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TVA Group Reports Second Quarter 2020 Results

Le vendredi 31 juillet 2020
TVA Group

TVA GROUP REPORTS SECOND QUARTER 2020 RESULTS 

 

Montreal, Canada – TVA Group Inc. (“TVA Group” or the “Corporation”) announced today that it recorded operating revenues in the amount of $103.9 million in the second quarter of 2020, a year-over-year decrease of $42.1 million. The net loss attributable to shareholders was $2.7 million or $0.06 per share, compared with a net loss attributable to shareholders of $6.2 million or $0.14 per share in the same quarter of 2019. 

Second quarter operating highlights:

  • Consolidated adjusted EBITDA[1] of $7,366,000, a $3,602,000 favourable variance from the same quarter of 2019.
  • $3,470,000 in adjusted EBITDA1 in the Broadcasting segment, a $5,076,000 favourable variance due to a 59.4% improvement in negative adjusted EBITDA1 at the specialty channels, particularly “TVA Sports,” whose costs reflect a significant reduction in the sporting events broadcast by the channel, including postponement of the National Hockey League (”NHL”) playoffs, partially offset by a 38.4% decrease in the adjusted EBITDA1 of TVA Network.
  • $507,000 in adjusted EBITDA1 in the Film Production & Audiovisual Services segment, a $1,330,000 unfavourable variance caused primarily by the decreased profitability of soundstage, mobile and equipment rental and of postproduction activities as a result of the current health crisis. The segment’s other activities posted increased profitability.
  • $2,890,000 in adjusted EBITDA1 in the Magazines segment, a $321,000 unfavourable variance resulting mainly from discontinuation of some titles, partially offset by the performance of the other titles, the publication frequency of which was reviewed, generating cost savings in excess of the decrease in their operating revenues.
  • $428,000 in adjusted EBITDA1 in the Production & Distribution segment, a $106,000 favourable variance due mainly to savings in administrative expenses, which outweighed the decrease in gross margin on film production and distribution.

“As expected, the COVID-19 pandemic significantly impacted our results in the second quarter of 2020. Many of our activities were curtailed to comply with Quebec government directives. Among other things, the health crisis and the measures to curb the spread of the virus caused a significant decline in advertising revenues; a large reduction in the sporting events broadcast by the “TVA Sports” specialty channel, including in particular postponement of the NHL playoffs to the third quarter; a reduction in the publication frequency of some periodicals; and the suspension of most of our content production activities. TVA Group has however continued to provide essential services throughout the crisis in order to inform in addition to entertain the population, and we have been gradually resuming most of our activities since the end of the quarter, while maintaining and adjusting internal measures to safeguard the health and safety of our employees and the public. While our teams are primed and ready to resume our activities, the reopening is still subject to factors that are limiting its scope and speed, including the implementation of social distancing measures that complicate or slow the production of certain types of content, the shaky resumption of sporting events, and the precarious situation of some of our advertisers,” commented France Lauzière, President and CEO of TVA Group.

“TVA Group’s total market share increased by 1.8 points[2] to 42.3% in the second quarter of 2020. TVA Network grew its share by 0.2 points1 while the specialty channels posted a 1.6-point increase1 as a result of exceptional 5.1-point1 growth at “LCN,” which peaked at a market share of 10.6%,1 strengthening its status as Quebec’s most-watched specialty channel. The outstanding work of our employees during this unprecedented period allowed us to provide continuous news coverage and to continue producing original content to entertain our audiences. For example, we are very proud of the television event Une chance qu'on s'a, which paid tribute to Quebecers’ efforts to fight COVID-19. It drew an average audience of more than 2.0 million viewers and raised more than $2 million to help seniors and victims of domestic violence,” added France Lauzière.

“The Film Production & Audiovisual Services segment's financial results were significantly affected by the pandemic, forcing the suspension of film shoots, including a Disney production that was filming at our facilities, and delaying the start of a second major production scheduled for the second quarter. Postproduction activities have also been affected by the current situation, but most of the segment's other activities were maintained and helped mitigate the decline in profitability,” continued the President of TVA Group.

“While the Magazines segment’s operating revenues continued their decline in the second quarter of 2020, exacerbated by the current situation, our efforts yielded a 37.8% decrease in operating expenses and enabled the segment to continue making a positive contribution to the Corporation’s operating results. This performance was made possible by the speed with which our people adjusted to the situation, temporarily curtailed the release of some titles and adjusted our content to address our readers' interests during the crisis. Protecting the strong brands that make TVA Group the largest publisher of French-language magazines in Quebec[3] remains our key priority. 

