- Increased revenues by 25 percent to $63.8 million for fiscal 2008
compared to $50.9 million in the same period for fiscal 2007.
- France revenues significantly increased to $11.8 million from
$2.6 million in fiscal 2007.
- Expenses increased to $17.7 million for fiscal 2008 compared to
$10.5 million for the previous year primarily due to Axia's active
pursuit of attractive bid opportunities in France, Singapore and
Australia.
- Axia was fully taxable during fiscal 2008 and recorded a net income
tax expense of $3.5 million as compared to a recovery of $2.3 million
for fiscal 2007.
- Net income of $8.1 million ($0.13 per fully diluted common share) for
FY2008 versus $16.0 million ($0.26 fully diluted per common share) for
the prior year.CALGARY, Sept. 22 /CNW/ - Axia NetMedia Corporation ("Axia" or the
"Corporation") today announced the results for fiscal 2008 and fourth quarter
ended June 30, 2008.
Art Price, Chairman and CEO commented, "Axia has excellent strategic
positioning in the transforming telecom sector. Technology, commercial and end
user demand fundamentals are aligned with the adoption of region-wide fibre
grids combined with wireless local access for transport/connectivity. These
fundamentals are also driving the separation of transport/connectivity
services from the many evolving web-based services."
He added, "Axia is uniquely positioned to grow profitably by leveraging
our track record of providing next generation network solutions utilizing our
no-conflict open access approach."FY2008 and 4Q2008 Operational Highlights
The Alberta SuperNet
--------------------The Alberta SuperNet continues to provide an excellent reference point on
how Axia's no conflict Open Access Network Next Generation ("OAN NextGen")
business model can bridge the Digital Divide between rural and urban
communities.
Operationally this year, the Corporation placed substantial focus on
connecting new customers to the Alberta SuperNet and increasing bandwidth
commitments from existing customers which resulted in increased bandwidth
usage by the government and retail service providers ("RSP") sectors.
In the government sector, Axia launched a Gigabit Ethernet Service for
customers who require large amounts of bandwidth and a Critical Infrastructure
Service for customers who need a SuperNet connection with 99.999% access and
network availability.
In the RSP and enterprise sectors, Axia launched Axia Broadband
Connection Services to facilitate connections to the Alberta SuperNet. As of
June 30, 2008, there were 67 RSPs selling services in 254 rural communities
and these RSPs have an aggregate of 797 active connections. RSPs are an
important component of the Alberta SuperNet's future growth and Axia is
working closely with them to grow their bandwidth requirements. New regional
and national RSPs were recruited in 2008 and it is anticipated that this will
significantly enhance the growth potential of the Alberta SuperNet.France - Covage
---------------Covage continues to make progress on the construction and commissioning
of its networks. Operationally, nine networks are active or in the early
stages of activation. Covage expects to activate Grand Angoulême and SEM@FOR77
in the fall of 2008 and Hérault Participation in the summer of 2009.
Axia's results from Covage increased dramatically since fiscal 2007 which
reflect both the increase in the number of networks reporting revenue due to
the transfer of the majority of its network interests into Covage and from
increasing bandwidth sales to its RSPs. In fiscal 2008 the number of Covage's
RSP customers increased from 10 to 26 while growing its bandwidth sales to 10
Gbps from 6.2 Gbps at the end of fiscal 2007.
The Corporation continued to strengthen its France business with Covage's
national fibre backbone connectivity project. The project will be completed by
mid-calendar 2009 and utilize 1,800 kilometres of existing dark fibre
infrastructure to create a ringed network from Arras in northern France to
Montpellier in the south of France. Covage believes that the national network
will create an attractive value proposition for national operators and large
corporate and government customers.
At this time, Covage has four additional OAN NextGen bids outstanding and
expects decisions to be made on these bids by the end of calendar 2008. Covage
continues to review new opportunities in light of the capital markets and the
slowdown in the French economy. Potential opportunities are selected if they
complement Covage's existing operations and the national backbone from a
geographical perspective and their economic potential given the investment
climate.International Opportunities
---------------------------As a result of Axia's success in Alberta and France, the Corporation is
pursuing potential OAN NextGen opportunities in other jurisdictions around the
world. Currently these opportunities consist of bid and proposal responses in
Singapore and Australia. Axia continues to have preliminary discussions in the
Middle East and North America.
