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Cogeco Cable Inc. president and CEO Louis Audet

J.P. Moczulski

Despite a continued drag from its operations in Europe, Montreal-based Cogeco Inc. posted relatively strong revenue growth of about 5.1 per cent that was roughly in line with analysts' expectations.

For the its second quarter of fiscal 2010, ended Feb. 28, the cable company's revenue pushed up to $320.4-million, generating a profit of $29.8-million and earnings per share of $0.61. The same quarter last year saw large impairment losses related to operations in Portugal, where Cogeco runs Cabovisão.

Analysts were expecting solid growth from Cogeco's Canadian cable, digital TV and Internet business, as the company still holds pricing power in its markets and continues to pick up customers. Revenue growth was roughly in line: Dvai Ghose at Genuity Capital Markets in Toronto had predicted revenue of $323-million; at National Bank Financial, Greg MacDonald had pegged it at $318.8-million.

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In a note to clients Thursday morning, Desjardins Securities analyst Maher Yaghi said his thesis on Cogeco "remains unchanged" given the company's performance. "Decent growth within Canada," he wrote, "will be offset in the near term by the dramatic deterioration in financial performance within Portugal."

Cogeco also posted robust net subscriber additions of 158,567 in the first six months of the year, and announced it was revising its previous guidance for subscriber growth.

However, Cogeco's investments in the highly competitive Portuguese market continued to be a problem, though less so than in the past. Analysts had been forecasting a stabilization in the company's battered position in Europe, which was being fought for with huge retention costs and being hammered by currency depreciation.

On the plus side, subscriber loss in the second quarter of 2010 stabilized to only 740 customers, down from a decrease of nearly 12,000 in the same quarter last year. But the company continues to pay dearly for its stake there, and year-over-year revenue declined by 20 per cent, Mr. Yaghi notes.

Cogeco Cable's parent company, Cogeco Inc., also posted second quarter results on Thursday, with net income of $10.5-million and earnings per share of $0.63.

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