Corus Entertainment's CEO Discusses Q2 2012 Results - Earnings Call Transcript

Corus Entertainment (CJREF.PK)

Q2 2012 Earnings Call

April 12, 2012 1:00 pm ET

Executives

John M. Cassaday - Chief Executive Officer, President, Director, Member of Executive Committee, Member of Audit Committee, Member of Corporate Governance Committee and Member of Human Resources Committee

Douglas D. Murphy - Executive Vice President and President of Corus Television

Chris Pandoff - Executive Vice President and President of Corus Radio

Thomas C. Peddie - Chief Financial Officer and Executive Vice President

Analysts

Adam Shine - National Bank Financial, Inc., Research Division

Drew McReynolds - RBC Capital Markets, LLC, Research Division

Paul Steep - Scotiabank Global Banking and Market, Research Division

Scott Cuthbertson - TD Securities Equity Research

Aravinda Galappatthige - Canaccord Genuity, Research Division

David McFadgen - Cormark Securities Inc., Research Division

Colin Moore - Crédit Suisse AG, Research Division

Presentation

Operator

Ladies and gentlemen, thank you for standing by. Welcome to the Corus Entertainment Second Quarter Analyst and Investor Call. [Operator Instructions] As a reminder, this conference is being recorded, Thursday, April 12, 2012. I would now like to turn the conference over to John Cassaday, President and Chief Executive Officer. Please go ahead, sir.

John M. Cassaday

Thank you, operator. Good afternoon, everyone, John Cassaday here, and welcome to Corus Entertainment's Fiscal 2012 Second Quarter Report and Analyst Call. And just anecdotally, we believe this is our 50th analyst call, so kind of a momentous occasion. Thank you for joining us today.

Before we read the cautionary statement, we'd like to remind everyone that there are a series of PowerPoint slides that accompany this call. The slides can be found on our website at corusent.com in the Investor Relations section.

We will now run through the standard cautionary statement. This discussion contains forward-looking statements which may involve risks and uncertainties. Additional information concerning factors that could cause actual results to materially differ from those in the forward-looking statements is contained in the company's filings with the Canadian Securities Administrators. Now we would like to introduce to you the Corus Entertainment team joining me on the call today. Tom Peddie, Executive Vice President and Chief Financial Officer; Doug Murphy, Executive Vice President and President of our Television division; and Chris Pandoff, Executive Vice President and President of our Radio division.

Turning to Slide 3 of the PowerPoint presentation. We are very pleased with our Q2 results. We finished the quarter with consolidated revenues of $206 million, up 8% from year ago and consolidated segment profit of $62 million, up 4% from prior year. Please note that the prior year numbers have been adjusted to reflect the sale of Quebec Radio, which we sold in February of 2011.

Turning to Slide 4. Despite a challenging economic environment, we continued to show solid growth overall in Q2. Revenue increases in the quarter were driven by the Television division, which was up 10% from prior year led by our Women's portfolio and the merchandising arm of our Kids business. Our Western Radio markets also saw a return to growth in the quarter.

In Q2, our consolidated net income from continuing operations increased significantly, up 16%.

Moving to Slide 5. Although Radio revenue was down 1% due to a challenging ad sales environment, segment profit was up 2%, demonstrating our disciplined focus on cost controls and margin improvement. In a number of key markets, our stations performed very well. While there was softness in Ontario's ad market, this was offset by growth in BC, Alberta and Manitoba.

With 2 consecutive quarters of growth, the Vancouver market is clearly showing signs of continued recovery, and our cluster is outperforming the market according to TRAM data. We are pleased with Television's performance in Q2 as well. For the second consecutive quarter, the division achieved double-digit revenue growth, up 10% compared to last year. Increased programming investments did impact segment profit, which was up 1%.

Subscriber revenues were also up slightly for the quarter driven by gains on Movie Central and Cosmopolitan Television, which were offset by declines on a few of our more mature services. Movie Central ended the quarter with 988,000 paid subscribers. Television saw gains in specialty advertising revenues, up 4%, with strong growth from our Women's and Co-view audiences.

Ad spending in the Women's portfolio was particularly strong as a result of impressive ratings and increased demand for the female demographic amongst our advertisers. Performance on the W Network was robust with a 9% increase in prime time audience tuning in response to aggressive promotional support around our holiday schedule, the launch of attention-grabbing programming such as Undercover Boss Canada and W Network's ongoing strength in movies.

We continue to make our Canadian programming investments work harder for us. This is exemplified by the success of the original series Undercover Boss Canada, which is attracting impressive ratings similar to those seen on conventional Television, reaching highs of 600,000 viewers to plus audience. In addition, renewed series such as Property Brothers, Love It or List It and Come Dine with Me Canada continue to perform well for W Network.

Our Kids portfolio did see some seasonal advertising softness in the quarter, but it was offset by impressive gains in our international merchandising distribution and other business, which achieved strong top line growth generating revenue increases of 46% for the quarter. These gains were fueled primarily by the continued outstanding performance of our breakout brand, Beyblade.

Over the holiday season, Hasbro toy sales for Beyblade were strong in many key territories. The brand strength was also bolstered by extensive retail programs deployed in major territories including Canada, France and the United States.

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