On May 5, 2008, Axia announced that OpenNet had submitted a response to
the Infocomm Development Authority ("IDA") of Singapore's RFP for the rights
to construct and provision passive fibre grid services throughout Singapore.
Axia is the lead member of the OpenNet consortium with a 30 percent interest.
Its partners are Singapore Telecommunications Limited (30 percent), Singapore
Press Holdings (25 percent) and SP Telecommunications Pte Ltd (15 percent). If
OpenNet is successful in this bid, Axia could fund its investment from cash
resources. This is the first part of the IDA's competitive bid process for a
complete Next Generation National Broadband Network. The second part is the
provision of active broadband services over the fibre grid. Axia is qualified
to respond to the second RFP and submissions are due before the end of this
calendar year.
In April 2008, the Government of Australia issued a Request for Proposal
to roll out and operate a national network. Axia has also qualified to respond
to a RFP for Next Generation Network implementation(s) in Australia.
Submissions are now expected to be delivered in late calendar 2008.
FY2008 and 4Q2008 Consolidated Financial Information
Fiscal 2008 was characterized by three significant areas of financial
importance: (i) the rapid increase of financial results for the European
segment; (ii) the increased emphasis on global business development
initiatives as the Corporation responds to attractive OAN NextGen
opportunities; and (iii) the transition from a period where Axia was not
taxable and earning significant income tax assets to one where the Corporation
is fully taxable.
Consolidated revenues for fiscal 2008 were $63.8 million, an increase of
$12.9 million from $50.9 million for fiscal 2007. Consolidated revenue for the
fourth quarter of fiscal 2008 increased $0.2 million to $16.2 million from
$16.0 million for the prior year. Consolidated gross profit for the fourth
quarter was $6.9 million or 43 percent of revenue which is an increase of $0.4
million compared to $6.5 million or 41 percent of revenue in the prior
quarter. For fiscal 2008 gross profit increased $4.8 million to $29.0 million
or 45 percent of revenue, compared to $24.1 million or 47 percent of revenue
last year. Consolidated expenses were $17.7 million for fiscal 2008 compared
to $10.5 million for the prior year. This was mainly due to a significant
increase in OAN NextGen bid activity in France, Singapore and Australia
compared to the previous fiscal year. During the fourth quarter, total
expenses were $5.0 million as compared to $4.3 million for last quarter.
During fiscal 2008, Axia incurred $1.8 million in additional stock-based
compensation expense as compared to the previous year, $1.7 million of which
is attributed to the stock options granted to the Chief Executive Officer in
fiscal 2007 which were approved by shareholders in fiscal 2008. This expense
was non-recurring and is non-deductible for income tax purposes.
For fiscal 2008, the Corporation's provision for net income tax expense
was $3.5 million as compared to a recovery of $2.3 million for the prior year.
Accordingly, changes in its net income tax provision between fiscal 2008 and
2007 represent a significant $5.8 million decrease in net income between these
two years.
During 2007 and 2006, Axia was not taxable and was recognizing a material
benefit of future income tax assets for the North American segment which
increased our net income during those periods. The recognition of future
income tax assets during 2007 increased net income by $2.5 million. During
fiscal 2008, Axia was recording a draw-down of the future income tax assets of
the fully operational North American segment of $1.8 million which was offset
by the recognition of future income tax assets for the European segment of
$3.3 million. The net recognition of future income tax assets for 2008 was
accordingly $1.5 million, a $1.0 million decrease from the prior year.
Additionally, Axia was fully taxable in fiscal 2008. Current income taxes
for 2008 amounted to $5.0 million as compared to $0.2 million for the prior
year. Income tax expense for the North American segment was $2.3 million for
2008 which was not taxable during 2007. Income tax expense for the European
segment for the current year was $2.7 million as compared to $0.2 million for
2007. Although the Corporation currently reports a net loss for the European
segment, certain funds it earns on construction activities are taxable and
give rise to the current tax provision.
