News Corp's shares took a tumble on Tuesday after the media group reported its Australian newspapers dragged down its first quarterly result as a stand-alone company.
Its local papers - which include The Australian, The Daily Telegraph and the Herald Sun - recorded a revenue drop of 22 per cent for the first quarter, the company said. This was enough to pull the entire group's revenues into reverse for the period, down 3 per cent to $US2.07 billion ($2.2 billion). According to Bloomberg, analysts had expected News Corp revenue to rise.
News Corp chief executive Robert Thomson said profit margins had improved for its newspaper business despite the fact revenues had been "particularly soft". "There are certainly headwinds in Australia, magnified by inauspicious foreign currency movements, but we have been consistently cost-conscious and are transforming our publishing operations longer term into multi-platform businesses," he said.
The news division, which includes newspapers, saw revenue fall 10 per cent to $US1.5 billion in the period, with Australia accounting for most of the decline.
Newspaper circulation and subscription revenues fell 6 per cent for the quarter, due to lower print volume and a decline in institutional revenues at its Dow Jones business.
That was partly offset by cover price increases of the British and Australian newspapers as well as improvements at The Wall Street Journal and WSJ.com.
Mr Thomson told analysts the company wanted to become less dependent on advertising and more subscription-focused. "We collectively recognise the need to evolve," he said. "We must generate more advertising revenue, but overall be less dependent on advertising and much more subscription-focused.
"And we must take advantage of the rise of mobile as a platform." News Corp reported a net profit of $US38 million for the first quarter, compared with a $US83 million loss for the same period last year.
Excluding costs related to the hacking scandal, acquisitions, divestitures and currency movements, earnings before interest, tax, depreciation and amortisation (EBITDA) fell 5 per cent compared with the previous first quarter.
News Corp's chief financial officer, Ajay Bedi, said expenses were "on the right track while revenues remain under pressure" and this financial year would continue to be a time of transition.
"We have been candid about some of the headwinds we face, particularly in news and information services," he said.
News shares dropped more than 3 per cent on Tuesday to $18.40.
Mr Thomson said the results marked the company's first quarter as the "new News" since the corporation split in two and was the beginning of a journey in its digital development. Rupert Murdoch split his old News Corp empire into two companies mid year with News Corp retaining the publishing assets and 50 per cent of Foxtel, 100 per cent of Fox Sports Australia, a stake in realestate.com.au and $2.6 billion cash.