WINNIPEG – Canwest Global Communications recorded a net loss of $1.04 billion for the fiscal year ended August 31, 2008, which was primarily due to a non-cash $1.01 billion write-down of goodwill and broadcast licences related to its Canadian conventional television operations.
According to the company’s release, the write-down reflects a deterioration in the near term profit expectations for the company’s Canadian conventional television business resulting from expected softness in conventional television advertising revenues combined with structural and regulatory challenges specifically facing the Canadian conventional television industry. Net earnings were $279 million for the previous year.
Operating profit in fiscal 2008 increased by 13% to $558 million from $492 million for fiscal 2007. Consolidated revenues for the year of $3.15 billion increased 10% from $2.86 billion in fiscal 2007.
The write down is consistent with actions of other North American media companies who are responding to the economy going in the tank this year.
“This, combined with the pressure on Canadian conventional television of an unbalanced regulatory framework, increased programming costs, required investment in technology and increased competition from specialty television as well as non-traditional media led to the write-down. The write down is a non-cash charge to income that does not affect Canwest’s liquidity, cash flows from operating activities, debt covenants, or have any impact on future operations,” reads the company’s press release this morning.
The company “has been preparing throughout much of fiscal 2008 for tougher economic times,” says the release. "We have seen impairment charges such as these in other large media companies throughout North America," said Leonard Asper, president and CEO, in the release. "The sooner we recognize the new reality, the faster we can recalibrate our business and move it forward.
“We believe investors should focus on the more important fundamentals of our business,” he continued. “Our publishing operations and specialty channels continue to produce strong operating profit and cash flows and continue to out-perform the industry. Our digital media continues to produce strong growth overall and we continue to transform our business by exacting better, more efficient, performance from our core assets while investing in growth media in response to the evolving habits and expectations of consumers, advertisers and distributors.
“Earlier this week, we took steps to address the negative impact of current market conditions while continuing to provide the quality products and services that our customers expect,” he added, referencing the termination of 5% of the company’s workforce, as reported by Cartt.ca.
Canwest’s Canadian television operations, including CW Media (formerly Alliance Atlantis broadcast segment) reported fourth quarter revenues of $207 million, an increase of 63% over the previous year. Operating profit in the fourth quarter, however, was a loss of $200,000, compared to a $10 million loss the previous year.
For the twelve months ended August 31, 2008, reported revenues were $1.03 billion and operating profit was $165 million, up 51% and 170% respectively, from the end of fiscal 2007. The increases primarily reflect the acquisition of the CW Media specialty television operations.
Canadian TV operations, including revenue and adjusted operating profit of the specialty operations of Alliance Atlantis on a pro forma basis for the three months ended August 31, 2007, revenue and operating profit would have increased $4 million from $204 million and decreased $2 million from $2 million. For the twelve months ended August 31, 2008, revenue and operating profit increased 2% to $1,03 billion and 14% to $165 million, respectively, over the prior year on a pro forma basis.
The company’s Canadian television operations, excluding the CW Media specialty television operations (so primarily Global Television and E!) reported fourth quarter revenues of $127 million, flat compared to revenues for the same period in fiscal 2007. The operating loss of $19 million was further down from the $10 million loss posted in Q4 ’07.
For the twelve months ended August 31, 2008, revenues were $671 million and operating profit was $44 million, down 2% and 28%, respectively, from the same period last year. “The lower revenue and operating profit performance for the fourth quarter and twelve month periods primarily relate to the impact of the writers’ strike which disrupted program schedules and viewing patterns, the loss of the NFL, and in the fourth quarter the effects of the Olympics and continued economic softness. These declines were partly offset by strong growth in specialty television assets,” says the release,
The CW Media specialty television assets reported revenues of $81 million and operating profit of $19 million for the fourth quarter, an increase of 5% on revenue and 57% on operating profit compared to the same period last year, on a pro forma basis. For the twelve months ended August 31, 2008, revenues were $360 million and operating profit was $121 million up 11% and 44% respectively, compared to the same period last year on a pro forma basis. Advertising revenues were up significantly for the twelve month period, reflecting an industry leading growth rate of 16%.
In Australia, Canwest’s majority-owned Network Ten’s fourth quarter revenue of $177 million was down 14% from $205 million during the same quarter in the previous year. Ten’s operating profit of $12 million was down 77% from the $52 million from the same quarter in fiscal 2007. For the twelve months ended August 31, 2008, reported revenues were $753 million and operating profit was $185 million, up 2% and down 10%, respectively, from similar periods last year. Ten’s fourth quarter results were impacted by the sudden decline in the advertising market driven by softer economic conditions and the impact of the Beijing Olympic Games.
The release added that the company will continue to look to eliminate or sell off “non-core assets” and take further steps along the lines of this week’s layoffs, if necessary.
Also in the release, the company said “(g)iven the uncertainty as to the economic outlook the company has renegotiated certain provisions of its senior credit facility, including an increase to the total leverage ratio covenant. With increased financial flexibility and the operational/restructuring initiatives announced on November 12, 2008, the company believes it will have sufficient liquidity to execute its business plans.”
