Source : Canadian Press

TORONTO — TV and radio operator CHUM Ltd. expects no better than flat results between now and the end of summer, as playoff hockey muscles aside its TV offerings and weaker-than-promised winter ratings hit advertising rates.

CHUM, which owns 33 radio stations and 33 television channels across the country, including Citytv and MuchMusic, said Thursday it earned $5.9-million or 21 cents per share in its second quarter ended Feb. 28.

That more than doubled year-ago net income of $2.5-million or nine cents per share, as revenue grew 7.8 per cent to $152.4-million from $141.3-million.

The quarterly result handily topped the Thomson Financial analyst consensus expectation of 13 cents a share, and CHUM stock gained five per cent, up $1.55 to $30.55 near midday but still down from $35 before the company reported a quarterly loss and slack sales growth last October.

CHUM's radio and TV stations "will continue to face a challenging environment" for the rest of the financial year concluding Aug. 31, company executives said.

"We expect advertising revenue in conventional (television) to be flat in the second half of the year," chief financial officer Alan Mayne told an analyst conference call. Advertising on specialty channels is forecast to be down slightly, only partly offset by higher subscriber revenues.

More generally, "the hockey money is flowing out" as advertisers shift their spending to stations that broadcast NHL playoffs, Mr. Mayne said. CHUM benefited last year from the lack of hockey competition during the NHL lockout.

In the specialty division, "Bravo does remain a challenge . . . and to a lesser extent MuchMusic," said CEO Jay Switzer.

Mr. Switzer also said conventional TV stations in general are under pressure, particularly in smaller markets, and the industry needs a thorough regulatory update, similar to the radio policy review the Canadian Radio-television and Telecommunications Commission is about to undertake.

"The rules that are in place and the (CRTC licence) conditions that we live with were effectively agreed to and set in the ‘70s and ‘80s, when it was a much better time for conventional television," Mr. Switzer said.

He said CHUM offered audience estimates to advertisers last autumn based on an aggressive program lineup, and "for the most part we did not live up to those estimates."

This didn't seriously hurt revenues in the second quarter, "but it does starting in the third quarter and beyond, so it'll be a question — and it gives me no pleasure to talk about this — of meeting lower estimates."

Mr. Switzer added that there are "pockets of good news and success stories" such as the MuchMusic VJ search, America's Next Top Model and Breakfast Television, but overall ratings are down from a year ago.

Asked whether CHUM is considering an income-trust offering similar to one reportedly contemplated by privately held radio competitor Standard Broadcasting Corp., Mr. Switzer said it's "a file we're watching," but CFO Mayne noted that Standard's move would mainly reflect "specific liquidity and estate-planning objectives" of its founder, Allan Slaight.

Mayne also observed that CHUM's situation would be more complex, because its radio holdings are just "one very key part of a much larger multimedia company."

He added that CHUM has no plans to buy back its shares and is "very comfortable" with its debt level and overall capital structure.

Mr. Switzer applauded his management team's cost control, especially in radio, also noting that capital expenditures will increase "in a small but important way" as high-definition TV broadcast capacity is expanded.

Citytv in Toronto is promising "a full slate" of HDTV by this fall, and "we're not able yet to talk about our plans for expanding our high-def channel output, but we are clearly looking at opportunities to grow the high-def base in specialty."

© Canadian Press