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News Corp sees real estate driven earnings surge while Aussie media revenues remain flat

News Corp has reported an earnings jump for the year driven by real estate services while the news and information group showed weak growth despite digital subscriptions growing by nearly a third.

The Australian news and information division recorded 1% revenue growth while Foxtel was flat for the year, however it reported a 39% EBITDA fall of $69m in the final quarter compared to last year.

News Corp CEO, Robert Thomson: “News Corp has a lustrous future, built on a strong digital and global foundation”

Overall, News Corp’s 11% revenue increase to $US8.1bn was driven by a 22% jump in real estate services while group EBITA saw a 21% rise to $US885bn, again driven by a 41% improvement real estate profits. REA group’s revenues increased 27% to $US666 million from $US525 million in the prior year

Foxtel loomed large in the News Corp’s global figures with last quarter’s $1bn write down of the subscription TV operator increasing the group’s net loss to $US1.4bn, an increase from $US643 million last year.

The company reported Foxtel’s subscribers at the end of the year were approximately 2.8 million, higher due to the launch of Foxtel Now. In the fourth quarter, the company claimed cable and satellite residential churn was 12.5% compared to 13.3% in the prior year.

Pro forma Segment EBITDA for fiscal 2018 decreased $154 million, or 22%, compared with the prior year, primarily due to $90 million of higher sports programming costs, mainly related to the Australian Football League and National Rugby League rights, as well as lower subscription revenues despite rising subscriber numbers.

In the group’s broadcast segment, which is largely made up of Australia’s Foxtel, residential ARPU for the for the last quarter declined 3% while the company EBITDA in the quarter decreased $69 million, or 39%, compared with the prior year, primarily due to lower subscription and advertising revenues at Foxtel along with the higher sports programming costs and $10 million of transition costs in the Fox Sports merger.

The results were the first time Foxtel’s full figures were fully accounted by News Corp after the company took full control of the business earlier this year following its deal that diluted Telstra’s stake in the joint venture.

Digital revenues represented 30% of News and Information Services segment revenues, compared to 26% in the prior year, reflecting strong paid digital subscriber growth at mastheads. According to the company’s internal figure, closing digital subscribers at News Corp Australia’s mastheads as of June 30, 2018 were 415,600, compared to 363,600 in the prior year.

“Fiscal 2018 was a year of operational and transformational success at News Corp,” said CEO Robert Thomson. “With robust performance across our businesses, and positive and profound changes in the character of our revenue flows, which were more global, digital and subscription-based.

“We generated strong revenue and Segment EBITDA growth in the Digital Real Estate Services and Book Publishing segments, which, together with the consolidation of Foxtel, drove over $1 billion in profitability for the year.

“Digital Real Estate Services continues to flourish and we expanded into meaningful adjacencies, broadening our audience and our revenue sources. HarperCollins’ success underscores the importance of intelligent editors and great writers in creating premium content. Algorithms are, as yet, unable to write empathetic, compelling books.

“We also saw meaningful operational improvements at the News and Information Services segment led by higher digital paid subscribers and disciplined cost initiatives, notably in Australia. Mastheads like The Times, The Sunday Times and The Wall Street Journal reached new heights in their digital transformation, with digital paid subscribers now exceeding print subscribers. The new Foxtel is focused on product innovation and leveraging its valuable content.

“News Corp is now a more substantial company after the Foxtel transaction, with a much higher percentage of recurring, subscription-based revenues, which should help offset a volatile advertising environment.

“We are marking five years since our Separation and are confident News Corp has a lustrous future, built on a strong digital and global foundation.”

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