News Corp (NWSA) 2017 Q2 法說會逐字稿

Good day, ladies and gentlemen. Welcome to the News Corp second quarter FY17 earnings conference call. Today's call is being recorded. Media is allowed to join today's conference in a listen-only basis. At this time, for opening remarks and introductions, I'd like to turn the conference over to Mr. Mike Florin, Senior Vice President and Head of Investor Relations. Please go ahead, sir.

Thank you very much, Katherine. Hello, everyone, and welcome to News Corp's fiscal second quarter 2017 earnings call. We issued our earnings press release about 45 minutes ago and it's now posted on our website, at newscorp.com. On the call today are Robert Thomson, Chief Executive, and Bedi Singh, Chief Financial Officer. We will open with some prepared remarks and then we'll be happy to take questions from the investment community.

This call may include certain forward-looking information with respect to News Corp's business and strategy. Actual results could differ materially from what is said. News Corp's Form 10-K and 10-Q filings identify risks and uncertainties that could cause actual results to differ and contain cautionary statements regarding forward-looking information.

Additionally, this call will include certain non-GAAP financial measurements, such as total segment EBITDA, adjusted segment EBITDA and adjusted EPS. The definitions and GAAP to non-GAAP reconciliations of such measures can be found in our earnings release. With that, I will pass it over to Robert Thomson for some opening comments.

Thank you, Mike. In the second quarter, we saw the efficacy of our strategic reinvestment and digital diversification. Both were evident in our increased operating profitability in the quarter, when the challenges in the advertising market, which is in the midst of transition, were patent. We achieved 16% EBITDA growth year-over-year, driven by strong performance in our Digital Real Estate Services segment and robust revenues at HarperCollins, along with appropriate and ongoing management of the cost base at our news mastheads.

As noted in the press release, reported earnings were significantly impacted by a non-cash reduction in the current value of Foxtel and a non-cash impairment charge related to our print properties in Australia, while they also benefited from a one-time gain as a result of the cash proceeds from the sale of REA's European business. Revenues overall were relatively stable, adjusting for foreign currency fluctuations, and that came despite the obvious blustery headwinds in print advertising. As I mentioned, our results this quarter demonstrate the profound importance of becoming more diverse, more digital and more global.

Our core platform has been bolstered by our determined expansion in Digital Real Estate, which is well on the way to becoming the largest contributor to our profitability. This segment posted another strong quarter, with a 16% year-over-year revenue increase, improved EBITDA margins and sizable audience gains. We are now the largest digital property business in the world with a strong and growing presence in the US, Australia, India and East Asia.

We're more global, as evidenced by the extension of our publishing footprint with the developments of the international platform we acquired with Harlequin, which has given us greater access to authors and readers in a broader number of languages and regions. Last month, we announced that we were assuming full ownership of HarperCollins Brazil. And we're more digital because of strategic investments in our news platforms, as well as the influence of our innovative acquisitions, including Storyful, Unruly and Checkout 51.

Our digital focus has helped the News and Information services segment garner 27% of its revenues through digital, up from 22% last year. We also are testing our own digital ad network, which will provide a measurable high-quality audience for advertisers who are increasingly wary, and rightly so, about the murky, tenebrous world of digital advertising. Thanks to this strategy, we believe we are far better positioned than our perceived peers to weather the storms buffeting the media and publishing landscape.

We continue to emphasize the importance of cost control and collaboration between and among our businesses. We face similar challenges and are sharing expertise and insight. Our mastheads are committed to producing high-quality content, verified by a talented breed of fact checkers called journalists.

We are in an era in which integrity is priceless, yet digital distributors have long been a platform for the fake, the faux and the fallacious, highlighting an issue which we have long stressed, that they have eroded the integrity of content by undermining its provenance. Put simply, content distributors are profiting at the expense of content creators and at the expense of veracity. There are clearly social, as well as commercial, consequences to this contradiction and the issue is far from being resolved. A tweet to an algorithm or a fact check here or there does not address the basic problem.

Ad agencies and their programmatic networks are also at fault, because they have sometimes artificially aggregated audiences and these are then plied with content of dubious provenance. The agencies win, the fabricators of the fake win, and advertisers and society both lose. Affinity and integrity are core elements of a sustainable relationship between advertiser and consumer; and yet affinity and integrity are far too often missing in the modern marketplace. Audiences are craving integrity, which is why so many of our mastheads have reported strong growth in readers and subscribers.

