Shaw’s Q1 Profits Soar, Cash Flow Shrinks

by Gaurav Kheterpal on January 16, 2012

Shaw ended year 2011 on a turbulent note as dissident shareholders questioned the $25.5-million payment made to former CEO Jim Shaw. Earlier this month, the company made its intentions clear that it’s well prepared to take on Telus in the battle of supremacy in Western Canada.

Last Thursday, Shaw reported an increase in profit in its first quarter on higher revenues amid a volatile economic and competitive environment. Though the company faced testing times due to competitive concerns, the loss of subscribers and steep discounts, Shaw top management claim they’ve a extraordinary competitive resolve.

Shaw’s overall revenue rose by roughly 19% to 1.28 billion, riding on the impressive performance of it’s media division. In a worrying sign, Shaw’s free cash dipped from $154 million a year earlier to $119 million. The company’s net income from continuing operations soared from $17 million earlier to $202 million. Excluding items, earnings came to $210 million for the quarter.

Shaw’s cable business grew by 4.5% year-over-year thanks to a 7.3% increase in the revenue per basic subscriber – however, this represents it’s weakest year-over-year increase in five years and yet another sign of the aggressive competition from Telus. The company lost 22,768 basic cable subscribers in the quarter. Shaw attributes this loss to its “own internal gaps” and “an intensifying competitive environment.”

There were other positives though as Shaw’s added another 60,000 digital cable subscribers in the quarter thanks to the launch of its premium digital cable service, Gateway and a high conversion rate from its analog customers.

Telus claims to roughly 20 per cent of the market in British Columbia and Alberta and the company expects to hit the half million subscriber mark by mid 2012. Therefore, it’s no surprise that Shaw has had to step up its promotional attack. The Calgary-based company has been offering up to $300 in prepaid credit cards and have reduced prices, but some industry analysts are saying that the deals will cost Shaw when its financial results are released this fall. The promotional approach is a direct response to Telus’ own aggressive angle.

“We continued to grow despite a volatile economic and competitive environment,” Shaw CEO Brad Shaw said in the earnings statement. The board of directors have authorized a 5% hike in its annual dividend to $0.97 per share. However, the company ruled out any plans to change its its dualshare structure, maintaining a setup that keeps voting power in the hands of the family.

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Written by: Gaurav Kheterpal. Follow TheTelecomBlog.comby:RSS,TwitterFacebook, or YouTube.

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