- News Corp has written down the value of Foxtel as it merges with Fox Sports.
- Digital real estate services were the standout performer in the third quarter.
News Corporation has booked asset write-downs of more than $1 billion to account for the merger of its Foxtel and Fox Sports operations.
The update formed part of the company’s trading results for the March quarter released this morning.
Net revenues for the quarter rose by 6% to $2.1 billion, but the write-downs say News Corp post a net loss for the quarter of $1.1 billion.
News Corp said the bulk of its non-cash impairments related a $998 million write-down for the Foxtel merger. The company flagged in March that a write-down would be forthcoming.
Prior to the merger, News Corp owned 100% of Fox Sports and half of Foxtel in a 50-50 arrangement with Telstra.
News Corp now owns 65% of the combined entity while Telstra owns the remaining 35%. The company also booked a non-cash impairment charge of $165 million on its investment in News America Marketing.
“As a result of lower-than-expected revenues from certain new products and broadcast subscribers at Foxtel, the Company revised its outlook which resulted in a reduction in expected future cash flows,” News Corp said.
“Based on the revised projections, the Company concluded that the fair value of its investment in Foxtel declined below its carrying value.”
Revenue in Australia declined 3%, the company said. For the company as a whole, “advertising revenues declined 3% compared to the prior year,” News Corp said. “The decline was driven by weakness in the print advertising market, mainly in Australia and the U.S.”.
In its cable division, revenue was up $7 million, or 6%, for the quarter compared to last year. News said this was mainly due to the impact from foreign currency fluctuations and higher affiliate revenues at FOX SPORTS Australia and Australian News Channel.
However, EBITDA for the cable segment tumbled 53%, primarily due to costs associated with NRL rights and the launch of a new dedicated NRL channel.
News Corp CEO Robert Thomson said that looking ahead, the company was focused on its pay TV and real estate platforms.
“From the fourth quarter, the combination of digital real estate services and pay-TV businesses will account for more than half of our profits and significantly increase recurring subscription-based revenues,” Thomson said.
Elsewhere, News Corp reported strong growth in its digital real estate services — including the REA Group and realtor.com — which reported revenue growth of 27%.
News Corp said circulation and subscription revenues rose by 7% in the quarter and free operating cash flow increased to $184 million, up from -$19 million at the same time last year.
The trading results reflect “strong growth in the Digital Real Estate Services and Book Publishing segments and a $70 million positive impact from foreign currency fluctuations”, News Corp said.
“The growth was partially offset by lower print advertising and News America Marketing revenues at the News and Information Services segment.”
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