Corus Entertainment Inc. Class B · TSX:CORS
Corus Entertainment Inc. Class B — Investor Day (September 2007)
73 slides from Corus Entertainment Inc. Class B's investor day presentation, Sep 26, 2007
Slide 1: Investor Day September 26, 2007
Investor Day September 26, 2007
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 objectives
Slide 3: Agenda
Agenda Opening Remarks/Overview 9:00 a.m. – 9:10 a.m. Business Reviews: Nelvana Enterprises 9:10 a.m. – 9:30 a.m. Radio 9:30 a.m. – 9:50 a.m. TV 9:50 a.m. – 10:10 a.m. Financial Overview 10:10 a.m. – 10:30 a.m. Break 10:30 a.m. – 10:45 a.m. Panel and Q&A 10:45 a.m. – 12:00 p.m.
Slide 4: F'07 In Review
F’07 In Review 1. Share Price: +26%. 2. Active Share Buyback Program: 2.5% of public float. 3. Dividend increased: 16%. 4. TELETOON position increased to 50%. 5. Sold Documentary Channel and CHRC AM in Quebec City. 6. Acquired CJZZ FM Winnipeg, CKBT FM Kitchener and CIGR FM Sherbrooke.
Slide 5: F'07 In Review (cont'd)
F’07 In Review (cont’d) 7. Secured new licences: Cosmopolitan TV 6 TLN licences (Music Television Español, Spanish Sports TV1, Spanish Entertainment TV1, Spanish Sports TV2, Spanish Entertainment TV2, Italian Entertainment TV) 4 new FM flips in Quebec (CKRS FM Saguenay, CJRC FM Gatineau, CHLT
Slide 6: F'07 In Review (cont'd)
F’07 In Review (cont’d) 9. Reformatted CKAC, Montreal. 10. Launched 4 new Nelvana brands: Ruby Gloom (YTV) Grossology (YTV) Bakugan (TELETOON) Wayside (TELETOON) 11. Announced deal with the City of Toronto to consolidate Corus Toronto facilities on the Waterfront
Slide 7: Major Priorities for F'08
Major Priorities for F’08 1. Intense focus on growth of core assets. 2. Quebec Radio turnaround. 3. Cost containment/margin stability. 4. Plan for a great building.
Slide 8: Why We Are a Good Investment
Why We Are a Good Investment 1. Solid management team with no turnover. 2. No distractions. Focused. Proven track record on execution. 3. Upside in Quebec Radio and Nelvana Enterprises. 4. Downside risk in advertising sales but the economy seems solid.
Slide 9: Why We Are a Good Investment (cont'd)
Why We Are a Good Investment (cont’d) 5. Developing our Women’s brands – Cosmo is a good first step. 6. Strong Balance Sheet with ability to: Invest in Acquisitions Increase dividend Buyback shares
Slide 10: Nelvana Enterprises
Investor Day September 26, 2007 Nelvana Enterprises
Slide 11: Overview
Overview Doing what we said we’d do Investing for growth
Slide 12: Doing What We Said We'd Do
Doing What We Said We’d Do 12 quarters of positive EBITDA and self-funded Disciplined financial management Exploited the Corus Advantage
Slide 13: Disciplined Financial Management
Disciplined Financial Management Nelvana has aggressively cut G & A expenses 2004 2005 2006 G & A* $ 29.7 $23.4 $20.8 EBITDA* $(83.7) $ 3.6 $ 5.5 EBITDA % - 4.4% 7.7% * millions
Slide 14: Exploiting the Corus Advantage
Exploiting the Corus Advantage CRTC requires broadcasters to acquire Canadian content Corus Kids Television develops programs that meet Canadian content requirements Nelvana Enterprises completes the financing in exchange for broadcast, home video and worldwide merchandising rights
Slide 15: Exploiting the Corus Advantage: Ruby Gloom Case Study
Exploiting the Corus Advantage: Ruby Gloom Case Study Ruby Gloom – $345,000 per episode Produced by Corus Kids Television Corus Industry Budget $ 345K $ 345K Tax Credits & Licence Fee (273K) (100K) Nelvana Enterprises Cost $ 72K $ 245K Less risk, better margins!
