Though it’s still earning profits, Canada’s leading theatre chain is looking for other ways to generate revenue in order to make up for its declining sales at the box office, according to an analysis of its more recent financial statement.

Cineplex by mckied on TradingView.com
Cineplex’s shares have been recently declining.

Cineplex‘s box office sales accounted for $712 million of total revenue in 2016. The proportion of sales as a percent of total revenue has declined 48 per cent since 2011.

In 2016, box office and food services  accounted for 77 per cent of Cineplex’s $1,478 million in total revenue.  Another two components, “media” and “other”, made up the rest.

“They are in a generally stagnant business (not much growth in movie attendance)”, says Christopher Hartt, a professor of Department of Business & Social Sciences in Dalhousie University in an emailed interview. In 2016, Cineplex attendance was $74,594 million. In 2016 the fourth-quarter, the attendance was 12 per cent down compared with the same period in 2015.

“They are essentially dependent on their suppliers to produce movies that the public wants to see”, says Hartt, “they try to control this by having long term arrangements with the more successful movie companies.”

Cineplex has refused to respond to requests for an interview about declining box-office sales. “We’re in our quiet period right now,” said Sarah Van Lange, the Director of Communications, Cineplex Entertainment, in an emailed statement.

To deal with declining box-office sales, Cineplex is trying to pivot from movies to other services like games and on-screen art exhibitions. “They(‘ll) create an experience, and create a reason for you to go”, says Rick Nason, a professor at the Rowe School of Business.

“They have tried to expand through acquisitions in related industries (gaming etc.),” says Dalhousie’s Christopher Hartt.

From the 2016 financial report, revenues from other column was doubled. Other revenues contain money from games, the Rec Room, Cineplex exhibition and others.

The Rec Room, a location based entertainment, which was kicked off in 2016, brought $2.36 million new income.

Games excluding Cineplex exhibition and The Rec Room are expanding as well. Compared with 2015, games brought near four times revenue than 2015. However, this is a tiny contribution to offset  their whole expenses, $1,369 million, in 2016.

“Movie theaters in general are under attack, it is not just about Cineplex,” said Nason, “so that is why they want to create more experience, like having drink service, having a restaurant experience, having the gaming experience, having seating areas, having pre-seating area. But Nason says these experiences are “mediocre”.

Revenue from food services has been steadily been declining since 2015. For the first three months of its most recent fiscal year, revenue from selling popcorn, chocolate bars and chips made up 28.8 per cent of revenues.

Canada’s biggest bookstore posted record revenues last year, according to an analysis of its most recent financial returns. Indigo Books and Music Inc. took in over $1 billion (CAD) in sales for the first time since 2011, and increased its revenue from the previous year by about 2.5%.

Although the returns seem promising on the surface, Dalhousie Professor of Finance Dr. Greg Hebb points out that financial results can’t be properly analyzed in a vacuum.

“Whenever you look at financial statements, it’s always relative. It’s hard to just say, ‘that’s good, that’s bad,’” said Hebb. “If you’re analyzing Indigo, you might want to look at… some other comparable company… and how it is compared to that.”

In Indigo’s press release for the annual financial returns, CEO Heather Reisman did exactly that.

“We are delighted to report our highest revenues ever in what was a tough year for many retailers,” she said.

Indigo by mckied on TradingView.com

Indigo has seen its stock prices decline since June.

In an analyst and investor conference call the day after Indigo’s press release, Reisman elaborated on the company’s success.

“We’re very pleased to report earnings growth, along with the fourteenth straight quarter of year-over-year sales growth,” she said.

It is true that Indigo increased their revenue and earnings before income taxes compared to the previous year. However, Hebb says those factors are not the best way to determine the financial state of a company.

“One thing to keep in mind here, accountants created this. And accountants have very unique specific rules on how they create this,” Hebb said, referring to the earnings sections of the financial returns. “It’s not how you and would generally think. For instance, you and I go out, we have money in our pocket to buy what we want to buy. That’s not really what this is showing. This may show they made $20 mil, but they may have no cash.”

Therefore, according to Hebb, the statement of cash flows is the most important in determining a company’s profitability.

“[The statement of cash flows] basically takes that accounting statement and says, ‘ok, how does that convert into actual cash coming in and cash coming out?’ Because at the end of the day that’s what you care about: do you have cash? Employees don’t get paid with net income. Net income is some number at the bottom of a sheet. They get paid with cash.”

Indigo made over $35 million (CAD) in cash flow from their operating activities, which essentially means their day-to-day business. That amount was actually a decrease of about 8% from the previous fiscal year, when that same number was upwards of $38 million (CAD).

