CALGARY – Despite a slowing of the loss of its cable subscribers, Shaw Communications posted an 8.8% drop in profits for the third quarter ended May 31, 2014.
Shaw said Thursday that net income for the period was $228 million, down from $250 million in the same period last year.
Consolidated revenue for the quarter of $1.34 billion increased 1.2% from $1.33 billion over last year, while total operating income before restructuring costs and amortization of $601 million improved 2.7% from $585 million year-over-year. Free cash flow for the three month period was $240 million, up from $138 million last year. The current three month period included lower capital investment compared to the prior year.
In connection with the restructuring of its operations, Shaw said it incurred $53 million in costs primarily in respect of the approximate 400 management and non-customer facing roles which were affected by the organizational changes announced in April. The anticipated annual savings, net of hires to support the new structure, is approximately $50 million, and the company will begin reporting on the new divisions of Consumer, Business and Media in the first quarter of fiscal 2015.
Shaw said its strategy is to balance financial results with maintenance of overall revenue generating units (RGUs). The Cable and Satellite divisions have 6.2 million RGUs – which represents the number of products sold to customers. During the quarter overall RGUs declined by 450.
Quarterly revenue in Shaw’s Cable division of $845 million improved 2.4% from $825 million last year, primarily driven by pricing adjustments and growth in Business, were partially reduced by various expense increases including employee related amounts and programming. Operating income before restructuring costs and amortization of $417 million increased 5% over the same quarter last year.
During the quarter, Shaw lost 12,075 video subscribers to end the period with 1,977,795. It added 12,399 new Internet customers to total 1,918,418, and increased digital phone lines by 4,834 to reach 1,374,220.
Satellite revenue increased 0.9% to $220 million from $218 million last year, while operating income before restructuring costs and amortization dipped 2.8% to $70 million compared to $72 million year-over-year. Revenue growth, primarily due to pricing adjustments, was more than offset by higher expenses including operating costs related to the new Anik G1 satellite and programming expenses.
Shaw Direct lost 5,608 subscribers to end the quarter with 887,229 DTH customers.
Over at Shaw Media, quarterly revenue and operating income before restructuring costs and amortization in the Media division of $301 million and $114 million, respectively, declined from $307 million and $116 million in the same period last year. Media's revenue and operating income before restructuring costs and amortization were down primarily due to reduced advertising revenues partially offset by increased subscriber revenues as well as the favorable impact of a retroactive adjustment in the first quarter of the year related to distant signal retransmission royalties.
CEO Brad Shaw said the company is increasing its fiscal 2014 guidance and now expects free cash flow to exceed $650 million.
"Our third quarter operating and financial results were solid as we continue to focus on the customer experience, leading technology, value leadership, and operational efficiencies”, he said in the news release. “During the quarter we undertook various actions to improve our overall efficiency, including announcing a reorganization of our Cable and Satellite business units into Consumer and Business, enhancing our ability to grow as the leading content and network experience company."
www.shaw.ca
