Cablemas 4Q08 Net Revenue and Adjusted EBITDA Up 18.2% and 5.0% YoY
Posted on: Friday, 15 May 2009, 09:08 CDT
Cablemas CEO
"Adjusted EBITDA margin for the year was 35.6% reflecting higher programming costs throughout the year. To adjust to the weakening economy this quarter we successfully began implementing a cost control program, which together with revenue growth, contributed to the 142 bps year-on-year increase in operating margin for the quarter. In addition, we are negotiating terms with suppliers in order to offset the effect of the depreciation of the Mexican Peso, which impacts around 30% of the Company's overall costs."
"Although Mexico has started to feel the effects of the global slowdown, we consider our business model to be defensive and continue to see an attractive growth potential in our markets. Nonetheless, we remain cautious and will continue implementing cost controls throughout the Company while limiting capital expenditures and consolidating our current infrastructure to further support our strong balance sheet position."
Financial and Operational Highlights(1) --------------------------------------- (in million Mexican Pesos) 4Q07 4Q08 % Chg. 2007 2008 % Chg. -------------------------------------------------------------------------- Financial Highlights -------------------------------------------------------------------------- Net revenue 698.8 825.8 18.2% 2,703.6 3,159.1 16.8% Operating profit 132.6 168.4 27.0% 550.1 541.5 -1.6% Adjusted EBITDA(2) 245.4 257.7 5.0% 1,012.1 1,126.2 11.3% Net income 30.3 (19.8) -165.5% 226.2 (9.4) -104.2% -------------------------------------------------------------------------- Operating margin 19.0% 20.4% +142 bps 20.3% 17.1% -321 bps Adjusted EBITDA margin(2) 35.1% 31.2% -391 bps 37.4% 35.6% -179 bps Net income margin 4.3% -2.4% -673 bps 8.4% -0.3% -867 bps -------------------------------------------------------------------------- Total Debt 2,897.1 3,106.6 7.2% 2,897.1 3,106.6 7.2% Net Debt 2,842.6 2,986.6 5.1% 2,842.6 2,986.6 5.1% Total Debt/ LTM Adj. EBITDA(2) 2.9x 2.8x 2.9x 2.8x Net Debt/ LTM Adj. EBITDA(2) 2.8x 2.7x 2.8x 2.7x EBITDA/ Net interest expense 4.0x 2.9x 4.0x 2.9x -------------------------------------------------------------------------- Operational Highlights -------------------------------------------------------------------------- Homes passed 2,204,603 2,512,760 14.0% 2,204,603 2,512,760 14.0% Cable Television subscribers 797,018 851,172 6.8% 797,018 851,172 6.8% High-speed internet subscribers 220,446 242,708 10.1% 220,446 242,708 10.1% IP Telephony lines 41,062 76,112 85.4% 41,062 76,112 85.4% -------------------------------------------------------------------------- (1) Unless otherwise stated, all financial figures discussed in this announcement are unaudited, prepared in accordance with Mexican Financial Reporting Standards and represent comparisons between the three-month periods ended December 31, 2008, and the equivalent three- month period ended December 31, 2007. Results for 4Q07 and FY07 are expressed in constant Mexican pesos as of December 31, 2007, while 4Q08 and FY08 results are in nominal pesos. Tables state figures in millions of pesos, unless otherwise noted. (2) Adjusted EBITDA is calculated by adding amortization and depreciation, net comprehensive financial results, net other income, special items, total income tax and asset tax, total employee statutory profit sharing, effects from associated companies and minority interest to net income/loss.FOURTH QUARTER 2008 CONSOLIDATED RESULTS
Net Revenues
Net revenues increased 18.2%, or Ps.127.0 million, during 4Q08 to Ps.825.8 million, as described below:
- Cable Television: The 10.6% growth in cable television revenues, from Ps.515.7 million to Ps.570.3 million was principally due to a 6.8% YoY increase in the number of subscribers to 851,172 with a penetration rate of 33.1%. Average monthly cable television revenues per subscriber (ARPU) increased year over year to Ps.227.3 from Ps.219.4, principally reflecting the increase in rates at the Minibasic service implemented earlier in the year. Average monthly net churn rates for cable television declined 3 basis points to 2.3%.
