Annual Report 2017
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annual report 2017 table of contents message to shareholders 5 television 8 news and radio 12 owned and original content 14 fiscal 2017 significant events16 our brands 18 board of directors 20 officers21 Corus values 22 management’s discussion and analysis 23 management’s responsibility for 57 financial reporting independent auditors’ report 58 consolidated statements of financial position59 consolidated statements of income and 60 comprehensive income consolidated statements of changes in equity 61 consolidated statements of cash flows62 notes to consolidated financial statements63 corporate information 109 Corus Entertainment Annual Report 2017 | 3 message to shareholders What better theme to reflect our Our presence in local markets has been strengthened extraordinary first year as the new Corus. by the combination of Global Television and Corus Radio in markets where they co-exist. As we anticipated, the Over the past 12 months, we completed our opportunity to share content and cross-promote our local transformational journey, merging the legacy Corus brands proved effective. The powerful combination of and Shaw Media businesses with incredible speed and television and radio also enabled us to rollout new bundled efficiency. Our newly combined team has brought together offerings for local advertisers, creating incremental the best of both companies to position Corus for the revenue opportunities. future, as we build on our strong foundation of powerful brands, great content and carefully articulated strategic New distribution technologies and regulations continue priorities. Led by the voices and feedback of our people, to introduce an increased level of consumer choice we have also reframed our corporate values to define our into the TV marketplace. The final phase of “pick and new culture, reflecting both the company we are today pay” was implemented this year following the Canadian and what we aspire to become. Radio-Television and Telecommunications Commission’s (“CRTC”) Let’s Talk TV process. In this new environment, we The industrial logic of combining the two companies has have proven that our strong television brands continue to been validated in our first year. With our new scale and be valued by subscribers. scope, we have further differentiated our brands and increased our audience share across Conventional TV, As viewing habits evolve, we believe there is an opportunity Specialty TV, and News and Radio. to engage audiences in new ways. We anticipated, back in 2015, that we must start to think and operate as a retailer In fact, Corus had the largest share of viewing in English of our products, with an increased focus on understanding Canadian commercial television for the 2016/2017 our audiences, leveraging data, and building a two-way 1 broadcast year. Global delivered its best performance relationship. Today, we have millions of Canadians with 2 in a decade, and our powerful portfolio of specialty whom we dialogue on a regular basis. television brands continue to be a leading destination for Women, Families, and Kids.3 Furthermore, we have In the midst of the changing landscape, the Canadian reorganized our television content team to focus on government began a review of the Canadian culture the verticals of Kids, Lifestyle, and Drama to ensure sector in 2016. In September 2017, its vision was set out alignment with our growth strategies. in a document called Creative Canada, which included a directive to the CRTC to review the Broadcasting Act in the 1. Numeris PPM Data, Total Canada, Broadcast Year 16-17 vs. Broadcast Year 15-16 (8/29/2016 to 8/27/2017 vs. 8/31/2015 to 8/28/2016) - confirmed data, M-Su 2a-2a, Share % of English Canadian Commercial TV stations, Corus English, Bell English, Rogers Media English, excludes Canadian Pay, U.S. & 4K stations 2. Numeris PPM Data, Total Canada, Share% of Canadian Conventional English TV, (Mo-Su 7-11p & 8p-11p, Broadcast Year 2007-2008 to Broadcast Year 2016-2017), Adults 25-54 Photo by Mike Ford by Mike Photo 3. Numeris PPM data, Total TV Broadcast Year 16-17 (8/29/2016 to 8/27/2017), Adults 25-54 Average Minute Audience (000) Canadian English Specialty stations - excludes sports stations 4 | Corus Entertainment Annual Report 2017 Corus Entertainment Annual Report 2017 | 5 coming year. As we continue to evolve our business today and for the future, we need predictability and a strong regulatory framework that acknowledges the competition we are facing from unregulated global players, one that removes barriers so we may compete effectively both domestically and globally. We have a long track record as successful creators and exporters of Canadian content that resonates with audiences in more than 160 countries, and have a growing international presence across multiple content platforms. In Canada, we are focused on providing content to consumers wherever they are, and supporting communities with local news and information programming that matters most to them. In the midst of these changes in landscape and all of our integration activities, we continued to drive forward many important initiatives that support the advancement of our strategic priorities, which are to: 1. Own and control more content; 2. Engage our audiences; 3. Expand into new and adjacent markets. Our strategy to own more of the content we produce remains an important part of Corus’ future. This content drives our audiences in Canada and provides a growing revenue stream internationally. Moreover, our strategy to control more content from leading content partners to bolster the competitiveness of our channel portfolio was evidenced this year with the launch of Cooking Channel (Canada). This great addition is a result of further deepening our partnership with Scripps Networks Interactive. advertising technologies, such as dynamic ad insertion and local addressable advertising. By working with our distribution In fiscal 2017, we almost doubled the production of original Kids content through our globally renowned Nelvana partners on their future platform roadmaps and conducting trials, we can refine our abilities to monetize these platforms. animation studio, unveiling an exciting slate of new properties; and we more than doubled the size of our Corus Studios Corus is firmly committed to staying on the leading edge of advertising technology innovation. lifestyle content slate for sale in the international market. On the financial front, we were challenged in the beginning of the year with headwinds on our advertising revenues. We will continue to grow our slate of owned content for export into the global marketplace in the coming year. As a As the year progressed, however, we delivered consecutive quarters of sequential improvements in television advertising producer, we are proud of the great content we create, and it is resonating with audiences worldwide. In addition to our revenues, consistent with our expectations—and importantly, we delivered on all of our financial priorities for fiscal 2017. original productions, we have forged strong partnerships with the Canadian production community and international Annual cost synergies in excess of our goal of $40 to $50 million were captured more quickly than originally anticipated, content companies, enabling us to more quickly develop franchise properties with built-in distribution opportunities. resulting in a greatly improved cost structure. Our intense focus on free cash flow enabled us to reach our deleveraging Owning more content also supports our strategic priority of expanding into new and adjacent markets so that we may target of 3.5 times net debt to segment profit one quarter earlier than anticipated. In fact, we delivered $293 million in free grow our revenue in the large global content marketplace. cash flow this year, above our expectations. As promised, we also maintained our commitment to an annual dividend of Engaging our audiences, at its core, means that we are focused on offering the best content that delights our viewers $1.14 per Class B Non-Voting Share. and listeners. Increasingly, an important new dimension of this strategic priority relates to data analytics and advanced In 2018, we remain resolute in our focus to further strengthen our balance sheet. Our commitment to deliver value to our advertising so that we can continue to improve the viewer and listener experience, as well as deliver increased value to shareholders continues. Our team has a firm mandate to manage costs and drive free cash flow to de-lever and return our advertisers. In this regard, we significantly expanded our advanced advertising capabilities as we realize the benefits of cash via our dividend. Future investments will be targeted to building strength in advertising through data and technology combining the power and reach of television with the insights and targeting of data. Client interest has been extraordinary, and providing new content for our audiences. with more than 100 advertisers now participating in this groundbreaking initiative. In closing, as we look back on our incredible accomplishments this year, we see the result of the talent, hard work and drive In fiscal 2018, we will double our investment in data analytics and advanced advertising. Our recent appointment of a of the remarkable team of people in all of our locations across Canada and around the world. Their inspiration to build a dedicated team in this area demonstrates our commitment to driving this important initiative forward and underscores stronger Corus was evident in our