(CANWEST GLOBAL COMMUNICATIONS CORP. LOGO)
NEWS RELEASE
For Immediate Release
July 6, 2006
CANWEST GLOBAL COMMUNICATIONS CORP. REPORTS Q3 RESULTS
WINNIPEG - CanWest Global Communications Corp. today reported its financial
results for the third quarter and nine months ended May 31, 2006. The Company
reported consolidated net earnings of $13 million or $0.07 per share for the
quarter compared to consolidated net earnings of $53 million or $0.30 per share,
for the third quarter of fiscal 2005.
The Company's consolidated revenues for the quarter declined by 9% to $731
million from $799 million for the same period last year. Consolidated EBITDA(1)
for the third quarter was $116 million compared to $194 million for the third
quarter of F2005. During the quarter, the Company announced that it has entered
into an agreement for the sale of its 45% interest in TV3 Ireland. Accordingly,
results of TV3 Ireland for the current and comparable periods in the prior year
are excluded from consolidated revenue and consolidated EBITDA and are reported
as results from discontinued operations, together with the results of Fireworks
Entertainment, the sale of which was completed in September, 2005.
Commenting on the results, Leonard Asper, CanWest's President and Chief
Executive Officer, said, "A number of factors contributed to the disappointing
operating results in the quarter. Conventional television in Canada remains a
challenge. In Australia and New Zealand, a cyclical correction in advertising
markets affected financial results, as did currency translation when local
currency results were translated into Canadian dollars. The stronger Canadian
dollar reduced EBITDA by approximately 5% or $6 million compared to the same
period last year. A slowdown in national advertising, which we believe to be
short-term, and weakness in print classifieds affected our publishing results
during the quarter. Cost reduction initiatives and an expected return to normal
revenue growth should support stronger publishing margins going forward."
Third quarter revenues of $323 million at the Company's Publishing and
Interactive operations were essentially unchanged from the same quarter of
F2005. The earlier positive momentum in national advertising stalled in the
quarter as a result of a significant slowdown in spending by the
telecommunications and financial services sectors. Publishing and Interactive
EBITDA was $66 million for the quarter compared to $75 million for the same
quarter one year ago. Financial results at the National Post remained stable for
the quarter with revenues and operating costs essentially unchanged compared to
the same quarter last year.
Revenues from Canadian Broadcasting operations declined by 6% for the quarter to
$188 million compared to the third quarter of F2005, a reflection of weaker
television ratings in the prior year and the impact of the return of NHL hockey
carried on CBC. Canadian
Broadcasting EBITDA declined to $24 million for the quarter compared to $57
million last year, mainly due to ratings-driven investments in new programming.
Global's launch of its fall schedule was well-received and should contribute to
stronger revenues going forward. Global's prime time schedule will include
returning hit shows such as House, Prison Break, Simpsons, Family Guy and ET
Canada plus a number of promising new U.S, programs. Global's digital specialty
television services continued to generate new subscribers, topping 5 million for
the first time in May.
Following several years of significant growth, the cyclical correction in the
Australian television advertising market continued in the third quarter. Third
quarter revenues declined 24% at TEN to $149 million, from $194 million last
year, while EBITDA was $21 million for the quarter compared to $53 million last
year. Currency translation was a significant factor in the decline with the
Canadian dollar up 12% against the Australian currency compared to one year ago.
TEN continues to gain audience share and to maintain a solid lead in its target
demographic of 16-39 year olds, with less than two ratings points separating all
three Australian commercial TV networks in the larger 16-54 demographic.
Financial results in New Zealand were also affected by weaker advertising
markets and a 20% exchange rate decline compared to last year, resulting in
stable revenues and increased EBITDA in local currency terms being more than
offset by the negative impact of currency translation.