Slide 16: Investing for Growth
Investing for Growth Creating and exploiting great brands Launching international channels Exploring broadband opportunities
Slide 17: Great Brands
ue Great Brands _Ar_ YB: 3 DI-GarA Ruby Cleon paKur Sre~VpPpPeErRsS happiest gir: acl 4 n the wo orld tAetreTs ¥ eee’ BABAR. BATTIEERAWirRSyJ = >» q — : ENTERTAINMENT
Slide 18: The Backyardigans
The Backyardigans Co-production with Nickelodeon Strong ratings performance in all broadcast markets (27 countries in 14 languages) Merchandise on shelf for Holiday Season: Canada United Kingdom USA Benelux Mexico Australia South America Fisher-Price international revenues tren
Slide 19: Bakugan
Bakugan Canada/Japan co-production Broadcast launch in Japan (April), Canada (July), Korea (August) and Taiwan (September) Rating well on TELETOON Successful Canadian toy launch Global multi-territory broadcast licence with Cartoon Network Worldwide merchandise launch Fall 2008/Spring 20
Slide 20: Great Brands – Our Brand Pipeline
Great Brands – Our Brand Pipeline
Slide 21: Launching International Channels
Launching International Channels KidsCo is a partnership with NBC Universal and DIC Entertainment Seasoned management Low cost distribution Deep libraries The best of the independent production community available in up to 40 countries once fully deployed Launched Central and Eastern Eur
Slide 22: Launching International Channels
Launching International Channels Qubo is a multi-platform, bilingual (English and Spanish) network for Kids 2-11 promoting literacy and values Five extraordinary partners: Corus, Entertainment Rights, ION Media Networks, NBC Universal and Scholastic NBC Saturday morning ratings up more than 50
Slide 23: Exploring Broadband Opportunities
Exploring Broadband Opportunities
Slide 24: Exploring Broadband Opportunities
Exploring Broadband Opportunities
Slide 25: Recap
Recap Doing what we said we’d do Delivering on EBITDA Disciplined financial management Maximizing efficiencies by exploiting the Corus Advantage Investing for growth Leveraging great brands Launching international channels Exploring broadband opportunities
Slide 26: Radio Division
Investor Day September 26, 2007 Radio Division “Growing With Confidence”
Slide 27: Corus Radio Investor Day
Corus Radio Investor Day Strength of radio industry in Canada Corus Radio 2007 Strategy for 2008: Quebec Retail sales focus Growing the interactive business
Slide 28: Radio Continues to be an Important Medium
Radio Continues to be an Important Medium 93% of Canadians listen weekly 21.6 hours of radio usage by listener (18+) Radio is the top-ranked media for daily and weekly reach for: Adults 18+ that are working/with children/HH income +$50K Radio reaches 91% of 12-17 year olds weekly Over 50
Slide 29: Radio Continues to be an Important Medium
Radio Continues to be an Important Medium The top reasons for solid radio tuning is tied to lifestyle - more time spent in the car and the ability to listen at work: 77% of Canadians listen while driving 53% listen while relaxing at home, 41% listen at work Radio is the best medium to reach
Slide 30: Share of Daily Media Time 18+
Share of Daily Media Time 18+ Radio continues to enjoy high use Adult Canadians spend 1/3 of their media time with radio Time spent with radio has remained the same compared to 2006 study results Internet share consistent with 2006 study at 17% share Foundation Research 2007 Magazines Intern
Slide 31: Radio Share of Advertising Spend
Radio Share of Advertising Spend Total advertising pie is growing Ad Spend by Media - 2005 Internet spending is the fastest Radio 15% growing medium Radio projected to maintain share New spapers 31% Magazines of advertising spend 10% Out-of-Hom e 4% Internet 5% Media 2005 2010 CAGR TV 35% TV $
Slide 32: Corus Radio Ratings and Penetration Strong
