US rules halve size of profits at News

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The Independent Online
PROFITS at Rupert Murdoch's News Corporation, produced under US rules for a pounds 190m share issue, are less than half the level previously published.

The prospectus for the share issue, filed with the Securities and Exchange Commission in Washington, shows that under US accounting practices the group's net profits in the year to 30 June were only Adollars 241m ( pounds 107m), compared with a figure of Adollars 502m as stated in the group's annual report, which is prepared under Australian accounting rules.

In the annual report, News Corporation's operating income is stated as Adollars 1.59bn, but under US rules this falls to Adollars 1.30bn as the US rules have far more rigorous standards about writing off intangible assets, such as the value of newspaper titles.

Consequently the income before abnormal items and tax fell from Adollars 622m to Adollars 415m and the earnings per share tumbled to just Adollars 0.66 compared with Adollars 1.40 under Australian regulations.

There is also a significant difference in the balance sheet strength of the group under the two different accounting policies. In the annual report the publishing rights, titles and television licences held by the group are valued at AS12.9bn, an increase of Adollars 518m over the figures in the middle of 1991 despite News Corporation actually making disposals in the year under examination.

Under US rules the value of these intangible assets is only Adollars 7.35bn, an increase of just Adollars 34m in the year.

This means that under Australian regulations the debt is worth 38 per cent of total assets, but under US practices the gearing ration rises to 80 per cent. Similarly, in the annual report, operating profits cover interest charges 1.7 times while under US rules the cover falls to 1.37 times.

News Corporation's results for 1991/2 have prompted some positive comment by stockbroking analysts. Derek Terrington of Kleinwort Benson Securities said that the group was in a strong position because of its 'discipline and daring'.

Against this background the group's equity offering was expected to be well received.

Reports from Australia indicate Mr Murdoch is again interesting himself in acquisitions. The reports say News Corporation is involved in a Adollars 240m bid for Australia's Channel 10 television network, which he sold in 1987 at four times the current price.

The bid tops a previous offer to Channel 10's owners, Westpac Bank, by Canada's CanWest Global Communications.