NEWS Corporation has reported a big rise in net profit despite a weak result from its Australian newspapers because of poor advertising markets and the shift of readers online.
Local mastheads, such as The Australian and the Herald Sun, as well as its pay-TV provider Sky Italia, were two businesses that were "clearly feeling the impacts of economic woes", News Corp's chief operating officer, Chase Carey, said.
Its publishing unit, which include its Australian and British newspapers and book publisher HarperCollins, reported first-quarter earnings before interest and tax (EBIT) of $US57 million ($A54.7 million), down 48 per cent from the previous corresponding period.
Publishing blotted what was otherwise a strong first-quarter result, with net profit for the three months to September 30 of $US2.23 billion more than triple the $US738 million achieved in the previous year.
Net profit, which came in a little above market expectations, was boosted by the sale of News Corp's stake in software company NDS in July, which produced a $US1.4 billion gain.
Market players cheered the result, with News Corp the best-performing stock on the S&P/ASX 50, climbing 3.2 per cent to $24.10.
While the results did not break out the performance of its Australian arm, News Corp said there were lower advertising revenues across all publishing divisions.
"In Australian publishing, the decline in display and classified advertising has clearly hit these businesses," Mr Carey said during a conference call with analysts.
"As discussed previously, we have major plans already being undertaken by our management team to address these shifts."
In June, News Ltd chief executive Kim Williams announced plans to reduce staff, consolidate its newsrooms and cut its 19 divisions on Australia's east coast to five over the next two years.
Mr Williams did not put a figure on the number of jobs to go.
"It seems as if the publishing business in Australia is struggling with little signs of a turnaround," Morningstar analyst Michael Corty said.
"Given the small size relative to the whole company, I don't think it is a big deal for the overall business."
News Corp booked a further $US67 million charge related to the costs of the ongoing investigation into the phone hacking scandal in Britain.
This was on top of the $US224 million incurred in 2011-12, relating to legal fees and compensation, among other things.
Chief financial officer David DeVoe said EBIT was expected to grow in the "high singles to low double-digit range" in 2012-13, from an adjusted $US5.6 billion in 2011-12.
News Corp's cable network programming division was again the strongest performer in the diversified media group, with first-quarter EBIT rising 23 per cent to $US953 million.
Its film and television divisions also posted earnings growth.
News Corp said total first-quarter revenue was $US8.14 billion, up 2 per cent.
Frequently Asked Questions about this Article…
Why did News Corp report a big rise in net profit despite a weak Australian publishing result?
News Corp's net profit for the three months to September 30 rose to US$2.23 billion, largely because the company sold its stake in software firm NDS in July, generating a US$1.4 billion gain. That one-off sale offset weakness in its Australian publishing arm, which suffered from falling advertising revenues and a shift of readers online.
How badly did News Corp's publishing unit perform and what were the numbers?
News Corp's publishing unit — which includes its Australian and British newspapers and HarperCollins — reported first-quarter EBIT of US$57 million, a 48% decline from the prior corresponding period, driven by lower display and classified advertising.
What impact did weak advertising markets have on News Corp's Australian arm?
The company said lower advertising revenues across all publishing divisions hit its Australian business hard; declines in display and classified advertising particularly affected local mastheads such as The Australian and the Herald Sun, prompting management to undertake major restructuring plans.
What restructuring did News Ltd announce for its Australian operations?
News Ltd chief executive Kim Williams announced plans in June to reduce staff, consolidate newsrooms and cut its 19 divisions on Australia's east coast down to five over the next two years. He did not specify how many jobs would be lost.
Did the market react to News Corp's quarterly result, and how did the stock perform?
Yes — market players cheered the result and News Corp was the best-performing stock on the S&P/ASX 50, climbing 3.2% to $24.10 following the announcement.
Are there any ongoing legal or investigation costs affecting News Corp?
News Corp booked a further US$67 million charge related to the ongoing investigation into the phone hacking scandal in Britain. This was in addition to US$224 million incurred in 2011–12 for related legal fees and compensation.
Which parts of News Corp's business showed strength in the quarter?
The cable network programming division was the strongest performer, with first-quarter EBIT rising 23% to US$953 million. News Corp's film and television divisions also posted earnings growth, contributing to overall resilience.
What outlook did News Corp give for future earnings (EBIT) growth?
Chief financial officer David DeVoe said adjusted EBIT was expected to grow in the "high singles to low double-digit range" in 2012–13, up from an adjusted US$5.6 billion in 2011–12. Total first-quarter revenue was US$8.14 billion, up 2%.
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