Australian writedowns hit News Corp’s Q2 result

Australian writedowns hit News Corp’s Q2 result

News Corporation has suffered second quarter losses, mostly attributed to writedowns on its Australian newspaper mastheads and an adjustment to the carrying value of its investment Foxtel.

The international group reported a loss of $US219 million from its continuing operations, compared to a profit of $US106 million from the corresponding period last year.

Profit from the News and Information segment was down 7 per cent, or $97 million compared to the previous year. Circulation and subscription revenues dropped by 5 per cent, but were up by 1 per cent if a $US28 million impact from negative foreign currency fluctuations is excluded.

The lower print volume was partially offset by higher subscription pricing, selected cover price increases in the UK and Australia and higher paid digital subscribers.

However, it was the Australian writedowns that largely impacted on the result. There were $US310 million in impairment charges, primarily related to the write-down of the fixed assets at the Australian newspapers, and lower equity earnings of affiliates.

This included a $US227 million write-down related to the adjustment of the carrying value of the company’s investment in Foxtel to fair value. Foxtel’s investment in Ten Group was a contributing factor, incurring a writedown of $US17million. The aggregate tax benefit on the Foxtel impairment and write-down was $121 million.

The bright spots in the quarter were the lift in digital subscription revenue and the growth of the company’s real estate businesses.

News Corp chief executive Robert Thomson said digital now accounted for 27 per cent of news segment revenues, up from 22 per cent. “We are especially confident in the value of our news brands, given growing consumer demand for accurate and timely journalism,” he said.

“In fact, the Wall Street Journal now has over 2.1 million paid subscribers and, for the first time, more than 50 per of those subscribers are digital.”

Mr Thomson said the rapid expansion of the company’s digital real estate services meant the segment was well on the way to becoming the largest contributor to the company’s profitability. “This segment posted another very strong quarter, with a 16 per cent year-over-year revenue increase, improved margins and robust audience gains,” he said.

The increase was attributed primarily to the continued growth at REA Group in Australia and Move in the US, as well as $US 9 million from the acquisitions of iProperty in Australia and Diakrit in Thailand.

Revenues at REA Group increased 19 per cent, or 14 per cent excluding a $6 million impact from favourable foreign currency fluctuations, due to an increase in Australian residential depth revenue, as a favourable product mix and pricing increase offset lower listing volumes, and the acquisition of iProperty.

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