As an example, the Wall Street Journal experienced a significant increase in paid digital subscribers through the election, adding more than 110,000 in Q2 compared to Q1 and surpassing 1 million, now representing more than 50% of the total subscriber base. This reflects an increased appetite for quality journalism in an era of remarkable upheaval.

And in the ad market, there has been an awakening and there will surely be a reckoning. Advertisers want reassurance that their products are displayed in suitable surroundings. They don't want muddled metrics and they don't want digital platforms and ad agencies arbitraging ambiguity.

The dangers of Chief Marketing Officers chasing fashion, rather than function, was highlighted in The Times of London today. Some of the world's best-known, most prestigious brands are inadvertently funding extremists and hard-core pornographers. I suggest that you read The Times. It's a subscription site, but that should be no problem for all of you. We are confident there are premium platforms and our great journalism will ultimately be beneficiaries for this reckoning.

Let us turn to our platforms and business in more detail. At Move, home of Realtor.com, we saw 10% revenue growth, adjusted for the sale of [Titling It] in November. Our headline revenue growth in the quarter was 7%; and as previously indicated, we expect that rate to rise in coming quarters. Importantly, as anticipated, Move contributed $10 million to the increase in segment EBITDA this quarter and we are confident that contribution will expand in the second half and in years to come.

Realtor.com continues to increase traffic versus the prior year and remains the strongest player in the industry in terms of audience engagement. That intensity has helped improve lead volume, always an important measure of potential income for this business. We are acutely conscious of the need to provide an incomparable service for our realtor clients.

We are renovating the Move house whilst living in it. One example is the advanced launch of our Advantage product in December, harvesting real-time feedback about potential leads and providing more targeted prominence for realtors providence. We continue to develop and roll out additional products, such as the launch last month of Sign Snap and Street Peek, which use image recognition and augmented reality technologies to provide consumers with an enhanced experience on their smartphones. And we are driving traffic between Realtor.com and our network of news sites, which provide a valuable flow of real estate analysis and intelligence.

In Australia, REA announce the sale of its European sites during Q2, which they believed lacked scale. The transaction extracted value for all shareholders and allows for a more intense focus on the Asian marketplace, with it stronger growth potential. In January, REA invested in PropTiger, which recently combined with Housing.com to become India's largest digital real estate company. News Corp has an existing stake in PropTiger and remains the largest holder in this Indian portal, with a roughly 38% combined stake, reflecting our direct investment and REA's interest.

For the quarter, REA reported 19% revenue growth, 14% excluding currency impact, and continued to drive higher traffic and engagement despite lower listing volume this quarter. For the first half of FY17, REA's audience in Australia has remained more than twice the size of its nearest competitor and visitors spent 7.6 times more time on the site.

In Book Publishing, HarperCollins experienced strong revenue growth in the quarter and a higher operating margin, as we saw the value of a broad roster of books that appeal to and explains the heartland of America, focusing on all Americans and not just a narrow elite. A case in point is "Hillbilly Elegy", with continuing good sales, as well as a significant impact on the public discourse in the wake of President Trump's victory in November.

We had particular success from the Christian group, which has an empathetic insight into what animates and motivates many Americans and has been the source of several bestsellers in the most recent quarter. Among these is "Magnolia Story", which performed well, as did the Sarah Young books, "Jesus Always" and "Jesus Calling".

In the quarter, Megyn Kelly's "Settle for More" also generated significant revenue and much debate, though it was not a key driver of EBITDA growth. Looking ahead, we see other books with broad-based appeal in this fiscal year, including "Hidden Figures", the book that is the basis for the eponymous Fox film, and Veronica Roth's latest work, "Carve the Mark" is also off to a good start.

At Dow Jones, while advertising remains challenged, the business continues to drive higher circulation revenues through increased digital subscriptions and higher pricing. Work on the WSJ2020 initiative continues, as we accelerate changes to the cost structure and management of the business to align it more closely with a digital and mobile future. As for print advertising, we are seeing signs of some moderation of declines in Q3. But the market is volatile and it would be improper to make a firm prediction at this stage.

At The New York Post, digital advertising revenues in the quarter exceeded those of print and The Post digital network had an average monthly audience in the quarter of approximately 58 million, including over 76 million in November, a sign of obvious reader interest in the election and its aftermath.

