News Corp’s quarterly results reveal the company’s shift to the United States has produced a small, but significant, reduction in transparency and disclosure.
In its first quarterly result since the shift in domicile occurred late last year, Rupert Murdoch’s company has dropped the geographical breakdown of the group’s operating income from the second quarter and half yearly profit announcement.
The information was included in the US dollar and Australian dollar versions of the first quarter profit announcement last year, but dropped from the half yearly announcement released at midnight on Wednesday.
Investors, especially those in Australia and New Zealand now have no guidance on how the Australasian part of the empire, mainly News Limited newspapers, is travelling.
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But indications are that the Australian newspaper business is doing very well and is now the most profitable media company in the country.
But the only hint of a result was the improvement from News’s newspapers around the world of 8% to $US 184 million in the latest half.
With lower income in the UK due to the capital expenditure of new printing plants requiring higher depreciation charges, the improvement came from the 34% rise in local currency operating income in Australia.
That came from ‘double digit’ growth in advertising revenues, and the inclusion of the Queensland Press results from November 12, 2004. That would have provided a small, lift in operating income that wasn’t there a year before.
(As part of the domicile move, Qld Press, which was 58% owned by the private Murdoch company, Cruden, was bought by News Corp for a total of $A2.9 billion, including debt).
Why News couldn’t continue providing the Australian figures is not explained, but they obviously had them.
The information is usually included on the page showing operating income and segment performance (see the latest announcement) and here’s a report on the overall result from AAP and the Fairfax website – Moves boost News Corp earnings – and a story from the ABC website.
All we have is the first quarter result in US and Australian dollars. This shows that Operating income from Australasia rose to $A129 million ($US91 million) from $A82 million ($US 54 million).
In the year to June 30 last the Australasian businesses had a good result, earning $A442 million ($US 315 million) compared to $A322 million ($US188 million) in 2003.
News Corp said in the latest announcement:
The Newspaper segment reported second quarter operating income of $ 184 million, an 8% increase versus the same period a year ago primarily reflecting advertising revenue growth in Australia.
The Australian newspaper group reported a 34% increase in operating income in local currency terms, primarily driven by a double digit increase in advertising revenue compared to a year ago and the inclusion of results from Queensland Press Pty Limited, which was consolidated beginning November 12, 2004.
Display advertising gains were driven by the retail sector as well as national strength with increases in the communications, consumer finance and airline travel categories. Additionally, classified advertising continued to expand with further growth in the employment and real estate categories.
Going on the half yearly statement for the previous year, that figure of $US184 million was only $US14 million more than the 2004 first half.
In Australian dollar terms, Australasia earned $A235 million in the first half of 2004, so a 34% rise in that would add around $80 million, making the contribution around $315 million.
That would in turn mean that Australian newspaper operations earned more in the first half of 2005 year, than the entire News Corp newspapers did around the world in the first half of 2004 of $A302 million, a reflection of the downturn in the UK operating income from the expansion in printing capacity there.
This would also indicate the Australian newspaper business of News (with Qld Press on board), will earn well over half a billion dollars this financial year, putting it ahead of PBL (with the gaming businesses excluded) and well ahead of Fairfax.
Meanwhile the impact of the digital roll-out plan at Foxtel is shown in the latest News results. News releases far more information about Foxtel than does its other 25% shareholder, PBL.
News said Foxtel revenues rose from $A419 million to $A489 million and the operating loss jumped to $A100 million from $A58 million, with the net loss put at $A79 million for the half compared to $A40 million.
Net debt, to finance the digital roll out jumped to $A464 million from $A42 million.
Subscriber numbers showed some increase. Including wholesale customers) they rose to 1.157 million from 1.073 million. Excluding wholesale customers, the rise was greater, up to 985,000 from 861,000.