Entertainment

Corus Entertainment Announces Fiscal 2021 First Quarter Results

Written by corres2

  • Consolidated revenues declined 10% for the quarter
  • Consolidated segment profit(1) decreased 3% for the quarter
  • Consolidated segment profit margin(1) of 42% for the quarter
  • Net income attributable to shareholders of $76.7 million ($0.37 per share basic) for the quarter
  • Net debt to segment profit(1) of 3.14 times at November 30, 2020, down from 3.18 times at August 31, 2020
  • Free cash flow(1) of $62.4 million for the quarter

TORONTO, Jan. 12, 2021 /PRNewswire/ – Corus Entertainment Inc. (TSX: CJR.B) announced its first quarter financial results today.

“Our first quarter results reflect another consecutive quarter of sequential improvement in Television advertising revenue, the impressive momentum of STACKTV and ongoing growth in our international content licensing business,” said Doug Murphy, President and Chief Executive Officer. “Once again, our strong free cash flow performance has improved our financial flexibility as we remain firmly focused on delivering consolidated revenue growth year over year. This promising start to the year coupled with the significant progress we are making to advance our strategic plan will position us extremely well as we emerge from the current climate as a new, stronger Corus.”

Financial Highlights                                                                                                                                                       


Three months ended


November 30,

(in thousands of Canadian dollars except per share amounts)

2020

2019

Revenues



Television

392,102

429,951

Radio

28,253

37,927


420,355

467,878

Segment profit (loss) (1)



Television

179,565

178,618

Radio

7,141

12,028

Corporate

(8,099)

(6,531)


178,607

184,115

Net income attributable to shareholders

76,664

78,116

Adjusted net income attributable to shareholders (1)

79,851

79,980

Basic earnings per share

$0.37

$0.37

Adjusted basic earnings per share (1)

$0.38

$0.38

Diluted earnings per share

$0.37

$0.37

Free cash flow (1)

62,374

53,048

(1) Segment profit (loss), segment profit margin, adjusted net income attributable to shareholders, adjusted basic earnings per share, free cash flow and net debt to segment profit do not have standardized meanings prescribed by International Financial Reporting Standards (“IFRS”). The Company believes these non-IFRS measures are frequently used as key measures to evaluate performance. For definitions, explanations and reconciliations see discussion under the Key Performance Indicators section of the First Quarter 2021 Report to Shareholders and/or Management’s Discussion and Analysis in the Company’s Annual Report for the year ended August 31, 2020.

Consolidated Results from Operations

Consolidated revenues for the three months ended November 30, 2020 were $420.4 million, down 10% from $467.9 million last year, and consolidated segment profit was $178.6 million, a decrease of 3% from $184.1 million last year. Net income attributable to shareholders for the quarter ended November 30, 2020 was $76.7 million ($0.37 per share basic), as compared to net income attributable to shareholders of $78.1 million ($0.37 per share basic) last year. Net income attributable to shareholders for the first quarter of fiscal 2021 includes integration, restructuring and other costs of $4.3 million ($0.01 per share, net of income taxes). Adjusting for the impact of this item results in an adjusted net income attributable to shareholders of $79.9 million ($0.38 per share basic) for the quarter. Net income attributable to shareholders for the prior year quarter includes integration, restructuring and other costs of $2.5 million ($0.01 per share, net of income taxes). Adjusting for the impact of this item results in an adjusted net income attributable to shareholders of $80.0 million ($0.38 per share basic) for the prior year quarter.

Operational Results – Highlights for Q1 2021 Television

  • Segment revenues decreased 9%
  • Advertising revenues decreased 14%, which is sequentially improved from advertising declines of 31% and 25% for the three months ended May 31, 2020 and August 31, 2020, respectively
  • Subscriber revenues were flat
  • Merchandising, distribution and other revenues increased 11% ($2.1 million)
  • Segment profit(1) increased 1%, which included $2.5 million of estimated Canada Emergency Wage Subsidy (“CEWS”) benefit
  • Segment profit margin(1) of 46% compared to 42% in the prior year

Radio

  • Segment revenues decreased $9.7 million (26%), which is sequentially improved from declines of 53% and 43% for the three months ended May 31, 2020 and August 31, 2020, respectively
  • Segment profit(1) decreased $4.9 million (41%), which included $0.4 million of estimated CEWS benefit
  • Segment profit margin(1) of 25% compared to 32% in the prior year

