TVA.B TVA Group Inc

MONTREAL, July 28, 2022 /CNW Telbec/ - TVA Group Inc. ("TVA Group" or the "Corporation") announced today that it recorded revenues in the amount of $147.5 million in the second quarter of 2022, a year-over-year decrease of $12.0 million. Net loss attributable to shareholders was $3.2 million or $0.07 per share, compared with net income attributable to shareholders of $3.9 million or $0.09 per share for the same quarter of 2021.

Second quarter operating highlights:

• $3,235,000 in consolidated adjusted EBITDA, ¹ a $10,730,000 unfavourable variance compared with the same quarter of 2021.
  
  
• $149,000 in negative adjusted EBITDA¹ in the Broadcasting segment, a $6,433,000 unfavourable variance resulting largely from the decreased profitability of TVA Network, which continued its strategy of increasing investment in content, partially offset by the improved profitability of "TVA Sports," which had to absorb significant content costs in the second quarter of 2021 as a result of the change in broadcasting schedule for the National Hockey League's 2020-2021 season.
  
  
• $2,172,000 in adjusted EBITDA¹ in the Film Production & Audiovisual Services segment ("MELS"), a $1,741,000 unfavourable variance caused by the decreased profitability of visual effects services and of soundstage, mobile and equipment rental, while postproduction posted an increase in profitability.
  
  
• $1,646,000 in adjusted EBITDA¹ in the Magazines segment, a $112,000 unfavourable variance due mainly to reduced government assistance and lower newsstand revenues, which were not entirely offset by cost-reduction measures and savings in operating expenses.
  
  
• $489,000 in negative adjusted EBITDA¹ in the Production & Distribution segment, an unfavourable variance of $2,496,000 reflecting fewer deliveries of films produced by Incendo during the period compared with the same period of 2021, when a number of new film sales were made after a slowdown caused by the pandemic.

"Second-quarter results were significantly affected by lower profitability in the Broadcasting segment, more specifically at TVA Network, as a result of our ongoing strategy of enhancing our investment in content," said Pierre Karl Péladeau, acting President and CEO of TVA Group. "The programming aired during this interim period testifies to our commitment on this front: viewers were able to enjoy a wide variety of content including major variety shows, reality shows and new programs. TVA Network grew its market share by 0.7 points during the quarter. Its hit variety show Star Académie drew an average audience of over 1.5 million viewers. Despite the soft advertising market due to the business environment, our strong programming enabled us to stand out with advertisers and to limit the impact on our over-the-air network's advertising revenues, which declined by a slight 1.7%. Our digital platforms increased their revenues by 19.9% during the quarter, due in part to the growing popularity of TVA+."

"We expect the downward trend in advertising revenues to continue in the coming quarters, as several foreign subscription video-on-demand services have announced plans to start accepting advertising on their platforms. This added competition comes on top of heightened competition from the public broadcaster, Radio-Canada, which has been carrying 'infomercials' in addition to its existing advertising vehicles for several quarters now. Furthermore, their growth on the web is enabling them to capture even more of the advertising dollars that are the sole source of revenues for the over-the-air television stations that bring Quebec families together in front of their television screens. Given this unfavourable set of conditions, we are dismayed by the recent decision by the Canadian Radio-television and Telecommunications Commission ("CRTC") to allow the public broadcaster more flexibility when it renewed Radio-Canada's broadcasting licence, and most importantly to ignore the calls to remove advertising from its television services, as was done with its radio services years ago. The status quo that the CRTC is maintaining can only lead to the weakening, undermining and continued decline of private television in Canada in the face of foreign competition, and as a result there is little potential for revenue growth. We call on the Minister of Canadian Heritage to intervene to ensure that Canadians continue to have access to multiple sources of news and entertainment, and to protect our society's pluralism and diversity."

"In the Film Production & Audiovisual Services segment, we were affected by lower volume in visual effects, which led us to review our service offering in this category to better position ourselves in the market. Accordingly, we are embarking on a shift that will ultimately deliver integrated virtual production and solid expertise in this area to help clients carry out their visual effects projects. MELS is committed to remaining at the forefront of the industry, as this repositioning demonstrates. Our soundstage and equipment rental services saw a decrease in business volume compared with the same period last year, when the blockbuster Transformers was filmed at our facilities. All of our other services were in strong demand, including postproduction and media accessibility services, which continue to gain popularity and recognition in the market," Mr. Péladeau added.

"In the Magazines segment, quarterly results were significantly impacted by reduced government assistance and an 11.1% decrease in newsstand revenues, which are a major revenue stream for our entertainment titles. In this context, we reiterate the importance of the federal government committing to maintain the current grant programs to support this segment, which has been in decline for years. As a leading publisher in the French-language market, we produce titles that showcase local talent and culture. Their survival is vitally important."

"In our Production & Distribution segment, business volume was down from the same quarter of 2021. Bear in mind that over the last two years, the pandemic has disrupted the production and distribution cycle for films produced by Incendo, and that is now creating timing differences in the financial results. We are currently completing production of four new films scheduled for delivery in the fall and are starting production of a series in co-production with Ireland. This business segment continues to support the diversification of our revenue streams and the expansion of our presence in English-language markets," Mr. Péladeau concluded.

COVID-19 pandemic

Since March 2020, the COVID-19 pandemic has at times affected the quarterly results of the Corporation's various segments. Given the uncertainty about the future evolution of the pandemic, including any major new wave, the full future impact of the public health crisis on operating results cannot be determined with certainty.