News America Marketing was a bright spot, with growing revenues, as domestic in-store advertising showed improvement and highlighted the importance of a presence at the point-of-purchase. The positive numbers, despite the investment spending at Checkout 51, our digital app, which now has 12.5 million members and is well ahead of schedule and providing the entire company with a source of valuable actionable data.

At News UK, The Times imprint materially outperformed its peers, based on market share, as evidenced by 9% volume growth year-over-year. The Times and The Sunday Times also expanded their digital subscriptions. The Sun's global digital audience reached approximately 61 million in December, representing more than 150% year-over-year increase, and The Sun audience expanded to 71 million in January.

Wireless Group revenues grew in local currency versus the prior year on a standalone basis, driven by talkSPORT. We see talkSPORT as having a long term and profoundly positive effect on The Sun. These are clearly complementary platforms and their cross promotional power is formidable.

News Corp Australia face challenges in the quarter, as we continued to consolidate operations where sensible and to emphasize the unique reach of our platforms in Australia. We saw the completion of the Sky News deal and the Australia regional media purchase, and we sold The Sunday Times in Perth and our stake in Carsguide. Around the company, we are divesting where appropriate and investing where growth and profits beckon. Our digital mastheads in Australia continued to grow and ended the quarter at 309,000 digital subscribers, a 21% increase year-over-year, adjusted for some divestitures.

Fox Sports announced the extension of National Soccer, that is, football, rides through 2022, further cementing its role, along with Foxtel, as the home of live sports in Australia. We now have Aussie Rules, Rugby League and Soccer signed up for the next five or so years, giving us an opportunity to build a franchise in each of these important sports.

Even with increased competition from lesser quality SVOD players, Foxtel's broadcast subscriptions in the quarter were relatively flat versus the prior year. Foxtel is focusing on enhanced IP offerings through Foxtel Play, which replaces Presto, to better capture the more affordable segment of the market. We want the new management team to focus on the Foxtel brand and functionality. There is no doubt that Foxtel has the most compelling content set and the user interface should be as compelling. Although there were challenges in the quarter, we continue to believe Foxtel has a long-term potential to drive higher penetration, while improved broadband pricing should make a bundled offer more attractive.

In conclusion, as evidenced by EBITDA growth this quarter, News Corp is in the midst of a positive transition that is far different than the fate befalling many of our peers. Throughout our businesses, we are enhancing additional strengths and collaborating creatively across our businesses, while astutely and resolutely cutting costs. We believe in the value of our trusted brands, the provenance of our content, and the long-term profits that will flow for all our investors. And now, for a deeper dive into the details, I defer to Bedi.

Thanks, Robert. We reported FY17 second quarter total revenue of $2.1 billion, down around 2% compared to the prior year. Currency had a $53 million unfavorable impact to revenues, with modest year-over-year improvement in the Australian dollar more than offset by continued weakness in the pound sterling. Reported total segment EBITDA was $325 million, compared to $280 million, up 16% versus the prior year.

For the quarter, EPS from continuing operations were negative $0.50, compared to $0.15 in the prior year. Significant nonrecurring items impacting EPS in the current quarter include a pretax non-cash impairment charge of $310 million principally related to fixed assets of the Australian publishing business. In addition, equity earnings of affiliates include a pretax write-down of $227 million to reduce our carrying value of Foxtel. These were offset, in part, by a pretax gain of $120 million at REA from the sale of their European businesses and a significant improvement in our operating results. Adjusted EPS from continuing operations were $0.19 versus $0.20 in the prior year; and adjusted EPS excludes the items I just mentioned and the other items shown in the press release reconciliation table.

Turning to the individual operating segments. At News and Information Services, revenues for the quarter decreased 7% from the prior year to approximately $1.3 billion. And within segment revenues, advertising, which accounted for 53% of revenues this quarter, decreased around 9%, or down 8% in local currency, driven by weaker global print ad trends. Circulation and subscription revenues decreased 5%, but rose 1% in local currency, driven by price increases and higher paid visitor volume offset by lower print volume.

News and Information Services segment EBITDA this quarter was $142 million, down from $158 million in the prior period, or approximately 10% down, driven principally by lower print advertising revenues partially offset by cost saving initiatives and higher profit contribution at News America Marketing and at News UK versus the prior year.

