TV helped McGraw-Hill grow in Q4


The small TV group (four stations) at The McGraw-Hill Companies seldom gets more than a passing mention in the firm’s quarterly financial reports. Nevertheless, TV was one of the contributors to growth in Q4.

Companywide revenues were up 4.2% in Q4 to $1.5 billion. Net income was down 8%, but adjusted for the sale of BusinessWeek and other special factors, gained 6.2% to $170.5 million. Earnings per share were 53 cents, or 55 cents on an adjusted basis, compared to 51 cents a year earlier. Leading the way in both revenue and profit gains was the company’s Financial Services segment.

Selling BusinessWeek to Bloomberg significantly reduced the size of the Information & Media division at McGraw-Hill, making the smallest division even smaller. Q4 revenues decreased by 1.6% to $249.3 million, but were up 7.6% excluding the impact of BusinessWeek. Adjusted operating profit was up 40.8% to $49.8 million. The operating margin for the division was hailed as the best in a decade (18.8% as adjusted for 2010), with a rebound in the broadcasting group’s performance credited, along with the divestiture of BusinessWeek and continuing strength at Platts, the energy information operation within the business-to-business group.

CEO Terry McGraw credited political advertising and improvement in both local and national time sales with fueling a 21.7% increase in Q4 TV revenue to $28.4 million. He noted that TV revenues were up 18.3% for all of 2010 to $96 million.

“Summing up for the Information & Media segment, the outlook for 2011 calls for revenue growth in the mid single digits, adjusted operating profit growth in the mid single digits as well,” McGraw told analysts. No specific guidance was provided for television. In addition to the TV group, the Information & Media segment includes the business-to-business group, consisting of Aviation Week, J.D. Power and Associates, McGraw-Hill Construction and Platts.

RBR-TVBR observation: From time to time over the years we have heard analysts ask why McGraw-Hill doesn’t sell its small TV group. That didn’t come up Tuesday. Rather, an analyst wanted to know why McGraw-Hill was sticking with the low-margin education business, which saw operating profits drop by more than half in Q4.