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 (income tax recovery) 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.

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, 2021.

The forward-looking statements in this news release reflect the Corporation's expectations as of July 28, 2022 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 at June 30, 2022, with notes, and the interim Management's Discussion and Analysis for the three-month and six-month periods ended June 30, 2022, can be consulted on the Corporation's website at www.groupetva.ca.

Consolidated statements of (loss) income

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

See accompanying notes to condensed consolidated financial statements.

Consolidated statements of comprehensive income

(unaudited) 
(in thousands of Canadian dollars)

See accompanying notes to condensed consolidated financial statements.

Consolidated statements of equity

(unaudited) 
(in thousands of Canadian dollars)

See accompanying notes to condensed consolidated financial statements.

Consolidated balance sheets

(unaudited) 
(in thousands of Canadian dollars)

Consolidated balance sheets (continued)

(unaudited) 
(in thousands of Canadian dollars)

See accompanying notes to condensed consolidated financial statements.

Consolidated statements of cash flows

(unaudited) 
(in thousands of Canadian dollars)

See accompanying notes to condensed consolidated financial statements.

Notes to condensed consolidated financial statements

Three-month and six-month periods ended June 30, 2022 and 2021 (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 Quebec Business 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 9). The Corporation is a subsidiary of Quebecor Media Inc. ("Quebecor Media" or the "parent corporation") and its 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. In view of the seasonal nature of some of the Corporation's activities, the results of operations for interim periods should not necessarily be considered indicative of full-year results.

Since March 2020, the COVID-19 pandemic has at times affected the quarterly results of the Corporation's segments. Given the uncertainty about the future evolution of the pandemic, including any major new wave, the full future impact of the public health crisis on operating results cannot be determined with certainty.

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 2021 annual consolidated financial statements, which describe the accounting policies used to prepare these financial statements.

These condensed consolidated financial statements were approved by the Corporation's Board of Directors on July 28, 2022.

Certain comparative figures for the three-month and six-month periods ended June 30, 2021 have been restated to conform to the presentation adopted for the three-month and six-month periods ended June 30, 2022.

2.  Revenues

3.  Purchases of goods and services

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

4.  Financial expenses

5.  Operational restructuring costs and other

Operational restructuring costs

For the three-month and six-month periods ended June 30, 2022 and 2021, the Corporation recorded a net charge for operational restructuring plan in connection with the elimination of positions and the implementation of cost reduction initiatives. The segment breakdown is as follows:

Other

For the second quarter of 2022, the Corporation recorded a $622,000 charge for impairment of its investment in an associate in the Magazines segment following revised financial guidance from that corporation's management and the continuing downward trend in revenues in the industry.

During the same period, the Corporation reversed a $587,000 charge following remeasurement of the contingent consideration payable on the acquisition of the companies in the Incendo group and made a $3,750,000 payment in connection with that acquisition. During the first six months of 2021, the Corporation reversed a $49,000 charge following remeasurement of the contingent consideration and made a $606,000 payment in connection with this one.

For the first half of 2021, the Corporation also recorded a $94,000 gain on the write-off of lease liabilities as a result of early release from certain real estate spaces.

6.  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

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

(a)  Stock option plans

During the six-month period ended June 30, 2021, 6,300 Quebecor Media stock options were exercised for a cash consideration of $374,000.

7.  Stock-based compensation and other stock-based payments (continued)

(b)  Deferred stock unit ("DSU") plans for executives

The following table shows changes in outstanding DSUs for the six-month period ended June 30, 2022:

During the six-month period ended June 30, 2022, no DSUs were redeemed under either the Corporation's plan or Quebecor's plan (during the same period of 2021, 18,122 DSUs under the Corporation's plan and 3,747 DSUs under the Quebecor plan were redeemed for cash considerations of $43,000 and $139,000, respectively).

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

During the three-month and six-month periods ended June 30, 2022, no DSUs were redeemed under the Corporation's plan for directors (35,868 DSUs redeemed for cash consideration of $104,000 during the same periods of 2021).

7.  Stock-based compensation and other stock-based payments (continued)

(d)  Stock-based compensation expense

For the three-month and six-month periods ended June 30, 2022, a compensation expense reversal in the amount of $113,000 and a compensation expense of $356,000, respectively, were recorded in respect of all stock-based compensation plans (compensation expenses of $219,000 and $903,000, respectively, for the same periods of 2021). 

8.  Pension plans and post-retirement benefits

The gain on remeasurement of defined benefit plans recognized on the consolidated statement of comprehensive income for the three-month and six-month periods ended June 30, 2022 reflects the increase in the discount rate, net of the decrease in the fair value of pension plan assets.

For the three-month period ended June 30, 2021, the gain resulted from the increase in the fair value of the assets, net of the decrease in the discount rate. For the six-month period ended June 30, 2021, the gain resulted primarily from the increase in the discount rate.

9.  Segmented information 

Management made changes to the Corporation's management structure at the beginning of the year. As a result of those changes, the activities of the TVA Films division, formerly presented in the Broadcasting segment, have been combined with the Production & Distribution segment's existing distribution activities. Financial information for comparative periods has been restated to reflect the new presentation.

The Corporation's operations 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, including those of its Communications Qolab inc. subsidiary;
• 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 ("media accessibility services"), postproduction, virtual production and visual effects;
• The Magazines segment, which through its TVA Publications inc. subsidiary, 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 and the TVA Films division produces and distributes television shows, movies and television series for the world market.

9.  Segmented information (continued)

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

SOURCE TVA Group