TORONTO - The head of Canada's largest media company urged investors Friday to ignore the "noise" of its massive $1-billion fourth-quarter writedown and knee-buckling $3.7-billion debt load and focus on gains it is making in its core businesses.
Speaking after CanWest Global Communications Corp. (TSX:CGS) said it lost $1.02 billion in the quarter ending Aug. 31, CEO Leonard Asper noted revenues and operating profits both rose in 2008.
"Investors should focus on the fundamentals of our business and not some of the noise from the writedown," Asper said.
"We delivered industry-leading profits in publishing and speciality television and digital media."
The non-cash writedown on goodwill and broadcast licences reflects sharply reduced profitability and lower expectations for the company's conventional TV assets, which includes the Global television network
Asper called it another example of "how challenged conventional television is in Canada today."
Other major broadcasters, including those in the U.S. and abroad, are also facing rough times as the viewers splinter among a plethora of speciality and digital channels.
"The conventional television revenue model continues to be challenging -- I would dare say broken," Asper said.
Asper also downplayed the significance of the company's $3.7-billion debt taken on from past acquisitions of the former Southam newspaper chain from Conrad Black's Hollinger group in 2001 and spending $2.3 billion for the Alliance Atlantis specialty TV broadcaster two years ago.
About two-thirds of the Alliance debt is held by New York-based investment bank Goldman Sachs, which can effectively take over CanWest if the Canadian broadcaster falls short of debt, cash-flow and rate-of-return benchmarks.
But Asper called the company's staggering debt "manageable."
"It really is in four separate companies," Asper said. "The cash flows match the debt in each of the different subsidiaries."
Still, servicing that debt did cost almost $90 million in the quarter, a 50 per cent increase over 2007, the company reported.
In trading Friday on the TSX, shares in Winnipeg-based CanWest, which have shed more than 90 per cent of their value this year, fell another 10 cents or 12.5 per cent to 70 cents each.
Despite Asper's somewhat rosy spin, one analyst called CanWest a precarious "house of cards" with $9.4 billion in financial commitments over the next five years.
"They're careful to stress they have debt in four different places but there's very little wiggle room in any one of those places," the analyst said, speaking on condition he not be named.
"Their financial position is very serious (although) there's nothing really in the near term that could catalyze some sort of action towards insolvency or bankruptcy."
While the writedown is non-cash, it does represent a real loss of value, he said.
"Aside from that, you can ignore the $1-billion writedown and look at the operating results and they're very, very weak as well."
On Wednesday, CanWest announced it was slashing five per cent of its 10,500-strong Canadian workforce -- a loss of 560 jobs -- as it struggles to deal with brutal economic conditions and fierce competition.
The cuts drew criticism from the unions that represent workers at CanWest papers. Union leaders accused CanWest of burying itself in debt with a binge of acquisitions.
"As with financial institutions south of the border, it is a victim of its own greed," said Peter Murdoch of the Communications, Energy and Paperworkers union.
"Notwithstanding the financial crisis, this company's problems are largely of its own making -- the result of very bad financial decisions."
The Toronto-based analyst said it's unlikely the latest cuts, which come on top of several hundred jobs cut earlier, would do much to reverse the company's ailing fortunes.
The quarterly loss of more than $1 billion reported Friday contrasts with a $197-million profit in the fourth quarter of fiscal 2007, amounting to a loss of $5.73 a share versus a gain of $1.11 a year ago.
Excluding the impact of the massive writedown, CanWest reported an adjusted loss of $38 million for the quarter, better than the year-earlier adjusted loss of $65 million.
The company, which publishes the National Post newspaper and dailies in cities from Vancouver to Montreal, noted fourth-quarter revenues were up to $726 million from $678 million a year ago.
"We like the position we're in because we've got very strong brands and we think we're sitting on the cusp of a digital age that may provide some real opportunity," Asper said.
"We see ourselves as a content company."
Asper again hammered the federal broadcast regulator for rejecting a request from Global, CBC, CTV and others to to let them charge cable and satellite distributors for carrying their channels.
Such charges would have pumped another $300 million a year into the industry's coffers.
"We're not going to just stand by and have our revenue taken away and still have these cost obligations," Asper told analysts.
"We will aggressively be pursuing changes."
In its financial report, CanWest said the company has already sold some of its properties to raise money and continues to evaluate its businesses with an eye to selling or eliminating "non-productive or non-core assets." CanWest has also renegotiated some debt agreements with creditors.
The analyst said he didn't expect cuts to programming that might turn off more viewers and have a direct revenue impact given CanWest is up against a determined CTV, which has been spending big dollars to buy popular shows.
For the full 2008 year, CanWest lost $1.04 billion -- including the writedown -- versus a year-earlier profit of $279 million.
However, adjusted earnings were $21 million, compared with a $6-million loss for all of 2007 as revenue for 2008 increased 10 per cent to $3.15 billion.
Controlled by the Asper family, CanWest is an international media company with interests in television, newspapers and the Internet in Canada, Australia, New Zealand, Indonesia, Malaysia, Singapore, Turkey, U.K and U.S.
