News Corp. Swings to Fiscal Fourth-Quarter Loss on Publishing Unit Charge

1:05 PM PST 08/08/2012 by Georg Szalai

UPDATED: The entertainment conglomerate, led by CEO Rupert Murdoch, once again posted higher financials for its cable networks unit and a full-year film profit increase.

Rupert Murdoch's News Corp. said Wednesday that it swung to a fiscal fourth-quarter loss due to a big charge for its publishing unit, whose value has been affected by weaker momentum and the ongoing phone hacking investigations.

The company posted a loss of $1.55 billion attributable to News Corp. shareholders, compared with a profit of $683 million in the year-ago period. The loss in the latest period included a $2.9 billion pre-tax impairment and restructuring charge primarily related to the company’s publishing businesses and a $15 million pre-tax loss partially due to a loss on the sale of property in the U.K. 

The quarterly figure also included a $57 million charge "related to the costs of the ongoing [phone hacking] investigations initiated upon the closure of The News of the World," the company said. That took the direct hacking costs for the company for the full fiscal year to $224 million.

The charges were partially offset by a $115 million pre-tax gain from the company’s participation in the BSkyB share buyback program. The year-ago quarter had included a $254 million loss tied to the company’s sale of Myspace.

News Corp.'s operating profit of $1.2 billion was down from $1.4 billion as a 26 percent increase at the cable networks division was more than offset by decreases at the other segments. 

As analysts had predicted, continued financial growth in the conglomerate's cable networks unit was outweighed by tough film unit comparisons and weaker American Idol ratings.

News Corp.'s quarterly revenue of $8.4 billion was down 6.6 percent from $8.96 billion in the year-ago period as a 15 percent gain at the cable networks segment was more than offset by declines at the other units.

Wall Street analysts had forecast earnings of $819.5 million, which the company matched when excluding the charges, on revenue of $8.92 billion, of which the results fell short.

Full fiscal year earnings from operations rose from $4.9 billion to $5.4 billion, but including special items, earnings declined  from $2.7 billion to $1.2 billion. The results included a $3 billion pre-tax impairment and restructuring charge primarily related to the publishing businesses. Revenue for the full fiscal year rose 1 percent to $33.7 billion.

Full-year growth in operating profits came in all segments except for publishing, with cable channels and film leading the way.

During a conference call with analysts, deputy chairman and COO Chase Carey called cable and broadcast television the "driving force" of the company. He also spoke of investing in sports-media in India, and of News Corp's. ongoing effort to create a meaningful education business that will "take advantage of digital technologies."

Making a rare appearance on the call was James Murdoch, whose role at the company his father founded has been diminshed since a phone-hacking scandal crippled News Corp's. European newspaper business. James Murdoch, though, did little talking beyond fielding a question concerning the company's Sky-Italia asset.

“We are proud of the full year financial growth achieved over the last twelve months, led by our cable network programming and filmed entertainment segments," Rupert Murdoch said in a statement. "Not only did we execute on our operating plan and deliver on our financial targets, we returned over $5 billion to shareholders through an aggressive buyback program and dividends. In addition, significant progress has been made in opportunistically addressing the company’s non-consolidated assets."

Added Rupert Murdoch, who did not participate in the earnings call: "News Corporation is in a strong operational, strategic and financial position, which should only be enhanced by the proposed separation of the media and entertainment and publishing businesses.”

Film unit operating profit for the year rose 22 percent from $927 million to $1.13 billion after a rare decline in the previous year due to tough comparisons with the late 2009 release of Avatar. In addition to such hit releases as Rise of the Planet of the Apes, the year also recorded "increased operating profit at the television production studios led by the growth of digital distribution revenue from the licensing of content to Netflix and Amazon, as well as an increase in license fees for How I Met Your Mother."

Full-year TV operating profit rose from $681 million to $706 million despite a fiscal fourth-quarter decline. "The increase was driven by a doubling of retransmission consent revenues, partially offset by lower political advertising revenue at the local television stations and the absence of the prior year’s broadcast of the National Football League Super Bowl XLV," as well as lower American Idol ratings, the company said. 

Cable network unit operating profit rose from $2.76 billion to $3.30 billion.

Email: Georg.Szalai@thr.com

Twitter: @georgszalai

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