News Corp cites Foxtel and REA Group as stand-out assets following record year

News Corp released its annual report for the year, and according to executive chairman, Rupert Murdoch, it was its “most profitable yet” with success is across each business.

This is despite the year being a been a “severe test for families, for countries and for companies” according to global chief executive Robert Thompson, due to the COVID-19 pandemic.

Overall, the global media company saw revenues in fiscal 2021 rise 4% and by 30% in the fourth quarter, indicating that the company is gaining in momentum, while profitability improved by 26% for the year.

Locally, the company closed or moved a number of its regional publications to digital-only offerings, in addition to making a large number of redundancies.

“News Corp Australia took the bold and necessary decision to convert most of our regional and community papers to digital only platforms, and we saw a 25% increase in digital subscribers at the mastheads in the fourth quarter, while there was a healthy recovery in advertising,” stated Thompson.

The improvement in the profitability of the News Media businesses, including News UK, News Corp Australia and the New York Post came off the back of “disciplined cost control and sage leadership throughout those businesses, and a strong recovery in advertising during the fourth quarter”.

The past year has also seen the company enter into new payment agreements with the major tech platforms, Facebook and Google.

“These deals, the financial terms of which are confidential, will add significant revenue annually – clearly into nine figures – and are a profoundly important part of the ongoing transformation of the content landscape,” stated Thompson. “We are also watching the evolution of the digital ad market, which, historically, has lacked transparency – the active interest of regulators worldwide should reduce opacity and provide higher yields for publishers.”

Thompson appeared at a senate committee hearing last week via video link where he stated digital platforms “are publishers, they publish information” and should be bound to the same regulations as publishers in Australia.

Along with a record number of digital subscriptions across its key mastheads, its jointly-owned subscription broadcast offering Foxtel recorded record subscriber growth, and at the end of June, saw streaming subscribers reach over two million, an increase year-on-year of 155%. Paying subscribers were 40% higher and fiscal year revenue rose 10%, while our EBITDA growth was 11%.

“That success has naturally given us much optionality as we consider Foxtel’s rather favorable future,” he added.

The Foxtel narrative is particularly positive, as our early emphasis on streaming and on securing long-term sports and entertainment rights has put the company on a decidedly upward trajectory.

“It is worth pausing for a moment to consider how the Foxtel narrative has changed decisively and positively. Where once we were being asked whether we would need to put extra funds into Foxtel, now we have attractive options for a growing, contemporary business that has a tangible upside.”

Foxtel will present its upfronts for 2022 today.

Digital real estate is another fast-growing sector for the company, and its local business, REA Group had a “supernal year”, with revenue growth of 27%, benefiting from currency and the continuing robust housing market in Australia that have seen record prices for properties across the nation.

“Again, listings were a key driver, with full-year listings 15% higher, while those in the fourth quarter surged 54%. One of the absolute lessons of the pandemic is that families and investors have focused on property as both a source of returns but also of enduring security. The allure of real estate is real, and the profits are palpable,” Thompson stated.

As of 30 June 2021, News Corp had US$2.15 billion of total outstanding indebtedness (excluding related party debt) with maturities ranging from fiscal 2023 through fiscal 2029, including US$854 million and US$314 million, respectively, of indebtedness held by its non-wholly owned subsidiaries, Foxtel and REA Group.

It’s cash balance exceeded US$2.2 billion at the end of June.

It also spent US$550 million, on advertising and promotional expenses for the fiscal years ended 30 June 2021.

According to Murdoch, News Corp’s strategy has been constant and clear: “grow digitally and globally. Simplify and be transparent.”

Despite the record result, the company’s print and digital advertising revenue was affected generally by overall national and local economic and business conditions. It cited certain sectors of the economy that account for a significant portion of the company’s advertising revenues, including retail, technology and finance. “Some of these sectors, such as retail, are more sensitive to weakness in economic conditions, as well as increased online competition.”

A decline in the economic prospects of these and other advertisers or the economy in general could alter current or prospective advertisers’ spending priorities or result in consolidation or closures across various industries, which may reduce the company’s overall advertising revenue, stated the report.

“While the company has adopted a number of strategies and initiatives to address these challenges, there can be no guarantee that its efforts will be successful. If the company is unable to demonstrate the continuing value of its various platforms and high-quality content and brands or offer advertisers unique multi-platform advertising programs, its results may suffer.”


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