Corus releases first combined quarterly

The broadcaster's first quarterly post its Shaw Media acquisition shows losses of $15.8 million.
money, Canada

In its first consolidated earnings report following the acquisition of Shaw Media, Corus Entertainment has posted a collective revenue of $360.8 million, up 78% over its previous unconsolidated quarter and segment profit up 90% over the same quarter last year. However, with soaring expenses from the $2.65 billion acquisition and during a period of staff and operational integration, the company has posted a net loss of $15.8 million for the third quarter ended May 31, 2016, $7.7 million greater than its loss in the previous quarter.

In a conference call announcing the results this morning, Doug Murphy, president and CEO of Corus Entertainment, said the company was moving quickly to achieve benefits from the integration of the two media companies. Given that the acquisition came just months ahead of the L.A. Screenings and the June upfronts in Canada (a first for Corus), he said the company had to move quickly to integrate the two companies. Murphy said the company was ahead of its target goals of saving $40 to $50 million in cost synergies over the upcoming 18 to 24 months, with the aim of deleveraging the company’s debt from the acquisition.

The Q3 earnings account for two months of Shaw Media’s operations. A missing line item in the report is earnings from the company’s pay TV business, from which it exited on Feb. 29 2016.

Revenues for TV were up 100% to $321 million, compared with $162 million in the corresponding quarter last year. Radio revenues were down 2% to $39.6 million.

Advertising revenues for the quarter were up 236% to $237 million compared with $97 million for the same period in 2015. Revenues from subscriber fees were also up 16%, hitting $98 million for the quarter, compared with $84 million. The company has also seen a 24% increase in revenue from merchandizing and distribution, following the company’s agreement with Disney for licensing rights for the Disney Channel in April last year.

Murphy said the company’s newly consolidated female-focused channels  - W, HGTV, Food Network and Showcase – remained “at the top of the pile” of female-skewing specialty channels in Canada. 

Murphy attributed conventional TV ad revenue declines to general market conditions. He also said that the “growth in sports-related audiences on specialty” on account of hockey and other sporting events resulted in more ad spend being shifted off conventional TV to sporting channels. Advertising on Corus’ specialty properties remained flat while there was a decline in ad spend on its French division, Corus Media.

Asked about whether the softness in advertising was expected to continue, Murphy said: “The overall market remains soft…Advertising is a confidence business and we are continuing to see a very soft advertising market. We are seeing sequential improvements in the Shaw Media portfolio and we expect continued strength in the kids business.”

Murphy also talked about the company’s plans moving forward. With exiting CFO Tom Peddie on his last conference call, the Corus team talked about its goal to achieve most of its organizational redesign by the end of August this year. With a new leadership team in place, the company aims to build its subscriber base by providing more attractive bundling opportunities for advertisers in local markets by combining its TV  (Global) and radio sales forces.

Corus Entertainment is currently in the process of renegotiating carriage relationships with BDUs, Murphy said.

 In a note on the report, RBC Capital Markets’ Drew Reynolds stated that the results were as expected.

“We believe underlying consolidated results were largely in line with our expectations and attribute the bulk of the variances to M&A assumptions (addition of Shaw Media and divestiture of pay television) and timing of synergies.”