TORONTO – A fourth-quarter loss couldn’t detract from a solid 2004 for CHUM Ltd., but CEO Jay Switzer was cautious Friday when talking about 2006.
As for fiscal 2005, which ended August 31st, revenue was up 12% to $628 million, EBITDA climbed 26% to $116 million and cash flow from operations rose 41% to $87.4 million.
Q4 was a high-cost quarter for the broadcaster, too, especially on the TV side as it integrated the former Craig Media stations in Alberta and Manitoba and re-branded those, as well as the former Newnets, and purchased programming that, until now, had been a bit out of its snack bracket.
Overall, operations expenses were up 9.4% on the year, compared to 2004, to $512 million, but in the fourth quarter, expenses were 25.8% higher than Q4 ’04, jumping to $140.3 million.
CHUM’s radio segment had a good 2005, but revenue growth was lower in the fourth quarter than in the first three quarters of this year “owing to an anomalous dip in the ratings position for CHUM-FM in the Spring ratings book.”
However, CHUM-FM regained its number one position in the Toronto market in the Summer ratings book. For the fiscal year, the radio segment recorded growth in EBITDA of 28% as a result of strong revenue growth and expense management (expenses dipped 3% to $82.2 million on the year). The Company’s FM stations recorded an increase in EBITDA and losses were reduced on the Company’s AM stations. EBITDA margin in fiscal 2005 increased to 37% from 31% in 2004. Management believes that this EBITDA margin is among the highest in the industry in Canada.
As well, “the company’s net earnings for the fourth quarter and fiscal year were negatively impacted by asset writedowns and the decision by the Copyright Board of Canada to increase the amount of royalties payable by radio stations to the Society of Composers, Authors and Music Publishers of Canada and the Neighbouring Rights Collective of Canada,” added the release.
For the fiscal year ended August 31, 2005, television revenue increased 5.3% with the company’s specialty television stations providing the growth. During this period, advertising revenue from CHUM’s specialty television stations increased 13.6% and subscriber revenue increased 15.3% over last year. The increase in television revenue, combined with excellent cost control, resulted in an increase in EBITDA of 27.1% in fiscal 2005.
The stated results don’t include the Craig acquisitions, which enable an apples-apples comparison, since CHUM did not own the Craig stations and specialties at the end of ’04.
As for 2006, Switzer did not sound bullish during the company’s conference call with financial analysts on Friday. Switzer said that so far, first quarter 2006 results were “generally meeting expectations”, but to expect “low-to-mid single-digit (percentage) growth (in 2006)… slower growth than we have seen in the past,” he explained.
“It’s still a challenging time in the conventional (broadcasting) space.”
“Management believes that the Company’s radio stations are facing a challenging environment in fiscal 2006. Management expects the rate of growth in radio industry advertising to slow in fiscal 2006 compared with fiscal 2005. In addition, the Company’s radio stations in Edmonton, Ottawa and Halifax will face increased competition in fiscal 2006 from new stations expected to be launched during the year. One of these competitors has already launched in Halifax,” says the press release.
“Management estimates that industry demand for television spot advertising will be up marginally in fiscal 2006. However, management believes that the company’s conventional television stations will continue to operate in a challenging competitive environment in fiscal 2006. The company’s main competitors in conventional television, who operate either a larger station group or network, have the ability to reach a greater audience and generate higher advertising revenue through their purchase of stronger programming that garners higher ratings compared with the company’s conventional television stations.
“In addition, the return of NHL Hockey and the Winter Olympics is expected to shift advertising dollars away from the company’s conventional television stations to those stations broadcasting coverage of these events. While management believes that the program schedule for Fall 2005 on its conventional television stations has improved over Fall 2004, overall, management expects advertising revenue growth on its conventional television stations to be modest.
Management expects continued momentum in industry growth of specialty television advertising revenue. However, management expects that MuchMusic and Bravo! may experience slower growth in advertising revenue in fiscal 2006 as a result of possible lower ratings during a transition period in the program schedule of these channels.
