The Murdoch clan’s News Corp is being battered by the impact of the COVID-19 pandemic and measures governments in the US, UK and Australia have adopted to control the virus and limit infections and deaths.
Every part of News is taking damaging hits, from newspapers to real estate, book publishing and especially the struggling subscription TV business, Foxtel which looks like being a hotspot for the company.
In a filing to the US Securities and Exchange Commission on Tuesday morning, Sydney time, News joined local media groups such as Southern Cross, Nine Entertainment, oOh!media and Seven West Media in confessing that the virus has badly damaged their finances and operations.
News said in the filing that it is “working proactively” to cut costs and adjust to the loss of revenues.
We have already seen that in close to 500 job cuts, forced leave and ending short term contracts at Foxtel, Sky News and Fox Sport have cut more than 20 journalist jobs while an unknown number of journalist jobs have gone at News Corp Australia metro papers. News Corp Australia has also suspended publication of 60 local and regional community and other papers; all hiring has stopped, the use of casuals has stopped in the newspapers and wages are being cut. Travel is not happening, print runs have been cut (saving money on paper, ink and press time costs).
News said in the filing that “The impact of coronavirus disease 2019 and measures to prevent its spread have created significant volatility, uncertainty, and economic disruption and are affecting News Corporation’s businesses.” News didn’t give any figures at all in the filing. Seeing it doesn’t issue a formal earnings guidance with expected revenue and profit growth figures, there’s probably no reason for any figures until the third-quarter earnings release in early May.
But from the language used in the filing there is going to be a lot of red ink. A big quarterly loss should be expected and there’s also the threat of more write-downs in the value of newspapers and the Foxtel business.
News said its news and information services business is seeing falls in newsstand sales, ad revenues, but the company is seeing higher digital subscriptions “including at the Wall Street Journal, The Times and The Sunday Times, as well as digital audience gains at online versions of its news properties, as people look to its quality journalism for reliable information.” News Corp Australia (where the financial pressures are greatest) was not mentioned in the filing).
The Foxtel subscription TV business is expecting to “the cancellation or postponement of sports events for which it has broadcast rights to adversely affect subscription revenue from broadcast and Kayo subscribers and, together with adverse economic conditions, to negatively impact advertising revenue. In addition, closures of pubs and clubs and lower occupancy at hotels throughout Australia are expected to adversely impact commercial subscription revenues.”
News Corp is already supporting Foxtel with loans valued at around $700 million, while its 35% other shareholder, Telstra, is paying $167 million of Foxtel’s transmission costs through Telstra’s HFC cable system.
Book publishing is seeing lower sales of print books, but higher sales of digital versions
“Sales are expected to be adversely affected by shipping restrictions and delays imposed by online retailers, as well as closures of brick-and-mortar retail stores. However, in recent weeks the Company has seen an increase in sales of digital formats of its titles, which remain readily available from online retailers,” News said in the filing.
The company’s digital real estate businesses in Australia (REA) and US (Move) “have been negatively impacted as a result of social distancing measures, business closures and economic uncertainty resulting from COVID-19. Weakness in new listing volumes and other adverse effects, as well as measures the Company has taken to support its customers in these challenging times, including re-list and re-upgrade offers for new listings and price concessions, are expected to adversely affect revenues.”
News warned that the virus and measures adopted to slow its spread are “expected to adversely affect the Company’s business and results of operations, as described above, and could have a material adverse impact on the Company’s business, results of operations and financial condition, particularly over the near to medium term.”
Without actually saying so, News attempted to assure the market that it has enough cash and available liquidity to get through the crisis by pointing to the fact that “as of December 31, 2019, the Company had $1.27 billion of cash and cash equivalents on its balance sheet. In addition, the Company has access to a committed $750 million revolving credit facility, which remains undrawn. The Company has no upcoming corporate debt maturities in the next 12 months.”
News didn’t say though that it also had $US1.2 billion of debt on its books at December 31. News Corp shares are down 34% so far this year while the wider US market is off 14.5%. The market has News on a worry list.