“The Production & Distribution segment, which includes the operations of the companies in the Incendo group, continues to make a positive contribution to the Corporation’s financial results. In addition to diversifying our revenue streams and expanding our presence internationally, particularly in English-language markets, this segment positions us to take advantage of the anticipated demand for production of original content, which will have been boosted by the current crisis. We are already planning the resumption of the segment's activities, which we hope to be able to accelerate through co-productions with New Zealand that are set to begin soon. 

“Once again, I sincerely thank all our employees in all our segments and all regions of Quebec. They have made it possible for us to continue informing and entertaining Quebecers, and they are the architects of our reopening,” Ms. Lauzière concluded.

Update on the COVID-19 situation

The second quarter results must be viewed in the context of the COVID-19 pandemic, an unprecedented situation with major consequences for Canadians and indeed the global economy. As a provider of essential services, our priority is to continue our mission of informing and entertaining the public. We kept our continuous news services available to all on our various broadcasting platforms and provided free access to our “LCN” all-news specialty channel throughout the quarter. TVA Group has taken and will continue to take all necessary measures to safeguard its employees’ health and safety by delivering services remotely whenever possible, applying physical distancing rules in the workplace, and implementing stringent health precautions at its facilities. 

We expect the financial impacts of this crisis will continue to be felt in the coming quarters, including: 

  • significant reduction in advertising revenues, which will inevitably affect the Broadcasting and Magazines segments;
  • increase in bad debts as a result of the precarious situation of some advertisers; 
  • significant variability in our revenues and content costs related to live broadcasts of sporting events organized by professional leagues, as they resume their activities while cancelling some events and making significant changes to formats and broadcast schedules;
  • reduction in the publication frequency of some periodicals, which will affect revenues in the Magazines segment; 
  • decline in the level of activity in the MELS segment and in the Production & Distribution segment resulting from a slow and complex resumption of our content production activities due to factors such as the need to comply with health precautions and physical distancing rules on the set, the closing of borders with some countries, and production insurance challenges.

On March 27, to adjust its cost structure to the lower volume of activities caused by the health crisis, the Corporation reduced the work assignments of approximately 25% of its workforce, who are now receiving benefits under the Corporation’s assistance program to compensate for being placed on stand-by. During the health crisis, this program provides financial assistance in addition to the Canada Emergency Wage Subsidy or Canada Emergency Response Benefit programs. Many of the entities in the Corporation’s various business segments qualified for the Canada Emergency Wage Subsidy, enabling the Corporation to mitigate some of the impacts of the crisis. 

Given the uncertainty surrounding the duration of the pandemic and its potential impacts, we are currently unable to predict the overall effect it will have on our operating and financial results. However, we believe that our current sound financial health, our strong balance sheet and the steps we have taken will enable us to continue to deliver positive cash flows. 

TVA Group continues to take steps on a daily basis to implement the action plans needed to maintain business continuity and the pursuit of its long-term strategies. Our management team is working to ensure sound management of the current crisis and to plan a gradual resumption of the Corporation’s activities, while following government directives. 

Definition

Adjusted EBITDA

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.

Conference call for investors 

TVA Group will hold a conference call to discuss its second quarter 2020 results on July 31, 2020, at 10:00 a.m. EDT. 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 July 31 to August 31, 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, labour relation risks, and the risks related to public health emergencies, including COVID-19, as well as any emergency measures implemented by government. 

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, as well as the update on risks and uncertainties in the Interim Management’s Discussion and Analysis for the three-month and six-month periods ended June 30, 2020.

The forward-looking statements in this news release reflect the Corporation’s expectations as of July 30, 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 condensed consolidated financial statements as of June 30, 2020, with notes, and the interim Management’s Discussion and Analysis for the three-month and six-month periods ended June 30, 2020, can be consulted on the Corporation’s website at www.groupetva.ca


[1] See definition of adjusted EBITDA below.

[2] Numeris – French Quebec, April 1 to June 30, 2020, Mo-Su, 2 a.m.–2 a.m., t2+

[3] Vividata, Spring 2020, Total Canada, 14+, January 1 to December 31, 2019

 

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