Lachlan Murdoch bets on Australia

It’s easy to focus on the bad news out of the media sector at the moment – perhaps best demonstrated by Fairfax Media’s market value slipping to an all-time low under the $1 billion mark on Friday – but on the weekend we also saw a bit of very good news emerge from the Murdoch family camp.

Lachlan Murdoch, Rupert Murdoch’s youngest son, has paid about $100 million to buy the 50% of radio group DMG Radio Australia that he didn’t already own.

Murdoch made a huge splash back in 2009 when he paid British media company Daily Mail and General Trust $112 million for a 50% stake in DMG, which is best known for its youth-orientated network Nova FM.

Murdoch raised the money for the transaction by selling shares in News Corp, and so the original DMG deal was seen as Lachlan’s big attempt to branch out from the family fold.

Murdoch has had mixed results from his other Australian media investments – earlier this year he sold a stake in regional television group Prime at a profit, although he remains well down on his investment in free-to-air giant Ten Network – but his radio play has been a pretty good one.

According to the company’s latest results for the year ended September 30, 2011, DMG Radio’s operating profits increased from $93.9 million to $122.8 million, with operating profit rising from $1.5 million to $5 million. Financing charges saw the company post a net loss of $5.7 million, compared with a loss of $7.5 million the year before.

Reports suggest Murdoch and his executive team, led by CEO Cathy O’Connor, has worked hard to cut the group’s costs and increased ad revenue.

In a year when radio sector revenues have remained flat, O’Connor told Fairfax that DMG’s revenues are up 9%. Murdoch’s investment company Illyria claims its internal rate of return from the DMG investment is running at 60%.