Corus Radio Ratings and Penetration Strong 12+ 12+ 12+ 12+ Market Share # Stations Share # Stations Share # Stations Share # Stations CORUS Astral/Standard CHUM Rogers Toronto 16.9 2 FM 1 AM 18.9 2 FM 1 AM 14.2 1 FM 1 AM 26.1 2 FM 2 AM Vancouver 29.2 2 FM 2 AM 8.7 1 FM 1 AM 13.6 2 FM 1 AM 21.2 2 FM
Slide 33: Corus Radio Large Market Penetration Strong
Corus Radio Large Market Penetration Strong Large Market Stations Corus 36 Astral/Standard 30 CHUM 17 Rogers 21
Slide 34: Radio's Secret Weapon: Internet
Radio’s Secret Weapon: Internet Media use by daypart Radio and the Internet are Adults 18+ complementary media: 70% 36% of Canadian adults tune 60% in while online 50% Daypart use of the two media 40% is complementary 30% Radio drives consumers to 20% websites; 56% of adults look 10% for adv
Slide 35: 2007 Key Accomplishments
2007 Key Accomplishments Record year for Revenue and EBITDA Ratings stability and growth in major markets Acquisition of CanWest radio stations in Kitchener and Winnipeg Will deliver $3.5M in revenue for F’08 Quebec: Leadership and structural changes in management Creation of Groupe Fo
Slide 36: Corus Radio Strategy for 2008 Growth
Corus Radio Strategy for 2008 Growth 1. Confidence in our key people. 2. Radio industry revenue growth expected at 4-6%. 3. “EBITDA Certainty” operational theme continues on expense base. 4. Successful Quebec strategy. 5. Emphasis on retail revenue growth.
Slide 37: Quebec: Keys to Growth in 2008
Quebec: Keys to Growth in 2008 Montreal (F): Management moves complete, stronger team in place in programming and sales CKAC positioned properly in relation to CINF-CHMP-CKAC (News-Talk-Sports) combination Corus “owns” spoken word formats in Montreal (F) Canadiens long-term deal with CKAC
Slide 38: Splice Interactive
Splice Interactive Corus Radio vision: brand extension to target hyper-local retail revenue pools Evolving interactive competency: Enhanced interactivity / consumer engagement More saleable custom features Inventory consistency across all Corus websites Greater measurable usage on websit
Slide 39: Splice Interactive
Splice Interactive Examples of hyper-local focus, custom solutions which deliver better content
Slide 40: Splice Interactive
Splice Interactive CORUS N@UVELLES "REFERENCE NOUVELLES AU QUEBEC Mateo = Météo Montréal usher Aurela NOTRE CHOIX EST CLAIR. NOTRE CHOIX EST VERT. > Adhérezdés maintenant ‘la Facture Internat NOTRE CHOIX EST CLAIR. NOTRE CHOIX EST VERT. Tous Gm ESS QU aitvce > Adhétez dis maintenant a la Facture Int
Slide 41: Corus Radio: Local Retail Revenue Growth
Corus Radio: Local Retail Revenue Growth Largest piece of the radio revenue pie (68% local) Significant untapped account Revenue Splits F'07 categories Other 8% National and local agency sales are National based on audience share and 24% completely transactional Local Retail success depends
Slide 42: Conclusion
Conclusion Radio continues to be used as a primary medium by both Canadian audiences and advertisers Radio industry revenue predicted to grow 4-6% in 2008 Corus Radio ratings remain solid Corus owns the most radio stations in the largest Canadian markets Corus Radio Interactive revenues ha
Slide 43: Television Division
Investor Day September 26, 2007 Television Division
Slide 44: Corus Television
Corus Television Positioned for Continued Growth: Strong investment in programming to drive ratings Broadening sub base Expense reduction New service launches
Slide 45: Key Indicators
Key Indicators Airtime Revenue: Industry Upfront solid Bookings trend Subscriber Trends: Digital rollout Pay sub trend Broader carriage Programming: Early season ratings
Slide 46: Challenges
Challenges Competition for Women heating up Conclusion of The Sopranos Childhood obesity concerns Managing margins while funding strong investment in programming
Slide 47: Women – a Key Growth Opportunity
Women – a Key Growth Opportunity W 18+ growing stronger than men (weekly reach 4% vs. 1%) Women – CEO of household Women prefer traditional TV
Slide 48: W – Keep it Growing!
