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Fireworks, Canadian TV results, drag down CanWest

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CanWest Global Communications Corp.
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Financial/Mergers & Acquisitions
WINNIPEG - CanWest Global Communications today reported consolidated net earnings from continuing operations for the fiscal year just completed were $194 million, an increase of 69% as compared to 2003.

However, net earnings for the year, ended August 31, 2004, reflected a number of one-time transactions, added the company, which included gains of approximately $117 million in the fourth quarter on the sale of CanWest's shares in Irish broadcaster Ulster TV and the effective disposition of a 30% interest in CanWest's New Zealand broadcasting assets.

And, "as a result of the early retirement of certain indebtedness, CanWest recorded foreign currency exchange gains of $36 million, the write-off of deferred financing costs of $5 million, interest rate and foreign currency swap losses of $111 million. In addition, a net loss of $208 million from Fireworks Entertainment was recorded in losses of discontinued operations," says the press release.

What all that means is, "the net loss for the year was $13 million versus net earnings of $46 million last year," explains the release.

On the company's Canadian TV side (which includes Global Television, CH, and specialty channels such as Prime, Mystery and others), fiscal 2004 saw revenues decline by 5% to $690 million. EBITDA for the year was $147 million, a decline of 32% from the $216 million recorded the prior year. "The combined effects of lower ratings in 2003, and increased competition for advertising revenues accounted for the decline. However, strong spring ratings arrested the downward trend and there are indications of year-on-year revenue growth at Global Television as we move into the first quarter of fiscal 2005," says the release.

Fourth quarter revenues from Canadian television operations declined by 5% to $131 million. Television operations reported a small EBITDA loss for the quarter. The Athens Olympics, which were carried by other networks (CBC and TSN), also had a detrimental impact on revenues in August, explains the release.

For the twelve months ended August 31, 2004, CanWest's consolidated revenues for the year were $2.113 billion, slightly up over last year's revenue of $2.10 billion.

Consolidated earnings before interest, taxes, depreciation and amortization (EBITDA) for the year were $447 million, down from last year's pro forma consolidated EBITDA of $469 million.

For the fourth quarter alone, consolidated revenues were $470 million compared to $464 million for the same period in 2003. Consolidated EBITDA for the quarter ended August 31, 2004 were $58 million, off from last year's Q4 mark of $66 million.

Results from continuing operations exclude revenues from Fireworks Entertainment for both years, as Fireworks was classified as a discontinued operation during fiscal 2004. The company's financial results for prior periods have been reclassified on this basis. CanWest recorded a net loss from discontinued operations of $208 million in 2004, compared to $69 million for the prior year.

"CanWest made important progress on many fronts in 2004 that together resulted in a significant improvement in overall results and that should contribute to positive financial results going forward," said company president and CEO Leonard Asper. "All of our international operations, including TV3 Ireland, the TEN Group in Australia and our New Zealand television and radio operations recorded their best ever financial results in 2004, with all of those operations generating substantial improvements in their respective EBITDA.

"Our newspaper operations also achieved a significant EBITDA gain in a still difficult Canadian advertising market. Together, these strong results more than offset disappointing results from our Canadian television operations and underscore the significant benefit derived from CanWest's diversified international mix of media assets," he continued.

"The company's balance sheet strengthened substantially in 2004 as a result of a combination of asset sales, re-financings and the successful IPO of CanWest MediaWorks (NZ) Limited in New Zealand. In October, the company announced an exchange offer for Hollinger Participation Trust Notes that, if successful, will further improve our balance sheet. All in all, 2004 was a very good year for CanWest," Asper added. "While debt reduction remains a top priority, our much improved balance sheet now positions us to re-focus on growth, including organic expansion of our existing operations, and through prudent acquisitions, either in growth markets or where we can identify synergies with our existing operations."

Following the regular meeting of the board of directors today, the company announced the appointment of Frank King of Calgary to the board. King is president and CEO of Metropolitan Investment Corporation and is the former chairman and CEO of the XV Olympic Winter Games, which were held in Calgary in 1988. King, 67, is a director of the Calgary Chamber of Commerce, Acclaim Energy Inc., Networc Health Inc., The Westaim Corporation, Agrium Inc., and Wi-Lan Inc. and is a Trustee of Rio-Can Real Estate Investment Trust.

CanWest also announced that it had accepted the resignations of two of its non-independent directors. Leaving the board (but not the company) are Tom Strike, president of CanWest MediaWorks International and Rick Camilleri, president of CanWest MediaWorks, both of whom were elected to the board on an interim basis in January 2004 when embattled, now-former Hollinger executives David Radler and Conrad Black quit.

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