News Corp earnings beat expectations
News Corp chief executive Robert Thomson has sounded a defiant note for the company with every segment posting growth as real estate investments and digital subscriptions pushed profits higher.
Shares in News Corp finished up 4.6 per cent to close at $19.70 as Mr Thomson laid out growth plans for the group ahead of a proposed merger of the company’s pay-TV businesses.
Pending definitive documentation and regulatory approval, News is combining Foxtel and Fox Sports, with News Corp con- trolling 65 per cent of the new company, and Telstra owning the remainder.
The new company was “expected to make a substantial contribution to our revenue and EBITDA, and fundamentally transform the nature of News Corp”, Mr Thomson said on a call with analysts.
First-quarter revenue beat analysts’ revenue expectations, climbing 5 per cent amid gains in the digital real estate business and growing digital sales in the newspaper unit, which helped offset falls in print advertising.
The company — which publishes The Australian as well as other newspapers in Australia, Britain and the US — reported total revenue of $US2.06 billion ($2.68bn) in the three months to September 30, compared with $US1.97bn in the prior period.
Earnings before interest, taxes, depreciation and amortisation improved 92 per cent to $US249 million, compared with $US130m in the prior year, partly boosted by a one-time $US46m tax benefit in Britain.
Net income for the quarter was $US87m.
Growth was also boosted by the acquisitions of Australian Regional Media, British talkback radio group Wireless and a $US26m positive impact from foreign currency fluctuations.
The digital real estate business, including contributions from REA Group and US listings business Move, reported a 20 per cent gain in revenue to $US271m. This means the segment was once again the biggest contributor to News Corp’s profitability.
“We saw the fruits of much labour to make this a more global and digital company, one increasingly defined by its growing digital real estate business and complemented by more recurring revenues from our cable and satellite businesses and subscription media offerings,” Mr Thomson said.
The company’s news and information services business, which accounts for roughly twothirds of News Corp’s top line, reported a 2 per cent, or $US19m, increase in revenue. Digital subscriptions were up at The Wall Street Journal and other mastheads including The Australian and The Times of London.
At the Dow Jones unit, publisher of the WSJ, digital subscriptions accounted for 60 per cent of revenues, a record number.
News Corp Australia’s newspapers maintained their digital growth momentum with subscriptions up 30 per cent compared to the same period a year ago.
The group recorded 375,000 paid subscribers, a bright spot for the newspaper industry as publishers restructure to boost digital-revenue streams.
The results come after Google announced it would end its First Click Free program following sustained pressure by Mr Thomson.
The move has been hailed as an important first step for publishers striving to implement a sustainable business model in a digital world, as publishers rely more on getting readers to pay.
“Rupert (Murdoch, executive chairman), Lachlan (Murdoch, co-chairman) and I, along with our colleagues at News Corp, have long taken a principled, and often solitary, stand to protect intellectual property and safeguard journalism, so we appreciate this significant first step taken by Google,” Mr Thomson said.