Major communications and media business News Corporation [ASX:NWS] sunk nearly 5% in share price earlier on Friday, after revealing ongoing negative impacts in operations and earnings caused by inflation.
The group reported that its earnings had plummeted by 30% for the second quarter of the year, moving down to US$409 million while revenue also fell 7% year-on-year.
NWS announced the need to reduce 5% of its workforce to keep afloat, which will see the loss of 1,250 jobs this year.
NWS has moved up in stock price so far in 2023, but over 12 months in its sector and in the wider market it has fallen 10% and 125% respectively.
News Corporation struggles as impact of inflation rages on
Rupert Murdoch’s iconic media company revealed its second quarter results for fiscal 2023, which reflected harsh wider economic sentiment as the waves of inflation continue to eat at the company’s budget.
Revenue had decreased by 7% at US$2.52 billion, compared with US$2.72 billion reported the year before. This included a 6% degradation based on foreign currency fluctuations, by US$171 million, and an adjustment of revenues that decreased 3%.
The results didn’t satisfy market expectations, with some analysts having forecast revenue more along the lines of US$2.57 billion.
Net income was reported at $94 million, much lower than the $262 million earned the year before.
NWS calculated pre-tax and other comparable earnings in the quarter to $409 million, down from the prior year’s $586 million.
There’s been as a significant drop in earnings per share, from 40 cents the year before to a meagre 12 cents. Adjusted EPS had also gone down from 44 cents the same time in 2022, to 14 cents.
NWS also noted higher operating expenses for its News Media segment (The Australian, The Daily Telegraph, The Herald Sun, and London’s The Times) caused by inflation, lower revenue, and $6 million in one-time costs related to its Special Committee fees for the Murdoch Family Trust.
To add insult to injury, News Media also posted 47% fall in earnings, to the total of US$59 million.
While most of the group’s revenue flopped, its Dow Jones segment managed to up its revenue 11%, with US$563 million. Its video subscription service also rose 5% to US$90 million.
Chief Executive Robert Thomson addressed the businesses performance in the current climate:
‘Obviously, a surge in interest rates and acute inflation had a tangible impact on all of our businesses. But we believe these challenges are more ephemeral than eternal. Just as our company passed the stress-test of the pandemic with record profits, the initiatives now underway, including an expected 5 percent headcount reduction, or around 1,250 positions this calendar year, will create a robust platform for future growth.’
Cash on hand was down US$102 million, compared to last year’s US$144, yet the company remains optimistic that business will improve as cost pressures ease in the year, with its sheer scale expected to offer some flexibility.
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Regards,
Mahlia Stewart,
For Money Morning
