Corus Entertainment Inc. Class B · TSX:CORS
Corus Entertainment Inc. Class B — Investor Presentation (May 2011)
35 slides from Corus Entertainment Inc. Class B's investor presentation, May 2, 2011
Slide 1: Investor Presentation: Built for Growth
INVESTOR PRESENTATION MAY 2, 2011 BUILT FOR GROWTH Vision: To be globally recognized as Canada’s most influential entertainment company
Slide 2: Safe Harbour Disclosure
SAFE HARBOUR DISCLOSURE To the extent any statements made in this presentation contain information that is not historical; these statements are forward-looking statements within the meaning of applicable securities laws. These forward- looking statements related to, among other things, our objective
Slide 3: Investment Highlights
INVESTMENT HIGHLIGHTS Leading Player Market leading brands in Television, Radio and Content in the Canadian Diversified media portfolio Media Sector Significant scale and international distribution network Expertise in brand building Leveraging Growth Opportunities Ability to grow and mone
Slide 4: Leading Player in Canadian Media Sector: Market Leading Brands
LEADING PLAYER IN CANADIAN MEDIA SECTOR: MARKET LEADING BRANDS 75% of Revenues (LTM) Leading Specialty and Pay TV Broadcaster 81% of EBITDA (LTM) (1) • W Network – flagship women’s channel Television • OWN – launched in 6M homes Mar’11 (50%) (50%) • Corus Kids – Canada’s leading Kids channels (33.3%
Slide 5: Diversified Media Portfolio
LEADING PLAYER IN CANADIAN MEDIA SECTOR: DIVERSIFIED MEDIA PORTFOLIO Diversified Favourable Revenue Mix Revenue Sources TV (Kids & International) Subscription 31% 37% Radio Advertising TV 25% (Pay & 48% International Specialty) and Other 44% 15% Well diversified revenue stream provides growth opport
Slide 6: Expertise in Brand Building: A Case Study
EXPERTISE IN BRAND BUILDING: A CASE STUDY • Cosmo is growing well and now reaches 4.5 million subscribers • Advertising revenues have grown 50%+ each year, on average • Positive EBITDA contributor in less than 3 years • Cosmo ranks 2nd among digital networks for its key demographic, W 18-34 (1) 4.5
Slide 7: Expertise in Brand Building: Leveraging the Corus Advantage
EXPERTISE IN BRAND BUILDING: LEVERAGING THE CORUS ADVANTAGE Corus is investing in its intellectual property to drive growth through broadcast revenues, international sales and merchandising Beyblade is the #1 toy brand in its category in Germany and Spain and top 3 in its category in other major mar
Slide 8: Growing Our Audiences: Specialty TV Verticals
GROWING OUR AUDIENCES: SPECIALTY TV VERTICALS Corus Television has built three strong customer verticals KIDS FAMILY WOMEN (2-11) (6-54) (18-54) Provides content to Kids and Family verticals, which assists Corus in meeting its regulatory obligations 8
Slide 9: Co-View Audiences: A Growth Opportunity
CO-VIEW AUDIENCES: A GROWTH OPPORTUNITY • As identified by BBM • Improves advertising ROI • Across breadth of categories Recall DOUBLED When Co-Viewing Source: YTV Observer Research Report, Summer 2009; Decode Research 9
Slide 10: Growing Our Audiences: Kids TV Co-View Growth
GROWING OUR AUDIENCES: KIDS TV CO-VIEW GROWTH • Co-view audiences attractive to advertisers and maximized by complementary scheduling across our key brands • Excellent traction with co-view segment on YTV since transition to PPM • Key growth area continues to be leveraged by Corus YTV Co-View Revenu
Slide 11: Growing Our Audiences: OWN: Poised for Growth
GROWING OUR AUDIENCES: OWN: POISED FOR GROWTH • Launched on March 1, 2011 to subscriber base of 6 million households • Projected to be accretive by end of fiscal 2011 • OWN is generating 3 times more ad revenue year-over-year than VIVA • Advertising community responding favourably to OWN, buying int
Slide 12: Growing Our Audiences: OWN: The O Factor
GROWING OUR AUDIENCES: OWN: THE O FACTOR • As of September, 2011, OWN will be the only place that viewers can access Oprah Fall Programming Highlights: • Oprah Encore • 60 episode best-of compilation of Oprah’s favourite moments packaged with new footage taking a behind-the-scenes approach • Oprah’s
