WINNIPEG – "A number of factors contributed to the disappointing operating results in the quarter," said CanWest Global Communications CEO Leonard Asper in reviewing the company’s third quarter performance, ended May 31, 2005.
"Conventional television in Canada remains a challenge. In Australia and New Zealand, a cyclical correction in advertising markets affected financial results, as did currency translation when local currency results were translated into Canadian dollars. The stronger Canadian dollar reduced EBITDA by approximately 5% or $6 million compared to the same period last year. A slowdown in national advertising, which we believe to be short-term, and weakness in print classifieds affected our publishing results during the quarter. Cost reduction initiatives and an expected return to normal revenue growth should support stronger publishing margins going forward," he added.
The company reported consolidated net earnings of $13 million, well off Q3 2005’s net earnings of $53 million, says Thursday’s press release.
The company’s consolidated revenues for the quarter declined by 9% to $731 million, compared to the same period last year. Consolidated EBITDA for the third quarter was $116 million, down from $194 million for the third quarter of fiscal ’05.
Third quarter revenues of $323 million at the company’s publishing and interactive operations were essentially unchanged from the same quarter of 2005. "The earlier positive momentum in national advertising stalled in the quarter as a result of a significant slowdown in spending by the telecommunications and financial services sectors," says the press release. "Publishing and interactive (the company’s newspapers and web portals like canada.com) EBITDA was $66 million for the quarter compared to $75 million for the same quarter one year ago. Financial results at the National Post remained stable for the quarter with revenues and operating costs essentially unchanged compared to the same quarter last year.
Revenues from Canadian broadcasting operations declined by 6% for the quarter to $188 million compared to the third quarter of F2005, a reflection of weaker television ratings in the prior year and the impact of the return of NHL hockey carried on CBC, says the press release. Canadian Broadcasting EBITDA significantly declined to $24 million for the quarter compared to $57 million last year, mainly due to ratings-driven investments in new programming.
Global’s launch of its fall schedule was well-received and should contribute to stronger revenues going forward. Global’s prime time schedule will include returning hit shows such as House, Prison Break, Simpsons, Family Guy and ET Canada plus a number of promising new U.S, programs. Global’s digital specialty television services continued to generate new subscribers, topping 5 million for the first time in May.
However, "we do not expect any material change to Global’s financial outlook in the fourth quarter, however, a number of initiatives at Global should contribute to improved financial performance in 2007," added the press release.
In Australia, following several years of significant growth, the cyclical correction in the Australian television advertising market continued in the third quarter. Third quarter revenues declined 24% at TEN to $149 million, from $194 million last year, while EBITDA was $21 million for the quarter compared to $53 million last year. Currency translation was a significant factor in the decline with the Canadian dollar up 12% against the Australian currency compared to one year ago. TEN continues to gain audience share and to maintain a solid lead in its target demographic of 16-39 year olds, with less than two ratings points separating all three Australian commercial TV networks in the larger 16-54 demographic.
Financial results in New Zealand were also affected by weaker advertising markets and a 20% exchange rate decline compared to last year, resulting in stable revenues and increased EBITDA in local currency terms being more than offset by the negative impact of currency translation.