That decrease seems bad, but as Hebb said, context is important in judging financial returns. When compared to Barnes and Noble, the largest bookstore chain in the United States, that 8% dip is negligible. Barnes and Noble is a much bigger company than Indigo, and its cash flow from operating activities was over $145 million (USD) last year, according to the NASDAQ stock market website. However, that represents a decrease in cash flow of over 25% from their previous year of almost $200 million (USD). Barnes and Noble is one of the struggling retailers that Reisman was referring to in her statement for the press release.

Comparison of Indigo and Barnes and Noble’s net cash flow by year (millions of USD)

In the aforementioned conference call, Reisman also noted a few other factors that made this year’s financial returns unique. One of them was the presence of a new book from the Harry Potter series, the play Harry Potter and the Cursed Child.

“There’s nothing like a Harry Potter book that we can see on the horizon,” she said of her projections for the upcoming year.

The other factor was the decline of the adult colouring book phenomenon. Adult colouring books had been a solid source of revenue for Indigo, but Reisman said the craze “is just about petered out.”

A medical marijuana company that recently opened a new clinic in Nova Scotia has posted over a $1 million loss in its last quarter, according to financial documents. The loss came after a rapid increase in spending over the same time last year.

Canabo Medical Inc.’s expenses rose by over 300 per cent from the end of January to the end of April 2017, compared to those months in 2016.

Julia Sawicki, an accounting professor at Dalhousie University, said this is likely because the company is only just starting to get up and running. It has yet to post a profit.

Canabo Medical Inc. by mckied on TradingView.com

Julia Sawicki, an accounting professor at Dalhousie University, says it’s normal for companies like Canabo Medical Inc. to lose money when they’re starting out.

“In 2016 they really weren’t spending that much money… now it seems like they’re online and paying salaries… expanding facilities,” she said.

Sawicki said it is normal for a new company to lose money in its first few years as it starts business, but it is hard to determine where it is going in the future. Canabo Medical Inc. did not respond to a request for comment on its financials despite several attempted contacts.

The company makes money in three ways: medical marijuana consultations, collecting data for research, and selling cannabis related products, according to the recent quarterly report. Most of its revenue is generated by medical consultation fees.

The company operates 22 clinics around Canada under the name Cannabinoid Medical Clinic. It operates two clinics in Nova Scotia, one in Halifax on Spring Garden Road and a new one in Wolfville. Others clinics are in Toronto, Ottawa, St. John’s, and Vancouver. It serves 20,000 patients across the country, according to the company’s website.

Canabo Medical also started selling shares to the public, which allowed it to raise around $8 million. The company lists this as a cash asset in its financials, while last year it had only around $2.5 million in cash.

In the six months before April 30, 2017 the company reported spending over $5 million in expenses. Around $2.4 million went towards the cost of starting to sell shares to the public, which is a “one-off” expense, according to Sawicki, and is not representative of its long-term financials.

One of the most dramatic spending increases for the company in its last quarter was on marketing and advertising, which was $275,848, compared to $805 during the same time in 2016. Travel costs also rose to $54,848 from $16,465, according to the quarterly report.

Sawicki said this type of spending is not uncommon for a new company that is getting on its feet.

“They seem pretty normal for a firm that really wasn’t doing that much for the first six months to a firm that’s really cranking up now,” she said.

In the management discussion and analysis, the company states that the reason for the dramatic increase in expenses is due to its clinic expansion and new salaries and benefits. In April 2017 Canabo Medical paid around $355,000 in salaries and benefits, but no amount is stated for April 2016.

The document says the company employs 28 people in total at it clinics and seven corporate staff. Canabo expects this number, and the salary expenses associated with it, to increase over the next year as it expands, according to the documents.

While the federal government has said it will legalize recreational marijuana by 2018, Canabo Medical Inc. does not anticipate this will have a significant impact on its business, according to the discussion of the quarterly report.

The next report the company is scheduled to release is for the period ending July 30, 2017.

In WestJet’s newest quarterly financial statements, its net income has dropped almost 50 percent by March 1, 2017. Although the company has managed to obtain a slight growth in revenue, it still ended up in a worse state financially when compared to the same time last year.

The net earning of WestJet has reached to the lowest point in 2017 for the last three years.

This is mainly due to two big increases in the company’s expenses: airplane fuel and maintenance.

“Maintenance has always been a main cost for most airlines,” says Mohammad Rahaman, a professor at Saint Mary’s University who is currently teaching finance and economics.

But this number increased drastically because of the declining economy in Canada.