Slide 13: Growing Our Audiences: Women's TV
GROWING OUR AUDIENCES: WOMEN’S TV • Strong growth in Women’s portfolio • OWN, Cosmo TV and W Movies are additive to Corus’ strength in this segment, serving to enhance the Women’s vertical • Significant upside exists as we grow our newer brands and continue to strengthen W 30 2 Q3 Launch of OWN is 2
Slide 14: Canadian English Specialty: Ad Revenue and Audience Share
CANADIAN ENGLISH SPECIALTY: AD REVENUE AND AUDIENCE SHARE Revenue Development Index 44 49 50 57 59 57 58 63 64 64 66 60% 54% 55% 52% 53% 50% 50% 50% 46% 47% 45% 43% 41% 40% 36% 34% 35% Share of 30% 31% English 28% 29% Canada 30% 26% 23% 21% 20% 18% 10% 0% 00/01 '01/02 '02/03 '03/04 '04/05 '05/06 '06
Slide 15: Corus' Specialty TV Audience Share
GROWING OUR AUDIENCES: CORUS’ SPECIALTY TV AUDIENCE SHARE Corus AMA 180.2 +69% 106.4 103.8 +66% 62.7 A25-54 W25-54 2007/08 2010/11 Corus has made significant progress in the last three years and we continue to grow Source: BBM Canada TV Meter/Nielsen Media Research; Weeks 1-26; M-Su 2a-2a; Total Can
Slide 16: Growing Our Audiences: Premium Television
GROWING OUR AUDIENCES: PREMIUM TELEVISION • After highly successful free-view campaign on Movie Central, major milestone reached… 1 MILLION PAID SUBSCRIBERS… and strong Q3 pacing • Long-term agreements in place with HBO (5+ years left) and Showtime • Provides subscribers with extensive mix of exclus
Slide 17: Our Take on Over the Top (OTT)
OUR TAKE ON OVER THE TOP (OTT) • Premium Television remains a growth business with a compelling consumer value proposition • Studio exclusivity for feature film pay window • Exclusive branded, scripted drama increasing in value to this audience • US cord cutting not principally a result of OTT • Neg
Slide 18: Positioning for Future Growth: Robust Distribution Market
POSITIONING FOR FUTURE GROWTH: ROBUST DISTRIBUTION MARKET • Canadian TV distribution market projected to continue growth as households migrate to digital environment • Digital penetration expected to increase from 67% to 84% in 2014 Canadian TV Distribution 8 7 Households (millions) 6 5 4 3 2 1 - 20
Slide 19: Positioning for Future Growth: TV Everywhere
POSITIONING FOR FUTURE GROWTH: TV EVERYWHERE • Consumers have virtually an insatiable appetite for more media on a multitude of platforms • Research indicates new services are complementary and additive to content consumption Monthly Hours Spent per User 2+ 210 180 Video on a Mobile Phone Monthly ho
Slide 20: Positioning for Future Growth: Corus in New Distribution Environment
POSITIONING FOR FUTURE GROWTH: CORUS IN NEW DISTRIBUTION ENVIRONMENT • Migration to digital distribution will increase growth opportunities for Corus digital channels • Strong brands required to stand out in digital channel universe • While traditional TV maintains audiences, new technologies will c
Slide 21: Technology Focused on Our Customers: HD Launches
TECHNOLOGY FOCUSED ON OUR CUSTOMERS: HD LAUNCHES • New channels at low capital cost; all channels now HD capable with integrated non-linear capability • Leveraged technological advantage of new Corus Quay facility to launch several key brands in HD, with more to follow… • Delivering value to our BDU
Slide 22: Regulatory Environment: Group Licensing
REGULATORY ENVIRONMENT: GROUP LICENSING New License Term Begins Sept 2011 • Reduced Canadian Content on analog channels: YTV, CMT, Treehouse, OWN & W • Greater scheduling flexibility due to removal of restraining conditions such as: • type of content mix • source of content • expansion of nature of
Slide 23: Corus Radio: Revenue Growth
CORUS RADIO: REVENUE GROWTH • Forecasting continued solid growth from the Ontario Radio market and Calgary • Competitively positioned in terms of formats, ratings and demographic appeal • Growth from a broad range of advertising categories • Implementing programming changes in Vancouver and Edmonton