Net income before net income taxes for fiscal 2008 was $11.6 million
($0.18 per fully diluted share) as compared to $13.6 million ($0.22 per fully
diluted share) for the prior year, a decrease of $2.0 million. Although the
gross profits from operating activities increased by $4.8 million during 2008,
the following major items contribute significantly to the reported decrease:
(i) non-recurring stock based compensation expense of $1.7 million recorded
during the current year; and (ii) the $4.5 million increase in business
development initiatives undertaken by the Corporation during fiscal 2008 in
pursuing and commissioning new OAN NextGen opportunities.
Net income before tax for the fourth quarter of fiscal 2008 was $1.9
million, a $0.6 million decrease from the $2.5 million reported during the
third quarter.
On an after tax basis, net income decreased from $16.0 million ($0.26 per
fully diluted share) for fiscal 2007 to $8.1 million ($0.13 per fully diluted
share) for the current year. This $7.9 million decrease in net income is
explained not only by those items noted above, but also the change in the net
income tax provisions between fiscal 2008 and 2007 resulting in a decrease in
net income of $5.8 million for the current year.
Net income for the fourth quarter was $1.5 million ($0.02 per common
share on a fully diluted basis) as compared to $3.1 million ($0.05 per common
share on a fully diluted basis) for the previous quarter. This decrease is
largely attributable to (i) increased business development activities; (ii)
non-recurring costs incurred during the fourth quarter relating to
organizational changes; and (iii) a change in the income tax provision from a
recovery of $0.5 million for the third quarter as compared to an expense of
$0.4 million for the fourth quarter.
As at June 30, 2008 the Corporation's working capital was $22.9 million
as compared to $43.1 million for the prior year. The major use of working
capital for the current year is directly attributable to the investment in
network construction and acquisitions for Axia's expanding operations in
France. As at June 30, 2008, Axia had $28.1 million in cash and short-term
investments and $4.8 million in restricted short-term investments. Subsequent
to year-end, the restricted short-term investments became available for
general corporate purposes.
Outlook
Mr. Price remarked, "Next Generation Network opportunities typically
involve deploying substantial capital in return for long term reliable
profits. The opportunities available to Axia are growing at a time when
traditional debt and equity capital markets are, to say the least, unreliable.
Axia's Management and Board assess the attractiveness of each new opportunity
taking into account the value of momentum and market position as well as
Axia's role with respect to deploying capital. At the same time, Axia's
Management and Board remains vigilant in considering the potential dilution
shareholders may face as a consequence of Axia choosing to raise capital in
the current environment. Axia plans to maintain its strong balance sheet
approach. Management and the Board will consider all these factors as the
Corporation seeks the path that it believes will maximize shareholder value."
Conference Call Scheduled
Axia will hold a conference call with the financial community on Tuesday,
September 23, 2008 at 3 p.m. (Eastern), 1 p.m. (Mountain) to discuss its
fiscal 2008 and 4Q2008 results. Axia CEO Art Price and Chief Financial Officer
Peter McKeown will participate.
To participate in the conference call, please dial (416) 644-3415 in
Toronto and internationally. If you are connecting from other parts of Canada,
dial 1-800-733-7571. Please call 10 minutes prior to the start of the call. In
addition, a live webcast (listen only mode) of the conference call will be
available at:
http://www.newswire.ca/en/webcast/viewEvent.cgi?eventID=2398660
Participants are invited to submit questions by email before and during
the conference call. Please send them to ir@axia.com.
A replay of the conference call will be available at (416) 640-1917 or
1-877-289-8525, passcode 21281999, followed by the number sign, from 6 p.m.
(Eastern) Tuesday, September 23, 2008 to midnight (Eastern) Tuesday, September
30, 2008 or through the webcast archives at www.newswire.ca.
About Axia
The audited Consolidated Financial Statements for the fiscal year ended
June 30, 2008 and related Management's Discussion & Analysis have been
reviewed and approved by the Corporation's Audit Committee and Board of
Directors. These reports have been filed on SEDAR at www.sedar.com and are
also posted at www.axia.com.
