21st Century Fox Quarterly Earnings Rise in First Report After Split

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Rupert Murdoch

UPDATED: In the first financial update since Rupert Murdoch's media empire was divided, the entertainment company recorded higher cable networks unit revenue, while the new News Corp was reported among discontinued operations.

Rupert Murdoch's 21st Century Fox on Tuesday reported higher fiscal fourth-quarter and full year financials.

In its first earnings report since the mid-year split of Murdoch's media empire, the entertainment company reported quarterly earnings from continuing operations of $977 million, or 42 cents per share, compared with $596 million, or 25 cents per share, in the year-ago period.

These figures where adjusted for the split, which created 21st Century Fox and publishing company News Corp, with the latter being part of discontinued operations in Tuesday's earnings report. Including discontinued operations, the company reported a loss of $308 million for the latest period that came in below the year-ago period's loss of $1.52 billion.

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Adjusted earnings per share, which exclude a range of one-time items, hit 31 cents, slightly below average Wall Street expectations, but up from 27 cents in the year-ago period. The special items included an $89 million gain from the company’s participation in U.K. pay TV giant BSkyB’s stock buyback program, $81 million in gains on asset sales and acquisitions and a $6 million restructuring and impairment charge.

The company reported quarterly operating income before depreciation and amortization for its business segments of $1.49 billion, up 14 percent from $1.31 billion in the year-ago period. That improvement was led by 25 percent growth at the cable networks unit, partially offset by weaker results at the filmed entertainment, television and satellite TV segments.

Revenue of $7.21 billion was up 16 percent from the year-ago period and exceeded Wall Street analysts's estimates.

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In the year-ago quarter, the old News Corp., including the assets of new News Corp and 21st Century Fox, had recorded a loss of $1.55 billion, or 64 cents a share, amid a write-down for the value of its publishing business. Excluding that and other special items, earnings per share had come in at 32 cents on revenue of $8.37 billion.

“With the separation complete, 21st Century Fox launches as a distinct public company with its own identity, its own strategy and its own growth and capital plan," chairman and CEO Murdoch said in a statement. "Although a significant amount of time and effort was spent over the past twelve months on this separation, we never lost focus on the operation of our businesses."

He added: The company not only delivered strong earnings and revenue growth led by our channels businesses, we also positioned ourselves for future success with strategic investments in our global channels businesses, including the acquisitions of Sports Time Ohio and an ownership stake in the YES Network, as well as the announcement of the impending launches of Fox Sports 1 and FXX. As a result of these advances, 21st Century Fox is poised to deliver continued innovation for our customers as well as sustained growth and long-term value for our stockholders.”

21st Century Fox COO Chase Carey is expected to speak on Tuesday's earnings conference call along with deputy COO James Murdoch and CFO John Nallen.

For the full fiscal year ended June 30, the company reported revenue of $27.68 billion, up 10 percent, driven by higher cable networks unit, film and TV results, plus the inclusion of Sky Deutschland in Germany.  Total segment operating income before depreciation and amortization reached $6.26 billion,up 9 percent.
21st Century Fox also reported full fiscal year income from continuing operations, excluding special items, of $1.36 per share, compared with $1.20.

Film unit operating income before depreciation and amortization (OIBDA) reached $117 million in the latest quarter, down from $140 million in the same period a year ago. The drop was due to lower contributions from the TV production studios "as a provision for library content more than offset the revenues related to the delivery of the new season of Arrested Development to Netflix," the company said.

Quarterly results also included the success of DreamWorks Animation’s The Croods, the home entertainment performance of Life of Pi, the pay TV market performance of Ice Age: Continental Drift and Prometheus, as well as the theatrical pre-release costs for The Wolverine and DreamWorks Animation’s Turbo.

Full fiscal year film OIBDA declined minimally from $1.312 billion to $1.308 billion.

Television unit OIBDA of $213 million fell from $235 million in the year-ago period. "This decline reflects a near doubling of retransmission consent revenues and lower programming expenses at the Fox Broadcast Company, which were more than offset by a 7 percent  decline in national and local advertising revenues primarily driven by lower American Idol ratings," 21st Century Fox said.

Cable networks unit OIBDA for the latest quarter reached $1.08 billion, up 25 percent amid growth in the U.S. and in international markets. Advertising revenues at the U.S. cable channels grew 4 percent.

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai