TORONTO (Reuters) - Shaw Communications Inc (SJRb.TO), Canada's No. 2 cable and satellite-TV company, reported a 38 percent gain in first-quarter profit on Friday, crediting subscriber growth and a recovery of import duties.
Shaw said net profit rose to C$112 million ($110 million), or 26 Canadian cents a share, in the three months ended November 30, from C$81 million, or 19 Canadian cents a share, in the same period a year earlier.
Excluding non-operating items, including a net duty recovery of about C$22 million related to the import of satellite receivers, profit rose to C$96 million from C$81 million.
Analysts had expected the company to earn 23 Canadian cents before one-time items on revenue of C$752.2 million, according to Reuters Estimates.
Revenue increased nearly 11 percent to C$743.8 million on customer growth and rate increases.
"We agree with the company's strategy of maintaining subscriber growth through promotion, which we believe is a route to long-term growth and value creation," National Bank Financial analyst Greg MacDonald wrote in a note to clients.
Shaw was named as a potential new entrant into the wireless market through a government auction of spectrum, or airwaves, scheduled for May. The company said it is reviewing the auction rules, but did not comment further on Friday.
Calgary, Alberta-based Shaw also said that free cash flow rose to C$90 million from C$76 million in the same period last year on higher service operating income before amortization and after increased capital investment of C$22 million.
"Shaw remains one of a few growth stocks that pay a reasonable dividend and, given our strong free cash outlook, there could be further increases in 2008," MacDonald wrote.
"As the market grows more concerned with a potential economic downturn, Shaw's utility-like business profile will keep it in a favorable light in our view."
Shaw has become known for steadily increasing its dividends to investors. Jim Shaw, the company's chief executive, told analysts during a conference call on Friday that while the company could again raise dividends now, it also wants to maintain a healthy balance sheet.
"I think that, down the road, I would look forward to dividend increases, maybe a little share buyback, maybe some debt paydown," he said. "The last I looked, I think we owed (Toronto-Dominion Bank) a lot of money."
Shaw said it added 8,138 basic cable subscribers in the quarter to total 2.2 million customers. It gained 39,496 digital customers for a total of 34,719 and added 802,636 Internet customers for a total of 1.48 million. It increased digital phone lines by 50,339 to a total of 435,696.
"We continue to gain efficiencies with our digital phone product which is a significant contributor to our growth," Jim Shaw said in a statement. "We are now able to offer the triple play of voice, video and data to approximately 85 percent of our homes."
However, Shaw's stock fell C$1.09, or 4.7 percent, to C$21.75 on the Toronto Stock Exchange as investors weighed the company's revenue, which came in short of expectations, and what UBS analyst Jeffrey Fan called "mixed" subscriber results.
Cable unit revenue rose 13 percent to C$565 million, and operating income before amortization increased almost 15 percent to C$273 million.
The satellite division had revenue of C$178 million, which was 4 percent higher than the same period last year, but operating income before amortization dipped to C$60 million from C$62 million.
Additional reporting by Jonathan Spicer; Editing by Rob Wilson