Home video market slows Lionsgate Q3

Home video market slows Lionsgate Q3

TORONTO -- Vancouver-based Lionsgate, the company behind the Oscar-nominated "Crash," on Friday cited timing issues and a soft home entertainment market to explain a shrinking fiscal third-quarter profit and its second fiscal-year guidance downgrade in three months.

Management said investors should look for a recovery in fiscal 2007 on the strength of Lionsgate's upcoming release slate and benefits from recent theatrical product like "Saw II."

Lionsgate CEO Jon Feltheimer said his company's continuing revenue from recent successes would reach into the first half of fiscal 2007, producing a $100 million swing in operating cash flow in the coming fiscal year.

"However, as our industry continues to move through an inflection point in advance of new revenue streams from high-definition DVD, electronic sell-through and other new technologies, we are experiencing continued softness in most areas of family home entertainment and direct-to-video titles which is offsetting gains in our other businesses," Feltheimer warned as Lionsgate recorded a fiscal third-quarter profit decline of 6.3% on Thursday on higher production and marketing costs.

Addressing analyst concerns, Lionsgate vice chairman Michael Burns insisted annual free-cash-flow of about $100 million was sustainable going forward if about 18 theatrical releases each year combined to generate at least $300 million in domestic boxoffice.

Shares in Lionsgate pulled back sharply during early-morning trading on the Toronto Stock Exchange, before stabilizing in the afternoon. The stock finished the week at CAN$9.86 ($8.55), down 2.7%, from Thursday's close.