CanWest finally in black

By PETER GRIFFIN

A buoyant advertising market, cheaper programming costs and some crowd-pulling TV shows has helped CanWest MediaWorks to its first annual profit as a listed company.

But its $60.9 million operating profit for the year to August, despite beating its listing prospectus forecast, failed to excite the market, with CanWest's share price closing down 5c at $1.72.

The operating profit was an increase of 55 per cent, with the two divisions of CanWest, TV Works and RadioWorks dramatically improving their operating performance.

Revenue increased 8 per cent to $228.7 million.

James Lindsay, domestic equity manager at Guardian Trust, which holds CanWest shares among its managed funds, said there had been some "overexcitement" around industry advertising rates that were expected to boost revenue further.

"Those expectations were built up from some of the rate card rises you've seen at TVNZ," he said.

Lindsay said CanWest's performance was good considering investors in the initial public offering had got in at $1.53 a share.

CanWest did not report a bottom-line result. Chief financial officer Peter Crossan said to do so would be like comparing "apples with cucumbers" because the separate Canwest and MediaWorks companies had different tax and goodwill positions before the merger and were owned through different structures. CanWest would report its bottom-line when it had a full year to compare against.

A free-to-air TV broadcaster with TV3 and the youth-oriented C4 channels forming its TVWorks division, CanWest managed to turn around C4 thanks to cheaper programming costs.

The channel, which has a strong focus on local music videos from artists like Scribe and Goodshirt, went from a $7.1 million operating loss to a $519,000 operating profit.

"The budgeted plan for C4 for year one was to achieve break even, but we did better than that by being able to reduce the cost going from TV4 to C4 by between $6 million and $7 million," chief executive Brent Impey said.

C4, which celebrated its first birthday on Saturday, is subsidised by NZ on Air funding. However, Impey said a shift from foreign-bought drama programming had cut most of the cost.

NZ on Air's deputy chief executive Bernard Duncan was unable to provide C4 funding details by press time.

The popular CSI crime shows had held up TV3's ratings. Impey said TV3 held 24 per cent of the 18 to 49 age group in viewership.

Sky's claim that it now rivalled TV3 in viewership did not mean Sky was as attractive to advertisers.

"Sky refers to the whole 50 channels in total, whereas we're running one channel only. Media buyers make decisions on the number of eyeballs watching," Impey said.

A slate of new programming for TV3 was planned, with CSI: New York and the Australian comedy series Kath & Kim screening next year.

RadioWorks - which has More FM, Solid Gold, Radio Pacific and The Rock among its stable of 17 radio stations - increased revenue 10 per cent and operating profit 25 per cent to $29.2 million.

On the agenda is a new Auckland FM station to start next year using a spectrum licence CanWest picked up for $6.3 million in December.

Impey expected the advertising market to remain strong.

"We've certainly started the first quarter strongly. At this stage, there's no indication of the slowdown some economists are forecasting."

He would not comment on TVNZ chief executive Ian Fraser's publicly held desire to plough TVNZ dividends back into programming rather than handing the cash over to the Government.