Cogeco reports first-quarter profit and revenue up from year ago mark

Cogeco Inc. reported its first-quarter profit rose compared with a year ago as its revenue also climbed, as customers spent more time online during the COVID-19 pandemic.

Cogeco said its Canadian broadband revenue grew 2.2 per cent in the three months ending Nov. 30, amid demand for residential high-speed internet for remote work, school and entertainment, as well as price hikes in June in Ontario and December in Quebec.

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U.S. broadband revenue jumped 9.8 per cent, adjusted for exchange rates, with an additional boost from political advertising during the U.S. presidential election.

Radio revenue fell 13 per cent in the quarter compared with the year-ago period, as retailers cut their ad campaigns. The company also said it had a decline in Canadian video service customers, and that it saved money by delaying certain sales and marketing spending.

"While the broadband business had strong results, the media business continued to be impacted by the pandemic due to certain segments of the retail industry reducing advertising budgets revenue," chief executive Philippe Jette said on a conference call with analysts.

The results come on the heels of the Cogeco board's decision to reject a takeover offer this fall from Altice USA Inc. and Rogers Communications Inc.

At the Cogeco Inc. annual general meeting, also held on Friday, Louis Audet said the Cogeco’s current share ownership structure gives the company "stability, a long-term perspective, and stewardship." Audet’s father founded Cogeco, and the family’s holding company, Gestion Audem, has 69 per cent of Cogeco Inc.'s voting rights.

"It's easy to understand why the Audet family does not wish to sell its interest in the Cogeco companies," said Audet at the meeting. "I can assure you that the Audet family intends to maintain its long-term commitment to Cogeco."

In all, the Montreal company's profit attributable to owners of the corporation totalled $40.5 million or $2.53 per diluted share, up from $31.3 million or $1.94 per diluted share a year earlier.

Revenue was $646.4 million, up from $618.5 million.

Cogeco owns radio broadcaster Cogeco Media as well as a controlling interest in Cogeco Communications Inc., a cable company with operations in Canada and the United States.

Cogeco Communications reported a profit attributable to owners of the corporation of $106.7 million or $2.22 per diluted share, up from $84.2 million or $1.70 per diluted share a year earlier.

Revenue at Cogeco Communications totalled $618.9 million, up from $586.8 million.

Cogeco recently closed its deal to buy DERYtelecom, which it says is the third-largest cable provider in the province of Quebec. Cogeco said it gained about 100,000 customers through the deal.

Jette said Cogeco is also forging ahead on plans to enter the mobile wireless service market, pending a review of mobile services by the Canadian Radio-television and Telecommunications Commission.

Other expansion plans for Cogeco include rural areas of Ontario and Quebec. Jette also said Cogeco's U.S. brand, Atlantic Broadband, is growing in Florida, and is shuffling its pricing packages to focus on Wi-Fi and broadband amid rising costs for video.

Chief financial officer Patrice Ouimet told analysts on the call that sales and marketing costs will "ramp up" leading up to this year's back-to-school season, and that "certain cost savings related to the pandemic are expected to decline in the second half of the year."

But Jette said that "fiscal year 2021 looks very promising, despite the unfavourable economic impacts related to the pandemic."

Shares of Cogeco Inc. rose 5.4 per cent to $83.13 in Toronto, while Cogeco Communications' stock was up nearly six per cent to $101.75.

RBC Capital Markets analyst Drew McReynolds said that there is relative value Cogeco Communications' shares after the rejected Rogers takeover, despite uncertainty over the CRTC's wireless reviews.

"Cogeco is proving relatively resilient to COVID-19 impacts, reflecting high revenue exposure to what is strong demand for Internet while avoiding the direct COVID-19 impacts on wireless and media revenues (unlike the case for other Canadian operators)," McReynolds wrote in a client note on Friday.

This report by The Canadian Press was first published Jan. 15, 2021.

Companies in this story: (TSX:CGO, TSX:CCA)

— With a file from Jon Victor in Montreal

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