Tag Archives: Income Fund

Movie Income Fund Q4 profit rises

TORONTO (CP) _ Movie Distribution Income Fund (TSX:FLM.UN) said Wednesday the limited partnership’s fourth-quarter profit rose to $18 million from $14.1 million a year earlier, primarily on foreign exchange gains.

Consolidated revenue for the three months ended Dec. 31 was $138.3 million, up 21 per cent from $114.3 million the year before, with increases in all territories.

Movie Distribution Income Fund holds an indirect 49 per cent interest in Motion Picture Distribution LP while Alliance Atlantis Communications Inc. (TSX:AAC.B) indirectly holds the remaining 51 per cent.

Last month, CanWest Global Communications Corp. (TSX:CGS) paired up with Wall Street bank Goldman, Sachs & Co. to acquire Alliance Atlantis in a $2.3-billion deal.

Under the proposed deal, a Canadian partner of GS Capital Partners, a private equity affiliate of the New York-based bank involved in the acquisition, would take control of Alliance’s interest in Motion Picture Distribution.

In Canada, the partnership’s revenue rose to $86.1 million from $65.5 million, as weaker theatrical slate was more than offset by stronger DVD releases in the quarter.

DVD sales included Passe-Partout, Bon Cop Bad Cop, Clerks II and Fearless.

Television revenue increased to $25.5 million from $15.4 million, while total library sales in Canada during the quarter were $25.9 million.

In the United Kingdom, revenue of $36.6 million was up slightly from $35.9 million the year before, while revenue in Spain was $15.6 million _ a 21 per cent increase.

The unrealized foreign exchange gain for the quarter was $2.9 million, compared to a loss of $900,000 in the prior year’s quarter.

"Despite a year of challenges, our model of distributing a portfolio of movies across a variety of platforms continued to show strength and resiliency," stated CEO John Bailey.

"Our Canadian operations benefited from a solid DVD slate and continued strong sales from our domestic library of 3,600 titles."

For the year, the partnership’s net income was $42.8 million, compared with $28.6 million in 2005. Consolidated revenue rose to $449 million from $431.2 million in the prior year’s period.

Looking forward, the company is expecting to generate solid sales from the expanded release of Oscar-nominated film Pan’s Labyrinth, as well as Rush Hour 3, The Golden Compass, Grind House, and Hairspray.

On the TSX Wednesday morning, Movie Distribution units were unchanged at $8.40.

Alliance appoints Executive VP

TORONTO, Oct. 25 /CNW/ - John Bailey, CEO today announced the promotion of Doug Smith to Executive Vice President, effective immediately. Reporting to both the CEO and the Executive Managing Director, Mr. Smith’s role is expanded to include direct support to the CEO on special projects, and working with Managing Directors on business improvement.

Mr. Smith will continue to oversee IT, Contract Administration, 3rd Party Service Providers, New Business Development and Operational Support of Business Units. Mr. Smith joined Alliance in 1997 to run Domestic TV Sales. During his time in that area, he grew the television business by directing MPD into the Video On Demand arena. Most recently Mr. Smith was Senior Vice President TV Distribution and Operations for MPD.
"Doug is a recognized and respected member of the MPD team," said Mr. Bailey. "His contributions over the years in a variety of areas have been a very important component of this company’s success."

"I’m very happy to have been given the opportunity to work more closely with the senior management team," said Smith. "We have a dynamic, energetic group and I am pleased to have been given the chance to play my part.

BCE converting into income trust

MONTREAL (CP) _ Telecommunications giant BCE Inc. (TSX:BCE), one of Canada’s most widely held companies, is dissolving itself and converting its Bell Canada holding into an income trust that will save millions in corporate taxes. The announcement early Wednesday follows the recent example of rival Telus Corp. (TSX:T), which is also converting to an income trust.

The move to an income trust structure is designed to increase shareholder value and provide huge tax savings for BCE, one of Canada’s bigtgest corporate taxpayers. However, the federal government, which stands to lose millions of tax dollars from such a move, says it remains "concerned" about the wave of trust conversions by Canadian companies. Canada has about 250 trusts _ worth about $200 billion _ in real estate, oil and gas, telecom, industrial, food processing and manufacturing sectors. They have become a popular investment vehicle because trusts pay most of their cash flows to investors, unlike corporations, which pay dividends to shareholders.

While companies who convert to trusts have tapped into a new lucrative investment market, they also are forced to pay most of their profits to unitholders, which prevents them from using excess cash for internal growth. As well, many trusts are in boom-to-bust industries where markets are volatile and can often lead to a suspension of payments when the business environment changes.

