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MarketScreener Homepage  >  Equities  >  Toronto Stock Exchange  >  TVA Group Inc.    TVA.B   CA8729482031

TVA GROUP INC.

(TVA.B)
  Report
Delayed Quote. Delayed Toronto Stock Exchange - 11/24 01:12:47 pm
1.75 CAD   -2.78%
10/30TVA : Reports third quarter 2020 results
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10/29TVA : Reports Third Quarter 2020 Results
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10/29TVA : Reports Third Quarter 2020 Results
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TVA : Reports Second Quarter 2020 Results

07/30/2020 | 07:28pm EST

MONTREAL, July 30, 2020 /CNW Telbec/ - 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 EBITDA1 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.

__________________________________

1

See definition of adjusted EBITDA below.

"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 points1 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 Quebec2 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.

__________________________________

1 

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

2 

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

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.

 

TVA GROUP INC.
Consolidated statements of loss


(unaudited)
(in thousands of Canadian dollars, except per-share amounts)



Three-month periods
ended June 30

Six-month periods
ended June 30


Note


2020


2019


2020


2019











Revenues

2

$

103,855

$

145,955

$

240,989

$

280,096











Purchases of goods and services

3


81,817


104,951


173,556


198,876

Employee costs

3


14,672


37,240


51,560


73,489

Depreciation and amortization



8,471


9,722


17,002


18,787

Financial expenses

4


665


1,047


1,335


2,004

Operational restructuring costs and others

5


1,802


1,477


2,104


4,645

Loss before tax recovery and share of income of associates



(3,572)


(8,482)


(4,568)


(17,705)











Tax recovery



(666)


(2,245)


(693)


(4,637)











Share of income of associates



(169)


(196)


(426)


(347)

Net loss


$

(2,737)

$

(6,041)

$

(3,449)

$

(12,721)











Net (loss) income attributable to:










Shareholders


$

(2,744)

$

(6,224)

$

(3,467)

$

(12,939)

Non-controlling interest



7


183


18


218





















Basic and diluted loss per share attributable to shareholders

7 c)

$

(0.06)

$

(0.14)

$

(0.08)

$

(0.30)

See accompanying notes to condensed consolidated financial statements.


TVA GROUP INC.
Consolidated statements of comprehensive loss


(unaudited)
(in thousands of Canadian dollars)



Three-month periods
ended June 30


Six-month periods
ended June 30




2020


2019


2020


2019











Net loss


$

(2,737)

$

(6,041)

$

(3,449)

$

(12,721)











Other comprehensive items that will not be reclassified to income:










Defined benefit plans:










Re-measurement loss (note 9)



(15,000)



(15,000)


Deferred income taxes



4,000



4,000





(11,000)



(11,000)












Comprehensive loss


$

(13,737)

$

(6,041)

$

(14,449)

$

(12,721)











Comprehensive (loss) income attributable to:










Shareholders


$

(13,744)

$

(6,224)

$

(14,467)

$

(12,939)

Non-controlling interest



7


183


18


218











See accompanying notes to condensed consolidated financial statements.

TVA GROUP INC.
Consolidated statements of equity

 

(unaudited)
(in thousands of Canadian dollars)


Equity attributable to shareholders

Equity
attributable
to non-
controlling
nterest

Total
equity


Capital
stock
(note 7)

Contributed
surplus

Retained
earnings

Accumula-
ted other
comprehen-
sive income
(loss)

Defined
benefit
plans














Balance as at December 31, 2018

$

207,280

$

581

$

59,406

$

3,497

$

966

$

271,730

Net (loss) income




(12,939)



218


(12,721)

Balance as at June 30, 2019


207,280


581


46,467


3,497


1,184


259,009

Net income




29,391



12


29,403

Other comprehensive income





1,777



1,777

Balance as at December 31, 2019


207,280


581


75,858


5,274


1,196


290,189

Net (loss) income




(3,467)



18


(3,449)

Other comprehensive loss





(11,000)



(11,000)

Balance as at June 30, 2020

$

207,280

$

581

$

72,391

$

(5,726)

$

1,214

$

275,740

See accompanying notes to condensed consolidated financial statements.

