjusted EBITDA^(1)
Broadcasting		21,345		16,676		42,862		28,085
Magazines		1,983		3,243		10,273		9,347
Film Production & Audiovisual Services		7,828		5,982		16,253		17,085
Production & Distribution		2,198		−		2,838		−
Intersegment items		214		−		214		−
		33,568		25,901		72,440		54,517
Depreciation and amortization		10,369		10,591		40,311		38,619
Financial expenses		850		792		3,892		3,285
Operational restructuring costs and others		853		1,515		5,890		1,669
Income before tax expense and share of income of associates	$	21,496	$	13,003	$	22,347	$	10,944

^(1)

The Chief Executive Officer uses adjusted EBITDA as a measure of financial performance for assessing the performance of each of the Corporation's segments. Adjusted EBITDA is defined as net income before depreciation and amortization, financial expenses, operational restructuring costs and others, income taxes and share of income of associates. Adjusted EBITDA as defined above is not a measure of results that is consistent with IFRS.

SOURCE TVA Group

Anick Dubois, CPA, CA, Vice‑President Finance, (514) 598‑3987

Related Links

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