Canwest books $1B charge, but operating profit up 13% by Grant Surridge
Source : National Post
November 14, 2008
Canwest Global Communications Corp. reported a spike in operating income yesterday, while at the same time opting to book a non-cash writedown of $1-billion related to the value of its television operations.
Canwest, which owns the National Post and Global TV, saw its operating profit rise 13% to $558-million. But because of the writedown, it reported a net loss of $1.04-billion for fiscal 2008 ending Aug. 31, compared to a profit of $279-million last year.
"We're facing the twin problem of having a higher debt-to-[operating profit] ratio than other companies and shareholder reluctance to invest in the media sector in general," chief executive Leonard Asper said in an interview yesterday.
The move to write down the value of television operations has been made by several other major media companies in North America and in Europe, including CBS, NBC and private British broadcaster ITV.
Last month, CBS wrote down US$14-billion to reflect a writedown of goodwill and other assets, warning profits would likely decline next year as advertisers show reluctance to spend in tough economic times.
In Canwest's publishing division, revenue in the quarter were $300-million, $5-million below the revenue for the same period in fiscal 2007. Publishing operating profits of $54-million for the fourth quarter were down 5% from $57-million for the same period in fiscal 2007. For the full year, revenue came in at $1.3-billion and operating profit was $294-million, up 1% and 9% respectively, from the same periods last year.
Operating profit growth for the fiscal year reflects the focus on cost containment in publishing operations.
In the Canadian TV operations, including the former Alliance Atlantis specialty TV properties, fourth-quarter revenue came in at $207-million, while operating profit came in at a loss of $200,000 versus $10-million in the previous year. For the full year, reported revenue was $1.03-billion and operating profit was $165-million, up 51% and 170% respectively. The strong year-over-year increases primarily reflect acquisition of the specialty TV operations.
Canada's largest media firm relieved some pressure on its debt obligations by renegotiating a covenant with its bankers that allows the ratio of its total debt to EBITDA to increase from five to 6.75 times next year.
"I think that's a reflection of the confidence the banks have in our future," Mr. Asper said.
In a note to clients yesterday, RBC Capital Markets analyst Drew McReynolds described the earnings results as neutral, and said the reframed covenants will hand the company a measure of financial flexibility in the coming fiscal year.
Canwest's stock fell 7¢ to close 73¢ on the Toronto Stock Exchange.
For the quarter ending Aug. 31, operating profit came in at $61-million versus $79-million for the same quarter last year. Revenue climbed to $726-million from $678-million.
On Wednesday, Canwest announced restructuring plans in response to the downturn and softer advertising and structural challenges within Canadian conventional television.
The plan includes the elimination of about 560 positions, about 5% of the workforce, some through attrition and voluntary buyouts. The company expects those moves to cut annual operating costs by about $60-million.
On a conference call to analysts, Canwest management reiterated that the advertising outlook for both conventional TV and the newspaper industry would likely slow next year alongside the overall economy.
With files from Zena Olijnyk
© National Post
Canwest, which owns the National Post and Global TV, saw its operating profit rise 13% to $558-million. But because of the writedown, it reported a net loss of $1.04-billion for fiscal 2008 ending Aug. 31, compared to a profit of $279-million last year.
"We're facing the twin problem of having a higher debt-to-[operating profit] ratio than other companies and shareholder reluctance to invest in the media sector in general," chief executive Leonard Asper said in an interview yesterday.
The move to write down the value of television operations has been made by several other major media companies in North America and in Europe, including CBS, NBC and private British broadcaster ITV.
Last month, CBS wrote down US$14-billion to reflect a writedown of goodwill and other assets, warning profits would likely decline next year as advertisers show reluctance to spend in tough economic times.
In Canwest's publishing division, revenue in the quarter were $300-million, $5-million below the revenue for the same period in fiscal 2007. Publishing operating profits of $54-million for the fourth quarter were down 5% from $57-million for the same period in fiscal 2007. For the full year, revenue came in at $1.3-billion and operating profit was $294-million, up 1% and 9% respectively, from the same periods last year.
Operating profit growth for the fiscal year reflects the focus on cost containment in publishing operations.
In the Canadian TV operations, including the former Alliance Atlantis specialty TV properties, fourth-quarter revenue came in at $207-million, while operating profit came in at a loss of $200,000 versus $10-million in the previous year. For the full year, reported revenue was $1.03-billion and operating profit was $165-million, up 51% and 170% respectively. The strong year-over-year increases primarily reflect acquisition of the specialty TV operations.
Canada's largest media firm relieved some pressure on its debt obligations by renegotiating a covenant with its bankers that allows the ratio of its total debt to EBITDA to increase from five to 6.75 times next year.
"I think that's a reflection of the confidence the banks have in our future," Mr. Asper said.
In a note to clients yesterday, RBC Capital Markets analyst Drew McReynolds described the earnings results as neutral, and said the reframed covenants will hand the company a measure of financial flexibility in the coming fiscal year.
Canwest's stock fell 7¢ to close 73¢ on the Toronto Stock Exchange.
For the quarter ending Aug. 31, operating profit came in at $61-million versus $79-million for the same quarter last year. Revenue climbed to $726-million from $678-million.
On Wednesday, Canwest announced restructuring plans in response to the downturn and softer advertising and structural challenges within Canadian conventional television.
The plan includes the elimination of about 560 positions, about 5% of the workforce, some through attrition and voluntary buyouts. The company expects those moves to cut annual operating costs by about $60-million.
On a conference call to analysts, Canwest management reiterated that the advertising outlook for both conventional TV and the newspaper industry would likely slow next year alongside the overall economy.
With files from Zena Olijnyk
© National Post
