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Astral Media records 'single largest quarter' driven by growth in all divisions

MONTREAL - Astral Media Inc. delivered its "single largest quarter" of growth as the specialty TV, radio and outdoor advertising company awaits regulatory approval of a friendly takeover by BCE Inc.

Astral said Thursday that its first-quarter profit increased to $59.6 million or $1.05 per diluted share, with revenue growth from all three divisions despite an uncertain advertising market.

"The 65th consecutive quarter of profitable growth represents the single largest quarter in the company's history," chief executive Ian Greenberg told analysts during a conference call.

"I am pleased by the strong results announced this morning as well as by our properties' ability to deliver growth in spite of a still uncertain advertising market," Greenberg said.

The deal by BCE (TSX:BCE) to buy Astral Media, which would provide more content for TV, smartphones, computers and tablets, was rejected last fall by the CRTC. The regulator ruled the transaction wasn't in the best interests of Canadians.

Astral operates 25 specialty cable television channels, 84 radio stations and outdoor advertising businesses. Astral also owns pay TV channels, The Movie Network and French language pay TV channel Super Ecran.

A revised proposal has been submitted to the Canadian Radio-television and Telecommunications Commission. Greenberg said he expects the CRTC to make details of the new application public in the coming weeks and to hold another round of public hearings in the spring.

"This new proposal addresses the issues raised by the CRTC in the Oct. 18 decision," he said. "Until the new application becomes public, we will not discuss the proposal's details."

Bell and Astral have said the deadline for the new deal, which must be approved by the CRTC, is June 1 and can be further extended until July 31.

First-quarter revenue for Astral (TSX:ACM.A) rose to $274.5 million. But it was about $3 million below analyst estimates calling for $277.2 million of revenue for the three months ended Nov. 30.

But profit beat analyst estimates by two cents per adjusted share, according to data compiled by Thomson Reuters.

Both the top and bottom lines were above the comparable period in 2011, when revenue was $271.1 million and profit was $55.8 million or $1 per share.

As a result of the deadline being extended for the takeover deal, Astral said it's restoring its cash dividend of 50 cents per share on its class A non-voting shares and class B subordinate voting shares. The dividend is payable Feb. 1 to shareholders of record Jan. 15.

National Bank Financial analyst Adam Shine is maintaining a $50 share target price for Astral and an outperform rating for now.

"We may soon opt to downgrade the stock to sector perform," Shine said in a research note.

"At present, though, Bell's offer represents upside of six per cent from Astral's share price with a dividend yield of 1.1 per cent when considering the upcoming 50 cent payment.

"As we think the Astral takeout will close within the next six to seven months, the annualized total potential return works out to 12 per cent to 14 per cent, which we think can still justify a short-term 'outperform.' "

On a segmented basis, Astral's television division accounted for $155.8 million of revenue, up two per cent from $153.6 million in the same quarter last year.

The increase was driven by increased ad and subscriber revenues for the specialty TV networks, Greenberg said.

Greenberg said he expects an increase in subscribers for its pay TV services in fiscal 2013, noting that 11,000 subscribers were added in the first quarter. Astral's pay TV services have almost 1.9 million subscribers.

Astral plans to launch a service in the coming weeks called TMN Go service that will be available on multiple platforms to access programming content from its pay TV service. Greenberg said it was delayed due to "some bugs."

The radio division generated $88.8 million, up from $88.3 million; and out-of-home advertising revenue from billboards and street furniture was $29.8 million, up from $29.3 million in the comparable period a year earlier.

Television also contributed the largest portion of Astral's EBITDA (earnings before interest, taxes, depreciation and amortization) at $61.2 million — up from $58.6 million a year before.

The radio division's EBITDA was $27.8 million, up from $27.6 million and out-of-home advertising had $11.9 million of EBITDA, up from $11.9 million.

The corporate drain on EBITDA was reduced to $7.3 million from $7.6 million.

Shares in Astral Media were up 36 cents at $47.26 in afternoon trading on the Toronto Stock Exchange.


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