Don Groves is a Deadline contributor based in Sydney
Rupert Murdoch’s Australian empire will generate as much of 60% of the annual earnings of the publishing arm of News Corp. after the company splits this year, say Sydney-based analysts who are generally sanguine about the new News Corporation’s prospects. The Oz group has largely gone under the radar of international investors until now because its financial results were not disclosed. With that set to change after the split, Kim Williams, CEO of Australian division News Limited, will face increased pressure and scrutiny from the get-go.
ComSec’s Alice Bennett expects News Corporation stock to be sold off aggressively at the start, creating one of the initial challenges for Williams. Bennett believes the sale will be down to factors that include News Corp.’s exposure to the Australian and New Zealand economies; the fact that publishing reps 53% of earnings; ongoing losses at the Amplify education business and the risk of further litigation in the UK. But, she does allow, “When the dust settles post demerger, we think this vehicle could provide some interesting opportunities for Australian investors given the highly cash-generative pay TV assets and higher-growth online assets.” Fox Sports and Foxtel, of which News Corp. holds 50%, are staying in the publishing fold. The company also owns 61% of realestate.com.au.
But, Citi analyst Justin Diddams slightly lowered his estimates of the new News Corp.’s earnings-per-share after the firm revealed its 44% stake in Sky New Zealand will be held by the new Fox Group and not the publishing division. Williams is expected to bear these challenges well after nearly 18 years as a trusted Murdoch lieutenant. In 1995, he was the inaugural CEO of Fox Studios Australia, a facility he built from scratch, and in 2001, he began a successful turnaround of the loss-making Foxtel. In late 2011, Murdoch moved Williams to the helm of News Limited following the departure of longtime chairman/CEO John Hartigan. (Demonstrating the News Corp. boss’ ties with his former homeland, Murdoch made himself chairman of News Limited.) Williams moved fast to restructure and streamline the company, whose newspapers command 63% of the total market, but have been hit with falling revenues and circulation. He also shed a bunch of long-serving, senior executives, centralized News Limited’s organizational structure and ordered several hundred layoffs. The News Corp. split announced last summer is expected to be complete around June of this year.