Slide 24: Advertiser Confidence in Radio
ADVERTISER CONFIDENCE IN RADIO TRAM Growth Toronto Edmonton Calgary In addition to a stable ratings currency, advertisers are expressing greater Quebec City confidence in electronic ratings for radio Ottawa/Hu… Kitchener The Top 3 growth markets in radio Vancouver spending year to date are PPM marke
Slide 25: Corus Radio: Operating Leverage
CORUS RADIO: OPERATING LEVERAGE • Margins targeted at 30% for F’11, an improvement of 5% following sale of Quebec Radio assets • Increased Cash Flow Radio EBITDA Growth % Scenario - 2011 Revenue Growth 2% 3% 4% 5% 6% Expense Growth 1% 5% 9% 13% 17% 21% 2% 2% 6% 10% 14% 18% 3% -1% 3% 7% 11% 15% 4% -4
Slide 26: Corus Radio: Regulatory – Bill C-32
CORUS RADIO: REGULATORY – BILL C-32 • Potential for meaningful cost savings for broadcasters • Bill C-32 would have exempted the copies broadcasters make of music when they place it into computerized playback systems • Election was called before the Bill was considered by parliament • Potential for
Slide 27: 2011 Financial Priorities: Maintain Strong Balance Sheet
2011 FINANCIAL PRIORITIES: MAINTAIN STRONG BALANCE SHEET Current leverage: 2.2x S&P: BB+ ( ↑ from BB at Jan’11) Comfort zone: 3.0x - 3.5x DBRS: BBB Maximum for an acquisition: 4.0x • Unused lines of credit = access to $400M - $600M of capital for acquisitions • Fixed rate financing in place for 6 ye
Slide 28: 2011 Financial Priorities
2011 FINANCIAL PRIORITIES • Return to dividend growth • Annual dividend increased 25% to $0.75 (from $0.60) per Class B Share in Oct’10 • Current dividend yield of 3.8% • 5 year Dividend CAGR of 24.6% as at Aug 31’10 • Rated #12 on the S&P/TSX Dividend Aristocrats Index • Dividend Reinvestment Plan
Slide 29: Stock Performance
STOCK PERFORMANCE Stock Performance as at Feb 28, 2011 (Q2) CAGR - 5YR Company CAGR - 1 YR CAGR - 5 YR (incl. Dividends) Corus 21.8% 3.9% 6.4% Canadian Peers (CDN $) Astral 12.3% 3.6% 4.9% Torstar 124.5% -9.0% -6.3% TVA -2.3% -3.3% -1.9% U.S. Comparables (US $) EMMIS 22.2% -41.7% -41.7% Entercom 28.
Slide 30: Human Capital: Balanced Scorecard Overview
HUMAN CAPITAL: BALANCED SCORECARD OVERVIEW • Corus has a highly motivated, skilled workforce • Productivity and employee engagement has significantly increased in past year Measure 2010 2009 Net Turnover 5.4% 6.39% Work Environment Employee Engagement 77.0% 72.5% Revenue/Employee – Radio $263,495 $2
Slide 31: Strong Financial Performance: Revenue and EBITDA Growth
STRONG FINANCIAL PERFORMANCE: REVENUE AND EBITDA GROWTH Revenue EBITDA (In C$ millions) (In C$ millions) 768 799 271 702 718 722 249 256 660 236 250 211 2006 2007 2008 2009 2010 LTM 2006 2007 2008 2009 2010 LTM Strong revenue and EBITDA growth driven mainly by ad revenue growth 31
Slide 32: Fiscal 2011: A Return to Strong Free Cash Flow
FISCAL 2011: A RETURN TO STRONG FREE CASH FLOW • Capital build-out of Corus Quay is virtually complete • Fiscal 2011 free cash flow will exceed $100M • Annual dividend increased to $0.75 per Class B Share in Q1’11 Operating and Free Cash Flow: 2006 – 2011E 200 Free Cash Flow Operating Cash Flow Mill
Slide 33: Upside Potential on Valuation
UPSIDE POTENTIAL ON VALUATION Valuation Upside 27.00 25.00 $22-24 23.00 Share Price ($) 21.00 19.00 17.00 15.00 7.8x 8.5x 9.0x 9.5x EV/EBITDA Multiple Current trading multiple “The Canadian media sector is off -7% from the cyclical peak on February 8th with EV/EBITDA multiples contracting 0.5x – 1.0
Slide 34: In Summary: Key Growth Opportunities
IN SUMMARY… KEY GROWTH OPPORTUNITIES Corporate • Strong free cash flow and dividend yield • Ability to leverage investment in technology to expand digital footprint at low cost Television • OWN’s exclusive, original programming and unique positioning will drive further growth in our Women’s vertical
Slide 35: Conclusion
CONCLUSION Leading Player in the Canadian Media Sector Leveraging Growth Opportunities Strong Financial Performance Seasoned Leadership 35
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