- High Speed Internet: The 8.7%, or Ps.11.5 million, rise in high-speed Internet revenues to Ps.142.5 million resulted mainly from a 10.1% increase in the number of subscribers to 242,708, with a penetration rate of 11.3%. High-speed Internet ARPU declined to Ps.198.6 from Ps.201.3 in 4Q07, reflecting a higher participation of competitively priced double and triple play offerings. Average monthly net churn rates for high-speed Internet declined 58 bps to 3.9% in 4Q08 due to the increase in the participation of a more stable double and triple play client base.
- IP Telephony: IP telephony revenues for the quarter rose by Ps.48.4 million, to Ps.81.3 million. The number of IP telephony lines in service rose 85.4% to 76,112 from 41,062 at the end of 4Q07. On
July 31, 2008 Cablemas terminated the commercial agreement with Axtel to provide IP Telephony services inTijuana . As a result, the total number of subscribers at year-end does not include 14,000 subscribers transferred to Axtel following the split. IP telephony ARPU for 4Q08 rose to Ps.363.0 from Ps.291.2 in the year-ago quarter. This increase principally reflects continued demand of new higher priced services including calls to mobile phones and long distance calls, as well as the ramping up of IP telephony in new cities.
Operating Profit
Operating profit for 4Q08 increased by 27.0%, or Ps.35.8 million, to Ps.168.4 million, driven mainly by a Ps.99.0 million rise in gross profit, which more than offset the Ps.63.2 million increase in SG&A. Operating margin rose 142 bps to 20.4% from 19.0% in 4Q07.
Table 4. Operating Profit ------------------------------------------------------------------------- 4Q07 4Q08 % Chg. ------------------------------------------ ---------------------- % of % of Million Ps. Revenues Million Ps. Revenues ------------------------------------------ ---------------------- ------ Service revenues 698.8 100.0% 825.8 100.0% 18.2% Cost of services 345.7 49.5% 373.7 45.3% 8.1% Gross Profit 353.1 50.5% 452.1 54.7% 28.0% SG&A 220.5 31.6% 283.7 34.4% 28.6% - Selling 64.5 9.2% 111.7 13.5% 73.3% - Administrative 138.1 19.8% 132.5 16.0% -4.1% - Amortization and depreciation 17.9 2.6% 39.5 4.8% 120.2% ------------------------------------------ ---------------------- ------ Total operating profit 132.6 19.0% 168.4 20.4% 27.0% -------------------------------------------------------------------------Cost of Services
Cost of Services for 4Q08 rose 8.1%, or Ps.28.0 million. The increase in cost of services was primarily due to:
- A Ps.20.1 million increase in cable TV programming costs, reflecting higher costs, the depreciation of the Mexican peso against the US dollar and the increase in the number of cable subscribers; and
- A Ps.3.1 million increase in Internet costs related to the incremental cost for bandwidth as the Company is offering higher Internet speeds at the same price to make its service more competitive. The increase also reflected the 10.1% growth in the number of Internet subscribers.
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses (including depreciation and amortization) or SG&A, increased Ps.63.2 million, or 28.6% YoY to Ps.283.7 million. As a percentage of sales, SG&A increased to 34.4%, from 31.6% in 4Q07. The absolute increase in SG&A principally reflected higher selling expenses incurred to continue to drive sales growth, which more than offset the reduction in administrative charges, as follows:
- Selling expenses rose 73.3% to Ps.111.7 million. As a percentage of revenues, selling expenses increased to 13.5% from 9.2% in 4Q07 principally reflecting an increase in commissions paid and the advertising campaign launched earlier in the year to promote the launch of IP telephony and triple play.
- Administrative expenses declined 4.1% to Ps.132.5 million. As a percentage of revenues, administrative expenses fell to 16.0% from 19.8% in the year-ago quarter. This improvement was the result of the Company's successful implementation of cost cutting initiatives began in 4Q08, including lowering office and travel costs as well as maintaining a tight control on payroll expenses.
- Amortization and depreciation rose 120.2%, or Ps.21.6 million, to Ps.39.5 million in 4Q08, mainly due to the increase in Capex and the amortization resulting from recent acquisitions.
Adjusted EBITDA
Adjusted EBITDA for 4Q08 increased 5.0%, or Ps.12.3 million, to Ps.25.7 million. The adjusted EBITDA margin decreased 391 bps to 31.2%. The following table sets forth the reconciliation between net income and adjusted EBITDA:
Table 5. Adjusted EBITDA -------------------------------------------------------------- 4Q07 4Q08 % Chg. -------------------------------------------------------------- Net income (loss) 30.3 (19.8) n/a Add (subtract): Amortization and depreciation 112.8 89.3 -20.9% Comprehensive financial results, net 92.9 (134.1) n/a Other (income) expense, net (27.5) (9.8) -64.4% Total income tax and asset tax 25.1 263.9 950.7% Employee profit sharing (2.4) 8.3 -445.5% Effects from associated companies 14.0 60.1 327.8% Minority interest 0.1 (0.07) n/a -------------------------------------------------------------- Adjusted EBITDA 245.4 257.7 5.0% --------------------------------------------------------------- Net comprehensive financial results were a gain of Ps.134.1 million compared with an expense of Ps.92.9 million in 4Q07.
