CanWest predicts higher profits despite downturn

Brent Impey

CanWest MediaWorks - owner of TV3, C4 and RadioWorks - expects growing advertising revenue to drive profit higher this year despite the slowing economy.

Chief executive Brent Impey said the company forecast advertising revenue growth in the current year of 3 to 4 per cent.

"I think that the market has sort of held up in the last four to five months and we remain confident therefore that we will exceed last year's profit, acknowledging that Campbell [Live] and RadioLive particularly add to our costs," he said.

Impey declined to say how much higher the current year's profit was expected to be.

In the 12 months to August 2005, CanWest made a trading profit of $67.8 million, up 11 per cent on its prospectus forecasts, and a net profit of $13.1 million, up 89 per cent on its prospectus forecasts.

UBS has forecast CanWest's trading profit to rise 5 per cent to $71.2 million in the year to August.

UBS chief analyst David Lane expects CanWest's advertising growth to outperform the market. He expects television advertising across the industry to rise 2.6 per cent and radio to rise 3.1 per cent.

In the first three months of the current financial year, CanWest said revenue was up 3.6 per cent over last year, but trading profit was down 10.7 per cent, mainly due to the cost of introducing the Campbell Live current affairs programme.

Impey said these expenses had paid off and would continue to drive advertising growth.

"In terms of television, we have gained share, principally through our news, Campbell show and our peak time schedule," he said.

"We've gained share against our competitors in television, which is driving our revenue share above the general ad market growth."

UBS' Lane said there was a lag between improved ratings and when advertisers were prepared to pay more.

"An element of that will impact in 2006, but definitely 2007," he said.

Operating earnings in the 12 months to August 2007 will rise to $81 million, UBS forecasts.

TV3 is to continue with its recent push into more New Zealand-made content this year, with Campbell Live continuing and new series of Bro Town and Outrageous Fortune.

Also continuing to drive advertising growth was the April launch of RadioLive as a national talk station, said Impey. The move "gave us access to advertisers who previously weren't advertising with us because we didn't have a national talk network".

Shares in CanWest were sold to investors at $1.53 at the company's float in July 2004. Since then they have consistently traded above their float price to a high of $2.44 in January last year. The shares closed yesterday at $1.69.

UBS has a "buy" rating on the stock, with a 12-month price target of $2.03.