TVA GROUP INC.
Consolidated balance sheets

 

(unaudited)
(in thousands of Canadian dollars)


Note

June 30,
2020

December 31,
2019







Assets












Current assets






Cash


$

2,828

$

3,383

Accounts receivable



147,185


160,552

Income taxes



5,664


2,508

Audiovisual content



72,770


88,422

Prepaid expenses



6,139


3,105




234,586


257,970

Non-current assets






Audiovisual content



54,457


54,678

Investments



10,993


10,598

Property, plant and equipment



167,294


175,653

Right-of-use assets



11,425


8,530

Intangible assets



26,342


29,311

Goodwill



23,703


23,703

Deferred income taxes



20,098


14,703




314,312


317,176

Total assets


$

548,898

$

575,146








Liabilities and equity












Current liabilities






Bank overdraft


$

5,874

$

Accounts payable and accrued liabilities



98,778


103,945

Content rights payable



91,152


83,244

Deferred revenues



18,187


16,883

Current portion of lease liabilities



3,403


3,238

Income taxes



1,516


309

Short-term debt



3,962


44,846




222,872


252,465

Non-current liabilities






Lease liabilities



10,383


7,978

Other liabilities



33,887


18,076

Deferred income taxes



6,016


6,438




50,286


32,492

Equity






Capital stock

7


207,280


207,280

Contributed surplus



581


581

Retained earnings



72,391


75,858

Accumulated other comprehensive (loss) income

9


(5,726)


5,274

Equity attributable to shareholders



274,526


288,993

Non-controlling interest



1,214


1,196




275,740


290,189

Contingencies

11





Total liabilities and equity


$

548,898

$

575,146


See accompanying notes to condensed consolidated financial statements.

TVA GROUP INC.
Consolidated statements of cash flows

 

(unaudited)
(in thousands of Canadian dollars)



Three-month periods
 ended June 30

Six-month periods
 ended June 30


Note


2020


2019


2020


2019

Cash flows related to operating activities










Net loss


$

(2,737)

$

(6,041)

$

(3,449)

$

(12,721)

Adjustments for:










Depreciation and amortization



8,471


9,722


17,002


18,787

Share of income of associates



(169)


(196)


(426)


(347)

Deferred income taxes



318


(506)


(1,817)


(573)

Gain on disposal of an asset

5


(253)



(253)


Others



(47)


22


(25)


(18)




5,583


3,001


11,032


5,128

Net change in non-cash operating assets and liabilities



22,960


14,684


33,089


7,714

Cash flows provided by operating activities



28,543


17,685


44,121


12,842

Cash flows related to investing activities










Additions to property, plant and equipment



(1,965)


(3,069)


(6,788)


(6,951)

Additions to intangible assets



(488)


(833)


(1,521)


(2,156)

Business acquisitions

6



(11,036)



(34,505)

Others



401



401


Cash flows used in investing activities



(2,052)


(14,938)


(7,908)


(43,612)

Cash flows related to financing activities










Net change in bank overdraft



458


(4,219)


5,874


4,656

Net change in revolving credit facility



(26,134)


6,371


(40,866)


19,721

Repayment of term loan




(2,780)



(5,532)

Repayment of lease liabilities



(867)


(1,129)


(1,723)


(2,232)

Others





(53)


(105)

Cash flows (used in) provided by financing activities



(26,543)


(1,757)


(36,768)


16,508

Net change in cash



(52)


990


(555)


(14,262)

Cash at beginning of period



2,880


2,860


3,383


18,112

Cash at end of period


$

2,828

$

3,850

$

2,828

$

3,850

Interest and taxes reflected as operating activities










Net interest paid


$

304

$

1,018

$

1,011

$

1,779

Net income taxes paid



44


1,117


3,073


2,773

See accompanying notes to condensed consolidated financial statements.