Looking now at performance across our key units. At Dow Jones, total ad revenues declined around 20%, similar to the prior quarter rate, as The Wall Street Journal continued to face challenges in several ad categories, including business-to-consumer, finance and technology. Circulation revenues at Dow Jones grew 6%, driven by higher subscription pricing and higher digital paid subscribers. And Professional Information Business revenues were relatively stable with the prior year, similar to last quarter.

And as we mentioned last quarter, Dow Jones has begun the implementation of cost savings initiatives under its WSJ2020 plan, with a target of approximately 8%, or $100 million, in cost savings on an annualized basis by the end of FY18. We continue to expect a pretax restructuring charge of $50 million to $60 million for this fiscal year, including $17 million that was reflected this quarter.

At News Australia, advertising revenues remain challenged and for the quarter declined 12%, or approximately 15% in local currency, with continued weakness in retail, real estate and auto. Circulation revenues at News Australia increased 1%, but were slightly lower in local currency, as cover price increases and higher paid digital subs were more than offset by print volume declines. On cost initiatives, as I mentioned last quarter, we are on track for an additional AUD40 million in cost savings in the second half and continue to seek additional cost reductions this year.

As I mentioned earlier, we recognized a non-cash impairment charge of $310 million, reflecting a write-down of the carrying value on our fixed assets in Australia. Following this impairment, the carrying value of the remaining long-lived assets at News Australia is approximately $420 million.

At News UK, whilst reported advertising revenues decreased 29%, ad revenues were down only in lower teens in local currency, due to print declines, a slight improvement from the prior quarter rate. Reported circulation revenues at News UK declined high teens versus the prior-year quarter, but were flat in local currency, as cover price increases were offset by single copy volume declines. News UK benefited this quarter from a combination of cost savings initiatives, including lower sports rights costs for The Sun, lower marketing and lower production costs.

While this group contributed around $25 million to reported revenues this quarter, representing low single digit growth in local currency driven by talkSPORT, the integration into News UK is progressing well. Commercial efforts are now focused on extending News UK's reach, particularly in sport. All of the News UK brands and platforms are now involved in sharing content, talent and driving cross promotion.

At News America Marketing, the business continues to perform well, with revenues up low single digits versus the prior year, driven by the strength of in-store promotions which grew mid-teens, offsetting declines in freestanding inserts. We saw increased CPG spending from flagship brands, in part due to the addition of new retailers and operational enhancements. And at Checkout 51, as Robert mentioned, we achieved 12.5 million members during the quarter, ahead of schedule, while incurring $8 million in investment spending during this quarter.

Turning to the Book Publishing segment, we had another very strong performance, with revenues of $466 million, up 4% compared to the prior year. This quarter benefited from the continued success of backlist titles, including "Hillbilly Elegy" by J.D. Vance and Sarah Young's "Jesus Always" and "Jesus Calling". Revenue growth also benefited from strong frontlist titles, including "The Magnolia Story" by Chip and Joanna Gaines, Patricia Cornwell's"Chaos", and "The Midnight Gang" by David Walliams. Megyn Kelly's "Settle for More" also contributed to the growth in revenue this quarter.

Total digital revenues, which include audio books, were approximately 16% of consumer revenues, with digital sales rising modestly over the prior-year quarter for the first time in two years, driven principally by audio books. And segment EBITDA of $75 million improved by 32% versus the prior year, helped by higher revenues noted above and the mix benefit from the higher margin backlist titles.

In Digital Real Estate Services, reported revenues for the segment increased $34 million, or 16%, to $242 million and adjusted revenues increased 10%. Reported segment EBITDA was $95 million, up $22 million, or 30% versus the prior year, benefiting from strong contribution at both Move and REA.

REA's revenues grew 19%, or approximately 14% in local currency, due to an increase in Australian residential depth revenue benefiting from favorable product mix and higher prices, coupled with a modest revenue contribution from iProperty. This was partially offset by the impact from lower listing volumes. REA reported their first half results today and just concluded their conference call, which provided more detail.

Move revenues, excluding the results of its TigerLead business, which was sold in November last year, rose approximately 10%, to $91 million versus the prior year, reflecting continued strong performance from [co-broke] and higher lead volume. On a reported basis, revenues rose 7%, to $93 million. TigerLead generated $17 million of revenues last year, but was declining as a lead generation source and had a very modest profit contribution.

