Shaw Communications (SJR) Tops Q4 EPS by 12c, Revenues Beat
Shaw Communications (NYSE: SJR) reported Q4 EPS of $0.34, $0.12 better than the analyst estimate of $0.22. Revenue for the quarter came in at $1.35 billion versus the consensus estimate of $1.01 billion.
“Fiscal 2020 was a unique and challenging year as every aspect of our lives was upended with the emergence of COVID-19. From the onset of the pandemic our priority remains focused on the health and safety of our employees and continuing to support our customers and communities,” said Brad Shaw, Executive Chair and Chief Executive Officer. “As COVID-19 unfolded, it cast a dark shadow around the world, however, it also highlighted the critical nature of highly capable facilities-based connectivity services, where Shaw’s Fibre+ network performance was amongst the very best. In fact, Ookla named Shaw the fastest and most consistent internet provider in western Canada. Across British Columbia, Alberta, Manitoba, and Saskatchewan, Shaw’s Fibre+ network was reported as the fastest. It is because of our significant long-term investments in our facilities-based networks that we could meet the surge in demand from our customers, while at the same time, expand our product suite with innovative and affordable wireline and wireless options for Canadians during their greatest time of need, including our Fibre+ Gig Internet speeds and a momentous achievement with the launch of Shaw Mobile. While no business is completely immune to the impacts from COVID-19, we have shown that we are resilient, agile and can deliver growth to our stakeholders in even the direst of circumstances, including significant free cash flow growth of nearly 40%, exceeding our target in fiscal 2020.”
Mr. Shaw continued, “Despite the unprecedented level of uncertainty that emerged in 2020, our sound business strategy and focus on execution has enabled us to navigate through this new environment without significant disruption. As demand for connectivity surged, we provided the critical lifeline for Canadians to continue to work, access education, and connect with family and friends during a difficult time for all. Not only was our network performance exceptional, but we introduced even faster Internet services and completed our largest product launch ever, with the introduction of Shaw Mobile, all while still primarily working from home – a remarkable feat. Although the COVID-19 pandemic has impacted certain areas of our business, we continued to make the appropriate investments and still delivered growth, meeting our financial commitments in fiscal 2020, including substantial free cash flow of almost $750 million.”
Fiscal 2021 Guidance
The Company is introducing its fiscal 2021 guidance, which includes adjusted EBITDA growth over fiscal 2020, consolidated capital investments of approximately $1.0 billion and free cash flow of approximately $800 million.
The severity and duration of impacts from the COVID-19 pandemic remain uncertain and management continues to focus on the safety of our people, most of whom continue to work from home, connectivity of our customer base, compliance with guidelines and requirements issued by various health authorities and government organizations, and continuity of other critical business operations. During the second half of fiscal 2020, the Company experienced a reduction in overall Wireline and Wireless subscriber activity, reduced wireless equipment sales, an improvement in Wireless postpaid churn, an increase of approximately 50% in wireline network usage as well as extended peak hours, increased demand for Wireless voice services by approximately 25%, a decrease in Wireless roaming and overage revenue, an increase in bad debt expense and the suspension, cancellation, or reduction of Business customer accounts, impacting Business revenue.
While the financial impacts from COVID-19 in the second half of fiscal 2020 were not material, the situation is still uncertain in terms of its magnitude, outcome, duration, resurgence and/or subsequent waves. Consumer behavior impacts remain uncertain and could still change materially, including the potential downward migration of services, acceleration of cord-cutting and reduced ability to pay their bills, all due to the challenging economic situation. Shaw Business primarily serves the small and medium sized market, who are also particularly vulnerable to the economic impacts of commodity price challenges and COVID-19, including mandated closures, self-quarantines or further social distancing restrictions.
We believe our business and facilities-based networks provide critical and essential services to Canadians and will continue to remain resilient in this dynamic and uncertain environment. Management continues to actively monitor the impacts to the business and make the appropriate adjustments to operating and capital expenditures to reflect the evolving environment. Considering the ongoing presence of COVID-19, the speed at which it develops and/or changes, and the continued uncertainty of the magnitude, outcome, duration, resurgence and/or second wave of the pandemic, compounded by the commodity price challenges, the current estimates of our operational and financial results which underlie our outlook for fiscal 2021 are subject to a significantly higher degree of uncertainty. Any estimate of the length and severity of these developments is therefore subject to uncertainty, as are our estimates of the extent to which the COVID-19 pandemic may, directly or indirectly, materially and adversely affect our operations, financial results, and condition in future periods.
As at the end of fiscal 2020, our net debt leverage ratio4 was 2.3x compared to the Company’s target leverage range of 2.5 to 3.0x. During the year, the Company repurchased approximately 5.6 million Class B Non-Voting Participating Shares (“Class B Shares”) under its normal course issuer bid (NCIB) program for approximately $140 million before pausing in April 2020 due to COVID-19 uncertainty. Considering the stable performance of the Company throughout fiscal 2020, its current leverage position along with its strengthening free cash flow profile, Shaw is pleased to announce that it intends to renew its NCIB program to purchase up to 24,532,404 Class B Shares, representing 5% of all of the issued and outstanding Class B Shares as of October 22, 2020. The NCIB program has been approved by the Board of Directors but remains subject to approval by the Toronto Stock Exchange (TSX) and, if accepted, will be conducted in accordance with the applicable rules and policies of the TSX and applicable Canadian securities law.
“Our fiscal 2020 performance was strong considering the elevated level of uncertainty surrounding COVID-19 and I am confident in our continued ability to deliver growth in the future. Our expanding range of products and services have never been more relevant for consumers and businesses, and the launch of Shaw Mobile will continue to drive wireless growth while further deepening our existing relationship with our Wireline customers. We maintain our focus on delivering a stable Wireline performance while scaling our Wireless business, investing to future-proof our networks and on delivering significant free cash flow, which remains a key tenet of our strategy. While we felt it was prudent to pause our NCIB activity in April to preserve liquidity, we still returned approximately $750 million to our shareholders through dividends and buybacks in fiscal 2020. With a substantial and growing free cash flow profile expected in fiscal 2021, combined with significant balance sheet strength, we expect to enhance our already strong capital return profile through our current dividend commitments and an additional share buyback program of up to 5% of currently outstanding Class B Shares. We believe that our balanced capital return initiatives are appropriate considering numerous factors, including the continued macro environment uncertainty due to the ongoing COVID-19 pandemic,” said Brad Shaw.
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