TVA GROUP INC.
Notes to condensed consolidated financial statements

Three-month and six-month periods ended June 30, 2020 and 2019 (unaudited)
(Tabular amounts are expressed in thousands of Canadian dollars, except per share and per option amounts)

TVA Group Inc. ("TVA Group" or the "Corporation") is governed by the QuebecBusiness Corporations Act. TVA Group is a communications company engaged in broadcasting, film production & audiovisual services, international production & distribution of television content, and magazine publishing (note 10). The Corporation is a subsidiary of Quebecor Media Inc. ("Quebecor Media" or the "parent corporation") and the ultimate parent corporation is Quebecor Inc. ("Quebecor"). The Corporation's head office is located at 1600 de Maisonneuve Boulevard East, Montreal, Quebec, Canada.

The Corporation's businesses experience significant seasonality due to, among other factors, seasonal advertising patterns, consumers' viewing, reading and listening habits, demand for production services from international and local producers, and demand for content from global broadcasters. Because the Corporation depends on the sale of advertising for a significant portion of its revenues, operating results are also sensitive to prevailing economic conditions, including changes in local, regional and national economic conditions, particularly as they may affect advertising spending.

The COVID-19 pandemic continues to have a major impact on the economic environment in Canada and around the world. On March 13, 2020, the Quebec government imposed a series of special preventive measures to limit the spread of the virus, including the suspension of business activities deemed non-essential. Since then, the Quebec government has gradually announced the stages of its reopening plan, which will extend over a period of several months. The crisis curtailed the operations of many business partners in the first half of 2020 and led to a significant slowdown in some of the Corporation's segments. Among other impacts, the COVID-19 virus and the measures to curb its spread caused a significant decline in advertising revenues, a large reduction in the sporting events broadcast on the "TVA Sports" specialty channel, a reduction in the publication frequency of some periodicals and the suspension of most of our content production activities. The Corporation has however continued to provide essential services in order to inform in addition to entertain the population, while putting in place internal measures to safeguard the health and safety of its employees and the public. The Corporation is providing television viewers with continuous coverage of the crisis on TVA Network and the "LCN" specialty channel. Because of the slowdown in the economy, the Corporation reduced the work assignments of approximately 25% of its workforce. The affected employees are receiving benefits under the Corporation's assistance program to make up 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 business units in the Corporation's business segments qualified for the Emergency Wage Subsidy, and provisions for subsidies receivable were recorded in the second quarter of 2020 as a counterpart of a reduction in employee costs or as a remittance to employees who are receiving benefits under the Corporation's assistance program following the reduction of positions. Given the uncertainty about the future course of the pandemic, it is not possible to determine all its impacts with certainty at this time.

Accordingly, the results of operations for interim periods should not necessarily be considered indicative of full-year results.

1. Basis of presentation

These consolidated financial statements were prepared in accordance with the International Financial Reporting Standards ("IFRS") issued by the International Accounting Standards Board ("IASB"), except that they do not include all disclosures required under IFRS for annual consolidated financial statements. In particular, these consolidated financial statements were prepared in accordance with IAS 34, Interim Financial Reporting, and accordingly are condensed consolidated financial statements. These condensed consolidated financial statements should be read in conjunction with the Corporation's 2019 annual consolidated financial statements, which describe the accounting policies used to prepare these condensed consolidated financial statements.

These condensed consolidated financial statements were approved by the Corporation's Board of Directors on July 30, 2020.

Certain comparative figures for the three-month and six-month periods ended June 30, 2019 have been restated to conform to the presentation adopted for the three-month and six-month periods ended June 30, 2020.