- Income taxes were Ps.263.9 million compared with Ps.25.1 million in the years ago quarter, reflecting higher non-cash deferred taxes for the period resulting from the gains generated by the derivative instruments to hedge interest and principal payments on outstanding US dollar denominated debt.
- Effects from associated companies were a loss of Ps.60.1 million, principally at PCTV.
- Depreciation and amortization declined 20.9%, or Ps.23.5 million, to Ps.89.3 million, principally reflecting accelerated depreciation in previous quarters.
Comprehensive Financial Results, Net
Net comprehensive financial results were a gain of Ps.134.1 million for the three-months ended
Table 6. Comprehensive Financial Results, Net -------------------------------------------------------------------- 4Q07 4Q08 % Chg. -------------------------------------------------------------------- Interest income 1.7 1.9 13.8% Interest expense -56.4 -100.9 78.9% Financial instruments (loss) -43.6 820.3 n/a Foreign-exchange (loss) gain, net -2.0 -587.2 29034.2% Monetary position (loss) gain 7.4 0.0 -100.0% -------------------------------------------------------------------- Comprehensive financial results, net (92.9) 134.1 n/a --------------------------------------------------------------------
Net Income
For 4Q08, Cablemas posted a net loss of Ps.19.8 million, compared with a net gain of Ps.30.3 million 4Q07 as explained above. Net income margin fell to negative 2.4% from positive 4.3% for 4Q07. It should be noted, however, that results for the quarter were negatively impacted by non-cash losses for a total of Ps.30.8 million resulting from the combination of deferred taxes and a foreign exchange loss, which more than offset a financial instruments gain.
FISCAL YEAR 2008 CONSOLIDATED RESULTS
Net Revenues
Net revenues increased 16.8%, or Ps.455.5 million, during FY08 to Ps.3,159.1 million.
- Cable Television: The 10.3%, or Ps.211.2 million, growth in cable television revenues was principally due to a 6.8% YoY increase in the number of subscribers to 851,171, with a penetration rate of 33.1%. Average monthly cable television revenues per subscriber (ARPU) rose 0.8% to Ps.227.8. This raise in ARPU was primarily the result of the increase in rates at the Minibasic service implemented earlier in the year. The average monthly net churn rates for cable television fell 3 bps to 2.32% for FY08 from 2.36% in FY07.
- High Speed Internet: Revenues rose 15.0%, or Ps.72.9 million, to Ps.558.4 million. The rise in high-speed Internet revenues resulted mainly from a 10.1% increase in the number of subscribers to 242,708, with a penetration rate of 11.3%. The 1.5% decline in high-speed Internet ARPU to Ps.200.9 reflecting a higher participation of competitively priced double and triple play offerings. Average monthly net churn rates for high-speed Internet fell to 3.9% for FY08 from 4.5% in FY07 reflecting a higher participation of more stable double and triple play clients.
- IP Telephony: IP telephony revenues for the period rose 102.7%, or Ps.121.6 million, to Ps.239.9 million. As of
December 31, 2008 , there were 76,112 IP telephony lines in service, up from 41,062 as ofDecember 31, 2007 . OnJuly 31, 2008 Cablemas terminated the commercial agreement with Axtel to provide IP Telephony services inTijuana . As a result, the total number of subscribers at year-end does not include 14,000 subscribers transferred to Axtel following the split. IP telephony ARPU for FY08 rose 14.5% to Ps.341.3. This increase principally reflects continued demand of new higher priced services including calls to mobile phones and long distance calls, as well as the ramping up of IP telephony in new cities.
Operating Profit
Operating profit for FY08 declined by 1.6%, or Ps.8.7 million, to Ps.541.5 million, driven mainly by an increase of 23.2% in SG&A which more than offset the 13.3% increase in gross profit. Operating margin declined to 17.1% from 20.3% in FY07, principally due to higher cost of services and SG&A as a percentage of sales.
