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File photo of John Cassaday, CEO of Corus Entertainment.Deborah Baic/The Globe and Mail

Corus Entertainment warned investors that it could have trouble hitting its profit targets for the year, despite stronger than expected advertising sales this summer.

The Toronto-based television and radio broadcaster saw its profit increase in its third quarter, but revenue slipped as subscriber and advertising revenues decreased. Weakness across those key categories has the company concerned it won't hit the targets it set for itself at an investor day in November.

"Advertising sales in July and August 2012 are pacing ahead of a year ago in both radio and television," the company said in a regulatory filing, reminding investors it estimated it would post consolidated segment profit of $300-$310-million and free cash flow surpassing $125-million. "Despite the expectation of a strong quarter, it will be a challenge to hit the low end of our segment profit guidance."

The analysts who follow the company have speculated the company could be a takeover target, particularly because BCE Inc.'s takeover of Astral Media leaves the company as the last large independent broadcaster in the country. The company's shares are up 14 per cent so far this year, despite persistent challenges in the advertising market.

Revenue decreased 4 per cent at its television segment. Corus said it had particular trouble in its specialty television division, where ad sales were down 11 per cent. The company's television assets include HBO Canada, YTV, The Oprah Winfrey Network and Movie Central.

"The decrease in specialty advertising revenues in the third quarter 2012 resulted from soft demand in the kids segment, driven by the toy, entertainment and food categories," the company said, adding the television segment's 43 per cent profit margins are 5 per cent lower than a year ago.

Revenue at the company's 37 radio stations was 3 per cent lower as growth in Vancouver and Alberta was offset by weakness in Winnipeg and Ontario.

Chief executive officer John Cassaday said the company posted a "solid" quarter, saying it's difficult to compare the numbers with a strong third quarter last year.

"Despite tough year-over-year comparables, we delivered a solid performance in the quarter, growing net income and earnings per share, maintaining our exceptional margins through rigorous cost controls and continuing to generate impressive free cash flow," he said. "Looking ahead, our exceptional brands, superior programming and disciplined cost controls position us well for a recovery in the advertising market."

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