Revenues jump 11.5% at CHUM
Toronto, - CHUM Limited says improved ad sales for radio and television helped boost its quarterly revenues to $120.9 million for the quarter ended February 28, 2003. The number represents an increase of $12.5 million or 11.5% from the same period last year.
For the first six months of fiscal 2003 radio sales increased 11.8% over the corresponding period last year and 9.6% for the three months ended February 28, 2003. Sales growth for comparable properties operating in both fiscal 2003 and fiscal 2002, or organic sales growth, for the six months ended February 28, 2003, for AM and FM radio was 8.2% and 11.1% respectively. AM radio sales for fiscal 2003 six months, amounted to $10.8 million.
Organic sales growth for television, that includes both advertising and subscription revenue, for the six months ended February 28, 2003 increased 13.4 % when compared with the corresponding period last year. The balance of the television sales increase is from Citytv Vancouver, acquired November 1, 2001 and CIVI-TV Victoria, launched October 4, 2001, both of which did not operate for the full first six
months of fiscal 2002, and the new digital specialty channels (Diginets), which launched in September 2001, but did not generate revenues until January 2002 when the free preview period ended.
The third segment of the Company's business ("other") is comprised of the environmental music distribution division and corporate expenses being costs associated with the corporate activities performed by CHUM for its divisional operations and subsidiaries.
The environmental music distribution business had an EBITDA margin of 12.3% for the six months ended February 28, 2003 compared with 12.0% for the corresponding period last year.
CHUM Limited and Novalaser Communications Inc., the minority shareholder of NovaVision Multimedia Inc. have agreed to split the business assets of that corporation so that CHUM will retain the Muzak and Business Television portions of the business and Novalaser will keep the Corporate Radio and Telephony portions of the business. The transaction which is expected to close on April 30, 2003 will be effective at April 1, 2003. Sales and expenses within this segment will be slightly reduced in the future but it is not expected to affect the company's
CHUM's operations expenses for the six months ended February 28, 2003 amounted to $227.6 million, an increase of $19.6 million or 9.4%when compared with the six months ended February 28, 2002. For the three month period ended February 28, 2003, operations expenses were $5.5 million or 5.2% greater than for the corresponding period last year. The lower rate of increase in operations expenses for this year's second quarter compared with the rate of increase for the first six months for this fiscal year, is primarily attributable to television operations noted above which operated for only a portion of the first six months in fiscal 2002.
The radio segment operations expenses were down by $1.5 million for the six months ended February 28, 2003 when compared to last year because the termination of The TEAM sports radio programming on five of the Company's AM radio stations more than offset increased operations expenses. Excluding The TEAM's operations expenses last year, the organic increase for fiscal 2003 amounted to 9.8%.
Two of the largest components of the Company's operations expenses were remuneration, including benefits, and television purchased programming costs. Total remuneration increased in fiscal 2003 in line with the Company's expectations of 6.1% for non-sales staff and 18.1% for sales staff. Since much of sales staff remuneration is performance driven, these increases are in line with the increase in sales for this fiscal period. Total increased remuneration for the six months ended February 28, 2003, is $7.4 million when compared with the same period last year.
Television purchased programming costs for the six months ended February 28, 2003 increased by $7.9 million over the corresponding period last year. This increase was incurred principally within conventional television to improve the quality and competitiveness of the Company's acquisition strategies.
The Citytv format stations in Toronto and Vancouver took advantage of the emerging and expensive reality based TV genre, while the NewNet group of television stations has upgraded the strength of its prime time schedule. These improvements have allowed the company to enhance its profile and maintain its market share against increased competition.
In the short term, the company says it is focusing on improving operating margins in the Company's conventional television properties, minimizing operating losses on AM radio, reducing loan balances through improved cash flow from operations and looking for growth opportunities in selective markets. With these future developments, CHUM seeks to maintain stable growth with the support of a strong balance sheet. Although a few of these initiatives may carry short-term risk, the company is focused on these strategies in order to achieve its long term objectives of value, security and growth.
Airtime sales and bookings continue to be strong for both radio and television. Through to the end of the third quarter ending May 31, 2003, the company has over achieved sales budgets and management expects this trend to continue for the balance of fiscal 2003.
Radio advertising sales to the end of May 2003 are 9.5% ahead of sales for the corresponding period last year. As reported in Trans-Canada Radio Advertising by Market Report, released by the Radio Marketing Bureau, radio sales for major and some medium markets across Canada increased over the six month period ending February 28, 2003 by 7.7% over the same period last year.
As an industry, television has been buoyed in the second quarter of 2003 by clients with stronger advertising budgets than last year, despite the fact that last year's advertising figures included the Olympic Games. The resulting increased advertising sales in the second quarter more than offset the minimal softening in advertising sales originally expected for April and May due to concerns relating to the war in Iraq. Unlike the U.S., Canada did not experience a substantial negative impact from the conflict and, at time of writing, business has returned to normal says CHUM.
The Company anticipates maintaining current performance percentages over budget to the end of May and, in all likelihood, to the end of the fiscal year. If the Middle East stabilizes and the American economy rebounds, management understands that economists are anticipating continued growth in the Canadian economy. The company expects that such growth will contribute to continuing positive results for CHUM Limited.
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