2. Revenues






Three-month periods
ended June 30

Six-month periods
ended June 30



2020


2019


2020


2019










Advertising services

$

42,729

$

71,185

$

104,845

$

138,141

Royalties


34,637


35,279


71,030


69,048

Rental, postproduction and distribution services and other services rendered(1)


13,695


21,368


38,547


36,682

Product sales(2)


12,794


18,123


26,567


36,225


$

103,855

$

145,955

$

240,989

$

280,096



 (1)

Revenues from rental of soundstages, mobiles, equipment and rental space amounted to $2,705,000 and $12,226,000 during the three-month and six-month periods ended June 30, 2020 respectively ($7,212,000 and $12,236,000 during the same periods of 2019). Service revenues also include the activities of the new Production & Distribution segment.

(2)

Revenues from product sales include newsstand and subscription sales of magazines and sales of audiovisual content.

3. Purchases of goods and services and employee costs

The main components of purchases of goods and services were as follows:





Three-month periods
ended June 30

Six-month periods
ended June 30



2020


2019


2020


2019










Purchases of goods and services:









Rights and audiovisual content costs(1)

$

62,779

$

75,401

$

127,778

$

139,853

Printing and distribution


2,987


5,580


6,662


10,963

Services rendered by the parent corporation:









-       Commissions on advertising sales


4,479


7,542


10,908


14,642

-       Others


2,256


2,222


4,498


4,460

Building costs


3,646


4,238


7,744


8,817

Marketing, advertising and promotion


1,668


4,270


5,438


8,764

Others


4,002


5,698


10,528


11,377



81,817


104,951


173,556


198,876

Employee costs(2)

$

14,672

$

37,240

$

51,560

$

73,489


$

96,489

$

142,191

$

225,116

$

272,365



 (1)

During the second quarter of 2020, the Corporation remeasured its audiovisual content asset, given the current pandemic and its impacts on the Corporation's operations. As a result of this remeasurement, the Corporation recorded a $28,056,000 audiovisual content charge for the three-month and six-month periods ended June 30, 2020. Despite this charge, rights and audiovisual content costs decreased by $12,622,000 and $12,075,000 by comparison with the respective three-month and six-month periods ended June 30, 2019. Management will remeasure the value of the audiovisual content asset in the coming quarters as the situation develops.

(2)

For the three-month and six-month periods ended June 30, 2020, employee costs are presented net of the $14,544,000 the Corporation qualified for the Emergency Wage Subsidy for employees whose work assignments were maintained. This amount is presented in its entirety in accounts receivable as of June 30, 2020.

4. Financial expenses






Three-month periods
ended June 30

Six-month periods
ended June 30



2020


2019


2020


2019










Interest on short-term debt

$

181

$

811

$

615

$

1,501

Amortization of financing costs


13


48


35


97

Interest on lease liabilities


139


175


282


344

Interest expense on net defined benefit liability


67


96


162


209

Foreign exchange loss (gain)


150


(45)


24


(39)

Others


115


(38)


217


(108)


$

665

$

1,047

$

1,335

$

2,004

5.   Operational restructuring costs and others





Three-month periods
ended June 30

Six-month periods
ended June 30



2020


2019


2020


2019










Operational restructuring costs

$

2,097

$

1,496

$

2,250

$

2,896

Others


(295)


(19)


(146)


1,749


$

1,802

$

1,477

$

2,104

$

4,645

Operational restructuring costs

For the three-month and six-month periods ended June 30, 2020 and 2019, the Corporation recorded a net charge resulting from the rationalization of operating activities in connection with the reduction of positions and the implementation of cost-reduction measures which the segment breakdown is as follows:





Three-month periods
ended June 30

Six-month periods
ended June 30



2020


2019


2020


2019










Broadcasting

$

1,415

$

834

$

1,439

$

1,147

Film Production & Audiovisual Services


682


108


682


111

Magazines



554


129


1,638


$

2,097

$

1,496

$

2,250

$

2,896

Others

During the three-month and six-month periods ended June 30, 2020, the Corporation recognized a $253,000 gain on disposal of an asset, for proceeds on disposal of $310,000.

