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Corus Entertainment blames kids TV for weakness in its second-quarter results

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TORONTO - Corus Entertainment is blaming the kids for a chunk of the weakness it experienced during the second quarter as it suffered from a slide in advertising revenues in its television business.

The TV, radio and animation company reported a double-digit decline in revenue and weaker profits that it characterized as "softness," but it was tough to nail down exactly where the company stumbled most.

Executives pointed towards numerous factors related to its TV ad revenue, which fell 12 per cent on a tepid response from advertisers for children's programming.

"Virtually all of that was related to the entertainment space which just was a real disappointment to us in the quarter," chief executive John Cassaday told analysts on a conference call.

"A problem well-defined is a problem half-solved and to define the specific problem, it was kids and then more specifically, the entertainment sector."

Corus operates a slate of specialty television channels, including YTV, Treehouse, Nickelodeon Canada, ABC Spark, which cater to children and family shows. It also owns the W Network, the Canadian version of OWN: Oprah Winfrey Network and Cosmopolitan TV. Together, the kids and women's programming channels make up a notable chunk of its operations.

The company also owns 37 radio stations, children's book publishing, and animation assets.

In the second quarter, the company's profits attributable to shareholders fell nearly 26 per cent to $5.9 million or seven cents per diluted share in the three months ended Feb. 28, as it recognized a $25-million pre-tax debt refinancing charge. The results were down from $31.6 million on 38 cents in the 2012 period that ended Feb. 29.

Revenue totalled $183.7 million, down 11 per cent from $205.7 million in the year-earlier period.

Shareholders responded to the results by sending the stock (TSX:CJR.B) down four per cent, or $1.02, to close at $24.60 on the Toronto Stock Exchange.

Breaking down the results, television revenue dropped to $143.4 million from $163.3 million.

But radio revenues were also lower, falling to $40.3 million from $42.4 million a year earlier.

Cassaday pointed to the "expected" fading popularity of the Beyblade toy franchise for part of the weakness in its television division. The toy, which is essentially a series of spinning tops that spawned a line of toys and a TV show, once added millions of dollars to the company's pocket each quarter. In the second quarter, the company declined to breakout exactly how much — or how little — the Beyblade toys and programming contributed to the results.

"We probably wouldn't share that information," Cassaday told an analyst who pressed for details.

He noted that a highlight of the quarter was the successful refinancing of Corus' senior unsecured guaranteed notes that resulted in a 300 basis point reduction in financing costs.

Corus said removing the debt refinancing charge, adjusted net income attributable to shareholders in the quarter was $24.4 million, or 29 cents per diluted share.

Last month, after the second quarter ended, Corus signed a deal to buy the 50 per cent ownership interest in Teletoon and two Ottawa-based radio stations, CKQB-FM and CJOT-FM that it does not already own from Bell as part of that company's deal to acquire Astral Media Inc.

Corus also agreed with Bell and Shaw Media to buy each of their respective 50 per cent interests in the French-language specialty channels Historia and Series+.

Separately, the company signed a deal with Shaw Media to buy the remaining 49 per cent stake in ABC Spark. As part of the agreement, Corus will sell its 20 per cent stake in Food Network Canada to Shaw Media.

Also on Thursday, fellow TV media company Astral (TSX:ACM.A) delivered notably better results. The company posted $41.2 million in net earnings in its second quarter, up eight per cent from $38.2 million in the year earlier period.

Revenue increased to $237.1 million from $233.5 million.

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