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Scripps a cable pip

Newspaper/TV group's HGTV, Food see gains

NEW YORK — Cincinnati-based newspaper/TV group E.W. Scripps is fast emerging as a mini-cable network powerhouse, as the company’s wholly owned Home & Garden TV and Food Network helped drive network group profits up a whopping 70% for the second quarter over the same period last year.

Company on Monday was the first of several publishing and broadcast group to disclose second-quarter financial results this week.

Buoyant growth in cable network ad sales and affiliate fees helped Scripps offset otherwise sluggish growth among Scripps’ 21 daily newspapers and its 10 broadcast TV stations. Overall company net income for the three months ended June 30 was $64.7 million, up from $27 million a year earlier, excluding investment writedowns and unusual items. Second-quarter sales clocked in at $474.8 million, up from $380.4 million a year earlier.

Profit stagnation

Company’s shares nevertheless fell as execs warned of continued revenue and profit stagnation in the third quarter, in part due to bigger programming investment at Shop at Home and other developing networks.

Segment profits at Scripps Networks — which also includes newer nets DIY: Do it Yourself, and Fine Living plus the recently acquired Shop at Home network — came in at $55.9 million, with revenues up 28% to $142 million for the three-month period.

On a conference call Monday, execs indicated that it continues to test the possibility of launching a regional Hispanic cable net version of its HGTV and Food Network services. No launch date has been set.

Company said it expects to sell 60%-65% of its primetime inventory out of the recent cable upfront, at double-digit CPM increases. Cable net ad revenues are expected to be up 25%-30% for the third quarter, with affiliate fees up 10%. HGTV and Food Net reach 81 million and 79 million homes respectively.

Nets see gains

Both nets posted strong ratings gains over last year (HGTV up 24% and Food Network up 15%). In addition to being the company’s primary growth engines, the two networks comprise already constitute the biggest chunk value for shareholders, worth as much as $4 billion based on transaction multiples of other cable networks.

But far from pondering a divestment in the bull market for niche cable nets, Scripps seems to prefer to grow organically.

Scripps chief executive Kenneth Lowe told investors Monday that programming costs would likely increase 25% for the rest of the year. The investment in DIY and Fine Living will reduce third-quarter cable network division profits by about $11 million. The two developing nets are on track to be in 20 million U.S. TV homes by the end of the year, Lowe said.

Scripps benefits from owning full control of both its networks and their programming, which comprises mostly unscripted, easily repeatable information-based shows.

No plans to sell

While the company has long been touted as a possible takeover candidate for Disney, due to its large number of ABC affils, family-controlled Scripps has made it clear it has no intention of selling out now. In fact, its balance sheet is strong enough to support significant new investment in networks. The company has said that proposed relaxation to ownership rules could lead to station swaps, rather than outright station or newspaper purchases, however. Despite its relatively small size in all three of its core businesses, the company values the cross-promotional possibilities of owning TV stations, newspapers and cable nets.

Newspapers, which continue to suffer from slow economic growth, saw profits fall 4.4% to $67.5 million off a measly 1.5% revenue boost. Increased syndicated programming costs helped stunt profit growth in broadcasting, where profits were down 1.2% to $24.5 million off revenues up 4.2% to $78.9 million.

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