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Australian paper cuts cloud profit outlook for Murdoch's News Corp

8 Feb 2013 THE AGE - COLIN KRUGER


NEWS Corp has blamed an underperforming Australian business, Sky Italia, and its US television network for an earnings downgrade just months before the media group splits its publishing and broadcast assets into separate companies.

Chief financial officer David DeVoe said total operating income for the current financial year was now expected to be in the "mid to high single digits", compared with last year's $US5.6 billion result, due to the underperforming business units. The company previously had said earnings would rise to the high single to low double digits.

"In Australia we have been hammered by an economy we keep hoping has hit bottom, yet seems to find new lows," chief operating officer Chase Carey said.

"This was clearly evident during the holiday season where we were unable to benefit from the seasonal advertising lift, as we had in prior years. As stated earlier, we're actively working to restructure this business for the future."

He said the split of its publishing and entertainment businesses remained "on track" for the end of the financial year.

News Corp reported that revenue rose 5 per cent to $US9.43 billion ($A9.1 billion) for the second quarter, while adjusted operating income rose 5 per cent to $US1.66 billion.

News Corp's cable network programming accounted for biggest share of the result, with an operating profit of $US945 million and revenues rising 18 per cent.

Executive chairman Rupert Murdoch said: "News Corp's fiscal second-quarter performance reflects our strong momentum. Double-digit gains in our cable and television businesses, along with improvements in our publishing segment, drove revenue and earnings growth even as we seized opportunities to invest in our core businesses for long-term and sustainable growth."

Net income attributable to shareholders more than doubled to $US2.38 billion. This largely related to other income from gains on acquisitions such as the $2 billion it paid for James Packer's Consolidated Media Holdings.

On the publishing side, the company reported a better performance from its British newspapers, and contributions from book publishing acquisitions, "more than offset lower advertising revenues at the Australian newspapers".

Ongoing investigations into the British phone hacking scandal - following the closure of The News of the World - cost the company $US56 million for the quarter.

Mr Carey said the Sky Italia satellite TV business, which made a loss for the December quarter, would be $US100 million below target this year.

He blamed the bad performance of its Fox Broadcast Network on "a sports schedule which just didn't bounce our way".

Profits at film operations dropped $US10 million to $US383 million. The biggest contributor for the December quarter was Life of Pi, which brought in some $US500 million worldwide.