Calm before the COVID storm in Corus Q2

Corus Entertainment Inc. has deferred the declaration of its dividends in response to the uncertainty surrounding the COVID-19 epidemic and its effect on the broadcasting industry, but the company has a “pretty good muscle memory on expense control,” according to Doug Murphy, the company’s CEO. The company said it is deferring the declaration “out of an abundance of caution,” as well as halting a share buy back. The company has until June 9 to declare the dividend, and stressed that it is not “reducing, eliminating or temporarily suspending the dividend at this time,” according to the company’s second quarter report. Corus also said that ad revenue is dropping since the COVID-19 outbreak began having a widespread effect in Canada, but that total viewership is up some 10 per cent across the industry. “We are well positioned to weather this and we are acting decisively in managing our operations and financial position with the utmost of prudence,” said CEO Doug Murphy on Wednesday’s second quarter earnings call, adding that the new reality of social distancing has led to Canadians “rediscovering” the company’s offerings, given the absence of live sports since the pandemic forced their cancellation. “At Corus, we have seen material audience growth across our portfolio. Including some significant shifting of audience as a result of the cancellation of sporting events,” Murphy told analysts, saying news viewership was at record levels. Advertising however, will be hard hit, Murphy said on the call. “Consumer facing businesses -- which have been the ones hardest hit to date -- such as restaurants, airlines, travel businesses, hospitality, have for the moment cancelled their advertising campaigns.” In response to the rapidly changing environment, Murphy said the company has put in place a hiring and travel freeze, and eliminated all discretionary spending. Because of the production slowdown the company will start to see some programming shortages, though perhaps not until the fourth quarter, Murphy said, explaining that programming for the third quarter is “mostly” completed with schedules set. The CEO also called for increased regulatory relief from the CRTC in response to the crisis. “From a regulatory, modernization of the Broadcast Act perspective we have, as you know, been advocating that we need more rapid change than waiting to the next base license period,” Murphy said, calling for a reconfiguration of programming obligations. “We are strongly of the view that the sole obligation on us should be to provide news: local, national, television, radio, digital to Canadians on a timely and important basis. This is a pandemic that is rife with fake news and it’s our job to provide real news. Our traditional obligations of Canadian programming expenditures need to be commensurately reduced.” “In a practical manner, there’s no way we can spend the money we have to spend this year because of the shut down in production.” This past fall, Corus asked the CRTC if it could defer some of its Canadian content requirements, citing volatility in the media market, a request which inspired BCE Inc., Rogers Communications Inc., and Quebecor Inc. to ask for the same flexibility. It has been a rocky few years for the company. In its filing with the CRTC from the fall, Corus cited the rise of new direct-to-consumer, Internet-based platforms; rising programming costs; debt obligations; and a Competition Bureau ruling that prevented the company from selling two French-language channels that Corus says would have netted it $200 million. In trying to offload the channels, Corus also let $2.3 million in Canadian Media Fund money go unspent, cash which reverted back to the CMF. In its second quarter filing announced Wednesday, the company reported $376 million in overall revenue, down two per cent from $384.1 million reported the prior year. The revenue numbers are from the three months that ended on Feb. 29 and largely do not reflect the impact of the COVID-19 pandemic. The revenues represent a profit of $115.5 million, up from $113.7 million in the same period last year. In television, the company reported revenues of $347.8 million, down two percent from the $353.5 million they reported last year, which Corus said was a result of a six per cent decline in advertising revenue and a two per cent decline in subscriber revenue. “The decrease in advertising revenues was driven by lower audiences for specialty services,” the company said in its quarterly report, “the reinstatement of simultaneous substitution for the NFL Super Bowl on a competitor network and the disposal of TLN in March 2019.” Radio revenues decreased eight per cent in the quarter, down to $28.2 million from $30.6 million in the same period last year. “The decline in advertising revenues in the quarter and the year-to-date was driven primarily by lower market tuning levels, a soft retail advertising environment and the continuing economic and ratings challenges in Alberta,” the company’s annual report said. — With reporting by Michael Lee-Murphy at mleemurphy@thewirereport.ca and editing by Anja Karadeglija at akarad@thewirereport.ca

Calm before the COVID storm in Corus Q2

News | April 1, 2020

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Calm before the COVID storm in Corus Q2

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