“It’s like you have a car and you are planning to buy a new car, but you suddenly lost your job. What are you going to do? Instead of buying a new car, you would spend a lot of money on maintaining it keeping it in good shape.”

Another big increase in its expense is the aircraft fuel, which is not a big surprise to a lot of people since the three major oil companies have increased their oil price from 2016 to 2017.

WestJet has been in the spotlight for their unionization. The workers voted to form a union in May, 2017. Along with this considerable net income drop, the stock market is expected to go down. However, the company’s stocking price is at one of its historical highest levels in years, even after the discussion of unionization.

WestJet by mckied on TradingView.com

WesJet’s stock prices have been showing a steady increase since May 16, 2017.

“It looks like the marketers think they believe the company is going to deal with the unionization very well,” Rhanmad says, “it’s the uncertainty that the stock holders fear. Once they know they are or aren’t going to unionize, they are more confident.”

According the company’s financial reports from 2015 to 2017, WestJet has decreased their employ benefit share three years in a row. The company says in their newest annual report that the profit share system is a “variable cost” and the awards for its employees corresponds to how well the company does that year.

WestJet is not the only airline that has been suffering from the increased oil price and a declining domestic economy. In fact, Canada’s largest airline Air Canada also experienced a very similar financial year. The company also ended up with a deficit of 37 million after a surplus in the previous year.

WestJet didn’t respond to voicemail or email about this article.

Canada’s fastest internet provider is constantly losing cable television customers but claims it has the solution this fall back, according to its most recent financial statement.

Rogers Communications Inc. ended the first three months of 2017 with 1,796,000 cable television subscribers compared to 1,870,000 subscribers at the same period last year. This decline has been constantly increasing in the past five years.

To remedy to its losses, the telecommunication giant announced at the end of 2016 a partnership with Comcast Corp. to license the X1 cloud-based TV platform, which will launch in early 2018.

The system initially launched in the United States in 2012 and provides a cloud-based DVR, an advance guide, voice-activated remote controls and internet applications.

Comcast Corp. X1 product is comparable to Apple TV, as it currently provides Netflix and will soon be adding YouTube.

Alan Douglas Horn, president and chief executive officer of Rogers said during the 2017 first quarter analysts conference call that, as the company heads into the first quarter of next year and launches “the excellent Comcast platform,” the expectation is that it will “drive positive net adds.”

Dalhousie University assistant professor at Rowe School of Business said in an email that “the question of whether Rogers can continue to compensate for failing cable demand depends on whether the company can deliver cable far more efficiently than they have to date, or else leapfrog effectively from behind into next generation technologies their non-cable company competitors are into.”

Despite the constant fall in cable television subscribers, cable revenues decreased marginally this quarter due to more home phone and internet subscribers.

Rogers ended the first quarter of 2017 with $855 M in revenues for its cable services as opposed to $858 M to end of the last quarter of 2016.

“When we look at customers either staying with us or coming in, we find that over half of them are choosing their in-home services provider based first on internet”, says Horn.

Growth in wireless business

Rogers Communications Inc. increased its net income by 28 per cent and ended the first quarter of its 2017 fiscal year with $290 M in net income, up from $230 M for the same period last year.

Rogers Communications Inc. Stock Prices by arvinjoaquin on TradingView.com

The company’s stock prices have been increasing after a slight dip.

It attributed the net income increase to its growth in wireless business, after acquiring 60,000 new wireless subscribers, compared to 14,000 subscribers in the first three months of 2016.

The wireless subscribers have been increasing steadily in the past year, but Rogers considered this year’s addition of wireless subscribers the strongest one since 2009, therefore extensively contributing to a higher net income.

“Wireless revenue and subscriber growth was impressive, and importantly, this robust growth did not come at the expense of profit”, said chief financial officer at Rogers Communications Inc. Anthony Staffieri during an analysts teleconference.

Rogers Share Everything plans gained in popularity among the new wireless subscribers.

Share everything plans are wireless plans with data. Customers can either keep the data for themselves or share the data between family, friends or other devices such as a tablet. Subscribers of these plans also get to use other services such as Spotify, Texture and Rogers NHL GameCentre LIVE.

In its management discussion and analysis document, Rogers said it believes the increases in gross and net additions this quarter were results of its strategic focus on enhancing the customer experience by providing higher-value offerings, such as the Share Everything.

Staffieri said that although he won’t disclose the number of devices per plan, “when looking at the numbers, we continue to see that we are moving in the right direction.”

The number of tablets added into this type of plan remains very low, said Staffieri, but “it’s certainly something that consumers find helpful and they share everything and more value from that.”