News Corp cuts outlook for annual earnings

Thursday 07 February 2013 19.19
Rupert Murdoch's New Corp cuts earnings outlook
Rupert Murdoch's New Corp cuts earnings outlook

Media conglomerate News Corp has cut its forecast for annual earnings.

It said that underperformance at several businesses including its Fox broadcast network would offset a gain in earnings in the most recent quarter.

The company said that operating income for the current fiscal year, which runs up to June, would now grow by "mid- to high single digit" percentages.

This is down from the "high single- to low double-digit" percentages it predicted in November.

Fox's once-hot singing competition show, "The X Factor," failed to generate large audiences, while post-season NFL football also saw an audience decline from a year earlier. Sky Italia, the company's satellite TV business in Italy, lost subscribers in a weak economy.

"Clearly, `X Factor' was a disappointment for us," chief operating officer Chase Carey told analysts on a conference call. "Maybe early in the year, we were a little too optimistic."

The company, which is controlled by its lead shareholder and chief executive Rupert Murdoch, earned $2.38 billion, or $1.01 per share, in the fiscal second quarter. That is up from $1.06 billion, or 42 cents per share, a year earlier.

Earnings got a once-off $1.4 billion boost due to the company taking a bigger stake in pay TV networks Fox Sports Australia and Fox Star Sports Asia. It also posted a $131m gain from participating in a stock buyback programme at British Sky Broadcasting, in which News Corp has a stake of about 40%.

The one-time gains were offset by restructuring charges of $65m related to newspapers abroad. Excluding one-time items, adjusted earnings came to 44 cents per share, beating the 43 cents per share expected by analysts.

Revenue was $9.43 billion, up 5% from $8.98 billion. The company said its pay TV network business helped grow revenue.

Analysts said the downward outlook revision came as a surprise. While audience ratings problems at Fox and troubles at Sky Italia were expected, they thought the difference would be made up by strong pay TV networks like Fox News Channel and FX as well as new fees from TV signal distributors that carry its TV stations.

Carey said that to cope with the subscriber loss in Italy, the company would aim to cut $200m in programming costs there.

News Corp is planning to split into two companies this year - one for publishing and the other for the TV and movie businesses. That would help the larger surviving entity made up of the movie studio and TV assets show faster profit growth. That entity will be rebranded Fox Group, while the newspaper and publishing company will keep the name News Corp.

Carey addressed multiple reports recently that News Corp is preparing to launch a national sports network in the US to compete with The Walt Disney's ESPN. Carey called it "the world's worst kept secret" and said the company had amassed a broad array of sports rights that include NASCAR auto racing, as well as baseball, college football and basketball, soccer and mixed martial arts, but he did not provide launch details.