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03.11.2020 23:01:00

Indigo Reports Fiscal 2021 Second Quarter Financial Results - Year-over-year revenue growth driven by exceptional e-commerce results, retail's continued recovery and success of paid membership program

TORONTO, Nov. 3, 2020 /CNW/ - Indigo (TSX: IDG), Canada's largest book and lifestyle retailer announces its second quarter results.   

Indigo Books & Music Inc. (CNW Group/Indigo Books & Music Inc.)

Revenue for the second quarter ended September 26, 2020 was $205.3 million compared to revenue of $203.4 million in the same period last year, an increase of $1.9 million. Buoyed by continued interest in the core categories of reading, wellness, at-home learning and entertainment, the Company's online channel more than doubled, delivering growth of 113.6%. This growth was complemented by the retail channel's ongoing recovery – albeit still below normal levels – and the success of the Company's paid membership program.

Commenting on the results, CEO Heather Reisman said: "Our team has put out extraordinary effort over the last eight months and meaningfully pushed our business forward notwithstanding the challenges of operating in a COVID environment.  This quarter, we successfully launched our proprietary home brand Oui and have seen continued success in our core categories of wellness, reading and kids entertainment. We also launched an industry leading click-and-collect service and on-boarded Instacart.   These advances allow us to provide our customers with 'have it your way' access channels.  We are energized by these results, and by customers' continued affinity for our brand."

During the quarter, the Company remained focused on productivity efforts. These actions resulted in an adjusted EBITDA (see "Non-IFRS Measures" below) improvement of $6.5 million dollars compared to the second quarter of last year. These savings were realized against pressures from pandemic-related costs related to staffing for social distancing, ongoing requirements for personal protective equipment, and enhanced safety and security measures.

Indigo reported a loss before income taxes of $17.5 million for the second quarter ended September 26, 2020, compared to a loss before income taxes of $27.9 million last year, an improvement of $10.4 million. This was achieved through improved operating performance and lower depreciation in the year.

With no outstanding debt and a cash balance of $137.5 million, the Company is well positioned to manage through these very uncertain times.

Analyst/Investor Call 
Indigo will host a conference call for analysts and investors to review these results at 9:00 a.m. (Eastern Time) tomorrow, November 4th, 2020. The call can be accessed by dialing 416-764-8688 from within the Toronto area, or 1-888-390-0546 outside of Toronto. The eight-digit participant code is 74471107.          

A playback of the call will also be available by telephone until 11:59 p.m. (ET) on November 11, 2020. The call playback can be accessed after 12:00 p.m. (ET) on November 4, 2020, by dialing 416-764-8677 from within the Toronto area, or 1-888-390-0541 outside of Toronto. The six-digit replay passcode number is 471107#. The conference call transcript will be archived in the Investor Relations section of the Indigo website, www.indigo.ca. 

Forward-Looking Statements 
Statements contained in this news release that are not historical facts are "forward-looking information" within the meaning of applicable Canadian securities legislation. To the extent any forward-looking information constitutes "financial outlooks" within the meaning of applicable Canadian securities laws, such information is being provided as preliminary financial and operational results. Financial outlooks, as with forward-looking information generally, are, without limitation, based on the assumptions and subject to various risks and uncertainties that could cause actual results to differ materially from those expressed in or implied in this news release. Among the key factors that could cause such differences are: general economic, market or business conditions; the future impacts and government response to the COVID-19 pandemic, including any impact to online and/or retail operations of the Company; competitive actions by other companies; changes in laws or regulations; and other factors, many of which are beyond the control of the Company, as set out in the Company's annual information form dated June 23, 2020 and available on the Company's issuer profile on SEDAR at www.sedar.com.

Undue reliance should not be placed on such forward-looking information and no assurance can be given that such events will occur in the disclosed time frames or at all. Any forward-looking information included in this news release is made as of the date of this news release and the Company does not undertake an obligation to publicly update such forward-looking information to reflect new information, subsequent events or otherwise unless required by applicable securities laws.

Non-IFRS Financial Measures 
The Company prepares its consolidated financial statements in accordance with International Financial Reporting Standards ("IFRS"). In order to provide additional insight into the business, the Company has also provided non-IFRS data, specifically adjusted EBITDA, in this press release. These measures do not have standardized meanings prescribed by IFRS and are therefore specific to Indigo and may not be comparable to similar measures presented by other companies. 

