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News Corp reports $506 million profit

Although News Corp (ASX: NNC) has a financial year end date of 30 June, the recent separation of the company from Twenty-First Century Fox (ASX: FOX) led to News Corp applying to the ASX for a waiver.

This allowed the firm to report its results up to 90 days after the end of the financial year, hence the release of the company’s results today rather than last month when most other companies with a balance date of 30 June reported. The reason News Corp applied for the waiver relates to the preparation of its accounts in accordance with US accounting standards and that under US reporting requirements is has 90 days to lodge annual financial statements.

So with that explanation out of the way we can turn to the results. The diversified global media company reported a 2.7% lift in revenues to US$8.891 billion and reported a net income of US$506 million, which corresponds to earnings per share of US 87 cents.

A highlight from the results was the performance of the Digital Real Estate Services division. This division includes News Corp’s 61.6% interest in REA Group (ASX: REA). REA owns the flagship realestate.com.au site amongst other websites and boasts a share price which has soared 141% in the past 12 months. It is currently trading near its all-time high of $39.74.

News Corp houses a somewhat odd mix of both ‘old world’ and ‘new world’ media assets. Businesses now grouped under News Corp that used to be a part of parent company Fox include newspapers, information services, digital real estate services, book publishing, digital education and sports programing and pay-TV distribution in Australia. The TV and cable businesses as well as the film production and distribution businesses have been retained by Twenty-First Century Fox.

While overall performance looked OK, particularly given the inevitable structural headwinds faced by the newspaper businesses, shareholders were no doubt disappointed that no dividend was declared, with the company simply stated that it “expects to pay regular dividends in the future.”

Foolish takeaway

In an overall down market, News Corp’s shares were sold off around 5% in early trading on Monday after the results were released, but managed to recoup some losses and are trading down only 2.5% at midday. At current exchange rates, financial year 2013 earnings translate to 92.3 Australian cents. At a current share price of $17.60 this implies a price-to-earnings ratio of 19 times, which would appear to be in the range of fair value but should also be considered in light of REA’s share price.

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Motley Fool contributor Tim McArthur owns shares in Twenty-First Century Fox.

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