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Declining sales cause Corus to miss profit target

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TORONTO -- While spinning Beyblade toys were once the rage with kids, their fading popularity is becoming a pain in the side of Corus Entertainment Inc. as the company warned investors Thursday it would miss its profit guidance for the financial year.

The TV, radio and animation company said a 26 per cent drop in sales for its toy products, combined with a decline in radio advertising revenues, has put pressure on earnings.

"Given the weaker-than-anticipated radio results coupled with the declines in our merchandising and distribution businesses, it is now apparent that we will miss the lower end of our segment profit target," chief executive John Cassaday told analysts on a conference call.

Corus had initially forecast a profit of $293 million to $303 million for 2013.

He noted the company still expects "solid growth" from its main television operations during the fourth quarter, and guidance on free cash flow remains unchanged.

The outlook came as the company missed analyst expectations for its third-quarter results, despite profits more than doubling on the sale of its non-controlling interest in The Food Network Canada for $55.4 million.

Net income attributable to shareholders was $89.9 million or $1.07 per diluted share, an increase from $43.2 million or 51 cents in the same fiscal 2012 period.

Excluding the gain on The Food Network, Corus earned $34.5 million or 41 cents per share, missing analyst expectations of 52 cents per share, according to a survey by Thomson Reuters.

Revenue in the three months ended May 31 was $200.1 million, down from $204.1 million.

Corus shares closed the session down 4.5 per cent, or $1.12, to $23.55 at the Toronto Stock Exchange on Thursday.

Cassaday pointed to weakness in Ontario radio station ad sales as one reason the division's results were weaker, while Vancouver and Calgary "performed very well."

Overall, revenue from radio fell to $47.1 million from $49.3 million.

But it was the lack of interest in the Beyblade franchise -- which Cassaday called "expected" last quarter -- that hit the company's results the hardest.

Beyblades are a series of spinning tops that spawned a line of toys and TV shows and once added millions of dollars to Corus' pocket each quarter through production and licensing. A toy franchise called Bakugan has found a similar success through Corus' animation division Nelvana.

The company doesn't break out how much the toys and programs contribute to its overall earnings, but kids franchises can prove to be a highly lucrative but extremely volatile industry.

"When we hit the ball out of the park, which we've done four years kind of in a row now with two boys action hits, Bakugan and Beyblade, it sure feels good," said Doug Murphy, president of Corus Television.

"But when you have to reset and come off that, as we're doing right now, it stings a little bit."

The company hopes to counteract the downturn with four new properties in development at Nelvana, two that will be marketed toward preschoolers and two for boys.

Later this summer, Corus will launch a line of toys for the series Mike the Knight in North America, after a rollout in the United Kingdom earlier this year.

In its television business, the company reported revenue declined to just under $153 million from $154.7 million a year earlier.

-- The Canadian Press

Republished from the Winnipeg Free Press print edition July 12, 2013 B11

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