As Robert mentioned, Realtor launched Advantage in early December, a new market priced product targeted to listing agents and, as some said, its showcase product. While it's early in the rollout, we are pleased with the take-up rate and with the positive feedback from our customers. We continue to expect revenue growth to improve in the second half and to see increasing EBITDA contribution this fiscal year versus the prior year.

For the quarter, Move contributed $10 million to segment EBITDA growth. And average monthly unique user growth at Realtor.com remains strong, up mid teens year-over-year to $44 million in the quarter.

In Cable Network Programming, revenues fell 2%, to $104 million, compared to the prior-year quarter, reflecting lower subscription and advertising revenues, partially impacted by the absence of the Rugby World Cup in the prior year. Segment EBITDA in the quarter rose 31%, to $51 million, due to the absence of programming rights costs related to the Rugby World Cup and the English Premier League.

With respect to earnings from affiliates, equity income was negative $238 million this quarter, compared to positive $15 million last year. As noted earlier, this quarter includes a $227 million pretax non-cash adjustment to step down the carrying value of Foxtel as a result of the flow-through impact of lower EBITDA into projected future cash flows.

And recall that prior to the separation of new News Corp in FY13, the Company acquired an additional 25% stake in Foxtel through Consolidated Media Holdings and had stepped up its carrying value and recognized a pretax non-cash gain of $900 million at that time. As a result of this adjustment, the current carrying value of News Corp's 50% stake in Foxtel is now $1.2 billion and we also hold a $325 million shareholder note due from Foxtel. And again, for clarity, all the amounts I just mentioned are all in US dollars.

Our equity loss pick up for this quarter also included a $9 million negative impact related to a change in the fair value of Foxtel's investment in 10 network and a $2 billion loss related to Foxtel's Presto wind down. We expect Foxtel to incur additional Presto shut down costs in the third quarter in the range of $20 million to $25 million, with our share being at 50% of that range.

Regarding its operational performance, Foxtel ended the quarter with more than 2.8 million total subscribers, with closing cable and satellite subscribers flat compared to the prior year. In the second quarter, cable and satellite churn was at 15.6%, comparable to the first quarter, which was primarily related to customers under no contract offers, as well as seasonal sport disconnections.

Foxtel revenues for the quarter increased 1%, to $602 million, but were down 3% in local currency; and EBITDA decreased 7%, to $144 million, but was down 10% in local currency, due to the decrease in revenue and increases in programming costs, specifically in local production and sports, partially offset by lower transmission costs. Cable satellite ARPU for the quarter was down approximately 4%, to around AUD86.00. Capital expenditures from continuing operations for the first half was at $108 million, lower than the $120 million in the prior year.

And for the upcoming fiscal third quarter, just a few points to note. Whilst global print trends remain uncertain at our newspaper operations, we expect further cost saving initiatives across our news mastheads. We also expect to see growth at News America Marketing, led by in-store promotions. In Digital Real Estate Services, we expect to see increased EBITDA contribution and improved revenues at Realtor.com, combined with continued growth at REA. Book Publishing should continue to benefit from a strong release slate. We are encouraged by the success of Margot Lee Shetterly's "Hidden Figures" and we will also have the release of Veronica Roth's "Carve the Mark". And at Cable Network Programming, rights costs should be down modestly in local currency, given the absence of EPL rights.

So in summary, as we had expected, this quarter demonstrated the importance of visitor real estate to our growth trajectory, the importance of a strong portfolio of content at HarperCollins, and the ability to monetize global rights, and finally, our commitment to improving the cost structure at News and Information Services. And with that, let me hand it back to the operator for Q&A.

(Operator Instructions)

John Janedis, Jefferies.

Hi. Thank you. On Dow Jones, with the revenue there more than 50% digital, how quickly are the digital circulation and advertising buckets growing? Is the Journal primarily competing with Facebook and Google or traditional publishers for ad budgets? And what is the time line of the $100 million in cost savings?

John, Robert here. I think the Journal itself has a quite distinctive audience, as you can imagine, both by virtue of income and demography generally. And it's difficult to imagine Facebook, Snapchat or anyone else replicating what is a unique audience. I think that's what the team at Dow Jones are emphasizing a unique audience that's growing because of its unique quality content.

