News Corp’s newspapers were again a millstone around the neck of the company in the three months to the end of December. The company’s latest financial results revealed that once again the company’s digital real estate operations and currency movements were the saviours for the second quarter in a row. Digital real estate — REA Group in Australia and Move in the US — saw a 21% jump in revenue, while currency movements (the fall in the value of the greenback) boosted revenues by US$47 million.
Seeing revenue for the group was only up 3% (around US$20 million) News Corp has again had to get help from its newer businesses and the Forex market rather than its traditional print operations in Australia, the US and UK — Harper Collins book publishing arm, its News America retail market operation and its pay TV businesses in Australia. Those pay TV businesses — Foxtel and Fox Sports are in the final throes of a merger deal being hammered out with Telstra, with the final shape of the deal expected to be revealed next week.
News directors also said that in addition to the digital real estate businesses and currency gains, the result also benefited from “the acquisitions of Australian Regional Media (‘ARM’) and Australian News Channel Pty Ltd (‘ANC’). Growth was partially offset by lower News America Marketing and print advertising revenues at the News and Information Services segment. Adjusted Revenues decreased 1%.”
The company reported a lower net loss of US$66 million (thanks mostly to the negative impact of the US tax cuts on its huge collection of tax deferred assets). The company said the loss though was 70% lower than the US$219 million in red ink that was driven by those big impairments of Foxtel (US$270 million) and the value of the fixed life assets in Australia and UK newspapers of US$310 million.
News’ favourite profit measure is called total segment EBITDA (Earnings Before Interest, tax, Depreciation and Amortisation) and is not recognised by accounting bodies. On this basis, News said it rose 1% to US$329 million, from US$325 million in the December quarter of 2017 (that excludes the half a billion dollars of impairments). On an adjusted basis, stripping out a few things, News said the figure showed no growth on 2017.
Digital real estate not only lifted revenue 21%, its segment EBITDA jumped 25%, the strongest performance of the businesses for both revenues and earnings. The news and information business saw flat revenue in the quarter of US$1.29 million, and a 1% dip in segment EBITDA to $US140 million in the quarter. Favourable currency movements helped boost the contributions from news Australia and News UK, as did cost cuts.
“Within the segment, News UK, News Corp Australia and Dow Jones revenues grew 7%, 4% and 1%, respectively, while revenues at News America Marketing declined 16%. Adjusted Revenues for the segment were 5% lower compared to the prior year,” the company reports.
Directors also say that advertising revenues fell 6% compared to 4th quarter of 2016.
“The decline was driven by lower home delivered revenues of US$37 million at News America Marketing primarily due to two fewer free-standing inserts and a decline in custom publishing revenues. The results also reflect the weakness in the print advertising market and the decision to cease The Wall Street Journal’s international print editions in the second quarter of fiscal 2018.”