Digital surge powers News Corp $US1.3bn earnings

Shares in the media major jump to a record high as it registered its most profitable year in almost a decade.

News Corp chief executive Robert Thomson. (Picture: AFP)

News Corp has registered its most profitable year in almost a decade, underpinned by a bumper fourth quarter during which revenue surged by 30 per cent as a result of soaring digital subscriptions, and record profits at HarperCollins and Dow Jones.

The company, which owns The Australian and metropolitan titles including the Herald Sun, Daily Telegraph, The Courier-Mail and The Advertiser, also enjoyed record subscriber growth at Foxtel, in which it has a majority stake.

A combination of the sharp earnings jump and the prospect of a share buyback drove News Corp shares to a fresh record high, closing Friday 7.9 per cent higher at $35.20.

The number of Foxtel subscribers eclipsed two million in the fiscal year 2021, an increase year-on-year of 155 per cent — a result described by News Corp chief executive Robert Thomson as “a profound escalation”, due in part to the successful launch of entertainment streaming arm Binge last year.

“The Foxtel narrative is particularly positive, as our early emphasis on streaming and on

securing long-term, valuable sports and entertainment rights has put the company on a

decidedly upward trajectory,” Mr Thomson said.

“Our paying subscribers were 40 per cent higher and fiscal year revenue rose 10 per cent, while our EBITDA growth was 11 per cent.

“We are obviously pleased with the exponential evolution of both Kayo, our sports streaming product, which has rights to Australia’s most popular sports, and Binge, our entertainment streaming service, as they combine world-class technology, clever user interfaces and high-quality, compelling content.

“It is worth pausing for a moment to consider how the Foxtel narrative has changed

decisively and positively over the past 18 months. Then, we were being asked whether

we would need to put extra funds into Foxtel, and now we have attractive options for a

growing, thoroughly contemporary business that has a tangible upside.”

Mr Thomson also observed the strong performance of News Corp’s Australian mastheads.

“We saw a 25 per cent increase in digital subscribers at the mastheads in the Fourth

Quarter, while there was a healthy recovery in advertising. Clearly businesses are

subject to the vagaries of the virus in Australia, but the robust recovery in recent months

is a hopeful harbinger,” he said.

Mr Thomson said the company’s end-of-financial-year results were all the more impressive given the trying circumstances brought about by the coronavirus.

“The past year has been a severe test for families, for countries and for companies — the

stresses and strains of a pandemic have stretched the social fabric and the commercial

canvas,” Mr Thomson said.

Despite the unforseen headwinds, the company has achieved better-than-expected outcomes.

News Corp’s overall revenues were $US9.36bn ($12.64bn) in the year to end-June. This was a 4 per cent increase compared to $US9.01bn in the prior year, reflecting the 30 per cent increase in the fourth quarter.

“In short, we had the most profitable year since we created the new News Corp; Dow

Jones had its most profitable year since it was acquired in 2007; and HarperCollins and

Move also recorded their most profitable years. And we believe there is clearly more

growth ahead.”

Total segment pre-tax earnings for the year were $US1.27bn compared to $US1.01bn in the prior year. News reported fourth quarter total segment EBITDA of $US210m, an 8 per cent increase on the same period a year ago, primarily due to higher revenues.

Net profit for the full year was $US389m as compared to a net loss of $US1.55bn in the prior year.

Mr Thomson said News Corp’s strong record of cash generation, with a positive net cash position of $US2.2 billion at the end of June, gives the company “enhanced flexibility”.

He noted the company this week took advantage of the sale of S&P Global and IHS Markit energy information business OPIS which will be “transformative” for News’ Dow Jones Professional Information Business.

“Our robust cash position has prompted the company to actively review our capital allocation policy, with a greater focus on buybacks,” Mr Thomson added.

He also noted the worth of the news payment deals that the company had signed with the tech giants Google and Facebook.

“The intrinsic value of our content has been amplified through landmark news payment agreements with major tech platforms. These deals, which are confidential, will add revenue annually into nine figures and are a profoundly positive sign of the ongoing transformation of the news landscape,” he said.