The winding down of BCE "certainly does mark the end of an era in Canadian business," said Michael Sabia, CEO of BCE and Bell Canada. Sabia said the income trust _ the Bell Canada Income Fund _ will be strictly a telecommunications business. The move by Telus was an important factor in the BCE decision, he added.

"It further confirms the focus that we have in our overall strategic direction, which is returning the company to its roots and building a business in the business that we know _ telecommunications _ and sticking with that," Sabia told a conference call. He said the BCE conglomerate, also known as Bell Canada Enterprises, was created in a different era with a different purpose that focused on diversification.

"But the strategy we’ve been pursuing over the last three or four years is not about diversification, but about focus with Bell as the centrepiece of that focus."

BCE stock increased more than four per cent in trading on the Toronto Stock Exchange, gaining $1.37, or 4.34 per cent, to close at $32.92 with 35.74 million shares changing hands.

The conversion would likely create Canada’s largest trust by a wide margin _ BCE’s current market value stands at around $25.8 billion _ and would simplify the telecom company’s corporate structure.

The Bell Canada Income Fund would have an initial annual cash distribution of $2.55 per unit, compared with the current BCE dividend of $1.32 a share.

Income trusts have grown in popularity in recent years in Canada as they face a lower tax burden than regular corporations, passing the tax bill on to individual unitholders who receive monthly distribution payments.

Finance Minister Jim Flaherty said he wouldn’t comment specifically on BCE’s conversion plan and the potential loss of federal tax revenue.

"We do remain concerned about the issue and we do continue to monitor the situation in Canada," Flaherty said after a speech in Vancouver.

The decision to convert to a trust was based on existing federal income tax rules and didn’t require an advance tax ruling, Sabia said.

It will be financially advantageous because BCE will avoid an $800-million tax bill in 2008 when the company would no longer have tax losses or shelters, he said. The expected tax bill with remaining shelters is pegged at $250 million for the next year.

Merrill Lynch analyst Joel Sutherland said as a result of the "trusting" of BCE, the spectre of repercussions from the federal government has been removed.

Many Canadian companies will see it as "a milestone in terms of ‘If they can do it, why can’t we?"’ Sutherland said in a research note.

He said he doesn’t expect the Conservative government to act as long as it’s in power and budget surpluses continue to last.

BCE will save corporate tax but taxes still will be paid, said portfolio manager Leslie Lundquist of Bissett Investment Management.

"Unitholders will still have a tax bill at some point down the road," she said from Calgary, adding she doesn’t believe the Conservative government will move to clamp down on income trusts.

She said the challenge will be to maintain business growth and capital spending while still being able to pay out the distributions to unitholders.

Sabia said there are no plans to lower the company’s 15 per cent ownership in Bell Globemedia, owner of the Globe and Mail newspaper and CTV, which BCE sees as a content provider for its telecommunication businesses. He also said he plans to remain as CEO of the income trust.

BCE is widely held by individual shareholders and pension funds and analysts had been waiting to see if Sabia would follow Telus’s recent move to become an income trust.

Sabia said he couldn’t have made the move to an income trust any sooner. He said he needed to ensure the new entity could support growth and pay the higher distributions to unitholders. He also said he needed to see the ability to win back customers lost to cable companies, retain customers and see positive changes to cost structure, service levels and pricing.

"To have tried to do this six, eight, 12 months ago would have not have not been the right thing because we wouldn’t have had the same level of confidence," Sabia said.

Income trusts are typically valued higher than corporations in the market because of their lower tax structure, Lundquist said. Sabia expects reduced costs of about $10 million annually and possibly up to $20 million once BCE is dissolved.

BCE is Canada’s largest communications company. Under the Bell brand, its services include local, long-distance and wireless phone services, high-speed and wireless Internet access, broadband services, information and communications technology services and direct-to-home satellite and VDSL television services.

Other BCE businesses include satellite Telesat Canada, which is itself in the middle of a spinoff process and an initial public offering of stock. Separately, Bell Aliant Regional Communications Income Fund announced Wednesday its intention to take private the Bell Nordiq Income Fund, which serves northern Ontario and Quebec.

As part of the BCE wind-down, already approved by the board of directors:

_ Each BCE share would be exchanged for one unit in the Bell Canada Income Fund.

_ BCE and Bell Canada will make a cash offer to buy back all of their outstanding preferred shares.

_ An issuer bid circular is to be mailed to preferred shareholders in December. A special meeting of common and preferred shareholders will be held in Montreal in January.

_ Bell Canada Income Fund units are expected to begin trading in the first quarter of 2007.

Bell Aliant units ticked 55 cents lower to $34.10 Wednesday afternoon on the Toronto Stock Exchange.