W – Keep it Growing! Comedy Block Women Experts Transformational How to Look Good Naked Gillian Moves In Early season results: +5% overall (primetime up sharply) Winners – Will & Grace, How to Look Good Naked, Monster in Law
Slide 49: Cosmo TV – Youthful Complement to W
Cosmo TV – Youthful Complement to W Cosmopolitan TV Canada Focus on lucrative W18-35 audience Launch early 2008 High Quality Fun, Fearless & Entertaining Programming
Slide 50: Cosmo TV
Cosmo TV Tap Lucrative, Underserved Female Audience W18-35 Lifestyle Age Age 18 Gap 54 Series/Movies
Slide 51: Cosmo TV
Cosmo TV Main Programming Categories: Movies, Series, Reality, Relationships, Trends & Style
Slide 52: Pay TV – Yes, There is Life After Sopranos!
Pay TV – Yes, There is Life After Sopranos! ROME 1,000,000 Final Season ROME 950,000 ROME 900,000 850,000 Season 4 Season 2 Season Season22 800,000 Final Season 750,000 Dexter Dexter Season 3B Season 2 700,000 Season 5 Aug-06 Nov-06 Feb-07 May-07 Aug-07 Nov-07 Feb-08 May-08 Aug-08 883 subs F’07 F’08
Slide 53: Pay TV Growth
Pay TV Growth Strong Sub Growth will continue in F’08 Showtime’s Dexter – Season 2 (September) Free Preview – Shaw, Bell ExpressVu and Telcos (November 9-11) Launch of HD2 – Star Choice
Slide 54: Kids TV: Lots of Opportunity
Kids TV : Lots of Opportunity A strategic relationship with Nickelodeon Advertising food to Kids: realignment and new ideas Multiplatform content matures Treehouse: Canada’s strongest preschool brand Developing new audiences for YTV
Slide 55: A Strategic Relationship with Nickelodeon
A Strategic Relationship with Nickelodeon Exclusive broadcast of key Nickelodeon and Nick Jr. content Closer branding ties between Nickelodeon and YTV Major thrust behind new Nickelodeon programs (e.g. The Naked Brothers Band)
Slide 56: Advertising Food to Kids: Realignment & New Ideas
Advertising Food to Kids: Realignment & New Ideas Childhood Obesity continues to be a major health concern Corus is committed to educating and informing kids about healthy lifestyles Minister of Health responded to the Standing Committee’s Report on Childhood Obesity saying no regulatory actio
Slide 57: Multiplatform Content Matures
Multiplatform Content Matures Corus has created a Content Hub combining its animation studio and interactive production into a single focused unit Interactivity is no longer an afterthought but rather an integral part of content development This content is delivered through our broadcast brand
Slide 58: Treehouse: Canada's Strongest Preschool Brand
Treehouse: Canada’s Strongest Preschool Brand Treehouse delivers the best of preschool content to kids and families – with overwhelming market share and brand recognition DVD Mobile Cable VOD Website Electronic Sell Through Live Shows Driving Driving the the value value equation equation
Slide 59: Developing New Audiences for YTV
Developing New Audiences for YTV Fall schedule balances Kids ratings success with increased focus on Co-View and Adult audiences Family/Co-View Primetime YTV’s Get Real! brand unites Family reality-based programming after 7 p.m. Fox’s hit Futurama joins YTV favourite Pinky and the Brain at 9 p.m.
