TORONTO – CHUM Limited reported a solid second quarter on Thursday but company executives also warned of a softer second half of fiscal 2006 and addressed some of the regulatory issues faced by Canadian broadcasters.
Consolidated revenue in the second quarter, ended February 28, increased by 7.8% to $152.4 million compared to Q2 2005. Consolidated EBITDA increased by 30% to $19.2 million. For the six months ended February 28, 2006, revenue was up 12.3% to $339.2 million and EBITDA increased 17.5% to $67.9 compared to the first half of fiscal 2005.
CHUM’s net earnings in the second quarter increased by $3.4 million to $5.9 million from $2.5 million in the second quarter last year. For the first six months of this year, net earnings increased 26% to $30.2 million. Net earnings for the second quarter and first six months, excluding the severance charges, would have been $6.1 million and $30.9 million, respectively.
CHUM owns various media assets such as the Citytv and A Channel broadcast stations, specialty services such as MuchMusic, Bravo! and Court TV Canada, as well as 29 radio stations.
Company CEO Jay Switzer warned financial analysts during a conference call on Thursday that third quarter results will likely be softer, due to issues on its conventional TV side. For example, the company did not perform in the ratings as it had hoped with its fall and winter slate of programming. Switzer characterized two shows, Everybody Hates Chris and Supernatural as solid but not hits and added the movies Citytv relies on are gradually diminishing in the ratings.
"We’re looking at dealing with the challenges in conventional overall," he said. Citytv and A Channel did not hit its ratings estimates and that will affect third quarter results, said Switzer adding, "it gives me no pleasure to talk about this."
The analysts have all heard and read about CanWest Global CEO Leonard Asper’s wish that broadcasters be paid a fee for carriage and they asked Switzer about it, in the context of the upcoming CRTC TV policy review, which has yet to be announced but what is an open secret now.
""How do we deal with getting paid appropriately for investments we’re making in high definition. Who shares that risk and return?" he asked.
"I believe there are many conventional stations, CanWest, ours, others, that are losing money and unless we figure out a better way to structure local television it could be very challenged five years from now," added Switzer, who also pointed to the trouble with time shifting, where stations from around the country are available on cable and satellite.
"It’s costing all the major Canadian broadcasters tens of millions of dollars," he said. "It’s hard to ask a consumer to go back and not have those out of market signals so finding a way to deal with compensation or finding a way to work with the advertising community to have us figure out more ways of getting value to viewers, regardless of what market they come from, is a challenge we’re facing.
"Together with our friends in cable and satellite, we created this great benefit and now we have to figure out a way to get better revenues from this problem that we created," he said.
