Cogeco 2004 Annual Report Download - page 5

MESSAGE TO SHAREHOLDERS
Cogeco Cable Inc. 2004 3
Above all, digital television is about choice, control and conven-
ience while also delivering superior sound and picture quality.
It truly is home theatre at your fingertips! Since this service was
launched in 1999, Cogeco Cable has attracted over 208,000
customers as of August 31, 2004.
Cable is a highly-flexible technology that makes interactivity
possible. With VOD and HD DVR, our customers can experiment
with and gradually adopt a new style of television viewing. Our
customers only need to decide what they want to watch and when
they want to watch it. Movies, documentaries, children’s programs
– all are available at the viewer’s command and can be controlled
in ways similar to VCRs and DVDs. This is an advantage unique
to cable.
In the realm of HD television, the picture quality on a HD monitor
is approximately three times greater than that of a standard tele-
vision, much better than that of a DVD, and the Dolby 5.1 sound
ensures a viewing experience comparable to a movie theatre. And
now that HD programs are becoming more commonplace, the
Motorola DCT 6208 terminal launched in April, which integrates
both a DVR and HD, provides an optimal television viewing
experience and constitutes a true complement to VOD.
RESULTS BEYOND
OUR EXPECTATIONS
These successes translate into concrete results. At fiscal year-end,
operating income was $203 million, up 16% over last year. Free
Cash Flow stood at $43.5 million or $1.09 per share, compared to
$2.4 million or $0.06 per share for fiscal 2003. Operating Margin
rose from 35.9% to 38.6%. However, our results, although very
satisfying, especially in terms of acquiring and retaining cus-
tomers, translated into a net loss of $32.2 million because of the
previously mentioned accounting and tax changes.
Subscriptions to HSI service continued to rise, posting 19% growth
over the fiscal year to stand at 245,000. The increase in digital
service customers was also substantial and exceeded our expec-
tations, with a 28% increase over 2003, reaching 208,000 at
the end of fiscal 2004. This service contributes significantly
to cus tomer retention.
CUSTOMERS AND PERFORMANCE
FOR 2005
Looking ahead to 2005, our key areas of focus will be customers
and performance.
Cogeco Cable intends to meet the needs of its customers, above
all, in innovative ways and in a well thought out manner. Through
ongoing market research, we will build a knowledge base of
customers expectations to improve our offering and services.
Using this research and relying on the results of our surveys, we
will continually offer new services that will help our customers
to connect easily to the world. The results? Marketing will be
improved and better targeted. It will be in step with, even ahead
of, customer expectations.
Such a customer-centric approach results in greater customer
loyalty and consequently in an increased interest in purchasing
new services, thereby generating additional revenues. Customer
loyalty is also beneficial because retaining existing customers
is less costly than acquiring new customers, thereby improving
operating ratios. The competition is strong, and Cogeco Cable
intends to play a leading role in meeting the communication
needs and expectations of consumers.
For example, responding to customer needs was the impetus
behind our Internet/video bundles, which have been available
since 2000. More and more customers are opting for these bundles
which allow them to take advantage of discounts and help us
to develop greater customer loyalty. In 2005, we will focus on
improving these service bundles; we will introduce more compet-
itive digital products as well as IP telephony. The flexible cable
platform offers a world of possibilities, and Cogeco Cable will use
all of its expertise to market products and services that make our
customers’ lives easier.
Maurice Myrand, Chairman of the Board