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Profit shrinks at Corus as European ad revenues wilt

Toronto, - Corus Entertainment Inc. posted a sharp decline in fiscal third quarter profits Wednesday and warned it may not meet its earnings targets for the year because of a squeeze in European advertising revenues that has hurt its Nelvana division.

For the three months ended May 31, the company made a net profit of $463,000, or one cent a share down from earnings of $103.3 million, or 60 cents a share for the same period a year ago.

Revenues grew, however, to $149.4 million, from $138 million a year before.

The company noted that last year's third-quarter results included the ammortization of broadcast licences and a goodwill charge of $11.3 million, an after-tax gain of $87 million from the sale of its 50 per cent interest in The Family Channel Inc. and a future income-tax recovery gain of $23 million.

This year's third-quarter results included an after-tax gain of $10.8 million from the sale of Viewer's Choice, Klutz and Astral Media Inc. shares, as well as an after-tax accounting loss of $11.7 million.

Excluding the special items, this year's quarterly earnings are still weaker, at three cents a share, compared with 11 cents a share the year before. Corus is a major media and entertainment company with specialty TV networks and 52 radio stations.

Corus president and CEO John Cassaday linked the profits decline to weak European advertising, primarily in Germany, which hurt the company's Nelvana Ltd. content division.

The Toronto-based children's programmer saw a revenue decline of 28 per cent and a sharp fall in profits.

"These results reflected the disappointing situation in the European market, particularly in Germany where a number of broadcasters are facing financial difficulties," the company said in a release.

Nelvana, which also sells children's merchandise, suffered the most because of the European dowturn, Cassaday said.

"Nelvana's margin ... was impacted by the global downturn in advertising, particularly in the German market," he said. "We are responding to this with further cost reductions and a strategic commitment to build our merchandise revenues behind our classic brands."

Corus's radio and television both saw an increase in revenues. Radio revenues rose by three per cent, while a strong subscriber growth fuelled a 30 per cent revenue growth at the company's television unit.

Shares of Corus (TSX:CJR.B) were trading at $23.99, down 51 cents, on the Toronto stock market Wednesday.

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