Currency volatility hits News Corp’s bottom line

Sharp foreign currency fluctuations, and softening housing markets, have contributed to a decline in News Corp’s second-quarter revenues.

Robert Thomson is the global head of News Corp. Picture: News Corp

Sharp foreign currency fluctuations, and a softening housing market in the US and Australia, have contributed to a 7 per cent decline in News Corp’s second-quarter revenues.

The media company reported total revenues for the quarter of $US2.52bn, down from $2.72bn in the corresponding period of the previous financial year.

Announcing the results, News Corp chief executive Robert Thomson said: “The second quarter produced challenges for some of our businesses and highlighted the progress made in other segments that had been challenged.

“Obviously, a surge in interest rates and persistent inflation had an impact on all of our businesses, but, in particular, digital real estate and book publishing, which remains a majority physical business and continues to be subject to logistical exigencies.

“But we believe these challenges are more ephemeral than eternal, and just as our company passed the stress-test of the pandemic with record profits, the reforms now underway at our businesses should create a solid platform for future profitability.

“Crucially, we will be reducing headcount across the company by 5 per cent. That is a necessary response given these macro conditions.”

The headcount reduction, which will be conducted in coming months, is expected to see the cutting of 1250 jobs across the company’s global assets and save the company $US130m ($190m) annually, according to Dow Jones.

Mr Thomson said he was “particularly proud to highlight the continuing revival of Foxtel”, the Australian streaming-led sports and entertainment platform.

“Streaming continues to be a core strength of Foxtel, as we have added well over half a million paying over-the-top subscribers in the past year,” he said.

“BINGE reached nearly 1.4 million paying subscribers in the quarter and will be launching advertising on the platform later this fiscal year as we seek to maximise the Foxtel Group’s revenue potential.

“Total paying subscriptions at the Foxtel Group were up 10 per cent year-over-year, and we also saw the benefits of modest price increases at Kayo and BINGE.

“Overall, Foxtel’s continuing success and positive trajectory have certainly increased our optionality for that business.”

News Corp’s digital real estate services arm experienced a softer than expected quarter, due to challenging housing market conditions in Australia and the US, Mr Thomson said.

“The painful complexities of the current housing market in both the US and Australia are well known. The property market invariably has interest rate-related cycles but with rates nearing a peak in both the US and Australia, we believe the next phase of the cycle is not far away.”

REA remains the market leader in Australia, with more than three times the audience of its nearest competitor, Domain.

Mr Thomson pointed to “broader trends that will inevitably be auspicious, such as our evolving partnerships with major tech platforms, and the incipient changes to the digital advertising market, which should enable us to improve yields for our valuable inventory and have more oversight of permissioned data.”

“At the same time, we are absolutely focused on reducing costs across our businesses and making price adjustments where prudent. And we are continuing to work on the integration of our recent acquisitions, OPIS and CMA, which are already enhancing revenue and profits at Dow Jones,” he said.

News Corp’s chief financial officer Susan Panuccio said: “We continue to expect higher costs due to supply chain and inflationary pressures. Advertising conditions remain challenging, and visibility is limited.

“We expect ongoing foreign exchange headwinds, albeit at a more modest impact given recent spot rates.

“We remain committed to reducing costs where we can – driven by headcount reductions across our business units, prioritised marketing spending and lower discretionary costs, while balancing investment spend.”

News Corp is the publisher of The Australian.