Buried in the submission News Corp made last week to the Senate committee looking at tax avoidance was confirmation that 2012-13 — the financial year for which Crikey published leaked internal accounts in 2014 — was the Murdoch company’s annus horribilis so far as its trading performance was concerned.
News Corp has never revealed the bottom-line figures for its Australian operations. The figures, which News Corp Australia chief Julian Clarke told the Senate took several days to put together, offer a rare glimpse into internal operations. Its submission says the bottom-line figures for News Corp Australia were:
- 2009-10, $503.9 million;
- 2010-11, $511.5 million;
- 2011-12, $228.8 million;
- 2012-13, $34.9 million;
- 2013-14, $355.9 million (which was the first post-split figure).
The submission revealed that News Corp’s “accounting profit before non-taxable gains and intangible impairment” was just $35 million in the year to June 2013. That is the company’s trading result before the impact of one-off profits and asset write-downs (which have been a feature of the News Corp accounts in recent years). It was the lowest of the five year’s figures in the submission, and close to the lowest for a long, long time.
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But it also included trading results from a host of businesses that left the company for 21st Century Fox in the great News split at the end of June 2013. So the financial results up to the end of the 2012-13 year included revenue, earnings etc from the Fox film and TV businesses (which were not big contributions).
“Over the last five financial years, from 2010 to 2014, News Corp Australia’s statutory accounting profit before tax was $815.9m. This is consolidated and reported to ASIC under News Australia Holdings Pty Limited,” News said in its submission. There were no figures given for Australian revenues in that period, or profit sources (newspapers, etc).
Write-downs in four years, from 2009-10 to 2012-13 totalled a net $2.33 billion. The write-downs were $12.4 million in 2009-10, $713.1 million the next year, $686.1 million in 2011-12 and a massive $922.2 million in 2012-13, and none in 2013-14.
And then there were the very helpful one-off tax-free book profit on the purchase of Consolidated Media, which delivered an extra 25% of Foxtel (to 50%, with Telstra holding the other half), and an extra 50% of Fox Sports, giving News 100% of the biggest pay-TV program supplier in the country. That produced a tax-free gain for News of $1.22 billion. On top of that, there was the sale of the News stake in Sky NZ in 2013 for a profit of $292.6 million. The net effect of these two one-off profits was to offset the $922 million of impairments, and the weak trading profit of $34.9 million, and produce a totally misleading but nevertheless accurate accounting profit before tax of $627.4 million.
It is significant that the Cons Media takeover and the Sky NZ sale happened in 2012-13 because, at the end of June 2013, News restructured into 21st Century Fox (video, film and other content, plus cable and free-to-air TV) and News Corp (print and some cable TV in Australia). The two deals seem to have been a tidying up of unfinished business ahead of the split and had the added benefit of easing the pain of the write-down in asset values ahead of that split.
News failed to conjure up any one-off profits in 2010-11 when the write-down of $713.1 million produced a loss of $201.6 million. Likewise in 2011-12, the $686.1 million in write-downs produced a loss of $457.3 million. In 2012-13, the one-off profits offset the low trading profit and more than $922 of impairments to produce a “profit” of $627.4 million. In 2013-14, there were no write-downs or one-off profits, and News Corp’s profit was $355.9 million. That rebound wasn’t explained by News in its submission, but could have a lot to do with the deep cost-cutting undertaken by former CEO Kim Williams in his brief time at the head of News, although his replacement, Julian Clarke, would deny that (and has done his best to denigrate Williams’ time at the helm of News).
News says it earned $815.9 million in the five years to 2013-14 — but strip out the $1.51 billion in one-off profits from the Cons Media and Sky NZ sales, and News lost $698.6 million in the five years, thanks to the $2.33 billion of impairments. Ignoring those, News’ trading profits in the five years totalled $1.66 billion, with a decided slide from 2010-11 onwards.