During the first six months of 2020, the Corporation recorded a $194,000 charge in respect of business acquisitions, compared with $1,865,000 in the same period of 2019. The 2019 charge included a $1,794,000 obligation to invest in the broadcasting system, in connection with the acquisition of the companies in the Serdy Média inc. and Serdy Vidéo inc. groups (note 6).

6. Business acquisitions

(a) Serdy

On February 13, 2019, the Corporation acquired the shares of the companies in the Serdy Média inc. and Serdy Vidéo inc. groups, including the "Évasion" and "Zeste" channels, for a total purchase price of $25,604,000, including a $1,604,000 adjustment upon a predetermined working capital target agreed to by the parties, less $519,000 in acquired cash. On the acquisition date, the Corporation paid $24,000,000, which was the agreed purchase price before an adjustment upon a predetermined working capital target agreed to by the parties, less preliminary acquired cash in the amount of $531,000.

The acquisition is consistent with the Corporation's strategic objective of enhancing its array of television content for its viewers and advertisers. The goodwill associated with the acquisition arises mainly from the quality of the content and the expected synergies.

As a condition of approval of the transaction, the Canadian Radio-television and Telecommunications Commission required the Corporation to make investments with tangible benefits in the order of $1,794,000, specifically investments in the Canadian broadcasting system to support French-language productions. This obligation was recognized in operational restructuring costs and others as an acquisition cost.

Allocation of the purchase price was finalized during the fourth quarter of 2019.

(b) Incendo

On April 1, 2019, the Corporation closed an agreement reached on February 22, 2019 to acquire the shares of the companies in the Incendo group for a cash consideration of $10,392,000 (net of $859,000 in acquired cash and a $644,000 reimbursement due to an adjustment based on a predetermined working capital target agreed to by the parties) and a balance payable at fair value of $6,818,000 on the acquisition date. The purchase price is also subject to adjustments related to the achievement of financial conditions in the three years following the acquisition date. The contingent consideration was set at $1,739,000 on that date, according to the discounted future cash flows of the future contingent adjustments. The discounted future value is determined according to significant inputs not based on observable market data, assumptions and a range of probabilities for the achievement of financial conditions. On the acquisition date, the Corporation paid $11,036,000, which was the agreed purchase price before an adjustment upon a predetermined working capital target agreed to by the parties, less acquired cash in the amount of $859,000.

This acquisition is in keeping with the Corporation's strategy of diversifying its revenue streams and expanding its international footprint, especially in English-language markets. The goodwill associated with this acquisition arises primarily from the organization's expertise and expected future growth.

Allocation of the purchase price was finalized during the fourth quarter of 2019.

The final breakdown of the fair value of assets and liabilities related to these acquisitions is as follows:










Serdy


Incendo


Total








Non-cash assets acquired







Current assets

$

11,997

$

14,004

$

26,001

Non-current audiovisual content


3,893


4,191


8,084

Property, plant and equipment


1,720


156


1,876

Intangible assets


8,661


12,575


21,236

Right-of-use assets


1,469


249


1,718

Deferred income taxes


241



241

Goodwill(1)


4,813


9,788


14,601



32,794


40,963


73,757

Liabilities assumed







Current liabilities


5,404


17,390


22,794

Lease liabilities


1,469


249


1,718

Deferred income taxes



4,375


4,375



6,873


22,014


28,887

Net assets acquired at fair value

$

25,921

$

18,949

$

44,870








Consideration







Cash

$

25,085

$

10,392

$

35,477

Amounts payable  and contingent consideration(2)



8,557


8,557

Investment in Canal Évasion inc., 8.3% owned by the Corporation


836



836


$

25,921

$

18,949

$

44,870








(1) 

Goodwill is not tax deductible.

(2)  

The current portion of the amounts payable and of the contingent consideration in connection with the acquisition of the Incendo group is presented under "Accounts payable and accrued liabilities," while the long-term portion is presented under "Other liabilities" on the consolidated balance sheets.

7. Capital stock

(a) Authorized capital stock

An unlimited number of Class A Common Shares, participating, voting, without par value.