For additional context see "Results of Operations" and "Non-IFRS Financial Measures" in the Management's Discussion and Analysis (which can be found at www.indigo.ca/investor-relations or www.sedar.com).

AboutIndigo Books& Music Inc. 
Indigo is a publicly traded Canadian company listed on the Toronto Stock Exchange (IDG). Indigo is the world's first Cultural Department Store – a physical and digital meeting place inspired by and filled with books, music, art, ideas, and beautifully designed lifestyle products. Indigo believes in real books, in living life fully and generously, in being kind to each other and that stories – big and little – connect us.

Indigo founded the Indigo Love of Reading Foundation in 2004 to address the underfunding of public elementary school libraries. Every year the Foundation provides grants to high-needs elementary schools so they can transform their libraries with the purchase of new books and educational resources. To date, the Foundation has committed over $32 million to more than 3,000 elementary schools, benefitting more than 1,000,000 students. Most recently in April 2020, in the wake of the COVID-19 pandemic and unprecedented nation-wide school closures, the Foundation committed $1.0 million to provide books to families in need. To learn more about Indigo, please visit the "Our Company" section at indigo.ca.

Consolidated Balance Sheets

(Unaudited)










 As at

 As at

 As at


September 26,

September 28,

March 28,

(thousands of Canadian dollars)

2020

2019

2020





ASSETS




Current




Cash and cash equivalents

137,521

46,615

120,473

Short-term investments

-

20,500

-

Accounts receivable

12,022

19,809

7,640

Inventories

252,470

298,690

241,812

Prepaid expenses

9,243

7,489

6,062

Income taxes receivable

138

640

138

Derivative assets

148

123

3,794

Other assets

1,768

949

2,320

Total current assets

413,310

394,815

382,239

Loan receivable

446

-

446

Property, plant, and equipment, net

84,195

117,375

91,215

Right-of-use assets, net

363,846

401,928

382,146

Intangible assets, net

22,277

30,866

24,571

Equity investment, net

2,353

2,773

2,353

Deferred tax assets

-

100,004

-

Total assets

886,427

1,047,761

882,970

LIABILITIES AND EQUITY




Current




Accounts payable and accrued liabilities

239,337

222,968

164,294

Unredeemed gift card liability

46,550

42,987

51,673

Provisions

2,170

-

2,034

Deferred revenue

14,428

8,148

10,682

Short-term lease liabilities

63,376

65,959

68,402

Derivative liabilities

25

199

-

Total current liabilities

365,886

340,261

297,085

Long-term accrued liabilities

1,494

1,761

1,196

Long-term provisions

724

46

469

Long-term lease liabilities

486,089

480,277

500,215

Total liabilities

854,193

822,345

798,965

Equity




Share capital

226,986

226,986

226,986

Contributed surplus

13,576

12,039

12,822

Retained deficit

(207,924)

(13,328)

(158,801)

Accumulated other comprehensive income (loss)

(404)

(281)

2,998

Total equity

32,234

225,416

84,005

Total liabilities and equity

886,427

1,047,761

882,970

 

Consolidated Statements of Loss and Comprehensive Loss

(Unaudited)












13-week

13-week

26-week

26-week


period ended

period ended

period ended

period ended


September 26,

September 28,

September 26,

September 28,

(thousands of Canadian dollars, except per share data)

2020

2019

2020

2019






Revenue

205,279

203,364

340,360

395,920

Cost of sales

(125,889)

(118,565)

(222,833)

(227,247)

Gross profit

79,390

84,799

117,527

168,673

Operating, selling, and other expenses

(90,649)

(106,022)

(154,105)

(209,593)

Operating loss

(11,259)

(21,223)

(36,578)

(40,920)

Net interest expense

(6,261)

(5,846)

(12,545)

(11,270)

Share of loss from equity investments

-

(815)

-

(1,588)

Loss before income taxes

(17,520)

(27,884)

(49,123)

(53,778)

Income tax recovery

-

7,429

-

14,253

Net loss

(17,520)

(20,455)

(49,123)

(39,525)






Other comprehensive income (loss)





Items that are or may be reclassified subsequently to net loss:





Net change in fair value of cash flow hedges
   [net of taxes of 0 and 0; 2019 - (275) and 92]

(1,503)

753

(2,412)

(251)

Reclassification of net realized (gain) loss
   [net of taxes of 0 and 0; 2019 - 48 and 215]

5

(133)

(1,258)

(588)

Realized gain on discountinued cash flow hedges
   [net of taxes of 0 and 0; 2019 - 0 and 0]

