Viacom Profits Slump on Movie Weakness, Higher Costs
August 04 2016 - 08:50AM
Dow Jones News
Viacom Inc. reported a 27% slide in profits, hurt by the
continued weak performance at it networks, higher costs and a poor
box-office showing.
The results come amid a high-stakes fight for control of the
company. In June, Sumner Redstone, the 93-year-old who controls
Viacom through his holding company National Amusements Inc.,
decided to replace five board members at the media company,
including Chief Executive Philippe Dauman, his confidant of nearly
three decades.
Mr. Dauman and others have responded with a lawsuit questioning
Mr. Redstone's mental capacity and whether he is being unduly
influenced by his daughter Shari Redstone, vice chair of Viacom.
She has denied the assertion.
For the June quarter, Viacom reported a profit of $432 million,
or $1.09 a share, down from $591 million, or $1.47 a share, a year
earlier. Excluding a tax benefit, per-share earnings fell to $1.05
from $1.47.
Revenue edged up 1.6% to $3.12 billion.
Analysts polled by Thomson Reuters had projected $1.01 in
adjusted earnings per share on $3.01 billion in revenue.
Viacom had warned in June that results would fall well short of
expectations, a gloomy outlook that the company blamed on weak
movie sales and a delay in a video-on-demand licensing deal, caused
in part by the company's turmoil.
At that time, the company said it expected per-share earnings
between $1 and $1.05 for the quarter, compared with an average
analyst estimate of $1.38, according to Thomson Reuters.
Shares in the company, down 23% over the past year, rose 4.9% to
$51 in premarket trading.
Wednesday, Viacom said revenue from the company's media networks
business—its largest—declined 3.2% as domestic ratings fell and
advertising dollars declined. Amid declining sales and climbing
expenses, profit in the segment tumbled 22%.
Viacom, owner of networks including VH1 and Nickelodeon, has
grappled with viewers' increasing tendency to cut the cable cord,
like other media companies. Fellow cable operator Time Warner Inc.
on Wednesday announced a 10% stake in the streaming service Hulu in
an effort to remain competitive in the changing market.
For its part, Viacom has been working to beef up its data-driven
advertising products, such as Viacom Vantage, while investing in
original content to help boost profitability.
Viacom's filmed entertainment revenue, meanwhile, jumped 30%
from a year earlier, thanks largely to higher licensing fees. But
the underperformance of "Teenage Mutant Ninja Turtles: Out of the
Shadows" and rising costs pulled film earnings to a loss of $26
million, down from a year-earlier profit of $48 million.
Viacom's Paramount Pictures business has been a flashpoint in
the conflict between company management and Mr. Redstone. Mr.
Dauman would like to sell parts of the business, but National
Amusements Inc.—the holding company through which Mr. Redstone
controls Viacom—has publicly opposed the move, calling it a mistake
and saying it could have a "severe negative impact" on the
company's future.
The Wall Street Journal, citing people familiar with the matter,
has reported that Viacom is in talks with China's Dalian Wanda
Group Co. to sell a 49% stake in Paramount and is seeking a deal
that would value the studio at $8 billion to $10 billion.
Wednesday, Mr. Dauman noted that Viacom's international
performance during the quarter was stronger than its domestic
showing. He said the company continued to work on its strategic
plan of increasing spending on producing original content and
ramping up its data-driven advertising products. Total expenses
rose 18%, pushing the company's operating margin down to 24.8% from
35.4%.
Write to Lisa Beilfuss at lisa.beilfuss@wsj.com
(END) Dow Jones Newswires
August 04, 2016 08:35 ET (12:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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