News Corp posts bumper September quarter

The media major shares are up 6.9 per cent as it continues to build on the momentum of Dow Jones and Foxtel.

The News Corp boss said despite extended lockdowns across much of Australia, News Corp Australia “is faring well, showing significant improvement in profitability”.

News Corp continues to build on its strong performance of the past financial year, registering a bumper September quarter underpinned by record profitability of Dow Jones, the ongoing success of subscription streaming company Foxtel, and the market dominance of the company’s digital real estate assets.

Announcing the results, News Corp chief executive officer Robert Thomson said the first quarter of fiscal 2022 “was the most profitable of its kind since the relaunch of News Corp in 2013, building on the trends evident in the last financial year”.

Revenues for the September quarter were $US2.5bn ($3.78bn), an increase of 18 per cent, while the media company’s net profit surged to $US267m from $US47m in the previous corresponding period.

The better-than-expected results drove a share surge in News Corp — they closed on Friday at $33.90, up 6.9 per cent.

Mr Thomson noted that Dow Jones, which includes The Wall Street Journal, “achieved stronger profitability than any first quarter in its 140-year history”.

News Corp owns news mastheads including The Australian, The Daily Telegraph, The Herald Sun, The Courier Mail and Adelaide’s The Advertiser. It also owns London’s The Times and The Sun.

Mr Thomson also highlighted the success of the performance of Australian-based subscription streaming company Foxtel, which last month launched a new live news streaming platform Flash, following on from the successful rollout of its entertainment platform Binge in 2020 and Kayo Sports in 2018.

At the end of September, total Foxtel subscribers numbered about 4 million, up 18 per cent year-on-year. This includes a record 2.2 million streaming subscribers — consisting of Binge, Kayo and Foxtel Now customers — up 68 per cent from the first quarter of 2020/21.

Of Flash, Mr Thomson said: “It adds to the lustre of Foxtel and is indicative of its renaissance. We are now obviously in a position to be even more ambitious for Foxtel and are always seeking to maximise its undoubted potential.”

There has been industry speculation that News Corp will consider a stockmarket listing for Foxtel in the first half of 2022.

Mr Thomson said News Corp was “reviewing potential permutations to maximise shareholder value and growth”, but was not specific.

Asked at a subsequent investor call on Friday morning about a possible float, Mr Thomson said: “Clearly we and our partners at Telstra (the telco has a 35 per cent stake in Foxtel) recognise that the prospects of Foxtel have changed fundamentally.

“We have a streaming success story, we have cutting-edge world-class tech and we have a user interface that has vastly improved.

“Our team made some tough decisions to rationalise, made some smart decisions on streaming and systems, and here we are today. Whatever we do, we will not be naive. Naivety is not in our nature.”

Mr Thomson noted that subscription video services segment EBITDA – which covers Foxtel – rose 46 per cent in the first quarter.

The News Corp boss said that despite extended lockdowns across much of Australia, News Corp Australia “is faring well, showing significant improvement in profitability”.

He cited the continued recovery of the advertising market from Covid-19-related market weakness in the prior year, rising digital advertising revenues and news masthead subscriptions in Australia, which were up 24 per cent year-on-year.

In Australia, news masthead subscriptions increased to 850,000, compared to 685,000 for the same time last year.

In the three months to September 30, News Corp’s total segment EBITDA was $US410m during the quarter compared to $US268m the previous year, the highest quarterly growth rate since 2017.

Digital Real Estate Services segment revenues increased 47 per cent, driven primarily by strong yield and demand at the REA Group and Move.

Dow Jones saw its highest first-quarter revenue and profitability since its acquisition, while the company’s book publishing segment revenues grew 19 per cent.

News Media segment revenues grew 18 per cent, largely due to the rebound in the advertising market, strong digital subscriber gains and new content licensing revenues from recent news payment agreements with major tech platforms.

Mr Thomson said the payment-for-content deals that News Corp struck with Facebook and Google will contribute annual revenues “in the nine figures … clearly putting our news businesses on a more profitable path”.