Cable 'coming right' with 69% loss drop


Franklyn Butler


Tribune Business Editor

Cable Bahamas top executive yesterday said the 69 percent reduction in fourth quarter losses showed its performance was "coming right" regardless of the $332.5m Summit Broadband sale.

Franklyn Butler, the BISX-listed communications provider's chief executive, told Tribune Business that the figures for the three months to end-June 2019 showed "the worst of the growth period is behind us" even before the group receives the mammoth proceeds from its US exit.

With Cable Bahamas "as close as it has ever been" to returning to profitability, and resuming dividend payments, Mr Butler said the Summit Broadband sale had better "aligned" shareholder wishes with the direction being pursued by management and Board.

He argued that this was best shown by the company's share price, which more than doubled from a 52-week low of $2 to a high of $5.47 immediately the deal was announced. While Cable Bahamas' stock has fallen back slightly since to $4.80 in the wake of Hurricane Dorian, Mr Butler said the company and its shareholders were now back "in sync".

The Cable Bahamas chief also revealed to Tribune Business that RoyalFidelity Merchant Bank & Trust has been hired to advise on how to maximise use of the proceeds from the Summit sale, which is expected to close before 2019 year-end.

Some of the funds will almost certainly be used to pay down the group’s long-term debt, while other potential uses include further investment in Cable Bahamas’ local TV, Internet and fixed-line businesses, as well as Aliv, plus further acquisition/expansion opportunities if they arise.

Mr Butler said Aliv, the mobile operator in which Cable Bahamas holds a 48.25 percent management stake and Board control, had fulfilled another "promise" by delivering $5.5m in operating income (EBITDA) during the 2019 fourth quarter - a $13.5m positive swing compared to the prior year's $8m operating loss.

Confirming that the Summit Broadband sale closing remains "on track", the Cable Bahamas chief told this newspaper that the 2019 fourth quarter numbers showed "things were coming right" even without the pending sale to Grain Management, a US-based private equity business specialising in the communications industry.

For the three months to end-June, Cable Bahamas slashed its net and comprehensive loss by more than two-thirds, cutting this from $9.036m in the prior year to $2.804m this time around. The reduced "red ink" was achieved largely by lower interest expense and a near-$10m reduction in operating expenses.

Mr Butler argued that Cable Bahamas was not a forced seller of Summit Broadband despite its debt-burdened balance sheet, instead pointing out that the Florida exit would enable it to focus solely on The Bahamas and better meet shareholder needs.

"I wouldn't say we had to," he said of the sale. "I don't know that we needed to make the Summit transaction. When you go through a growth phase it's not unusual for a company in this environment to be out of sync with its shareholders.

"It was important to make sure we could breed confidence in the company with our shareholders. If you reflect on the share price, what shareholders have said and where the share price is now it's clear we have greater alignment between the shareholders and management and Board of our company. This was about aligning the company's objectives with our shareholders."

Based on the Cable Bahamas' financials issued yesterday, the group is receiving $332.5m for a business that generated quarterly revenues of $19m during the three months to end-June 2019 and $4.3m in operating income.

Confirming RoyalFidelity's hiring, Mr Butler said of Summit Broadband: "The conversation now shifts in earnest so we can signal to the market a bit more clearly on what we intend to do with the use of these proceeds."

Cable Bahamas' balance sheet will look much different from the 2019 year-end version once the Summit Broadband proceeds are received and deployed. The $464.5m in long-term bank and preference share debt will likely be much reduced, with the year-end current solvency deficiency - where current liabilities exceeded current assets by almost $28m - almost certainly eliminated.

The US disposal thus enables Cable Bahamas to monetise its investment in acquiring, amalgamating and building up its Florida business over a five-and-a-half year period. Prior to this, the company had come under increasing pressure from some shareholders, especially small retail investors, over the suspension of dividend payments and two consecutive years of $50m-plus comprehensive losses.

Besides the loss of investment returns and scale of the “red ink” over the past four financial years, shareholders had also started to fret over the long-term debt that the company was carrying on its balance sheet at end-March 2019.

Viewing the BISX-listed communications provider as over-leveraged, there was a growing feeling that the company’s expansion had been over-ambitious and too fast, with the capital intensive needs of both Aliv and the Florida operations a continuing obstacle to Cable Bahamas’ return to profitability.

Many of these concerns have subsided, at least for now, and Mr Butler told Tribune Business yesterday: "The results were coming good. If you look at the fourth quarter, the worst of the growth phase is behind us. On the net income front, if you look at the fourth quarter, and in the context of the last few quarters, it's as close as its ever been."

Mr Butler would again not be drawn on precisely when Cable Bahamas will return to profitability or resume paying dividends to common shareholders, instead saying: "It's really for us about focus now. We want to be able to focus on the Bahamian market to continue to drive revenues, and build shareholder value for all who have been on this exciting journey with us."

Referring to the plan unveiled to Cable Bahamas shareholders at the last annual general meeting (AGM), he added that one of the key pledges - recapitalising the balance sheet - had now been fulfilled with the Summit Broadband deal.

Admitting that several elements could have been "executed sooner, faster, better", Mr Butler added: "We've done a lot of the right things based on the plan to get to where we want to be. Technology is always evolving, the competition is knocking on the door, but in broad strokes we've made good progress on the plan."

While Cable Bahamas was "still challenged on the TV side" by Netflix and Android boxes, Mr Butler said it was still finding growth "even at slower rates" on its broadband Internet and fixed-line voice segments. Its REV segment, which includes all three businesses, saw operating income jump by 63 percent in the 2019 fourth quarter to $15.8m.

The group's Rev Trio and cashback promotions had been designed to drive value, said Mr Butler, who added: "Our big focus is on the consumer. People want more capacity, and Rev Trio was designed to give them more capacity and greater value, enabling their connected lifestyle.

"We are finding ways to be smart and drive costs out of the business over the next few months as we await the Summit transaction to close, which is well on track - certainly before the end of the calendar year."