NINE MONTHS ENDED MAY 31, 2006
For the nine month period, the Company recorded consolidated net earnings of $24
million or $0.13 per share, compared to consolidated net earnings of $116
million or $0.66 per share for the first nine months of 2005. Excluding the
effects of non-recurring charges related to the income trust IPO in the first
quarter, and the early retirement of certain debt obligations and the settlement
of interest rate and cross currency swaps, earnings from continuing operations
for the nine months ended May 31, 2006 would have been approximately $87 million
or $0.49 per share, compared to $183 million or $1.03 per share in the same
period last year.
For the nine month period ended May 31, 2006, the Company recorded consolidated
revenues of $2,225 million, a decline of 5% compared to consolidated revenues of
$2,341 million for the first nine months of the prior year. Consolidated EBITDA
for the first nine months of fiscal 2006 was $430 million compared to $625
million for the same period last year. A substantial component of the EBITDA
decline in the year to date is attributable to the disappointing financial
results from Canadian and Australian conventional television and the negative
impact of less favourable currency translation rates from Australia and New
Zealand. Currency changes have reduced EBITDA by approximately 5% or $20 million
for the first nine months of the current fiscal year.
HIGHLIGHTS OF THE THIRD QUARTER INCLUDE THE FOLLOWING:
- CanWest announced in April, the completion of the acquisition of four
Turkish radio stations Super FM, Metro FM, Joy FM and Joy Turk FM.
With two national stations and two stations in Istanbul the Company is
well positioned to implement an integrated radio strategy in Turkey
drawing on the extensive radio experience of its New Zealand and
Canadian radio operations. CanWest's new investment in Turkish
radio is reflected for the first time in the third quarter results
reporting an EBITDA contribution of $1.4 million for the six-week
period since acquisition.
- CanWest received distributions from the CanWest MediaWorks Income Fund
of $37 million for the third quarter and $96 million for the nine
months ended May 31, 2006.
- The TEN Group pty Limited (TEN) declared a dividend in June that will
result in aggregate dividend and interest distributions of A$39.2
million being paid to CanWest in July 2006. Including this
distribution, CanWest will have received a total of A$102.7 in
distributions from its Australian operations in fiscal 2006.
- In March CanWest MediaWorks New Zealand declared an interim dividend
of NZ$0.045 per share, which was paid on May 15. CanWest's share of
this dividend amounted to $5 million (NZ$7.1 million).
- In May the Company entered into an agreement for the sale of its stake
in TV3 Ireland subject to certain regulatory and other approvals.
CanWest expects to receive proceeds of approximately E138 million
(C$198 million) on closing of the transaction. Proceeds will be used
to reduce debt and to strengthening CanWest's financial position.
- Eye Corp achieved an international breakthrough in May, winning a
ten-year contract to manage the advertising concessions at all four
airport terminals of the British Manchester Airports Group Plc (MAG),
commencing June 1, 2006. MAG's airports in four UK cities serve
approximately 30 million passengers annually. This UK breakthrough
follows similar Eye Corp successes gaining valuable concessions for
Changi Airport in Singapore and the New South Wales Roads and Traffic
Authority in Australia.
- The re-branding and re-launch on June 1, of Global's analog specialty
channel Prime to TVtropolis, with a rejuvenated schedule of hit
programs of more recent vintage, should resonate well with viewers and
contribute to accelerated growth of the specialty channel going
forward.
OUTLOOK:
Financial results for the balance of the fiscal year will depend upon the
strength of the advertising markets in each of our geographic locations. Early
indications in the fourth quarter appear to support our expectation that we will
see a return to revenue growth in our Publishing and Interactive Group.
Timing of an expected recovery in the Australian television advertising market
is another important factor. Competition for ratings among the three Australian
commercial networks is extremely fierce and the advertising market remains
volatile in the short term. At the end of the quarter TEN was the only network
to post audience gains in all major demographics, particularly in its core 16-39
year demographic, and this should position TEN to capitalize when market
conditions improve.
CanWest's New Zealand operations continue to generate strong television and
radio ratings and are well positioned for a softening of the economic
environment. The less favourable currency translation terms will, however,
affect year-over-year comparisons.
We do not expect any material change to Global's financial outlook in the fourth
quarter, however, a number of initiatives at Global should contribute to
improved financial performance in 2007.