Corporate

  • Segment results included $0.8 million of estimated CEWS benefit
  • Free cash flow(1) of $62.4 million compared to $53.0 million in the prior year. The current quarter benefited from CEWS receipts of $24.9 million, offset by the payment of deferred corporate income tax installments from fiscal 2020 of $17.2 million.
  • Net debt to segment profit(1) was 3.14 times at November 30, 2020, down from 3.18 times at August 31, 2020, principally due to bank loan repayments of $33.5 million in the quarter
  • Consolidated segment profit margin(1) of 42% compared to 39% in the prior year

(1) Segment profit, segment profit margin, free cash flow and net debt to segment profit do not have standardized meanings prescribed by IFRS. The Company reports on these because they are key measures used to evaluate performance. For definitions and explanations, see the discussion under the Key Performance Indicators section of the First Quarter 2021 Report to Shareholders and/or Management’s Discussion and Analysis in the Company’s Annual Report for the year ended August 31, 2020.

COVID-19 Update

The resurgence of COVID-19 has meant that many communities have levels of COVID-19 higher than levels in April and May of 2020, when COVID-19 was formally characterized as a pandemic and restrictions were first imposed. Additional emergency measures have been introduced in various provinces and territories in order to counter the resurgence of COVID-19 cases. Disruptions caused by the imposition of these emergency measures, particularly in the retail sector, continue to negatively impact advertising revenues. These emergency measures are expected to continue into the second quarter of fiscal 2021 which could continue to adversely impact advertising and other revenues. Although COVID-19 vaccines have been approved by the public health authorities, the timing of phased-in roll-outs of the vaccines and subsequent relaxation of emergency measures remains uncertain at this time. There can be no certainty that the approval and subsequent availability of vaccines will reduce the impact of the COVID-19 pandemic on the Company’s business in the short to medium term.

The extent to which COVID-19 and any other pandemic or public health crisis impacts the Company’s business, affairs, operations, financial condition, liquidity, availability of credit and results of operations will depend on future developments that are highly uncertain and cannot be predicted with any meaningful precision, including new information which may emerge concerning the severity of the COVID-19 virus and the actions required to continue to contain the COVID-19 virus or remedy its impact, among others.

The Company’s financial priorities remain unchanged. Importantly, the Company remains committed to increasing its financial flexibility over the longer term. In this environment the Company believes it is prudent to conserve cash out of an abundance of caution. The Company is constantly evaluating the situation and monitoring any impacts or potential impacts to its business.

Corus Entertainment Inc. reports its financial results in Canadian dollars.

The unaudited interim condensed consolidated financial statements and accompanying notes for the three months ended November 30, 2020 and Management’s Discussion and Analysis are available on the Company’s website at www.corusent.com in the Investor Relations section.

A conference call with Corus senior management is scheduled for January 12, 2021 at 8:00 a.m. ET. While this call is directed at analysts and investors, members of the media are welcome to listen in. The dial-in number for the conference call for local and international callers is 1.647.427.7450 and for North America is 1.888.231.8191. More information can be found on the Corus Entertainment website at www.corusent.com in the Investor Relations section.

Use of Non-IFRS Financial Measures

This press release includes the non-IFRS financial measures of segment profit, segment profit margin, adjusted net income attributable to shareholders, adjusted basic earnings per share, free cash flow and net debt to segment profit that are not in accordance with, nor an alternate to, generally accepted accounting principles (“IFRS”) and may be different from non-IFRS measures used by other companies. In addition, these non-IFRS measures are not based on any comprehensive set of accounting rules or principles.

Non-IFRS financial measures should not be considered as a substitute for, or superior to, measures of financial performance prepared in accordance with IFRS. They are limited in value because they exclude charges that have a material effect on the Company’s reported results and, therefore, should not be relied upon as the sole financial measures to evaluate the Company’s financial results. The non-IFRS financial measures are meant to supplement, and to be viewed in conjunction with, IFRS financial results. A reconciliation of the Company’s non-IFRS measures is included in the Company’s most recent Report to Shareholders which is available on Corus’ website at www.corusent.com as well as on SEDAR at www.sedar.com.

