The stand out from News Corp’s June quarter results was the steady rise of Dow Jones and what is described as professional information, rather than the consumer focused news upon which the media group has been built.
The global media group posted a 9% drop in revenue to $US2.43 billion in the June quarter and reported a loss of $US8 million. However, over the year to June, profit was $1.4 billion, the second highest profitability recorded by the News Corp.
“Inflation, supply chain complications, and vaulting interest rates, along with volatile foreign exchange rates patiently presented challenges, some of which are more ephemeral than eternal,” Robert Thomson, chief executive of News Corp, told analysts in a briefing.
And News Corp saw significant progress across several segments, thanks, says Thomson, to a digital and international strategic focus.
Plus the benefits of cost cutting, including the 5% cut in headcount reduction which News expects to yield more than $160 million in annual gross savings.
“Not only was this fiscal year the second best ever in terms of profits, we believe we are poised for greater growth in the years ahead,” says Thomson.
A chunk of the revenue fall was due to fluctuating foreign exchange rates and being compared to 53 weeks, instead of 52, in the previous year.
At Morningstar, Brian Han, director of equity research, described the results as a “commendable performance” in the face of inflationary pressures, rate rises and precarious advertiser/consumer sentiment.
And the Dow Jones numbers were “eye-catching”.
While revenue fell 3.4% at Dow Jones, earnings lifted 25% to $US133 million.
High-margin professional information revenue grew 10% despite one less trading week, digital-only subscriptions across Dow Jones lifted 12% and digital revenue now accounts for 79% of the divisional revenue, from 76% a year ago.
Han says the benefits of cost cutting are clear in News’ EBITDA (earnings before interest, taxes, depreciation and amortisation) margins at 14.1%, up 1.5 percentage points. And that’s despite the 9% revenue fall.
In the News Media division, where the newspapers sit, EBITDA was up 36% to $US45 million despite the revenue dip.
“This ‘self help’ measure will come in handy amidst continuing inflationary pressures on wages, and necessary marketing/ product expenses in digital real estate, video and Dow Jones,” says Han at Morningstar.
Thomson says the company is building on a positive performance even with blustery headwinds.
“Dow Jones posted its highest profitability for both the quarter and the full year since we acquired the company (2007), helped by impressive results in the professional information business,” he says.
“Dow Jones has doubled its profitability in the past four years. And for the first time, Dow Jones was the highest contributor profits across all of News Corp in fiscal 2023.
“As we continue to develop the high margin B2B offerings. We are focused on Dow Jones as a pillar of News Corp’s future growth.
“With significant value appreciation for shareholders, Dow Jones is nearing an important threshold, with the lucrative B2B Business expected to be the highest contributor to profitability in fiscal 2024.”
The weak note at Dow Jones was advertising, down $16 million, or 14%, mainly due to 18% fall in print and 10% in digital advertising.
The culprit was an absence of a $9 million, or 8%, benefit from the additional week in the prior year period and continued weakness in print advertising, mainly driven by lower technology spending.
Excluding the absence of the benefit from the additional week in the prior year, advertising would have fallen 6% compared to the last year.
Thomson called out Dow Jones’ risk and compliance business, providing anti money laundering solutions to financial houses.
“It is worth noting that risk and compliance revenues have risen six fold over the past decade,” says Thomson.
“We believe prospects remain decidedly bright, as the corporate imperative to minimise risk and maximise compliance grows in an ever more complex regulatory regime.”
He says Dow Jones digital subscription growth accelerated in the second half, partly helped by bundling of products to capitalise on our clients’ need for sophisticated market analysis and analytics.
“We want to channel Market Watch readers to WSJ (Wall Street Journal) then to Barron's and Investor's Business Daily, and from there to our specialists business products. That is a pathway to profits for the company.”
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