Table 10. Operating Profit ----------------------------------------------------------------- ------ 2007 2008 ----------------------------------------------------------------- % of % of Million Ps. Revenues Million Ps. Revenues % Chg. ------------------------------------------ ---------------------- ------ Service revenues 2,703.6 100.0% 3,159.1 100.0% 16.8% Cost of services 1,326.7 49.1% 1,598.7 50.6% 20.5% Gross Profit 1,376.9 50.9% 1,560.4 49.4% 13.3% SG&A 826.8 30.6% 1,018.9 32.3% 23.2% - Selling 255.5 9.5% 360.0 11.4% 40.9% - Administrative 507.2 18.8% 535.8 17.0% 5.6% - Amortization and depreciation 64.1 2.4% 123.2 3.9% 92.1% ------------------------------------------ ---------------------- ------ Total operating profit 550.1 20.3% 541.5 17.1% -1.6% -------------------------------------------------------------------------Cost of Services
Cost of Services for FY08 increased by 20.5%, or Ps.272.0 million. The increase in cost of services was primarily due to:
- A 26% increase in cable TV programming costs, reflecting higher costs, the depreciation of the Mexican Peso and the increase in the number of cable subscribers;
- A 18.1% increase in Internet costs, which are related to the incremental cost for bandwidth as the Company is offering higher Internet speeds at the same price to make its service more competitive. Higher internet costs also reflect the 10.1% increase in the number of internet subscribers during the period;
- A 91.2% increase in telephony costs resulting from the roll out of IP telephony in new cities and the 85.4% increase in the number of IP telephony subscribers; and
- A 16% increase in depreciation & amortization resulting from an increase in fixed assets investments.
Selling, General and Administrative Expenses
Selling, General and Administrative Expenses (including depreciation and amortization) or SG&A, increased Ps.192.1 million, or 23.2%, YoY to Ps.1,018.9 million. As a percentage of sales, SG&A rose to 32.3% from 30.6%. The absolute increase in SG&A principally reflected higher selling expenses incurred to continue to drive sales growth that more than offset the reduction non-revenue generating administrative charges, as follows:
- A 40.9%, or Ps.104.5 million, increase in selling expenses to Ps.360.0 million principally reflecting an increase in commissions paid and the advertising campaign launched earlier in the year to promote the launch of IP telephony and triple play. The increase also reflects the expansion of the Company's sales force (1,340 salespersons as of
December 31, 2008 as compared to 1,215 as ofDecember 31, 2007 ). - A 5.6%, or Ps.28.6 million, increase in administrative expenses, including Ps.21.7 in wages and salaries. However, during 4Q08 the Company began implementing a series of cost cutting initiatives that have started to show positive results; and
- An 92.1%, or Ps.59.0 million, increase in amortization and depreciation, to Ps.123.2 million for FY08, principally due to an increase in assets and equipment and the amortization resulting from recent acquisitions.
Adjusted EBITDA
Adjusted EBITDA for FY08 increased 11.3%, or Ps.114.1 million, to Ps.1,126.2 million. The adjusted EBITDA margin declined 179 bps to 35.6% from 37.4%. The following table sets forth the reconciliation between net income and adjusted EBITDA:
Table 11. Adjusted EBITDA ----------------------------------------------------------------- 2007 2008 % Chg. ----------------------------------------------------------------- Net income (loss) 226.2 (9.4) n/a Add (subtract): Amortization and depreciation 461.9 584.7 26.6% Comprehensive financial results, net 231.3 141.4 -38.9% Other (income) expense, net (55.4) (7.8) -86.0% Total income tax and asset tax 131.7 315.0 139.1% Employee profit sharing 2.9 8.4 195.1% Effects from associated companies 12.9 93.9 625.8% Minority interest 0.4 0.01 -97.6% ----------------------------------------------------------------- Adjusted EBITDA 1,012.1 1,126.2 11.3% -----------------------------------------------------------------
- Net comprehensive financial results were an expense of Ps.141.4 million compared with an expense of Ps.231.3 million in FY07 as explained below;
- Income tax was a Ps.315.0 million provision, compared to Ps.131.7 million in FY07; principally reflecting the gains generated by the derivative instruments to hedge interest and principal payments on outstanding US dollar denominated debt.
- Depreciation and amortization rose 26.6.%, or Ps.122.8 million, to Ps.584.7 million, principally due to an increase in fixed asset investments; and
- Effect from associated companies was a Ps.93.9 million loss, principally at PCTV.