FORWARD LOOKING STATEMENTS:
This news release contains certain comments or forward-looking statements about
the objectives, strategies, financial conditions, results of operations and
businesses of CanWest. Statements that are not historical facts are
forward-looking and are subject to important risks, uncertainties and
assumptions. These statements are based on our current expectations about our
business and the markets in which we operate, and upon various estimates and
assumptions. The results or events predicted in these forward-looking statements
may differ materially from actual results or events if known or unknown risks,
trends or uncertainties affect our business, or if our estimates or assumptions
turn out to be inaccurate. As a result, there is no assurance that the
circumstances described in any forward-looking statement will materialize.
Significant and reasonably foreseeable factors that could cause our results to
differ materially from our current expectations are discussed in the section
entitled "Risk Factors" contained in our Annual Information Form for the year
ended August 31, 2005 dated November 28, 2005 filed by CanWest Global
Communications Corp. with the Canadian securities commissions (available on the
Fund's website at www.canwestglobal.com and on SEDAR at www.sedar.com ) and with
the U.S. Securities and Exchange Commission under Form 40-F (available on EDGAR
at www.sec.gov), as updated in our Management's Discussion and Analysis for the
three months and nine months ended May 31, 2006 dated July 6, 2006. We disclaim
any intention or obligation to update any forward-looking statement even if new
information becomes available, as a result of future events or for any other
reason.
The Company's financial statements are available on the Company's website:
www.canwestglobal.com.
CanWest Global Communications Corp. (www.canwestglobal.com), an international
media company listed on the TSX (trading symbols: CGS and CGS.A) and NYSE
(trading symbol: CWG), is Canada's largest media company. CanWest is Canada's
largest publisher of daily newspapers, and owns, operates and/or holds
substantial interests in free-to-air and subscription-based television networks,
out-of-home advertising, web sites, and radio stations and networks in Canada,
New Zealand, Australia, Ireland, Singapore, Malaysia, Turkey and the United
Kingdom.
For further information contact:
Geoffrey Elliot John Maguire
Vice President, Corporate Affairs Chief Financial Officer
Tel: (204) 956-2025 Tel: (204) 956-2025
Fax: (204) 947-9841 Fax: (204) 947-9841
jmaguire@canwest.com gelliot@canwest.com
CANWEST GLOBAL COMMUNICATIONS CORP.
BUSINESS SEGMENT INFORMATION
(UNAUDITED)
(IN THOUSANDS OF CANADIAN DOLLARS)
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED MAY 31, ENDED MAY 31,
-------------------- ---------------------
2006 2005 2006 2005
------- ------- --------- ---------
REVENUE
PUBLICATIONS AND INTERACTIVE - CANADA 322,850 323,383 965,244 938,609
------- ------- --------- ---------
TELEVISION
Canada 187,661 200,696 528,565 564,695
Australia - Network TEN 148,748 194,452 499,726 595,876
New Zealand - 3 and C4 24,716 30,948 83,454 89,803
------- ------- --------- ---------
361,125 426,096 1,111,745 1,250,374
RADIO - NEW ZEALAND 18,704 23,054 64,581 71,229
RADIO - TURKEY 2,246 -- 2,246 --
OUTDOOR - AUSTRALIA 26,219 26,803 81,358 80,625
------- ------- --------- ---------
CONSOLIDATED REVENUE 731,144 799,336 2,225,174 2,340,837
======= ======= ========= =========
SEGMENT OPERATING PROFIT
PUBLICATIONS AND INTERACTIVE - CANADA 66,417 75,144 195,552 216,006
------- ------- --------- ---------
Television
Canada 24,070 56,849 52,521 138,012
Australia - Network TEN 21,470 52,929 158,567 231,894
New Zealand - 3 and C4 4,978 5,868 18,839 22,364
------- ------- --------- ---------
50,518 115,646 229,927 392,270
RADIO - NEW ZEALAND 4,595 4,965 18,346 20,660
RADIO - TURKEY 1,376 -- 1,376 --
OUTDOOR - AUSTRALIA 3,493 5,327 15,658 18,024
------- ------- --------- ---------
126,399 201,082 460,859 646,960
Corporate and other (10,044) (7,217) (30,400) (20,987)
Ravelston management contract termination -- (188) -- (750)
------- ------- --------- ---------
OPERATING PROFIT (EBITDA)(1) 116,355 193,677 430,459 625,223
======= ======= ========= =========
(1) EBITDA is defined as earnings before interest, income taxes, depreciation,
amortization, interest rate and foreign currency swap losses, foreign
exchange gains (losses), investment gains, losses and write-downs, loss on
debt extinguishment, minority interest, interest in earnings of equity
accounted affiliates, realized currency translation adjustments and
earnings (loss) from discontinued operations. This supplementary earnings
measure does not have a standardized meaning prescribed by Canadian
generally accepted accounting principles and may not be comparable to
similar measures presented by other companies nor should it be viewed as an
alternative to net earnings. The reconciliation of EBITDA to net earnings
is evident on the face of the following consolidated statements of
earnings.
