News Corp reports: News Aust full year revenue drops 6%

• Australian digital news subscriptions up from 415k to 517k YOY

Highlights from News Corp’s Q4 results and commentary from CEO Robert Thomson:

• Revenues were $10.07 billion, a 12% increase compared to $9.02 billion in the prior year, reflecting the consolidation of Foxtel for the full year and growth at the Digital Real Estate Services segment

• Net income of $228 million compared to a net loss of ($1.44) billion in the prior year

• Total Segment EBITDA was $1.24 billion compared to $1.07 billion in the prior year

• The Wall Street Journal subscribers reached a record of 2.6 million with digital-only subscribers accounting for approximately 69% of the total subscriber base

• Subscribers for Foxtel’s over-the-top services grew over 90% since the beginning of the calendar year with approximately 777,000 paid OTT subscribers, including approximately 331,000 paid subscribers at Kayo

See separate post for details of Foxtel/Kayo

News Corporation has reported financial results for the three months and fiscal year ended June 30, 2019.

Commenting on the results, chief executive Robert Thomson said:

“News Corp completed fiscal 2019 robustly, with revenues rising 12 percent and profitability 16 percent higher compared to the prior year, reflecting the consolidation of Foxtel, strength in digital real estate and substantial progress in the successful digital transformation of our news businesses.

“We are acutely focused on simplifying the structure of the company and making clear the full value of the sum of our parts. To that end, we recently announced a strategic review of News America Marketing, including a sale of the business; we have received material interest and the process is progressing well.

“Significantly, we posted higher Segment EBITDA at our News and Information Services segment, thanks to a rapid rise in digital paid subscribers, particularly at Dow Jones. The Wall Street Journal recorded a notable increase in digital-only subscribers, who now account for over 69 percent of the total subscriber base. The Risk & Compliance business is also flourishing, with revenue expanding 24 percent, the fourth consecutive year of growth well above 20 percent.

“For the Digital Real Estate Services segment, both REA and realtor.com® strengthened their competitive positions through strategic acquisitions and product enhancements, despite headwinds in housing markets. We note with interest the recent signs of improvement in the U.S. housing environment, with lead volume improving, record traffic to realtor.com® and an uptick in pending home sales.

“At Foxtel, paying subscribers for the Kayo sports streaming service more than doubled between the third and fourth quarters to 331,000, while average churn among sports subscribers to the Foxtel broadcast service actually fell during the same period. Clearly, Kayo is adding significantly to the total number of sports viewers in Australia prepared to pay for premium content.”

FULL YEAR RESULTS

The company reported fiscal 2019 full year total revenues of US$10.07 billion, a 12% increase compared to $9.02 billion in the prior year period, reflecting the impact from the consolidation of Foxtel’s results following the combination of Foxtel and Fox Sports Australia (the “Transaction”) into a new company in the fourth quarter of fiscal 2018 and growth in the Digital Real Estate Services segment. The growth was partially offset by a $311 million negative impact from foreign currency fluctuations, lower print advertising and News America Marketing revenues at the News and Information Services segment, and $72 million of lower revenues as a result of the adoption of the new revenue recognition standard. Adjusted Revenues (which exclude the foreign currency impact, acquisitions and divestitures as defined in Note 1) increased 1%.

Net income for the full year was $228 million as compared to a net loss of ($1.44) billion in the prior year.

FOURTH QUARTER RESULTS

The company reported fiscal 2019 fourth quarter total revenues of $2.47 billion, an 8% decline compared to $2.69 billion in the prior year period, primarily due to the $105 million negative impact from foreign currency fluctuations, lower revenues at the Book Publishing segment, which includes the absence of the one-time contribution from the sublicensing agreement for J.R.R. Tolkien’s The Lord of the Rings trilogy, lower broadcast subscriber revenues at the Subscription Video Services segment, lower advertising revenues at the News and Information Services segment and $18 million of lower revenues as a result of the adoption of the new revenue recognition standard. Adjusted Revenues decreased 5%.

Net loss for the quarter was ($42) million as compared to a net loss of ($355) million in the prior year.

News and Information Services 

Full Year Segment Results

Fiscal 2019 full year revenues declined $163 million, or 3%, compared to the prior year, including the $154 million, or 3%, negative impact from foreign currency fluctuations. Within the segment, Dow Jones revenues grew 3%, while revenues at News UK declined 4% and revenues at News Corp Australia and News America Marketing both declined 6%.

Adjusted revenues for the segment were flat compared to the prior year.

Advertising revenues declined 7% compared to the prior year, reflecting weakness in the print advertising market, a $74 million, or 3%, negative impact from foreign currency fluctuations and lower revenues at News America Marketing.

Circulation and subscription revenues increased 1% compared to the prior year, reflecting continued strength at Dow Jones, partially offset by a $61 million, or 2%, negative impact from foreign currency fluctuations.

Other revenues increased 3% compared to the prior year, primarily due to the $38 million net benefit related to News UK’s exit of the gaming partnership with Tabcorp for Sun Bets.

Fourth Quarter Segment Results

Revenues in the quarter decreased $67 million, or 5%, compared to the prior year, reflecting a $40 million, or 3%, negative impact from foreign currency fluctuations.

Within the segment, Dow Jones revenues grew 4%, while revenues at News America Marketing declined 6%. News Corp Australia and News UK declined 7% and 10%, respectively, primarily driven by foreign currency headwinds. Adjusted Revenues for the segment were 2% lower compared to the prior year.

Advertising revenues declined 8% compared to the prior year, of which $18 million, or 2%, was related to the negative impact from foreign currency fluctuations. The remainder of the decline was driven by weakness in the print advertising market and lower home delivered revenues, which include free-standing insert products, at News America Marketing, partially offset by growth in digital advertising revenues. Advertising revenues at Dow Jones were flat in the quarter as growth in digital advertising offset the decline in print advertising. Digital revenues represented 40% of total Dow Jones advertising revenues in the quarter.

Circulation and subscription revenues were flat compared to the prior year, including a $17 million, or 3%, negative impact from foreign currency fluctuations. Circulation and subscription revenues again benefited from a healthy contribution from Dow Jones, which again saw a 7% increase in its circulation revenues, reflecting digital paid subscriber growth of 14% and subscription price increases at The Wall Street Journal, as well as the continued growth in its Risk & Compliance products.

Digital revenues represented 33% of News and Information Services segment revenues in the quarter, compared to 30% in the prior year. For the quarter, digital revenues for Dow Jones and the newspaper mastheads represented 37% of their combined revenues, and at Dow Jones, digital accounted for 55% of its circulation revenues. Digital subscribers and users across key properties within the News and Information Services segment are summarized below:

• The Wall Street Journal average daily digital subscribers in the three months ended June 30, 2019 were 1,818,000, compared to 1,590,000 in the prior year (Source: Internal data)

• Closing digital subscribers at News Corp Australia’s mastheads as of June 30, 2019 were 517,300, compared to 415,600 in the prior year (Source: Internal data)

• The Times and Sunday Times closing digital subscribers as of June 30, 2019 were 304,000, compared to 256,000 in the prior year (Source: Internal data)

• The Sun’s digital offering reached approximately 113 million global monthly unique users in June 2019 (Source: Google Analytics; prior year comparable statistic unavailable due to source change)

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