Revenues up, but profits down at AAC

Toronto - Alliance Atlantis Communications Inc. says higher interest charges eroded the entertainment company's fiscal second-quarter profit, negating higher revenue.

Net earnings were $6.6 million or 17 cents a share, down from $9.6 million or 30 cents per share a year earlier, Alliance Atlantis (TSE:AAC.A, AAC.B) reported Monday.

Revenue was up 11.5 per cent to $216.4 million, thanks mainly to growth in advertising revenue and profits in the company's motion picture distribution group with such features as Scary Movie 2, The Others and Rush Hour 2.

But earnings were weighed down by higher interest charges and non-cash losses from the company's 33 per cent interest in Headline Media Group Inc. (TSE: HMG).

"We are particularly pleased that the strength of our results is evident across our three core operating groups," chairman and chief executive Michael MacMillan said in a release.

"In addition to continued growth in advertising revenue in the Broadcast Group, we successfully launched six new digital channels during the quarter."

The digital channels are Showcase Action, Showcase Diva, The Independent Film Channel Canada (subject to CRTC approval), Discovery Health Channel Canada, National Geographic Channel, BBC Canada.

MacMillan said that with the coming release of Lord of the Rings - Part 1 and The Shipping News, the movie group is set to complete its most successful year ever at the Canadian box office.

Revenue for the company's TV broadcast group increased 22.2 per cent in the second quarter to $30.8 million, driven by a 13.9 per cent increase in subscriber revenue and a 38.4 per cent increase in ad revenue.

The group's cable TV channels -- Showcase, Life Network, History Television, HGTV and Food Network Canada -- generated revenue of $28.8 million, up 16.6 per cent from the same period last year.

As for the digital channels, Alliance Atlantis has secured deals with carriers Shaw, Starchoice, Bell ExpressVu, Rogers and others representing 85 per cent of the current digital market of about 2.3 million Canadian households.

The company's CSI: Crime Scene Investigation continues as the third-highest rated program on U.S. network television, having won its time slot for six weeks running.

The firm's TV production group received a record seven Emmy Awards, including five for Life With Judy Garland: Me and My Shadows. Programs produced by Alliance Atlantis received 14 Gemini Awards.

In trading on the Toronto stock market Monday, Alliance Atlantis B shares rose 36 cents to $15.36.

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