CANWEST GLOBAL COMMUNICATIONS CORP.
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
(IN THOUSANDS OF CANADIAN DOLLARS EXCEPT AS OTHERWISE NOTED)
FOR THE THREE FOR THE NINE
MONTHS ENDED MONTHS ENDED
------------------- -----------------------
MAY 31, MAY 31, MAY 31, MAY 31,
2006 2005 2006 2005
-------- -------- ---------- ----------
Revenue 731,144 799,336 2,225,174 2,340,837
Operating expenses 406,692 415,317 1,174,793 1,150,495
Selling, general and administrative expenses 208,097 190,154 619,922 564,369
Ravelston management contract termination -- 188 -- 750
-------- -------- ---------- ----------
116,355 193,677 430,459 625,223
Amortization of intangibles 676 4,988 11,138 14,885
Amortization of property, plant and equipment 24,575 23,454 72,618 68,160
Other amortization 3,335 1,291 6,167 3,773
-------- -------- ---------- ----------
Operating income 87,769 163,944 340,536 538,405
Interest expense (46,111) (58,796) (144,950) (192,572)
Interest income 350 792 1,602 2,277
Amortization of deferred financing costs (1,524) (3,093) (4,954) (8,414)
Interest rate and foreign currency swap losses (4,746) (7,530) (132,445) (57,030)
Foreign exchange gains (losses) (12,042) (791) (12,467) 5,946
Investment gains, losses and write-downs 202 285 103,259 231
Loss on debt extinguishment -- -- (116,880) (43,992)
-------- -------- ---------- ----------
23,898 94,811 33,701 244,851
Provision for (recovery of) income taxes (5,260) 17,654 (60,285) 52,814
-------- -------- ---------- ----------
Earnings before the following 29,158 77,157 93,986 192,037
Minority interest (18,534) (22,251) (78,978) (78,626)
Interest in earnings of equity accounted affiliates 566 504 1,393 1,551
Realized currency translation adjustments (1,017) 392 (2,797) (456)
-------- -------- ---------- ----------
NET EARNINGS FROM CONTINUING OPERATIONS 10,173 55,802 13,604 114,506
Earnings (loss) from discontinued operations 3,071 (3,105) 10,203 1,760
-------- -------- ---------- ----------
NET EARNINGS FOR THE PERIOD 13,244 52,697 23,807 116,266
======== ======== ========== ==========
EARNINGS PER SHARE FROM CONTINUING OPERATIONS (IN DOLLARS):
BASIC $ 0.06 $ 0.31 $ 0.08 $ 0.65
DILUTED $ 0.06 $ 0.31 $ 0.08 $ 0.64
EARNINGS PER SHARE (IN DOLLARS):
BASIC $ 0.07 $ 0.30 $ 0.13 $ 0.66
DILUTED $ 0.07 $ 0.30 $ 0.13 $ 0.65