REGIONAL pay TV operator Austar United Communications has lifted its first quarter pre-tax profit on slightly increased subscriber numbers and flagged a $300 million capital return to shareholders.
Profit before interest, tax and significant items rose nine per cent to $26 million in the three months to March 31, 2008, as subscriber numbers rose 1.4 per cent to 678,202.
Earnings before interest, tax, depreciation and amortisation (EBITDA) jumped 32 per cent to $51 million.
Chief executive John Porter told a teleconference today that dented consumer confidence had reduced discretionary spending, but the company was "looking for a typically strong quarter in the second quarter``.
Mr Porter said the first quarter had delivered a "solid set of numbers`` in difficult trading conditions.
"We feel like we`re through the worst of it: people who had to make adjustments with mortgages and lifestyle have done it,`` he said.
"We haven`t really seen an impact on sales.
"Those with discretionary dollars see good value in the product ... in a time when people are burning less petrol and going out less.
"People are spending more time at home.
"Some people are ... feeling the heat, so they`re having disconnect - a few more than we would like.``
He said Austar`s increased rates during this tougher macroeconomic environment had contributed to disconnections.
However, churn rates - disconnections - had trended down of late.
"The average of 1.53 for Q1 (the first quarter) has been trending down.
"For the full month of March, it was 1.43 and April is trending lower than March.
"We are cautiously optimistic that given the current trends, we can continue to push down the churn rate in the second and third quarter towards more historical performances.
"Over 15,000 customers now subscribe to the MyStar service, and subscriber growth momentum continues.
"The combination of a growing subscriber base and our ability to increase ARPU (average revenue per user) will see Austar deliver another year of solid EBITDA growth.``
First quarter ARPU rose 5.4 per cent to $78.66.
Mr Porter said advertising sales on a full year basis were up about 25 per cent on last year.
"This is becoming a bigger component for us and the company is targeting $12-13 million this year for ad sales,`` he said.
Mr Porter said the company was disappointed that plans to sell its WiMAX wireless spectrum were shelved after the federal Government withdrew funding for the Opel broadband consortium, a joint venture between the SingTel-owned Optus and Futuris-owned Elders.
"We`re changing our strategy and feel that the opportunity will come back around with the next round of government/private sector partnerships on broadband availability in regional areas.
"We would like to see our spectrum become part of the solution for broadband in regional Australia.``
He said Austar believed the spectrum was the right technology.
"We do not intend to pursue it on a stand alone basis: we`ll actually use it to leverage ourselves into the best possible wholesale arrangement, which will enable us to offer ADSL, cellular, HDPA and other products to customers, basically utilising other people`s networks and bundling and branding them with our product,`` he said.
Austar also announced today that in addition to an on-market buy-back program announced on April 16, it would also seek shareholder approval to return up to $300 million to shareholders over 12 months.
This would be achieved through an on-market buy-back, an equal access off-market buyback, or an equal reduction of capital on all ordinary shares.
Shareholders will vote on the proposal at Austar`s annual general meeting on May 29.
At 1.32pm (AEST), Austar shares were 2.5 cents lower at $1.36.
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