Corus shares hit record low as firm reduces dividend, takes $1B writedown

Corus Entertainment Inc.’s stock plummeted to a record low after it slashed its dividend and devalued its television and radio assets by $1 billion, a drastic reality check for a traditional media player grappling with industrywide digital disruption.

The Toronto-based broadcasting and production firm’s stock fell nearly 18 per cent to $5.13 on the Toronto Stock Exchange on Wednesday after it announced it will cut its dividend by 79 per cent to 24 cents per non-voting share as of Sept. 1. It will instead direct the cash to more quickly repay the debt it was saddled with two years ago when it bought Shaw Communications Inc.’s media assets for $2.65 billion.

Corus also wrote down its TV and radio assets by $1.031 billion to reflect current market value, a non-cash goodwill impairment charge that resulted in a quarterly loss of $935.9 million in the three months ended May 31. Without the charge, its adjusted profit increased to $78 million from $70 million in the same period last year, largely thanks to reduced costs.

Chief executive Doug Murphy cautioned investors to “anticipate a bumpy road over the short term” as television advertising revenue, which dropped more than Corus expected this quarter, is likely to continue its decline. “As you are all aware, our industry is in a state of flux as new choices emerge and consumer behaviours change,” he told analysts.

But Murphy said the new capital allocation plan, which aims to reduce leverage to under three times debt to segment profit, presents a “thoughtful, realistic” strategy that will prepare Corus for the future. It plans to focus on key content targeted at the “most coveted audiences” of women and families, follow viewers online and use technology to improve revenue, be it through automated, micro-targeted advertising and the ability to insert ads into video on demand offered over cable providers’ new set-top boxes that use Comcast’s X1 platform.

Cormark Securities analyst David McFadgen lauded the tech efforts, but questioned whether they will ever be able to generate enough revenue to compensate for the revenue declines on the traditional side of the business.

Murphy said it’ll take a few years, but hopes the strategy will give investors confidence.

While the dividend cut was even higher than predicted, Desjardins analyst Maher Yaghi said in a note to clients that deleveraging is “a better use of free cash flow than dividends at this moment.”