An unlimited number of Class B Shares, participating, non-voting, without par value.

An unlimited number of Preferred Shares, non-participating, non-voting, with a par value of $10 each, issuable in series.

(b) Issued and outstanding capital stock





June 30,

 2020

December 31,

2019






4,320,000 Class A common shares

$

72

$

72

38,885,535 Class B shares


207,208


207,208


$

207,280

$

207,280

(c) Loss per share attributable to shareholders

The following table shows the computation of loss per basic and diluted share attributable to shareholders:





Three-month periods

ended June 30

Six-month periods

ended June 30



2020


2019


2020


2019










Net loss attributable to shareholders

$

(2,744)

$

(6,224)

$

(3,467)

$

(12,939)










Weighted average number of basic and diluted shares outstanding


43,205,535


43,205,535


43,205,535


43,205,535










Basic and diluted loss per share attributable to shareholders

$

(0.06)

$

(0.14)

$

(0.08)

$

(0.30)

The loss per diluted share calculation does not take into consideration the potential dilutive effect of stock options of the Corporation, because their impact is non-dilutive.

8. Stock-based compensation and other stock-based payments

(a) Class B stock option plan for officers




Six-month period ended
June 30, 2020


Number

Weighted
 average
exercise price





Balance as at December 31, 2019

515,000

$

2.43

Cancelled

(10,000)


2.16

Balance as at June 30, 2020

505,000

$

2.43

Of the options outstanding as at June 30, 2020, 35,000 Corporation Class B stock options could be exercised at an average price of $6.85.

(b) Quebecor Media stock option plan




Six-month period ended
June 30, 2020


Number

Weighted
 average
exercise price





Balance as at December 31, 2019

31,600

$

69.19

Exercised

(18,800)


68.37

Balance as at June 30, 2020

12,800

$

70.39

Of the options outstanding as at June 30, 2020, 12,800 Quebecor Media stock options could be exercised at an average price of $70.39.

During the three-month period ended June 30, 2020, 16,000 Quebecor Media stock options were exercised for a cash consideration of $876,000 (during the three-month period ended June 30, 2019, 19,600 stock options were exercised for a cash consideration of $739,000).

During the six-month period ended June 30, 2020, 18,800 Quebecor Media stock options were exercised for a cash consideration of $1,002,000 (during the six-month period ended June 30, 2019, 20,600 stock options were exercised for a cash consideration of $782,000).

(c) Quebecor stock option plan




Six-month period ended
June 30, 2020


Number

Weighted
 average
exercise price





Balance as at December 31, 2019

420,500

$

28.82

Cancelled

(20,000)


26.52

Balance as at June 30, 2020

400,500

$

28.93

Of the options outstanding as at June 30, 2020, no Quebecor Media stock options could be exercised.

(d) Deferred stock unit ("DSU") and performance stock unit ("PSU") plans

TVA Group has a DSU plan and a PSU plan for some management employees based on TVA Group Class B Non-Voting Shares ("TVA Group Class B Shares"). Quebecor also has DSU and PSU plans for its employees and those of its subsidiaries, based on, among other things, Quebecor Class B Shares. Under these plans, the DSUs vest over six years and will be redeemed for cash only upon the participant's retirement or cessation of employment, as the case may be. The PSUs vest over three years and will be redeemed for cash at the end of that period, subject to achievement of financial targets. Under the TVA Group plan, holders of DSUs and PSUs are entitled to take dividends on TVA Group Class B Shares in the form of additional units. Under the Quebecor plan, holders of DSUs and PSUs are entitled to receive dividends on Quebecor Class B Shares in the form of additional units.

The following table shows changes in outstanding DSUs and PSUs during the six-month period ended June 30, 2020:




Outstanding units


Corporation stock units

Quebecor stock units


DSU

PSU

DSU

PSU






Balance as at December 31, 2019

177,256

131,129

29,150

16,148

Granted

356

Cancelled

(20,692)

(4,322)

Redeemed

(131,129)

(16,148)

Balance as at June 30, 2020

156,564

25,184

 

(e) Deferred stock unit ("DSU") plan for directors

As of June 30, 2020, the total number of DSUs outstanding under this plan was 334,056 (300,088 as of December 31, 2019).

