News Corp releases third quarter results

“We saw particular progress in our quest to be more digital and global”

Results highlights:

• Revenues of $1.98 billion, a 5% increase compared to $1.89 billion in the prior year
• Income (loss) from continuing operations was break-even, compared to ($128) million in the prior year
• Digital Real Estate Services segment contributed to strong growth in Total Segment EBITDA

(Unless indicated otherwise, all figures in US dollars)

News Corporation has reported financial results for the three months ended March 31, 2017.

Commenting on the results, chief executive Robert Thomson said:

“In the third quarter, we saw particular progress in our quest to be more digital and global, while there was tangible improvement in operating efficiencies. We posted solid revenue growth and substantial earnings growth, highlighted by momentum in digital real estate services, where continued to expand traffic, revenue and profitability.

At news and information services, while print advertising remains volatile, we saw some moderation this quarter. Overall, the segment was a source of growth this quarter – in both revenues and profitability – driven by, in particular, the robust performance of in-store product at News America Marketing, digital subscriber gains of more than 300,000 at the Wall Street Journal and the benefits of ongoing cost control.

News and Information Services

Revenues in the quarter increased $32 million, or 3%, compared to the prior year. Adjusted revenues increased 1% compared to the prior year.

Advertising revenues increased 4% due to higher in-store product revenues at News America Marketing, primarily driven by an increase in client spending and, to a lesser extent, timing-related benefits. Advertising revenues also benefited by $21m from the acquisition of Wireless Group and $20m from the acquisition of Australian Regional Media (ARM).

These factors were partially offset by weakness in the print advertising market.

Circulation and subscription revenues decreased 1%, but increased 3% excluding an $18m impact from negative foreign currency fluctuations, due to higher subscription pricing and selected cover price increases, partially offset by lower print volume.

Digital revenues represented 24% of segment revenues in the quarter, compared to 23% in the prior year; for the quarter, digital revenues for Dow Jones and the newspaper mastheads represented 29% of their revenues. Digital subscribers and users across key properties within the News and Information Services segment are summarised below:

• The Wall Street Journal average daily digital subscribers in the three months ended March 31, 2017 were 1,198,000, compared to 893,000 in the prior year (Source: Internal data)
• Closing digital subscribers at News Corp Australia’s mastheads as of March 31, 2017 were 333,400 (including ARM), compared to 261,500 in the prior year (Source: Internal data; adjusted for divested mastheads)

Cable Network Programming

Revenues in the quarter increased $15m, or 14%, compared to the prior year primarily due to the acquisition of Sky News and favourable foreign currency fluctuations.

Foxtel revenues for the third quarter increased $13m, or 2%, to $591m from $578m in the prior year period.

In local currency, Foxtel revenues decreased 3%. Foxtel’s total closing subscribers were 2.8 million as of March 31, 2017, with closing cable and satellite subscribers 1% lower compared to the prior year period. In the third quarter, cable and satellite churn was 16.1% compared to 14.3% in the prior year. Churn was at a more normalised level of 13.5% in March.

Foxtel’s net income was nil, compared to $32m in the prior year period, primarily due to $21m in losses related to Foxtel management’s decision to cease Presto operations in January 2017 and a $14m loss resulting from the change in the fair value of Foxtel’s investment in Ten Network Holdings.

Foxtel EBITDA decreased $13m, or 9%, to $131m from $144m in the prior year. In local currency, Foxtel EBITDA decreased 13%, primarily due to lower revenues and planned increases in programming costs, specifically investments in sports.

Foxtel operating income for the three months ended March 31, 2017 and 2016 was $79m and $85m, respectively, after depreciation and amortisation of $52m and $59m, respectively. Operating income decreased primarily as a result of the lower revenues and increased programming spend noted above, partially offset by lower depreciation cost and the positive impact of foreign currency fluctuations.

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