And the push for WSJ2020 is not only to improve the flow of news, but to make much more efficient the actual delivery of the content in ways that suit the contemporary user. Generally speaking, at Dow Jones, as you said, digital revenues are growing, both in terms of advertising, circulation revenue is up around 6%. And in terms of print this quarter, as I mentioned earlier, it's hard to give you a definite outlook for this quarter, but certainly thus far, the decline is moderating.

And just with regard to the cost savings that we mentioned under WSJ2020, we're expecting to take out $100 million on an annualized basis by the end of FY18.

Thanks, John. Katherine, we'll take our next question, please.

Entcho Raykovski, Deutsche Bank.

Hi, Robert. Hi, Bedi. My question is around Foxtel, basically around the churn rate, which has remained around that 15%, 16% mark. Do you expect that to decrease in coming quarters, as perhaps you get into more favorable comps? And just on Foxtel, as well, you've obviously detailed the expected shutdown costs around Presto. Will there be any [output] deals which will remain on foot that will also need to be renegotiated that may stay with the Foxtel platform and will continue to incur costs?

Entcho, I handle the first bit of that question. As you say, Q2 churn was around 15.6%, compared to 10.3% in the prior year during Q2. Clearly, there are a lot of offers out in the market, no contract sales, which aren't necessarily more fluid. Also, last year at this time, we had the Rugby World Cup, whereas you know, Australia performed unexpectedly well, which was obviously auspicious for some. There is no Rugby World Cup this year. But we're entering a crucial sales period for the key core winter sports, Rugby League and Aussie Rules. And so over the next two quarters, we obviously expect to see stronger results. But look, there are offers out there with the phasing out of Presto and the focusing on Foxtel Play, and it's certainly up to our team in Australia to prove to customers what we all know to be a fact, that the offering in sport and other programming by Foxtel is far superior to that of the competition.

I think in terms of the question you had on the Presto shutdown, look, we expect, as I said, for additional costs in the coming quarter. We don't comment on specific output deals, but we have recently renewed HBO. I think that was announced. And the team there is keeping a very close eye on the costs.

Thank you, Entcho. Katherine, we'll take our next question, please.

Craig Huber, Huber Research.

Yes. Thank you. Just want to say right up front, forgive the tone of this question. I mean no disrespect here. But just bear with me a second here. Your stock is down, as you know, about 20% from mid-2013, when you were separated out from your parent company. The S&P 500, however, is up 45% since then. And any investor that's owned your stock for a significant period of time here is pretty frustrated, I would imagine. I'm just wondering if you, your Board, the Murdoch family, would seriously consider doing something different, as you think out over the next 12 to 18 months, than what the current game plan has been here the last three and half years. By that, I mean potentially sell underperforming assets, spin off some assets, potentially, step up the share buyback significantly with $1 billion plus on the balance sheet of cash, raise the dividend significantly. Clearly, investors don't buy into the current game plan. I'm just wondering if it's any appetite at your level, the Board's level, the Murdoch family level, to do something potentially different here in the next 12 to 18 months. Thank you.

Craig, Robert here. No disrespect taken. As you know, and as we've made clear to investors, we are in the midst of transition. You can see what's happening to the newspaper business. That's no secret to anyone. And to someone as observant as you, that's certainly no secret at all. As you also realize, we've made a series of investments and divestments, including Amplify. So it is a company in transition. We are seeing -- you asked about change -- the character of the company itself has changed. It's based on the traditional principles that were the fuel to success for the old News Corp for many decades. But it's also a company that's using that expertise, for example, in news and judgment and analysis to enhance its profile in digital real estate, which is now the fastest growing sector of the company itself. And as you can tell, from both our numbers and our voices, we're optimistic about the expeditious evolution of that particular sector. At heart, as we are, as we have always been, focused on long-term value per share. And we are quite confident that over a period, that will become evident to all.

Thank you, Craig. Katherine, we'll take our next question.

Brian Han, Morningstar.

Good afternoon, gentlemen. In the News and Information Services division, can you please give us a rough idea as to the percentage of its revenue from North America marketing? And also, in the impairment for Foxtel, what penetration rate are you assuming now for the long term?

