WRITE-DOWNS at News Corporation’s Australian newspapers and a revenue slump forced the media company into a $US1.6 billion ($A1.5 billion) loss for the three months to June 30, although underlying earnings met analysts’ expectations.
Excluding the charges, annual net profit fell to $US1.2 billion, from $US2.7 billion a year earlier. Earnings before interest and tax climbed 13 per cent to $US5.6 billion but are expected to rise more slowly this financial year – in the ”high single- to low double-digit range”, the company said.
Chief operating officer Chase Carey said advertising growth would continue to stagnate, growing about 1 per cent in the US.
In preparation for the company’s split into separate publishing and entertainment divisions next year, the group announced write-offs of $US2.8 billion, ”most significantly” related to the Australian operations. It surprised the market with a fall in fourth-quarter revenue to $US8.37 billion, although one analyst attributed most of the fall to the rising US dollar. The decision to slash the value of its Australian assets followed a re-examination of its growth assumptions for newspaper publishing, the company said.
Operating income at its publishing division – which includes newspapers in Britain, Australia and the US, as well as the Dow Jones newswire – almost halved in the fourth quarter, dropping $US131 million to $US139 million.
Full-year operating income for the publishing division fell $US392 million, due to falls in advertising revenue at its Australian newspapers, the integrated marketing services business and its newspapers in Britain, as well as the absence of contributions from the closure of the News of the World in the UK, the company said.
Mr Carey told analysts that after a management overhaul at its Australian businesses, there would be more significant restructuring of the local arm, which would weigh on profits this financial year.
Chairman Rupert Murdoch said he was proud of the company’s growth, saying it had ”continued to innovate, grow and consistently adapt to the rapidly changing media industry landscape”.
Citi analyst Justin Diddams told clients that the earning ”miss” would be disappointing for investors. But he said it was worth noting that the company still hit its 2011-12 guidance and delivered a robust guidance outlook for next year. ”And management remains committed to the share repurchase program,” he said.
Cable networks remained the powerhouse of the group, contributing $US792 million in operating income for the quarter, up 26 per cent, supported by a 15 per cent increase in revenue. Television was the next largest contributor but its performance was dampened by poor ratings on key shows such as American Idol, and an advertising decline.
News Corp shares slipped 73¢, or 3.2 per cent, closing at $US21.88.
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