THE News Corporation Ltd last night confirmed its record operating loss had grown to $12 billion, the largest in Australian corporate history, while reporting a 15 per cent increase in underlying earnings for the year to $3.5 billion and raising expectations for more growth in 2003.
News, which publishes The Australian, took another $3.5 billion hit on the carrying value of its 42.6 per cent owned US company Gemstar TV Guide. That takes total net losses from other items to $13.2 billion for the year, after write-offs for sports rights and Italian and German pay-TV investments.
But News's loss was dwarfed last night by the $22.5 billion half-year loss reported by the company's French rival Vivendi Universial. Vivendi, which ousted chief executive Jean-Marie Messier after a plunge in its share price, booked a goodwill writedown of $20.1 billion and carried another $6.2 billion of provisions.
While News's write-offs were expected to attract the most local attention, the underlying result came in slightly above expectations.
Operating income (or earnings before interest and tax) grew to $3.5 billion against expectations of a $3.3 billion result.
And the company expected further growth in 2003 as the advertising markets continued to improve.
"We are expecting a 2003 operating income growth at News Corp to be in the high teens to low 20s range above 2002, while Fox's is projected to increase by 25 to 30 per cent," chief financial officer David DeVoe said.
However, this year's net profit was hit by higher losses at the company's associated businesses.
The first-time inclusion of $181 million in losses from the half-owned Italian pay-TV business Stream pushed losses at associated entities to $314 million from $162 million last year. That reduced the annual net profit to $1.22 billion from $1.28 billion last year.
Chairman and chief executive Rupert Murdoch described the year as "economically trying" but noted there had been an improvement in the US and international advertising markets.
"Obviously we were disappointed by the writedowns in our investment in Gemstar, which we took during the year due to that company's declining share price," he said.
"Nonetheless, we are working closely with Gemstar to take the necessary steps to restore the value of that important asset."
He threatened to withdraw from the potential merger of Stream with the Vivendi-owned rival Telepiu if they could not be satisfied with the quality of its subscriber base.
"But we are not at that stage yet and are having friendly talks," he said.
Group revenues rose 13 per cent for the year to $29 billion. The most impressive operating gains were made by the filmed entertainment and cable divisions. Their operating income grew 86 per cent to $904 million and 93 per cent to $380 million respectively.
The television business, which has been hit by lower ratings, reported a $134 million decline in operating income to $873 million despite the first-time inclusion of the Chris-Craft TV stations in the US.
News said the strength of its balance sheet was evident with its free cash flow of $2.6 billion and the repayment of $3.4 billion in debt.
