Is News Corp still raking in the cash? New figures show the rivers of (diversified) gold are drying up.
Book publishing and real estate starred in December-quarter results from Rupert Murdoch’s new News Corporation, which earlier today reported a 9% jump in earnings before interest, tax, depreciation and amortisation to $US327 million, sparking a sharp recovery in its share price.
But Murdoch’s newspaper business continue to drag on earnings, particularly in Australia where the advertising market remains challenging, print circulation continues to fall and the lower currency is eroding revenues in United States dollar terms. News continues to pay a heavy price for the British phone hacking scandal, reporting some $US51 million in associated costs in the quarter, up from $US49 million a year earlier.
In the three months to December, overall group revenues fell 4% to US$2.2 billion compared with the same quarter a year ago. But given this is News Corp’s first six months as a new entity, year-on-year financial comparisons are difficult. News’ ASX-listed shares jumped 8% today.
Book publishing EBITDA jumped 33% to US$68 million due mainly to the success of children’s author Veronica Roth’s Divergent trilogy, and a 39% jump in the sale of e-books. News’ Australian-born chief Robert Thomson said the rise of e-books meant a “growing increase in the value of our back catalogue … a wonderful archive we’re able to exploit”.
News Corp also reported a 20% increase in EBITDA, to US$55 million, from its 62% stake in ASX-listed REA Group, publisher of realestate.com.au, which reported on Wednesday.
Foxtel revenues more than doubled from US$8 to US$17 million, mainly as a result of the November 2012 acquisition of James Packer’s Consolidated Media Holdings which owned a 25% stake, and also due to a falling churn rate. Foxtel is benefiting from a rapid take-up of Telstra’s T-Box and is introducing “triple-play” bundles — broadband, telephony and pay TV — which have proved popular in America. The overall cable segment EBITDA was $US53 million.
But in News’ newspaper business, which still accounts for around three-quarters of both sales and profits, revenues fell 9% to US$1.6 billion and segment earnings fell 13% to US$255 million. Australian newspaper revenue fell 17%, of which 10% was currency related.
Newspapers continue to cut deeply into operating costs, despite a much-reduced headcount as a result of last year’s redundancies and a new multi-year printing deal in Australia that will generate US$30 million in savings over the next 18 months.
Revenue from the circulation and subscriptions to the Australian newspapers fell 7%, of which 2% was attributable to the lower currency. Falling circulation revenue was partly offset by raising cover prices in Australia, the US and the UK.
On this morning’s dial-in, analysts welcomed early signs of recovery in advertising and, asked about the outlook, Robert Thomson said December had been a “good month” and, after a holiday lull, February seemed “slightly better”.
Thomson said Australian chief Julian Clarke, who took over from Kim Williams last year, was an “inspiring character and there has been an improvement in the atmosphere” in the Australian arm. He said News aims to have a single “cost of content” — be that a news story, book or real estate transaction — and be able to repurpose that content across its platforms.