News Corp posts US$1.13bn loss, citing Foxtel as main cause

News Corp polished off the third quarter of the financial year with a US$1.13bn loss, attributing the majority to write-downs for the Foxtel and Fox Sports merger in Australia.

The losses included US$998m in non-cash write-downs related to the merger.

Robert Thomson welcomed Foxtel to the ‘corporate’ family overnight

In addition to the write-downs from Foxtel, the New-York based entity reported a $US165m impairment for News America Marketing.

Loss per share for stockholders was US$1.94 compared to US$0.01 the prior year.

News Corp said ‘lower-than-expected’ revenues from new products and broadcast subscribers at Foxtel forced the company to revise its outlook.

This was flagged two months ago to the US Securities and Exchange Commission.

With the merger of Foxtel and Fox Sports complete, News Corp now owns 65% of the combined entity, while Telstra holds the remaining 35%.

Foxtel delivered ‘lower-than-expected’ revenues from new products and broadcast subscribers

The financial results come a month after Foxtel signed a multi-million-dollar cricket deal with Cricket Australia and Network Seven, which will run for the next six years.

Total revenue for Foxtel was US$587m, down from US$591m in 2017, while EBITDA [earnings before interest, tax, depreciation and amortisation] declined by US$27m (a fall of 21%), from US$131m to US$104m. In Australian currency, revenues fell by 4% due to subscriber ‘mix’ and low advertising revenues, while EBITDA suffered a 24% decrease, attributed to lower revenues and increases in sports programming costs, namely AFL rights.

As of March 31, Foxtel had 2.8m subscribers, the release posted to the ASX and US-based NASDAQ said.

But looking at the cable network programming segment, total revenue was up by 6%, from US$122m to US$129m, which was due to affiliate revenues at Fox Sports Australia and Australian News Channel. But the segment’s EBITDA fell by US$18m – a 53% decline. EBITDA now sits at $16m, with the decline attributed to the timing of programming payments related to the launch of Fox Sports’ dedicated NRL channel and high NRL programming rights costs.

Despite the mixed results, chief executive Robert Thomson welcomed Foxtel to the “corporate family”.

“We believe the company is uniquely positioned, given its potential in a rapidly expanding OTT market, with unrivalled sports offerings and premium entertainment and news content. From the fourth quarter, the combination of digital real estate services and pay-TV businesses will account for more than half of our profits and significantly increase recurring subscription-based revenues,” Thomson said.

Growth in revenue from news and information services was attributed to circulation and subscription revenues, which climbed 7% year on year.

News Corp’s third quarter results included a massive loss, attributed to Foxtel write downs

In news and publishing, News Corp Australia’s revenue was down by 3% for the third quarter.

In Australia, digital subscribers across the mastheads was at 409,000, as of March 31, compared to 333,400 the prior year.

REA Group’s revenue increased by 35% to US$158m, from US$117m, which was attributed to an increase in Australian residential revenue.

Total revenue was up for the quarter from US$2.10bn compared to US$1.98bn in the previous corresponding period, a 6% year-on-year increase. Most of that revenue came from News Corp’s digital real estate arm, REA Group and book publishing.

EBITDA was down by 15% compared to the year prior, from US$215m to US$182m.

“We finished the fiscal third quarter with strong revenue growth, led by outstanding performances at our digital real estate services and book publishing segments. Revenues this quarter improved by 6% and are up 4% for the first nine months of this fiscal year,” Thomas added.

“Reported earnings in the third quarter were affected by a non-cash write-down of our investment in Foxtel, as we previously disclosed in March, and non-cash impairment charges, mostly related to News America Marketing.”


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