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News Corp swings to profit as digital subscriptions impress

This morning media giant News Corp Inc. (ASX: NWS) reported its results for the financial year ending June 30, 2019. Below is a summary of the results with comparisons to the prior year. All figures in US$.

  • Revenue of $10.07b, up 12%
  • Net profit of $228m, compared to a net loss of $1.44b
  • Total segment EBITDA $1.24b, versus $1.07b
  • Adjusted earnings per share 46cps, compared to 44cps
  • Q4 total revenues of $2.47 billion, -8%, partly due to the $105 million FX headwind
  • Q4 segment EBITDA $269 million, -14% decrease
  • Q4 EPS 6cps, versus 7cps in prior comparative period
  • The Wall Street Journal subscribers reached a record of 2.6 million

“Significantly, we posted higher Segment EBITDA at our News and Information Services segment, thanks to a rapid rise in digital paid subscribers, particularly at Dow Jones. The Wall Street Journal recorded a notable increase in digital-only subscribers, who now account for over 69 percent of the total subscriber base,” commented News Corp boss Robert Thomson.

While its core news and information services business delivered a robust year after adjusting for FX headwinds, the digital real estate services segment largely under Move Inc and realestate.com.au was softer on the back of weaker property markets in Australia and the US. 

Print advertising revenues and subscriptions also continue to fall, although digital is growing nicely across News Corp’s flagship mastheads The Wall Street Journal, The Australian, The Times, The Sunday Times and The Sun

It also merged the Fox Sports and Foxtel business in Australia and introduced a Kayo online sports steaming service in a bid to halt the decline in subscriptions across its Fox Sports offerings. 

Outlook

The ASX-listed scrip is flat at A$19.58 on the results this morning. The US listed scrip closed at $13.03 on around 28x trailing earnings of 46 cents per share. 

This morning REA Group Limited (ASX: REA) which is majority owned by News Corp reported a full year net profit of $296 million on EBITDA of $501 million and revenue of $875 million.

This is on an EBITDA margin of 57% and for investors shows the benefits of being a capital-light digital only business that is relatively scalable. REA Group also boasts a return on equity close to 30%. By comparison News Corp’s EBITDA margin is just 12%. 

Traditional value investors may prefer something like News Corp to investigate, whereas those prepared to bet on growth may prefer REA.

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Motley Fool contributor Tom Richardson owns shares of REA Group Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia has recommended REA Group Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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