Slide 60: In Conclusion
In Conclusion Corus TV remains well positioned: Strong programming Early season marketing thrust in Pay TV Expanding distribution New service launches Expense control
Slide 61: Financial Overview
Investor Day September 26, 2007 Financial Overview
Slide 62: Financial Priorities Recap - 2007
Financial Priorities Recap - 2007 Improve Operating Margins & Earnings Increase Dividend Improved Repurchase Shares Total Shareholder Return Increase Share Price
Slide 63: Financial Priorities 2007 – Progress Report
Financial Priorities 2007 – Progress Report Dividend increased from $0.86 to $1.00 per share Up 16% Dividend Yield increased from 0.6% to 2.2% 1 million shares acquired through NCIB Share Price: August 31, 2006 $38.63 August 31, 2007 $48.83 Up 26% Free Cash Flow of approximately $95 mi
Slide 64: Net Debt
Net Debt Sept. 1, 1999 – Aug. 31, 2007 800 700 $ Million (Cdn) 600 500 400 300 200 100 0 99 00 01 02 03 04 05 06 07 19 20 20 20 20 20 20 20 20 Fiscal Year
Slide 65: Net Debt to EBITDA
Net Debt to EBITDA Corus has a Strong Balance Sheet Sept. 1, 1999 – Aug. 31, 2007 7.0 Net Debt to EBITDA x 6.0 5.0 4.0 3.0 2.0 1.0 0.0 99 00 01 02 03 04 05 06 07 19 20 20 20 20 20 20 20 20 Fiscal Year
Slide 66: Share Price Performance vs. Peers
Share Price Performance vs. Peers Strong Year-Over-Year Growth 55 (3) 50 (2) Corus + 26% Closing Share Price $ (TSX) 45 40 35 (1) 30 (1) Sept’06 – AAC Takeover Speculation Begins 25 (2) CanWest/Goldman Sachs bid of $53/AAC share announced Jan 10’07 (3) AAC delisted from TSX Aug 16’07 20 15 10 5 N M
Slide 67: Share Price Performance vs. Peers (VWAP)
Share Price Performance vs. Peers (VWAP) Strong Year-Over-Year Growth 60 +33% +21% +48% (1) -5% -12% 50 VWAP $ (TSX) 40 Aug 31'06 30 Aug 31'07 20 10 0 Corus Astral AAC CanWest TVA (1) AAC VWAP based on the period from September 1, 2006 to August 16, 2007 (last trading day before delisting)
Slide 68: Market Valuation of Corus
Market Valuation of Corus Current Value Based on Street Consensus for 2008: Target Share Price Range Consensus $47.50-$59.00 $55.38 EBITDA Range ($M) Consensus ($M) TV $195 - $206 $200 Radio $ 76 - $ 84 $ 80 Nelvana Enterprises $ 1 - $ 12 $ 6 Consolidated $254 - $269 $263
Slide 69: Nelvana: Then & Now
Nelvana: Then & Now Value Measures 2000 2007 # of Episodes Corus Produced (250) Requirements (125) Size of Library Size of Library (1,400) (3,000) EBITDA Cash Flow
Slide 70: Nelvana: Then & Now
Nelvana: Then & Now Value Drivers 2000 2007 Broadcast Licences Merchandise Revenue Canadian Dollar $0.65 Canadian Dollar $0.95 Tax Credits Tax Credits TV Conditions of Licence Launch of New International TV Channels Ability to Exploit New Platforms The World Still Needs Good Conten
Slide 71: Financial Priorities - 2008
Financial Priorities - 2008 Continue to Repurchase Shares and Renew NCIB Maintain a Dividend Yield in Excess of 2%
Slide 72: Financial Guidance - 2008
Financial Guidance - 2008 Consolidated EBITDA $250 to $260 million Free Cash Flow $90 to $110 million
Slide 73: Policy Reviews
Policy Reviews Overlapping timelines but with no real impact in fiscal 2008 Diversity Process: Oral hearing ended Friday, September 21 Final comments deadline extended to Friday, October 12 The timing of the new policy release is unclear. Chair has stated he wants it before the January 28,