Fairfax Media earnings slide with Domain posting greatest revenue growth
Fairfax Media has reported operating earnings of $145.1m for the six months ended December 31 – down 9.9% on the final six months of 2015 – with Domain continuing to be responsible for a majority of the publishing company’s earnings.
The company – which publishes The Sydney Morning Herald, The Age and The Australian Financial Review – posted earnings before interest, tax, depreciation and amortisation (EBITDA) of $145.1m, down 9.9% from $161.1m, while revenue for the company was down 5.8% year-on-year from $958.1m to $902.9m.
Fairfax Media CEO Greg Hywood said: “For the half, the Fairfax Group delivered net profit of $84.7m, up 6% compared to year prior.
“Our three publishing businesses maintained an intense focus on cost reduction, a stronger emphasis on digital publishing, and made progress in building new revenue opportunities.
“We are pleased with the continued profitability of our publishing businesses in the face of the largest structural change in the industry’s history. This is a remarkable performance which few publishers globally have matched.”
Greg Hywood: We are pleased with the continued profitability of our publishing businesses
Domain – which Fairfax has announced it will look to separate from the business and list separately on the ASX – posted revenue growth of 5.8% from $153.9m to $162.9m, driven by growth in digital.
The real estate advertising arm of Fairfax’s business saw its EBITDA drop 12.8% from $65.7m to $57.3m.
Digital advertising for Domain was up 15.3% year-on-year from $99.1m to $114.3m, while print advertising was down 11.3% from $54.8m to $48.6m.
Hywood said: “Domain delivered 15% growth in digital revenue, supported by further depth penetration yield increases and strong growth in media, developers and commercial. Depth revenue growth was 12%. Domain is also seeing very pleasing growth coming out of utilities connections.
“Print advertising was constrained by listings environment, with revenue down 11%.”
Looking at Fairfax’s Australian Metro Media division – which includes The Sydney Morning Herald, The Age, The Australian Financial Review, Digital Ventures and Life and Events businesses – revenue was down 8.2% from $304.1m to $279.1m, while EBITDA for the segment was down 12.2% from $31.5m to $27.7m.
Advertising revenue for the segment was down 16.6% from $149.1m to $124.3m. Overall circulation revenue was up 0.9% from $113.8m to $114.8m with growth in digital subscription revenue of 22% offsetting declines in print circulation revenue.
Hywood said: “Metro publishing advertising revenue declined 16%, impacted by weakness in retail and motoring categories.
“Overall circulation revenue increased 1%, benefiting from the strong growth in paid digital subscriptions. Declines in print circulation volumes were partially offset by cover price increases.
“Metro digital subscription revenue revenue of $22m was up 22%. This was supported by a digital subscriber base of 226,000 across the SMH, The Age and The Australian Financial Review. All three titles delivered year-on-year-growth, particularly the Financial Review.”
The subscriber figure is modestly up on the figure reported in August of 209,000.
Last week Fairfax Media appointed Chris Janz as MD of Australian Metro Publishing.
On the appointment Hywood said: “Chris joined Fairfax in August last year and is overseeing the impressive product and technology development work that will be the centrepiece of Metro’s next generation publishing model.
“This involves an even greater primacy of our digital publishing focus, delivering unrivalled news and information products to our customers, and sustaining a commercially successful print proposition.”
Hywood put to bed speculation the company was looking to end the daily print publication of The SMH and The Age within the year.
“While we have considered many options, the main we have developed involves continuing to print our publications daily for some years yet,” he said.
“This is the best commercial outcome for shareholders based on current advertising and subscription trends.”
Within Metro Media, the Digital Ventures segment (Stan, Weatherzone, HuffPost Australia, Allure Media, RSVP/Oasis, Aszuna Australia, Healthcare, Skoolbo and Over60) posted an EBTIDA of $3.8m, down 15.8% year-on-year from $4.5m.
Advertising revenue for the segment was down 2.8%, from $8.7m to $8.5m.
Hywood said: “Results from our Digital Ventures portfolio reflect the sale of Tenderlink in October 2016. EBTIDA reflected solid results from Weatherzone and improved net profit contribution from RSVP/Oasis, which is included at the Associate line.”
Commenting on streaming service Stan, he said: “In just two short years, Stan has delivered exceptional performance. It is the leading local SVOD service. The business is on a clear path to profitability and expects to reach cashflow breakeven during FY2018.”
According to Hywood, as at February 13, Stan had more than 700,000 active subscribers.
The Australian Community Media division reported revenue of $225.6m, down 12.2% from $257.1m, posting an EBITDA of $43.1m, down 4.7% from $45.2m.
Advertising was down in the segment by 11.3%, from $172.1m to $152.7m, while circulation revenue was down 9.9% from $46m to $41.4m.
New Zealand Media reported a revenue decline of 4.1%, from NZ$166m to NZ$159.2m, with EBITDA down 9.9% from NZ$30.3m to NZ$27.3m.
Hywood said: “Weaknesses in print advertising revenue was partially offset by strong digital growth of 21% and significant expansion in the contribution of events. Circulation revenue declined 8% with volume declines offsetting improvements in yield.”
Looking at Macquarie Media, total revenue was up 1% from $69m to $69.6m with EBITDA up 11.2% from $12m to $13.3m.
Hywood said: “The business is implementing programming and sales changes which are expected to drive performance in the second half.”
Miranda Ward worked for Mumbrella from 2013 to 2017, eventually becoming deputy editor. Miranda joined Mumbrella in September 2013 from Sky News.
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Two figures stand out. The 44% rise in Domain costs in digital and the 30% of Domain that is to “spin off”. The first is ridiculous. The second is bizarre.
One could easily conclude that Fairfax is in deep trouble, that Domain has big management issues and that Domain can’t actually float, so it isn’t.
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I’m not clear on what you are saying?
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There’s not a lot you can spin there with a double digit EBITDA decline in AMM (SMH, The Age, and AFR), and the same in Domain, previously the saving-grace-cash-cow. How did they manage to lose that much EBITDA out of Domain with that decline in revenue? Must be some issue with increasing costs – but what? That flash new office? Must be more than that!
Splitting Domain out is bizarre – they always talked about AMM being critical for the success of Domain in terms of promoting properties with ads and inserts etc etc.
It stands to reason that they don’t want the newspapers dragging down Domain’s value, so they are doing something now at the first sign of trouble in Domain.
RE digital subscribers, seems like they stagnated after year one and have struggled to step up since then. Sadly not a lot of value for Joe Blow who can just go incognito and not get the warnings. I quit my SMH subscription 2 years ago and I can still access the full tablet app! Quite amazing.
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