Management Discussion and Analysis
The review of the Corporation’s financial position and operating results should be read in conjunction with the audited financial statements on the following pages. The results for 2017-2018 cover the period from April 1, 2017 to March 31, 2018 while the comparative numbers are for the period from April 1, 2016 to March 31, 2017.
Results of Operations
The Corporation’s revenue includes amounts from the broadcasting distribution undertakings (BDUs), the federal government through the Department of Canadian Heritage (Department), recoupment of production investments, repayments of advances, interest, and tangible benefits. Total revenue decreased 4.7% in the fiscal year, from $369.3M in 2016-2017 to $351.8M in 2017-2018.
Contributions from BDUs decreased 7.8% or $16.9M in the fiscal year, from $216.5M in 2016-2017 to $199.6M in 2017-2018.
The federal government funding of $134.1M in 2017-2018 was consistent with 2016-2017.
Revenue from the recoupment of production investments decreased 9.8% or $0.7M in the fiscal year, from $7.6M in 2016-2017 to $6.9M in 2017-2018. Revenue from repayment of advances decreased 6.0% or $0.4M in the fiscal year, from $6.2M in 2016-2017 to $5.8M in 2017-2018.
Interest increased by 28.2% or $0.7M in the fiscal year, from $2.3M in 2016-2017 to $3.0M in 2017-2018.
CMF administers a tangible benefit program for Corus Entertainment, $1.0M was recognized as revenue in 2017-2018. An additional $1.4M in tangible benefits flowed directly to the CMF program under the revised CRTC Tangible Benefits Policy.
Total expenses decreased 5.4% or $20.3M in the fiscal year, from $378.6 in 2016-2017 to $358.3M in 2017-2018. Program commitments represented 94.8% of total expenses in the fiscal year, consistent with 2016-2017. The balance of the total expenses includes industry partnerships, general and administrative, program administration, and amortization.
Under the terms of the Contribution Agreement with the Department of Canadian Heritage, CMF’s total administrative expenses (excluding industry partnerships) are capped at 6.0% of total revenue. In the fiscal year, the total administrative expenses were $17.4M or 5.0% of total revenue, consistent with 2016-2017.
Total program commitments decreased 5.4% or $19.4M in the fiscal year, from $358.1M in 2016-2017 to $338.7M in 2017-2018. The CMF provides financial contributions to Canadian digital media and television producers primarily through two program streams: Convergent and Experimental. The Convergent Stream program commitments decreased by $22.5M, from $319.8M in 2016-2017 to $297.3M in 2017-2018. The Experimental Stream program commitments of $40.5M were $0.5M less than in 2016-2017. The program commitments for the international incentives were $1.4M, $3.1M supported new export-related programs, and prior years’ negative adjustments of about $3.6M were also reflected in the fiscal year.
Program Administration Expenses
The total program administration expenses decreased $1.6M or 14.1% in the fiscal year, from $11.7M in 2016-2017 to $10.1M in 2017-2018. The CMF outsourced the program administration activities to Telefilm Canada through a services agreement, their service fee decreased by $1.6M in the fiscal year from $11.4M in 2016-2017 to $9.8M in 2017-2018. The decrease is primarily due to the completion of development of the new program administration system. Other program administration expenses were $0.3M consistent with 2016-2017.
Industry partnerships of $1.1M in 2017-2018 represented a decrease of 4.1% from 2016-2017. The CMF continued to partner with television and digital media events in Canada and internationally.
General and Administrative Expenses
General and administrative expenses increased by 12.8% or $0.8M in the fiscal year, from $6.5M in 2016-2017 to $7.3M in 2017-2018. There were increases in compensation of $0.1M, marketing and communications of $0.6M, risk management of $0.1M, and Encore+ of $0.2M offset by savings of $0.2M in consulting.
Cash Flow and Reserves
BDU contributions are received monthly; the CMF invoices the Department of Canadian Heritage monthly in arrears based on payments to producers. Repayment of advances are received throughout the year and the majority of recoupment of production investments is received twice a year.
The CMF invests any funds not required for operations; investments are in federal treasury bills, provincial notes, GIC’s, term deposits, and asset-backed term notes. The Corporation’s investments are drawn on as required to fund program contractual obligations as they come due.
The CMF maintains unrestricted and restricted reserves. The funds in the reserves are accumulated over time through the excess of revenue over expenses and are used to support future years’ programs.
At the end of the fiscal year, there was $56.5M in restricted reserves and $5.7M unrestricted. At the end of 2016-2017, there was $61.0M in restricted reserves and $7.7M unrestricted.
The restricted reserves at March 31, 2018 include amounts for the settlement of expenses in the event of dissolution of the CMF of $5.0M, $19.5M to support the 2018-2019 program budget, and a $32.0M program funding contingency reserve.
The CMF estimates revenue based on contributions from the Department; Canada’s cable, satellite and IPTV distributors; and recoupment and repayment revenues from funded productions. In 2018-2019, it is assumed that there will be an increased contribution from the Government of Canada that will in part offset the expected decline in contributions from BDUs.
Based on the revenue estimates, the CMF determines a program budget. The 2018-2019 CMF program budget is $351.0M, $289.5M for the Convergent Stream, $42.0M for the Experimental Stream, $8.5M for aboriginal, $0.6M for accelerated partnership program, $3.0M for international incentives, $3.0M for diverse languages, and $4.4M for an export incentive. In addition, the budget for the CMF-Corus Page to Pitch program is $1.0M.