WRAPUP 1-Canadian media companies stung by weak advertising

Thu Jul 12, 2012 11:09am EDT

* Astral revenue slips ahead of acquisition by BCE

* Corus says ad revs weak in children's programming

By Alastair Sharp

TORONTO, July 12 (Reuters) - Sluggish advertising demand continued to hit revenues at Canadian television and radio companies in the latest quarter as economic uncertainty spurred big brands to hold off on spending, forcing broadcasters to cut costs sharply to get profit growth.

Corus Entertainment Inc, which focuses on content for children and women, had an 11 percent fall in specialty advertising revenue in its third quarter. Its shares fell sharply on Thursday after it released its results.

"Our specialty advertising revenues in the quarter were impacted by soft demand in the kids segment," Chief Executive John Cassaday said in a statement.

He attributed the company's 7 percent rise in profit to "rigorous cost controls".

Competitor Astral Media Inc, which is in the process of being acquired by Canadian telecom giant BCE Inc , also reported a drop in revenue, while posting a 3 percent rise in third-quarter profit. Its television advertising revenue fell 7 percent.

Astral shares were flat.

The specialty-TV channels of Astral and Corus, which have typically devoted much of their schedules to popular U.S. programming, have had this comfortable niche usurped by Netflix and other Internet offerings, which buy a more limited array of content and deliver it for a low monthly price.

Astral Chief Executive Ian Greenberg took comfort in the company's ability to notch profit growth "in spite of the challenging advertising market in which we operate".

Montreal-based Astral is being bought by BCE in a C$3 billion ($2.9 billion) deal, as Canada's largest telecom company moves to own more of the programming carried over its media platforms and expands its presence in French-speaking Quebec. The deal is awaiting regulatory clearance.

Astral's net income rose to C$51.2 million, or 91 Canadian cents a share, missing the average analyst expectation of C$1.02. Its profit was C$49.5 million, or 87 Canadian cents a share, a year earlier.

Consolidated revenue fell 1 percent to C$265.5 million, also below expectations.

"Consistent with Corus's results this morning, better television margins cushioned the revenue weakness" at Astral, RBC Capital Markets analyst Drew McReynolds said in a note.

Corus posted net income attributable to shareholders of C$43.2 million, or 51 Canadian cents a share, up from C$40.4 million, or 49 Canadian cents a share, a year earlier.

Revenue slipped 4 percent to C$204.1 million. In the television segment, subscriber revenue fell 2 percent.

The profit figures were broadly in line with what analysts had expected, but revenues disappointed.

Corus, controlled by Alberta's Shaw family, which also runs cable company Shaw Communications, will be Canada's last major independent media company if the Astral-BCE deal is approved, having so far avoided the consolidation sweeping through Canada's media and telecom industries.

The company's children's cable programming includes the Treehouse and Nickelodeon Canada channels.

Shares of Corus, which has a market value of C$1.85 billion, fell 6 percent to C$21.88 on Thursday morning on the Toronto Stock Exchange. Astral was flat at C$49.10.

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