Axia provides Real Broadband(TM) IP services and solutions through
planning, designing and operating no conflict Open Access Next Generation
Networks. Axia trades on the Toronto Stock Exchange under the symbol "AXX".
Forward-looking Statements: This news release contains forward looking
statements, including, without limitation, statements containing the words
"should", "believe", "anticipate", "may", "plan", "will", "continue",
"intend", "expect", "estimate" and other similar expressions which constitute
"forward looking information" within the meaning of applicable Canadian
securities laws. These statements are based on our current expectations,
estimates, forecasts and assumptions about the operating environment,
economies and markets in which we operate and are subject to important
assumptions, risks and uncertainties that are difficult to predict. The
assumptions, risks and uncertainties that could cause actual results to differ
materially from the forward looking information, include, but are not limited
to, changes in customer markets, changes in demand for our services, our
inability to deliver services in a timely and cost efficient manner,
technological change, general economic conditions and other risks detailed
from time to time in our ongoing filings with the Canadian securities
regulatory authorities, including in our Annual Information Form, which
filings can be found at www.sedar.com. Given these assumptions, risks and
uncertainties, readers are cautioned not to place undue reliance on such
forward looking statements. Unless otherwise required by applicable securities
laws, we undertake no obligation to publicly update or revise any forward
looking statements either as a result of new information, future events or
otherwise.CONSOLIDATED BALANCE SHEETS
June 30, June 30,
($000s) 2008 2007
-------------------------------------------------------------------------
Assets
Current assets:
Cash $ 2,210 $ 10,862
Short-term investments 25,867 41,309
Restricted short-term investments 4,763 -
Accounts receivable 25,222 7,623
Prepaid expenses 1,326 1,527
Future income tax asset 24 -
-------------------------------------------------------------------------
59,412 61,321
Technology and product development costs - 528
Property and equipment 49,373 12,666
Intangible assets 6,699 -
Goodwill 4,201 4,201
Advances to joint venture 1,785 12,932
Other assets 816 719
Restricted long-term investments 4,310 -
Future income tax asset 4,608 4,753
-------------------------------------------------------------------------
$ 131,204 $ 97,120
-------------------------------------------------------------------------
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued liabilities $ 29,826 $ 16,659
Income taxes payable 5,306 20
Current portion of deferred revenue 1,061 1,197
Current portion of lease obligation 284 270
Current portion of cost of excess space 61 80
-------------------------------------------------------------------------
36,538 18,226
Deferred revenue 1,503 825
Lease obligation 77 360
Cost of excess space 115 187
Shareholders' equity:
Share capital 48,074 47,740
Contributed surplus 2,893 702
Retained earnings 38,986 30,885
Accumulated other comprehensive income (loss) 3,018 (1,805)
-------------------------------------------------------------------------
42,004 29,080
-------------------------------------------------------------------------
92,971 77,522
-------------------------------------------------------------------------
$ 131,204 $ 97,120
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS AND RETAINED EARNINGS
For the periods ended June 30, 2008 and 2007
($000s except per Three Months Years Ended
share amounts) 2008 2007 2008 2007
-------------------------------------------------------------------------
Revenue $ 16,216 $ 13,632 $ 63,805 $ 50,916
Cost of products and
services sold 9,289 7,174 34,850 26,785
-------------------------------------------------------------------------
Gross profit 6,927 6,458 28,955 24,131
Expenses
Marketing 224 325 952 1,028
Administration 1,560 929 3,918 3,161
Business development 2,406 1,802 8,368 3,890
Stock-based compensation 20 155 2,299 473
Net interest and
financing charges
(income) (544) (384) (2,508) (1,343)
Depreciation and
amortization 1,369 881 4,661 3,274
-------------------------------------------------------------------------
5,035 3,708 17,690 10,483
-------------------------------------------------------------------------