(f) Stock-based compensation expense

During the three-month and six-month periods ended June 30, 2020, reversals of compensation expense in the amounts of $97,000 and $114,000 respectively were recorded in respect of all stock-based compensation plans (compensation expense of $653,000 and $1,168,000 in the same periods of 2019).

9. Pension plans and post-retirement benefits

The loss on remeasurement of defined benefit plans recognized on the consolidated statement of comprehensive loss for the six-month period ended June 30, 2020 mainly reflects the decrease in the discount rate since December 31, 2019.

10. Segmented information

Management made changes to the Corporation's management structure at the beginning of the year. As a result of those changes, the custom publishing, commercial print production and premedia services previously provided by the Magazines segment were combined with the Broadcasting segment's existing commercial production activities. Financial information for comparative periods has been restated to take into account the new presentation.

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 (note 6). 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 (note 6), the activities of the "Évasion" and "Zeste" specialty services 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 and 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 production equipment rental services, as well as dubbing and described video, postproduction and visual effects;
  • 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, and markets digital products associated with the various magazine brands;
  • 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.




Three-month periods
ended June 30

Six-month periods
ended June 30



2020


2019


2020


2019










Revenues









Broadcasting

$

86,767

$

116,464

$

194,828

$

226,204

Film Production & Audiovisual Services


7,460


14,248


25,442


27,201

Magazines


10,037


15,523


20,330


30,181

Production & Distribution


2,869


3,479


7,622


3,479

Intersegment items


(3,278)


(3,759)


(7,233)


(6,969)



103,855


145,955


240,989


280,096

Adjusted EBITDA (Negative adjusted EBITDA)(1)









Broadcasting


3,470


(1,606)


7,299


874

Film Production & Audiovisual Services


507


1,837


3,679


1,943

Magazines


2,890


3,211


3,554


4,592

Production & Distribution


428


322


1,095


322

Intersegment items


71



246




7,366


3,764


15,873


7,731

Depreciation and amortization


8,471


9,722


17,002


18,787

Financial expenses


665


1,047


1,335


2,004

Operational restructuring costs and others


1,802


1,477


2,104


4,645

Loss before tax recovery and share of income of associates

$

(3,572)

$

(8,482)

$

(4,568)

$

(17,705)

The above-noted intersegment items represent the elimination of normal course business transactions between the Corporation's business segments.

(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 (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 IFRS.

11. Contingencies

Lawsuits were brought by and against the Corporation, and against Quebecor and some of its subsidiaries, in connection with business disputes with a cable operator. At this stage in the proceedings, management of the Corporation does not expect their outcome to have a material adverse effect on the Corporation's results or on its financial position.

SOURCE TVA Group

© Canada Newswire, source Canada Newswire English

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Financials
Sales 2020 513 M 395 M 395 M
Net income 2020 26,0 M 20,0 M 20,0 M
Net Debt 2020 30,0 M 23,1 M 23,1 M
P/E ratio 2020 2,89x
Yield 2020 -
Capitalization 75,6 M 58,1 M 58,1 M
EV / Sales 2020 0,21x
EV / Sales 2021 0,18x
Nbr of Employees 1 310
Free-Float 31,5%
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Mean consensus HOLD
Number of Analysts 3
Average target price 3,20 CAD
Last Close Price 1,75 CAD
Spread / Highest target 243%
Spread / Average Target 82,9%
Spread / Lowest Target -8,57%
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Managers
NameTitle
France Lauzière President & Chief Executive Officer
Sylvie Lalande Chairman
Martin Picard Chief Operating Officer & Vice President
Anick Dubois Vice President-Finance
Denis Rozon VP-Productions, Operations & Technology
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