268

-

268

-

Other comprehensive income (loss)

(1,230)

620

(3,402)

(839)






Total comprehensive loss

(18,750)

(19,835)

(52,525)

(40,364)






Net loss per common share





Basic

$

(0.63)

$

(0.74)

$

(1.78)

$

(1.44)

Diluted

$

(0.63)

$

(0.74)

$

(1.78)

$

(1.44)

 

Consolidated Statements of Cash Flows

(Unaudited)







 13-week

13-week

 26-week

26-week


period ended

period ended

period ended

period ended


September 26,

September 28,

September 26,

September 28,

(thousands of Canadian dollars)

2020

2019

2020

2019






OPERATING ACTIVITIES





Net loss

(17,520)

(20,455)

(49,123)

(39,525)

Adjustments to reconcile net loss to cash flows from (used for) operating activities





Depreciation of property, plant, and equipment

4,300

5,891

8,891

11,824

Depreciation of right-of-use assets

10,893

10,189

21,545

20,022

Amortization of intangible assets

3,323

3,312

6,531

6,578

Loss on disposal of capital assets

-

490

247

951

Share-based compensation

306

373

606

621

Directors' compensation

73

73

148

157

Deferred income tax recovery

-

(7,429)

-

(14,253)

Rent concessions

(1,268)

-

(3,679)

-

Other

(371)

102

(113)

356

Net change in non-cash working capital balances related to operations

40,221

(2,078)

56,687

(19,531)

Interest expense

6,455

6,324

12,953

12,401

Interest income

(194)

(520)

(408)

(1,173)

Share of loss from equity investments

-

815

-

1,588

Cash flows from (used for) operating activities

46,218

(2,913)

54,285

(19,984)






INVESTING ACTIVITIES





Net purchases of property, plant, and equipment

(1,487)

(1,383)

(1,985)

(4,232)

Addition of intangible assets

(2,545)

(2,443)

(4,250)

(4,925)

Change in short-term investments

-

17,500

-

66,650

Interest received

194

173

408

826

Cash flows from (used for) investing activities

(3,838)

13,847

(5,827)

58,319






FINANCING ACTIVITIES





Repayment of principal on lease liabilities

(9,606)

(10,602)

(18,838)

(20,615)

Interest paid

(6,455)

(6,325)

(12,953)

(12,402)

Cash flows used for financing activities

(16,061)

(16,927)

(31,791)

(33,017)






Effect of foreign currency exchange rate changes on cash and cash equivalents

639

264

381

7






Net increase (decrease) in cash and cash equivalents during the period

26,958

(5,729)

17,048

5,325

Cash and cash equivalents, beginning of period

110,563

52,344

120,473

41,290

Cash and cash equivalents, end of period

137,521

46,615

137,521

46,615

 

Non-IFRS Financial Measures







The following table reconciles adjusted EBITDA to loss before income taxes, the most comparable IFRS measure:



13-week

13-week

26-week

26-week


period ended

period ended

period ended

period ended


September 26,

September 28,

September 26,

September 28,

(millions of Canadian dollars)

2020

2019

2020

2019

Revenue

205.3

203.4

340.4

395.9

Cost of sales

(125.9)

(118.6)

(222.8)

(227.2)

Cost of operations

(52.6)

(60.9)

(84.8)

(119.6)

Selling, general and administrative expenses

(20.7)

(25.2)

(33.3)

(50.6)

Depreciation of right-of-use assets

(10.9)

(10.2)

(21.5)

(20.0)

Finance charges related to leases

(6.5)

(6.3)

(13.0)

(12.4)

Adjusted EBITDA1

(11.3)

(17.8)

(35.0)

(33.9)

Depreciation of property, plant and equipment

(4.3)

(5.9)

(8.9)

(11.8)

Amortization of intangible assets

(3.3)

(3.3)

(6.5)

(6.6)

Gain (loss) on disposal of capital assets

1.2

(0.5)

0.9

(1.0)

Net interest income

0.2

0.5

0.4

1.2

Share of loss from equity investments

-

(0.8)

-

(1.6)

Loss before income taxes

(17.5)

(27.9)

(49.1)

(53.8)

1Earnings before interest, taxes, depreciation, amortization, impairment, asset disposals, and share of loss from equity investments, and includes IFRS 16 right-of-use asset depreciation and associated finance charges. 


 

SOURCE Indigo Books & Music Inc.

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