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Strong subscriber growth improves News’ bottom line

  News Corporation has recorded a 3 per cent increase in total revenues in the second quarter, reflecting strong digital earnings generated by a 29 percent increase in digital subscribers and the continued growth of REA Group assets in Australia. The results posted on Friday show total revenues for the group had grown from $2.12...

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News Corporation has recorded a 3 per cent increase in total revenues in the second quarter, reflecting strong digital earnings generated by a 29 percent increase in digital subscribers and the continued growth of REA Group assets in Australia.

The results posted on Friday show total revenues for the group had grown from $2.12 billion in the corresponding period last year to $2.18 billion. Total Segment EBITDA improved by a 1 per cent, reaching $329 million compared to $325 million the previous year.

The REA Group’s Australian site realestate.com.au continued to increase user traffic and growth throughout the quarter, with revenues increasing 24 per cent. News Corp Australia’s acquisitions of Australian Regional Media and Australian News Channel also were named as key contributors to growth.

News Corp chief executive Robert Thomson said the growth reflected the strength of the company’s digital strategy.

“The robust first half results highlight the virtue of our strategy to become increasingly digital and global, the discipline of our financial management, and our commitment to premium content and high-quality, high-integrity news.

“First half revenues were up 4 per cent and profitability improved by 27 per cent, including strong results in the second quarter.

“Our digital real estate services businesses continue to thrive, with flourishing audiences, strong lead volume, and product enhancements benefiting both consumers and agents. This quarter, the segment posted 21 per cent revenue growth and an increase of 25 per cent in Segment EBITDA,” he said.

Net losses improved by 70 per cent, finishing at $66 million, compared to $219 million the year prior.

The News and Information Services segment completed the quarter with adjusted revenues 5 per cent lower than that of the previous corresponding period.

News Corp Australia grew 4 per cent in the second quarter, closely behind News UK which saw 7 per cent growth.

News Corp Australia executive chairman Michael Miller said in a note to staff that the company “is on track to reach the targets set last year”.

“While total revenues were relatively flat compared to the prior year, News Corp Australia revenues increased. Particular mention was made of Australia’s success in achieving growth in digital subscriptions and digital advertising revenue; and in delivering our cost management programs,” Mr Miller said.

Circulation and subscription revenues contributed significantly to the international company’s growth, increasing 6 per cent within the quarter. Digital revenues represented 29 per cent of segment revenues, with Dow Jones increasing circulation revenues 10 per cent, reflecting continued subscriber growth.

News Corp Australia’s digital subscriptions grew 26 per cent compared to the previous year, from 309,200 to 389,600 in 2017.

This area also was improved by the acquisition of Australian Regional Media and increases in cover and subscription prices.

The Australian and UK businesses offset the decline of the quarter’s Segment EBITDA, which fell 1 per cent, or $2 million, in Q2.

Foxtel’s revenues decreased 3 per cent due to lower subscriber volume, partially linked to the closure of video streaming site Presto, and lower advertising revenues. However, the subscription service’s net income improved by 33 per cent to $32 million, due to the absence of losses pertaining to Ten Network Holdings, Presto and the planned increases in sports rights advertising.

Cable Network Programing revenues improved by 15 per cent to 16 million, due to the acquisition of of the Australian News Channel, operator of Australia’s Sky News network, as well as higher affiliate revenues at Fox Sports Australia.

However, Segment EBITDA decreased by 35 per cent to $18 million, attributed to the timing of programming amortisation related to the launch of a dedicated National Rugby League channel at Fox Sports Australia and $2 million of transaction costs related to the proposed combination of Foxtel and Fox Sports Australia.

News Corporation’s American arm, News America Marketing, was the biggest strain on funds, with revenues falling 16 per cent in the second quarter. Compared to last year, the business’ advertising revenues declined 6 per cent due to fewer free standing inserts and a decline in custom publishing revenues.

Digital Real Estate Services revenues increased $50 million in the second quarter, a total increase of 21 per cent when compared to the prior year. Key contributors to growth were the REA Group and Move.

Segment EBITDA increased $24 million, or 25 per cent, compared to the prior year, while Adjusted Revenues and Adjusted Segment EBITDA increased 18 per cent and 22 per cent, respectively.

REA Group increased 24 per cent to $178 million from $144 million within Q2, primarily due to an increase in Australian residential depth revenue. The company’s acquisition of Smartline was also a contributor to growth, which was partially offset by the sale of its European business in fiscal 2017.

At News’ sister company, 21st Century Fox, cable TV networks powered revenue growth in the December quarter, but higher costs related to sports programming and theatrical releases weighed on operating profit.

Fox booked a $US1.34 billion benefit tied to the US tax overhaul that more than doubled its quarterly net profit.

The quarterly report is the first since 21st Century Fox agreed late last year to sell most of its entertainment assets to Walt Disney in a $US52.4 billion deal. Disney will get the Twentieth Century Fox film and TV studio, some US cable TV networks and international assets, including Fox’s 39 per cent stake in UK pay TV giant Sky.

Fox will retain broadcast, sports and news assets, including the Fox TV network and Fox News.

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