May 9, 2013

Quarterly Profit Nearly Triples

From SmartMoney.com — News Corp.'s (NWS, NWSA, NWS.AU) profit nearly tripled in the quarter ended March 31, boosted by one-time gains and better results from its cable networks segment.

Meanwhile the publishing unit, to be spun off as a separate company in coming months, posted sharply lower operating income.

The media company posted net income of $2.85 billion, or $1.22 a share, up from $937 million, or 38 cents a share, in the year-earlier period. Revenue grew 14% to $9.54 billion.

In the quarter, News Corp. recorded $25 million in costs related to the proposed spinoff of the publishing division and $42 million in costs related to ongoing investigations of phone-hacking in the company's U.K. newspaper unit, down from $63 million for such costs in the year-earlier quarter.

The company also had significant one-time gains in the quarter related to international transactions, including the acquisition of an additional stake in Sky Deutschland and the sale of its ownership stake in SKY Network Television in New Zealand. Total operating income rose nearly 4%.

The cable networks segment increased operating income 17%, aided by the strong performance of regional sports channels, FX Networks, and the Fox News Channel. Those networks helped drive growth of 11% in the domestic subscriber fees the company collects from pay TV operators.

The television segment, which includes the Fox broadcast network and local TV stations, grew revenue slightly and boosted operating income by 15%, even as it struggles with television ratings that are sagging at Fox. The growth in profits was helped by a near doubling of "retransmission consent" revenues—money that cable and satellite operators pay to carry broadcast signals—and lower programming costs.

Fox's ratings in the key advertiser demographic of 18-to-49 year olds are down 22% this season compared with last year. A major factor is the decline of "American Idol," the singing competition that once commanded industry-leading audiences but has seen a significant ratings slide this season. The network will announce its new program lineup for the upcoming season on Monday when it holds its "upfront" presentation for advertisers, ahead of negotiations over the sale of ad time for next fall.

Offsetting the stronger results in the television businesses were weaker contributions from the publishing operations, where operating income fell 35% on a 4.3% decline in revenue. News Corp. said that increased contributions from its U.K. newspapers was offset by lower ad revenues at its Australian newspapers and its marketing services businesses.

The publishing businesses, which also include The Wall Street Journal, The New York Post, book publishing and this newswire, are due to be spun off into a separate company retaining the News Corp. name in coming months. A special shareholder vote on the separation is scheduled for June 11. The remaining media-and-entertainment focused company will be called 21st Century Fox.

Meanwhile, News Corp.'s filmed entertainment segment reported a 17% increase in revenue, helped by the theatrical and home entertainment revenues from movies including "Life of Pi" and "Taken 2". Operating income rose 6%.

News Corp., on its conference call, reiterated its outlook for the company's operating income to rise by a mid-to-high single-digit percentage for the fiscal year ending in June.