Just on News America Marketing, Brian, all I can tell you is that we are very pleased with the performance of the in-store sales. As we've indicated, the freestanding inserts, which are themselves partly dependent on the newspaper business nationally, haven't been performing as well. But our particularly strong position in in-store does indeed prove the potency of point-of-purchase. And we're working with our partners in that area to further develop our expertise and dovetailing that expertise with the data and intelligence that we're harvesting from Checkout 51. So overall for that segment, we're quite confident about performance and potential.

And just with respect to Foxtel, obviously we don't comment on the specific assumptions that we use, but we do expect Foxtel to improve as a business. The management team there is working hard. They have their target to improve [the stragglers] into the future. Clearly, they've got some cost challenges and they're meeting those head on. So I would say we're optimistic about Foxtel's future.

Katherine, we'll take our next question, please.

Raymond Tong, Evans and Partners.

Good morning, Robert. Good morning, Bedi. Just a question on the Books division. Clearly, the growth is improving there and you talked about how you've got a good line-up of books coming out. How do you think we should be thinking about margins for the next couple of quarters and in the medium term?

The Books business is difficult to forecast too long term. But what we're very confident about is the broader strategy that Brian Murray and the team have developed for internationalization of HarperCollins through the purchase of Harlequin. The ability that that gives us not only to take advantage of the front end, but also backlist books. And secondly, as Bedi has outlined, the current roster of books, which is performing particularly well and enduringly so. Interestingly, we are seeing an uptick in digital sales. And fascinatingly, part of that is due to the popularity of digital audio. But as I mentioned earlier on, we are particularly heartened by the Nashville-based HarperCollins Christian business, which is generating a lot of titles which aren't matched by other publishers, given the orientation, and generating a lot of revenue.

Thanks, Raymond. Katherine, we'll take our next question, please.

And currently no additional questions in the queue.

(Operator Instructions)

Tim Nollen, Macquarie.

Thanks. I thought I had tapped in star-one, but I guess I didn't. So thanks for taking this. Robert, I'm intrigued by your comments on fake news and also your complaint about how automated ad exchanges are benefiting the fake new sites, as well as the ad agencies. And you mentioned, I believe, starting up a digital ad network. Now I thought you already were quite active in programmatic buying or selling of your inventory. So I'm wondering if you could speak a bit more about what you're up to, what you will be doing that's new and different versus what you've been doing to date, and how you may be able to channel ad dollars to your site, your journalistic sites, as opposed to, say, a fake news site that I might start up one day, or anybody else. So I'm just curious, how do you think you can use this to monetize your business better?

Well, Tim, what I can talk about is the broad principle, which is harnessing the audiences that we have from our different mastheads and related real estate sites around the world, where you are in a verified environment, where the advertising can be authenticated, where advertisers are not embarrassed by the guilt by association that's clearly evident in The Times in London report today. Many of our executives have been talking about the lack of veracity in digital metrics. They are mad metrics. And I think we are reaching a point where this awakening by advertisers is becoming a reckoning, which makes a verified environment of quality content with a quality demographic much more desirable. And I'm fairly certain that advertisers will start to be more digitally discerning. And while not going into too much detail about what our plans are at this stage, we're not quite ready to do that, but our plan is fairly well advanced, but we do believe that we will be the beneficiaries of that reckoning.

Okay. Thank you, Tim. Katherine, we'll take our next question, please.

Erik Katz, Wells Fargo.

Thank you. You guys have been very transparent about the cost savings initiatives throughout your News and Info Services business, but can you give us an idea about much capital you've brought back into the business to bolster the digital side, and maybe how much has been in the last year? Just trying to understand how to quantify the investments versus the cost savings. Thank you

We haven't given that sort of specific number out. But I think we have said in the past that when we look at our capital expenditures, a significant part of the CapEx is IT-related. And within that IT-related bucket, quite a lot of it goes into investing into digital products. So even though CapEx is down year-over-year, the percent there that remains focused on digital is about the same. So that's one way of probably thinking about the kind of investment we're making. Now obviously, there's Op Ex costs in addition to CapEx. But we don't generally break those out, but most of our Op Ex investments are being focused more and more towards digital.

Great. Thank you.

Thanks, Eric. Katherine, we'll take our next question.

And with no additional questions, Mr. Florin, I'd like to turn the floor back over to you.

Great. Thank you, Katherine. Thank you all for participating. We'll talk to you soon. Have a good night.

Thank you. Ladies and gentlemen, that does conclude today's conference. Thank you all again for your participation.