Income before the
following 1,892 2,750 11,265 13,648
Gain on sale of
investment - - 333 -
-------------------------------------------------------------------------
Income before income tax 1,892 2,750 11,598 13,648
-------------------------------------------------------------------------
Current income tax (1,024) 47 (5,031) (189)
Future income tax
recovery (expense) 609 (1,414) 1,534 2,530
-------------------------------------------------------------------------
(415) (1,367) (3,497) 2,341
-------------------------------------------------------------------------
Net income 1,477 1,383 8,101 15,989
Retained earnings,
beginning of year 37,509 29,502 30,885 14,896
-------------------------------------------------------------------------
Retained earnings,
end of year $ 38,986 $ 30,885 $ 38,986 $ 30,885
-------------------------------------------------------------------------
Net income per share
Basic $ 0.02 $ 0.02 $ 0.13 $ 0.27
Diluted $ 0.02 $ 0.02 $ 0.13 $ 0.26
-------------------------------------------------------------------------
Weighted average shares
outstanding
Basic 63,537 63,352 63,537 59,316
Diluted 66,406 62,893 63,844 60,867
-------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the periods ended June 30, 2008 and 2007
Three Months Years Ended
($000s) 2008 2007 2008 2007
-------------------------------------------------------------------------
Net income $ 1,477 $ 1,383 $ 8,101 $ 15,989
Other comprehensive income,
net of tax:
Unrealized gains (loss)
on short-term
investments (73) - 192 -
Unrealized gains (loss)
on translation of self
sustaining operations (330) - 4,599 -
-------------------------------------------------------------------------
Other comprehensive income (403) - 4,791 -
-------------------------------------------------------------------------
Comprehensive income $ 1,074 $ 1,383 $ 12,892 $ 15,989
-------------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the periods ended June 30, 2008 and 2007
Three Months Years Ended
($000s) 2008 2007 2008 2007
-------------------------------------------------------------------------
Cash provided by (used in):
Operating activities:
Net income $ 1,477 $ 1,383 $ 8,101 $ 15,989
Items not involving cash
Depreciation and
amortization 1,369 881 4,661 3,274
Future income tax
(recovery) expense (612) 1,513 (1,534) (2,521)
Gain on disposal of
investment - - (333) -
Cost of excess space (43) (21) (91) (78)
Stock-based
compensation 20 155 2,299 473
-------------------------------------------------------------------------
2,211 3,911 13,103 17,137
Changes in non-cash working
capital items (3,738) 4,956 (24,481) 5,371
-------------------------------------------------------------------------
Cash provided by (used in)
operations (1,527) 8,867 (11,378) 22,508
Cash used in discontinued
operations - - - (92)
-------------------------------------------------------------------------
(1,527) 8,867 (11,378) 22,416
Financing activities:
Decrease (increase) in
restricted cash and
investments (9,063) 112 (9,028) 162
Issue of common shares - - 226 22,847
Repayment of lease
obligation (69) (66) (270) (255)
-------------------------------------------------------------------------
(9,132) 46 (9,072) 22,754
Investing activities:
Short-term investments 14,231 1,014 17,865 (28,874)
Acquisitions - - (2,230) -
Advance to joint venture - (261) 11,710 (12,932)
Purchase of property and
equipment (2,321) (4,942) (24,629) (6,329)
Disposal of investment - - 21 -
Purchase of property and
equipment included in
accounts payable (668) - 8,020 -
Technology and product
development costs - - - (374)
-------------------------------------------------------------------------
11,242 (4,189) 10,757 (48,509)
-------------------------------------------------------------------------
Effect of currency
translation on cash
balances and cash flows (5,987) (1,602) 1,041 (1,805)
-------------------------------------------------------------------------
Decrease in cash (5,404) 3,122 (8,652) (5,144)
Cash, beginning of period 7,614 7,740 10,862 16,006
-------------------------------------------------------------------------
Cash, end of period $ 2,210 $ 10,862 $ 2,210 $ 10,862
-------------------------------------------------------------------------%SEDAR: 00002394E
For further information: please visit Axia's website at www.axia.com, or
contact: Dawn Tinling, VP, Investor Relations and Communications, Axia
NetMedia Corporation, (403) 538-4074, dawn.tinling@axia.com
