There was some good news and a lot of bad news from the latest quarterly report from News Corp – the company’s newspapers in Australia remain a black hole with the slide in revenues and earnings continuing, as it has done for the past three years. But book publishing perked up, online property company, REA Group again performed strongly, Foxtel had a solid quarter, but Fox Sports didn’t.
And nowhere are the bits as blemished as in News’ Australian newspapers. In the week that Fairfax Media surprised by announcing between 70 to 80 redundancies, News Corp revealed that the revenue and earnings slide in News Corp Australia and its fleet of newspapers and magazines, continued unabated in the three months to March, with revenues falling 21%, helped by the rise in the value of the US dollar.
News CEO, Robert Thomson described conditions as "challenging" several times in his statement and briefing. There was no mention of earnings from the Australian newspaper and magazine operations.
"Australia clearly remains a challenge", Mr Thomson told the briefing this morning. Print sales at all News Australian papers are weakening and only cover price rises in the quarter have helped slow the fall in revenues.
Led by these weak results from News Corp Australia, revenues at the company’s core business, the newspapers and magazines and information in Australia, the UK and US, fell 9% in the quarter to $US1.45 billion.
It was the biggest factor in the 5% slide in overall revenues for News for the three months to March to $US2.08 billion. That saw earnings before interest tax depreciation and amortisation (ebitda) for the business fall 12% to $US146 million.
The weak performance by the company’s Australian papers and magazines (which hold a dominant share of the print media in this country) offset better returns from the company’s star growth business, REA Group, the Australian online real estate operation which lifted revenues and ebitda profits in the quarter $US16 million and $US12 million respectively.
Higher revenues and earnings at the Harper Collins book publisher in the quarter (ebitda jumped 83% or $US24 million), because of strong sales of the Divergent range of books and a surge in ebook revenues and profits (now equal to 26% of group revenues, up from 21%).
Foxtel’s revenues fell $US96 million to $US697 million from $US793 million in the quarter, thanks to the rise in the value of the US dollar (which impacted Australian newspaper revenues and earnings as well).
News said operating income for the quarter at Foxtel rose $US14 million to $US132 million from $US118 million "due to cost savings and reduced intangible asset amortization from the Austar acquisition, partially offset by foreign currency fluctuations." Total closing subscribers were approximately 2.6 million as of March 31, 2014, "a 5% increase compared to the prior year period driven by an increase in digital platform subscribers. Cable and satellite churn improved to 13.1% from 14.9% in the prior year," News said.
But it was the Australian newspapers where the damage was felt most. News’ quarterly report said:
"Australian newspapers revenues declined 21%, of which 13% is related to foreign currency(changes), and accounted for the majority of the Segment revenue decline compared to the prior year. Total segment advertising revenues declined 10%, driven by the negative impact of foreign currency coupled with weakness primarily in the print advertising market and the absence of results from LMG (the Dow Jones Local Media Group newspapers), partially offset by continued growth at News America Marketing led by in-store advertising.
"Circulation and subscription revenues declined 5%, primarily due to the continued decline in Institutional revenues at Dow Jones, the absence of results from LMG and lower print circulation volume, partially offset by cover price increases in the U.K. and at several Australian newspapers as well as higher subscription pricing at The Wall Street Journal and WSJ.com. Adjusted revenues declined 4% compared to the prior year, " News said.
"Segment EBITDA decreased $20 million in the quarter, or 12%, as compared to the prior year. Results were impacted by continued revenue weakness in the Australian market and Dow Jones’ Institutional business coupled with the sale of LMG and incremental dual rent and other facility costs related to the relocation of the Company’s London operations, which are primarily non-cash, partially offset by the growth of revenues at News America Marketing’s in-store advertising.
"Total costs declined 8% driven by the impact of cost savings initiatives and lower production costs, as well as the sale of LMG, partially offset by increased promotional costs and sports rights acquisition costs. Adjusted Segment EBITDA decreased 11% compared to the prior year."
News Corp reported third quarter ‘Total Segment’ ebitda of $US175 million, up 4% increase as compared to $US169 million in the 3rd quarter of 2012-13. "This improvement was driven primarily by stronger performances in the Book Publishing and Digital Real Estate Services segments, partially offset by declines at the News and Information Services segment, adverse foreign currency fluctuations and slightly higher losses at Amplify compared to the prior year.
News said its net income (profit) was $US48 million as compared to $US323 million in the prior year, which included a non-taxable profit on the SKY Network Television Ltd. "Adjusted net income available to News Corporation stockholders was $66 million compared to $73 million in the prior year. Impairment and restructuring charges were $10 million and $54 million in the three months ended March 31, 2014 and 2013, respectively," news said.
"Other Segment EBITDA for the three and nine months ended March 31, 2014 includes fees and costs, net of indemnification, related to the U.K. Newspaper Matters (The News of the World phone hacking and Sun bribery cases) $20 million and $56 million, respectively. Other Segment EBITDA for the three and nine months ended March 31, 2013 includes fees and costs related to the U.K. Newspaper Matters of $34 million and $144 million, respectively,” News said.These payments are covered by 21st Century Fox, the Murdoch family’s other media group which reported yesterday.
And in News management matters, the company has formally named Will Lewis, the former editor of The London Telegraph and senior executive with the Financial Times, as CEO of the Dow Jones Company. He has been interim CEO since Les Fenwick, the former Bloomberg head, departed. Lewis is more notable for overseeing the sorting out of the News of the World phone hacking case, and helping identify possible cases of bribery involving journalists on The Sun. That earned him the enmity of News Corp journalists in London. His appointment positions him to succeed News CEO, Robert Thomson, who was a previous CEO of Dow. News had still to name a new full time CEO for News Corp Australia. Julian Clarke is the acting CEO.
