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22 COGECO CABLE INC. 2007 Management’s Discussion and Analysis
OPERATING AND FINANCIAL RESULTS
OPERATING RESULTS
YEARS ENDED AUGUST 31, 2007 2006 CHANGE
(in thousands of dollars except percentages) $ $ %
REVENUE 938,880 620,001 51.4
OPERATING COSTS 559,559 358,631 56.0
MANAGEMENT FEES—COGECO INC. 8,568 8,392 2.1
OPERATING INCOME BEFORE AMORTIZATION 370,753 252,978 46.6
OPERATING MARGIN 39.5% 40.8%
REVENUE
Fiscal 2007 consolidated revenue increased by $318.9 million, or 51.4%, compared to the same period last year to reach
$938.9 million.
The Canadian operations contributed $110.9 million of the increase, or 18.4%, mainly due to various rate increases and
RGU growth and the Portuguese operations contributed $208 million due to the inclusion of a full year of fi nancial results
compared to only one month of operations in fi scal 2006.
OPERATING COSTS AND MANAGEMENT FEES
Fiscal 2007 consolidated operating costs increased by $200.9 million, or 56%, to reach $559.6 million.
The Canadian operations’ operating costs, excluding management fees payable to COGECO Inc., rose by $65.9 million,
or 19%, to service additional RGUs, including Telephony. Cabovisão’s operating costs amounted to $147 million for its fi rst
full year of operations as an indirect wholly-owned subsidiary of Cogeco Cable, compared to $11.9 million for its one month
of operations in fi scal 2006.
Management fees paid to COGECO Inc. amounted to $8.6 million, an increase of 2.1% over fi scal 2006, and are discussed
in detail in the “Related Party Transactions” section on page 13.
OPERATING INCOME BEFORE AMORTIZATION
Fiscal 2007 consolidated operating income before amortization increased by $117.8 million, or 46.6%, to reach
$370.8 million.
In fi scal 2007, operating income before amortization for the Canadian operations rose by $44.9 million, or 18.1%, compared
to fi scal 2006 as the growth in revenue outpaced the rise in operating costs. Cogeco Cable’s operating margin for the
Canadian operations remained essentially the same at 41% compared to 41.1% for the same period last year. The Portuguese
operations generated an operating income before amortization of $77.9 million for fi scal 2007 corresponding to an operating
margin of 34.6%. As a result of the full year of consolidation of the Portuguese operations’ lower operating margin,
Cogeco Cable’s operating margin declined from 40.8% for fi scal 2006 to 39.5% for fi scal 2007.