Comprehensive Financial Results, Net
Net comprehensive financial results were an expense of Ps.141.4 million for FY08, compared to an expense of Ps. 231.3 for FY07. This was mainly due to a Ps.833.6 million non-cash, non-monetary financial instruments gain resulting from the Company's hedging strategy described in "Debt Structure and Cash Flow", which more than offset the higher non-cash foreign exchange loss resulting from the depreciation of the Mexican peso against the US dollar as well as the increase in interest expenses. Pursuant to NIF B-10, inflation accounting is not applicable for 2008 and thus the result from monetary position is not determined for 2008.
Table 12. Comprehensive Financial Results, Net --------------------------------------------------------- 2007 2008 % Chg. --------------------------------------------------------- Interest income 5.4 10.8 99.6% Interest expense -261.4 -398.5 52.4% Financial instruments (gain) -15.1 833.6 n/a Foreign-exchange (gain) loss, net -5.0 -587.3 11744.0% Monetary position loss (gain) 44.8 0.0 -100.0% --------------------------------------------------------- Comprehensive financial results, net (231.3) (141.4) -38.9% ---------------------------------------------------------Net Income
For FY08, Cablemas posted a net loss of Ps.9.4 million, compared with a Ps.226.2 million gain posted in FY07. Net income margin for the year was down to negative 0.3% from 8.4% in FY07. It should be noted, however, that results for the quarter were negatively impacted by non-cash losses for a total of Ps.68.7 million resulting from the combination of deferred taxes and a foreign exchange loss which more than offset a financial instruments gain.
CAPEX
Capital expenditures for FY08 increased 44.9%, or Ps. 509.0 million, to Ps.1,642.1 million from Ps.1,133.1 million in FY07. Capital expenditures principally related to investments incurred in connection with the roll out of IP telephony and to expand and upgrade Cablemas' network. Following the strong capital investments made in 2008 and to adjust to the current environment, during 2009 Cablemas expects to maintain a conservative stance in terms of capital expenditures while focusing on further increasing market penetration by continuing to leverage its current distribution network.
As of
DEBT STRUCTURE AND CASH FLOW
Consolidated gross debt as of
Net debt, which is calculated as total debt minus cash and cash equivalents, increased YoY by 5.1% to Ps.2,986.6 million, from 2,842.6 million as of
Approximately 98% of Cablemas' debt is denominated in US dollars. All of the Company's bank debt is hedged by swap agreements on interest and principal payments for the life of the senior notes and the
Cash flow from operations during FY08 increased 63.7%, or Ps.532.2 million, to Ps.1,367.3 million. Net borrowings declined by Ps.424.0 million as the Company paid down the majority of its short term debt at the beginning of the 2008 fiscal year. CAPEX for FY08 increased Ps.509.0 million to Ps.1,642.1 million. Investments were principally related to the upgrade and expansion of Cablemas' network, customers' premises equipment investments and the roll out of IP telephony.
Table 14. Cash Flow ------------------------------------------------------------------ 2007 2008 Change ------------------------------------------------------------------ Cash at the beginning of the period 56.0 54.5 (1.5) ------------------------------------------------------------------ Net Income 226.2 Income before income taxes 305.6 + Depreciation and amortization 468.1 591.3 123.2 + Change in Working Capital 123.6 355.4 231.8 + Other 17.1 115.0 97.9 Cash Flow from Operations 835.1 1,367.3 532.2 - Capex (1,133.1) (1,642.1) 509.0 - Other (499.3) (31.6) (467.7) Net Investing Activities (1,632.4) (1,673.7) 41.3 + Debt 835.3 (431.7) (1,267.0) + Other (39.4) 803.7 843.1 Net Financing Activities 795.9 371.9 (423.9) ------------------------------------------------------------------ Cash at the end of the period 54.5 120.1 65.5 ------------------------------------------------------------------4Q08 Results Conference Call
Since
About Cablemas
Cablemas is the second-largest cable television operator in
Cablemas is the concessionaire with the broadest coverage in
This document may contain certain forward-looking statements concerning Cablemas' operations, performance, business, financial condition and growth prospects. These statements are based upon beliefs of management as well as a number of assumptions and estimates, which are inherently subject to significant uncertainties, many of which are beyond Cablemas' control. Actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause actual results to differ materially include, but are not limited to, changes in the Mexican economy, including changes in inflation rates or exchange rates, changes in political conditions and government policies in
SOURCE Cablemas, S.A. de C.V.
Source: PR Newswire
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