October 27, 2010 / 1:35 PM / 7 years ago

UPDATE 3-Ad recovery helps Canada's Corus, Astral

* Both companies cite strong advertising revenue

* Astral TV ad revenues jump 25 pct

* Corus maintains 2011 guidance, raises dividend 25 pct (Recasts to add Astral results, analyst call)

By Alastair Sharp

TORONTO, Oct 27 (Reuters) - Canadian broadcasters Corus Entertainment CJRb.TO and Astral Media ACMa.TO were aided by a bounce in advertising spending in their most recent quarters, suggesting an advertising recovery may come quicker than expected.

Astral, which is Canada’s largest radio broadcaster, the third-largest outdoor advertiser and an operator of specialty-TV channels, reported a 2 percent rise in net profit for the latest quarter on Wednesday. Corus, which owns specialty-TV channels and radio stations, posted a 64 percent fall in quarterly profit but raised its dividend.

Canadian advertising spending fell by at least 6 percent in 2009 and analysts have said it will likely not return to pre-recession levels until 2011. Credit Suisse expects mid-single digit growth for 2010 and 2011.

But Montreal-based Astral said it had a 25 percent increase in television advertising revenue in the quarter, while Toronto’s Corus said revenue from specialty advertising rose 22 percent and overall advertising revenue expanded by 10 percent.

Both companies, each of which owns regional rights to HBO Canada, said advertising growth far exceeded gains in income from subscribers.

Astral Chief Executive Ian Greenberg told an analysts’ call that the growth in the company’s fiscal fourth quarter would likely not be repeated in its first quarter, but that he expected television advertising growth in “low double digits” and radio “somewhere in the mid-single digits”.

“We are in a low visibility environment and advertisers’ investment decisions continue to be last-minute decisions,” he said.

Excluding one-off items, Astral reported a net profit of C$45.1 million ($43.8 million), or 80 Canadian cents a share. Revenue rose 9 percent to C$238.4 million.

Analysts had expected earnings of 64 Canadian cents a share, on revenue of C$233.5 million, according to Thomson Reuters I/B/E/S.

Corus, meanwhile, raised its dividend by 25 percent despite the 64 percent drop in profit, which it blamed on higher expenses.

For Corus’s television unit, “strong specialty advertising was offset somewhat by a decline in merchandising and other revenues,” BMO Capital Markets analyst Tim Casey wrote in a note to clients.

Corus’s net income fell to C$6.8 million, or 8 Canadian cents a share in the quarter ended Aug. 31, compared with C$18.7 million, or 23 Canadian cents, a year earlier.

The Toronto-based company said earnings were hit by restructuring costs and a radio tariff totaling more than C$20 million, or 16 Canadian cents a share.

Excluding one-time items, analysts had on average expected earnings of 28 Canadian cents a share, according to Thomson Reuters I/B/E/S.

Revenue for the company, which owns specialty-TV channels such as Movie Central and Treehouse, rose 4 percent to C$202.8 million, short of the C$206 million estimated on average by analysts.

Corus, which is controlled by Canada’s Shaw family through its ownership of the majority of Corus’s Class A voting shares, said its board had approved an increase of 15 Canadian cents in its annual dividend to 75 Canadian cents a share.

The company said it is well-positioned to meet its 2011 guidance of earnings before interest, taxation, depreciation and amortization (EBITDA) of between C$285 million and C$295 million and free cash flow of C$100 million.

Corus’s non-voting Class B shares closed 2.5 percent higher at C$22.08 on the Toronto Stock Exchange on Wednesday, while Astral added 1.4 percent to C$39.88.

Corus shares have risen 11 percent this year while Astral has gained more than 19 percent.

$1=$1.03 Canadian Editing by Peter Galloway

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