Shaw, Corus post lower quarterly profits

A pair of Canadian communications companies said Wednesday they both suffered lower earnings in their most recent fiscal quarters, a sign of the growing financial pressure on the country's media companies.

Shaw Communications Inc., which owns various television and internet assets, earned $156 million, or 36 cents a share, for the period ended Feb. 28. That was down 48 per cent from a net profit of $299 million for the same three months one year earlier.

Corus Entertainment Inc., which owns television and radio assets, made $29 million, or 36 cents a share, for its fiscal second quarter, which also ended Feb. 28, versus a profit of $35.4 million for the same period last year. The company's net income slipped 18 per cent, or $6 million.

The two companies are symptomatic of a sector that has been hit by an advertising slowdown and debt questions in an increasingly fragmented consumer market, experts say.

Shaw's digital play

Shaw, which provides cable television service along with telecommunications businesses, explained a portion of the earnings drop occurred because the company received a $105 million tax refund in the second quarter last year.

Once that special item is subtracted, Shaw's income rose 21 per cent.

The Calgary-based company saw its revenue rise 10 per cent in the quarter, reaching $839 million.

Shaw is in the midst of a switchover from a basic cable television company to a provider of more exotic digital communication services, such as high-speed internet.

Currently, 39 per cent of Shaw's 5.8 million total subscribers are basic cable customers. But, this group only constituted 2.2 per cent of second-quarter growth in overall users.

By contrast, Shaw's digital subscribers constituted 57 per cent of the company's user growth in the period, or a firm record 106,000 new customers. The more lucrative digital clients, however, only make up 19 per cent of Shaw's subscriber base.

Shaw said it is sticking to its forecast of free cash flow of $500 million for 2009, not bad considering the debt woes faced by other media players, such as CanWest Global Communications Corp.

Still, Shaw has $2.9 billion of outstanding long-term debt on its balance sheet and a ratio of borrowing due for repayment in 12 months or longer of 1.4 times the amount of Shaw's shareholders' equity. That ratio would be considered to be at a high level by accounting standards.

Corus's ads stumble

Corus, which inhabits a different part of Canada's media landscape from Shaw, saw its revenue barely rise at all, up one per cent to $181.4 million for the second quarter of the current fiscal year.

The company's radio sales, generally a barometer of Canada's advertising market, fell by five per cent in the first six months of the fiscal year, hitting $133.5 million.

Worse still, Corus warned not to expect any pickup in the second half of the year.

"Radio revenue will remain challenged but the current outlook for the back half of the year remains consistent with the first half," Corus said in its presentation to shareholders.

The Toronto-based firm pointed to merchandising growth as a way to cope with lower advertising sales, at least as far as its kids' divisions are concerned.

Canada's media companies, whether broadcast or newspapers, have been slammed by a falloff in advertising revenue, both because of the economic slowdown and the rise in internet use.

As well, some firms, such as CanWest, have had all kinds of problems refinancing their outstanding debt. The owner of the Global television just received a two-week extension from its bankers but still faces a huge debt load and reluctant lenders.