Caution Concerning Forward-Looking Information

This press release contains forward-looking information and should be read subject to the following cautionary language:

To the extent any statements made in this press release contain information that is not historical, these statements are forward-looking statements and may be forward-looking information within the meaning of applicable securities laws (collectively, “forward-looking information”). These forward-looking statements relate to, among other things, our objectives, goals, strategies, intentions, plans, estimates and outlook, including the adoption and anticipated impact of our new strategic plan, advertising and our expectations of advertising trends for fiscal 2021, distribution, merchandise and subscription revenues, operating costs and tariffs, taxes and fees, and can generally be identified by the use of words such as “believe”, “anticipate”, “expect”, “intend”, “plan”, including the adoption and anticipated impact of our new strategic plan, “will”, “may” and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances may be considered forward-looking information. Although Corus believes that the expectations reflected in such forward-looking information are reasonable, such information involves assumptions, risks and uncertainties and undue reliance should not be placed on such statements. Certain material factors or assumptions are applied with respect to the forward-looking information, including without limitation, factors and assumptions regarding the general market conditions and general outlook for the industry, interest rates, stability of the advertising, distribution, merchandise and subscription markets, operating and capital costs and tariffs, taxes and fees, our ability to source desirable content and our capital and operating results being consistent with our expectations. Actual results may differ materially from those expressed or implied in such information. Important factors that could cause actual results to differ materially from these expectations include, among other things: our ability to attract and retain advertising revenues; audience acceptance of our television programs and cable networks; our ability to recoup production costs, the availability of tax credits and the existence of co-production treaties; our ability to compete in any of the industries in which we do business; the opportunities (or lack thereof) that may be presented to and pursued by us; conditions in the entertainment, information and communications industries and technological developments therein; changes in laws or regulations or the interpretation or application of those laws and regulations; our ability to integrate and realize anticipated benefits from our acquisitions and to effectively manage our growth; our ability to successfully defend ourselves against litigation matters arising out of the ordinary course of business; failure to meet covenants under our senior credit facility; epidemics, pandemics or other public health crises, including the current outbreak of COVID-19 and changes in accounting standards. Additional information about these factors and about the material assumptions underlying any forward-looking information may be found under the heading “Risks and Uncertainties” in the Management’s Discussion and Analysis for the year ended August 31, 2020 and the first quarter ended November 30, 2020 and under the heading “Risk Factors” in our Annual Information Form. Corus cautions that the foregoing list of important assumptions and factors that may affect future results is not exhaustive. When relying on our forward-looking information to make decisions with respect to Corus, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Unless otherwise specified, all forward-looking information in this document speaks as of the date of this document. Unless otherwise required by applicable securities laws, Corus disclaims any intention or obligation to publicly update or revise any forward-looking information whether as a result of new information, events or circumstances that arise after the date thereof or otherwise.

About Corus Entertainment Inc.

Corus Entertainment Inc. (TSX: CJR.B) is a leading media and content company that develops and delivers high quality brands and content across platforms for audiences around the world. Engaging audiences since 1999, the company’s portfolio of multimedia offerings encompass 33 specialty television services, 39 radio stations, 15 conventional television stations, a suite of digital assets, animation software, technology and media services. Corus is an established creator of globally distributed content through Nelvana animation studio, Corus Studios, and children’s book publishing house Kids Can Press. The company also owns innovative full-service social digital agency so.da, and lifestyle entertainment company Kin Canada. Corus’ roster of premium brands includes Global Television, W Network, HGTV Canada, Food Network Canada, HISTORY®, Showcase, Adult Swim, National Geographic, Disney Channel Canada, YTV, Global News, Globalnews.ca, Q107, Country 105, and Rock 101. Visit Corus at www.corusent.com.

CORUS ENTERTAINMENT INC.



CONSOLIDATED STATEMENTS OF FINANCIAL POSITION




As at November 30,

As at August 31,

(unaudited – in thousands of Canadian dollars)

2020

2020

ASSETS



Current



Cash and cash equivalents

49,937

45,900

Accounts receivable

393,605

297,585

Prepaid expenses and other assets

25,249

17,112

Total current assets

468,791

360,597

Tax credits receivable

31,485

26,745

Investments and other assets

61,154

59,424

Property, plant and equipment

323,641

333,762

Program rights

622,705

637,819

Film investments

43,167

44,891

Intangibles

1,762,009

1,789,018

Goodwill

664,958

664,958

Deferred income tax assets

54,328

53,668


4,032,238

3,970,882

 

LIABILITIES AND EQUITY



Current



Accounts payable and accrued liabilities

509,164

451,682

Current portion of bank debt

158,589

76,339

Provisions

8,965

8,621

Income taxes payable

12,076

12,698

Total current liabilities

688,794

549,340

Bank debt

1,315,016

1,429,750

Other long-term liabilities

462,253

492,956

Provisions

9,994

9,494

Deferred income tax liabilities

438,222

440,923

Total liabilities

2,914,279

2,922,463

 

EQUITY



Share capital

816,189

816,189

Contributed surplus

1,511,617

1,511,325

Accumulated deficit

(1,357,263)

(1,425,432)

Accumulated other comprehensive deficit

(579)

(2,258)

Total equity attributable to shareholders

969,964

899,824

Equity attributable to non-controlling interest

147,995

148,595

Total equity

1,117,959

1,048,419


4,032,238

3,970,882

CORUS ENTERTAINMENT INC.



CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME



Three months ended


November 30,

(unaudited – in thousands of Canadian dollars except per share amounts)

2020

2019

Revenues

420,355

467,878

Direct cost of sales, general and administrative expenses

241,748

283,763

Depreciation and amortization

37,987

39,967

Interest expense

24,736

28,823

Integration, restructuring and other costs

4,336

2,534

Other income, net

(565)

(2,063)

Income before income taxes

112,113

114,854

Income tax expense

29,565

30,494

Net income for the period

82,548

84,360

 

Other comprehensive income, net of income taxes:



Items that may be reclassified subsequently to income:



Unrealized change in fair value of cash flow hedges

2,487

4,949

Unrealized foreign currency translation adjustment

(29)

(53)


2,458

4,896

Items that will not be reclassified to income:



Unrealized change in fair value of financial assets

(779)

5,508

Actuarial gain on post-retirement benefit plans

3,385

4,756


2,606

10,264

Other comprehensive income, net of income taxes

5,064

15,160

Comprehensive income for the period

87,612

99,520

Net income attributable to:



Shareholders

76,664

78,116

Non-controlling interest

5,884

6,244


82,548

84,360

Comprehensive income attributable to:



Shareholders

81,728

93,276

Non-controlling interest

5,884

6,244


87,612

99,520

Earnings per share attributable to shareholders:



Basic

$0.37

$0.37

Diluted

$0.37

$0.37

CORUS ENTERTAINMENT INC.




CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY

(unaudited – in thousands of Canadian dollars)

Share capital

Contributed
surplus

Accumulated
deficit

Accumulated
other
comprehensive
loss

Total equity  
attributable
to
shareholders

Non-
controlling
interest

Total equity

As at August 31, 2020

816,189

1,511,325

(1,425,432)

(2,258)

899,824

148,595

1,048,419

Comprehensive income

76,664

5,064

81,728

5,884

87,612

Dividends declared

(12,497)

(12,497)

(4,245)

(16,742)

Actuarial gain on post- retirement benefit plans

3,385

(3,385)

Share-based compensation expense

292

292

292

Return of capital to non- controlling interest

(1,622)

(1,622)

Reallocation of equity interest

617

617

(617)

As at November 30, 2020

816,189

1,511,617

(1,357,263)

(579)

969,964

147,995

1,117,959









(unaudited – in thousands of Canadian dollars)

Share capital

Contributed
surplus

Accumulated
deficit

Accumulated
other
comprehensive
income

Total equity 
attributable
to
shareholders

Non-
controlling
interest

Total
equity

As at August 31, 2019

830,477

1,512,818

(758,757)

12,187

1,596,725

145,512

1,742,237

Comprehensive income

78,116

15,160

93,276

6,244

99,520

Dividends declared

(12,680)

(12,680)

(3,415)

(16,095)

Share repurchase under normal course issuer bid (“NCIB”)

(2,655)

(1,215)

(3,870)

(3,870)

Share repurchase commitment under NCIB

(5,314)

(2,449)

(7,763)

(7,763)

Actuarial gain on post- retirement benefit plans

4,756

(4,756)

Share-based compensation expense

254

254

254

Equity funding by a non- controlling interest

2,134

2,134

As at November 30, 2019

822,508

1,509,408

(688,565)

22,591

1,665,942

150,475

1,816,417

CORUS ENTERTAINMENT INC.



CONSOLIDATED STATEMENTS OF CASH FLOWS




Three months ended


November 30,

(unaudited – in thousands of Canadian dollars)

2020

2019

OPERATING ACTIVITIES



Net income for the period

82,548

84,360

Adjustments to reconcile net income to cash flow from operations:



Amortization of program rights

109,722

132,601

Amortization of film investments

4,264

5,826

Depreciation and amortization

37,987

39,967

Deferred income tax expense (recovery)

(5,359)

(5,979)

Share-based compensation expense

292

254

Imputed interest

11,034

12,556

Payment of program rights

(81,110)

(119,192)

Net spend on film investments

(9,749)

(15,522)

CRTC benefit payments

(612)

(722)

Other

672

(675)

Cash flow from operations

149,689

133,474

Net change in non-cash working capital balances related to operations

(86,308)

(76,002)

Cash provided by operating activities

63,381

57,472

INVESTING ACTIVITIES



Additions to property, plant and equipment

(976)

(4,265)

Net cash flows for intangibles, investments and other assets

(431)

(1,286)

Cash used in investing activities

(1,407)

(5,551)

FINANCING ACTIVITIES



Decrease in bank loans

(33,517)

(48,674)

Shares repurchased under NCIB

(3,296)

Return of capital to non-controlling interest

(1,622)

Payments of lease liabilities

(3,967)

(3,884)

Equity funding by a non-controlling interest

2,134

Dividends paid

(12,497)

(12,718)

Dividends paid to non-controlling interest

(4,245)

(3,415)

Other

(2,089)

(387)

Cash used in financing activities

(57,937)

(70,240)

Net change in cash and cash equivalents during the period

4,037

(18,319)

Cash and cash equivalents, beginning of the period

45,900

82,568

Cash and cash equivalents, end of the period

49,937

64,249

CORUS ENTERTAINMENT INC.





BUSINESS SEGMENT INFORMATION





(unaudited – in thousands of Canadian dollars)





Three months ended November 30, 2020






Television

Radio

Corporate

Consolidated

Revenues

392,102

28,253

420,355

Direct cost of sales, general and administrative expenses

212,537

21,112

8,099

241,748

Segment profit (loss)(1)

179,565

7,141

(8,099)

178,607

Depreciation and amortization




37,987

Interest expense




24,736

Integration, restructuring and other costs




4,336

Other income, net




(565)

Income before income taxes




112,113

 

Three months ended November 30, 2019






Television

Radio

Corporate

Consolidated

Revenues

429,951

37,927

467,878

Direct cost of sales, general and administrative expenses

251,333

25,899

6,531

283,763

Segment profit (loss)(1)

178,618

12,028

(6,531)

184,115

Depreciation and amortization




39,967

Interest expense




28,823

Integration, restructuring and other costs




2,534

Other income, net




(2,063)

Income before income taxes




114,854


(1) Segment profit does not have a standardized meaning prescribed by IFRS.  For definitions and explanations, see discussion under the Key Performance Indicators section of the First Quarter 2021 Report to Shareholders.

REVENUES BY TYPE




Three months ended


November 30,

(unaudited – in thousands of Canadian dollars)

2020

2019

Advertising

273,072

322,409

Subscriber fees

123,701

123,669

Merchandising, distribution and other

23,582

21,800


420,355

467,878

NON-IFRS FINANCIAL MEASURES 



Three months ended

(unaudited – in thousands of Canadian dollars, except per share amounts)  

  November 30,

Adjusted Net Income Attributable to Shareholders

2020

2019

Net income attributable to shareholders

76,664

78,116

Adjustments, net of income tax:



Integration, restructuring and other costs

3,187

1,864

Adjusted net income attributable to shareholders

79,851

79,980

Basic earnings per share

$0.37

$0.37

Adjustments, net of income tax:



Integration, restructuring and other costs

$0.01

$0.01

Adjusted basic earnings per share

$0.38

$0.38


Three months ended

(unaudited – in thousands of Canadian dollars)

November 30,

Free Cash Flow

2020

2019

Cash provided by (used in):



Operating activities

63,381

57,472

Investing activities

(1,407)

(5,551)

 

Add: cash used in business acquisitions and strategic investments (1)

61,974

51,921

400

1,127

Free cash flow

62,374

53,048


(1) Strategic investments are comprised of investments in venture funds and associated companies.


Three months ended

(unaudited – in thousands of Canadian dollars)

 November 30,  

 August 31,

Net Debt and Net Debt to Segment Profit

2020

2020

Total bank loans, net of unamortized financing fees

1,473,605

1,506,089

Lease liabilities

146,536

148,580

Cash and cash equivalents

(49,937)

(45,900)

Net debt

1,570,204

1,608,769

Segment profit (denominator) (1)

500,331

505,839

Net debt to segment profit

3.14

3.18


(1) Reflects aggregate amounts for the most recent four quarters, as detailed in the table in the “Quarterly Consolidated Financial Information” section of the First Quarter 2021 Report to Shareholders.

SOURCE Corus Entertainment Inc.

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