The media company recently issued more shares to pay down its debt and expand its faster-growing online business. At the same time, the company continues to close underperforming newspapers and improve the efficiency of its operation.
GLACIER MEDIA INC. (symbol GVC on Toronto; www.glaciermedia.ca) publishes community newspapers in Western Canada, as well as trade magazines and specialty/technical publications for professionals across North America.
The company’s Community Media business (mainly newspapers) accounts for roughly 60% of its revenue. Business Information publications, databases and tradeshows supply the remaining 40%. Glacier gets 90% of its revenue from Canada and 10% from the U.S.
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The company has a long history of expanding through acquisitions. In early 2011, it bought 15 trade magazines from Rogers Communications, including Canadian Contractor, Canadian Manufacturing Online, Canadian Metalworking, Canadian Packaging, Canadian Plastics, Hardware Merchandising, Fraser’s Directory and The Northern Miner.
In November of that year, it purchased a number of B.C. newspapers from the Postmedia Network for $86.5 million. They include the Victoria Times Colonist, Alberni Valley Times, Nanaimo Daily News and roughly 20 community publications.
Thanks to these acquisitions, Glacier’s revenue rose 23.4%, from $267.4 million in 2011 to $330.0 million in 2012. Weaker demand for print ads cut revenue to $328.9 million in 2013. The company also closed some of its smaller publications. As a result, revenue fell to $288.2 million in 2014, and again to $260.0 million in 2015.
Even with the contribution of its new operations, Glacier’s earnings fell 18.3%, from $22.6 million in 2011 to $18.5 million in 2012. The decline was mainly due to higher depreciation and interest costs. Per-share earnings fell 16.0%, from $0.25 to $0.21, on fewer shares outstanding.
Earnings then rose to $0.25 a share (or a total of $22.2 million) in 2013, but fell to $0.21 a share (or $18.4 million) in 2014, and to $0.12 a share (or $11.1 million) in 2015.
In response to declining revenue from advertising, particularly in Western Canada, the company is closing some newspapers and improving the efficiency of its printing operations. It’s also selling less-important publications and real estate. In the past two years, Glacier has received a total of $32.2 million through asset sales.
In the three months ended March 31, 2016, revenue declined 11.1%, to $58.5 million from $65.8 million a year earlier. However, earnings improved to $1.4 million, or $0.02 a share, from $380,000, or nil per share.
Glacier recently issued 20.7 million common shares at $0.65 each under a rights offering. That’s where existing shareholders have the opportunity, but not the obligation, to buy more shares of a stock. The company will use the proceeds of $13.5 million to pay down its long-term debt of $66.1 million (as of March 31, 2016). That’s a high 95% of its market cap. At the end of the quarter, Glacier also held cash of $4.5 million.
Cutting its debt will give the company more flexibility to expand its faster-growing online businesses. These include its 49% stake in Weather Innovations Consulting. It sells real-time weather reports to Western Canadian farmers and agricultural firms. Glacier also owns REW.ca (online real estate listings) and 50% of Fundata (mutual fund data).
The stock has dropped 44% in the past year, and now trades at 10.5 times the company’s forecast 2016 earnings of $0.06 a share. It is an inactive trader and that can expand its volatility, especially when the overall market is unsettled. To conserve cash, Glacier suspended its quarterly dividend of $0.02 a share in 2015.
TSI Network recommendation: HOLD only for highly aggressive investors.
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I bought Bellatrix based upon advice and it is now less 75% than the buying price. What is your outlook for this company please?
This one has 2 big negatives: exposure to western Canada and low oil prices, and the slow decline of newspapers in general.