Alliance strategy puts co. back in black

Sub growth, ad revs help overall totals rise 21.8% to $351.5 mil

TORONTO — With a year-end that has the company back in the black, Alliance Atlantis Communications’ post-merger strategy appears to be paying off.

Net earnings for the Toronto-based broadcaster, TV and film company were C$37.0 million ($25.0 million,) a dramatic turnaround from prior-year loss of $19.8 million.

Although the red ink of last year was attributed to a one-time restructuring charge in the wake of the merger of Alliance and Atlantis two years ago, AAC prexy and CEO Michael MacMillan noted that “even if we didn’t have those merger costs last year, this year is significantly improved.”

The company embarked on a strategy to increase the size of its broadcasting division by increasing the number of specialty channels it holds. AAC today owns all or part of seven channels in total. AAC also pledged to reduce the number of TV drama hours it produces in favor of higher-margin fare such as children’s programming, TV miniseries and movies, and more recently documentary and fact-based programming.

Staying in b’casting and production

“We think that strategically it’s very important that we’re in both (broadcasting and production),” said MacMillan. “Our goal is to continue to occupy that place where those two functions intersect. That’s why Disney bought ABC, and that’s why Vivendi and Seagrams have come together.”

The company’s activities on the year and the numbers that came out of it are consistent with those goals, notes CIBC World Market entertainment analyst Adam Shine, who has a buy on the company. “It looks like the post-merger synergies came through as promised through fiscal 2000,” he noted. “They’re in the sweet spot between being a content provider and a content packager and marketer.”

Shine said it remains to be seen how AAC will use the Internet to its best advantage.

Revenue for the year ended March 31 was up 21.8% to C$520.6 million ($351.5 million). Much of the leap was due to AAC’s broadcasting group, which enjoyed strong growth in subscriber and advertising revenue during the year.

Revenue growth and improved margins in the company’s three operating groups (television, motion picture and broadcasting) were responsible for a dramatic 79.1% hike in EBITDA to $40 million.

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