Fairfax revenues down but profits up as Hywood thanks staff for being a ‘shining example’ of ‘innovation’
Despite a 5.3% decline in total revenue to $1.732b, Fairfax Media’s chief executive, Greg Hywood, has said the company’s progress is a credit to the “talents, hard work and commitment” of its people.
In a column featured in the fiscal year 2017 report, Hywood said the company had a “track record” of leading change and “doing everything it takes to drive the commercial success” of the business.
He thanked everyone who had contributed to making Fairfax a “shining example” of a media company “leading innovation.”
According to the report, Hywood did not receive his bonus.
His base salary was $1.757m and with total shares/rights included, he earned $2.383m.
Fairfax Media’s operating EBITDA (earnings before interest, tax, depreciation and amortisation) fell 4.3% to $271.1m.
However, the company’s net profit grew 7.6% to $142.6m.
The publishing giant’s biggest area of growth was Domain Group, which climbed 8.1% to $320.3m from $296.3m for FY16.
Domain will start trading separately in mid November, with Fairfax planning to retain 60% of Domain’s shares.
The real estate group’s chairman will be Nick Falloon, and the company is expected to draw $150m of net debt upon separation, with proceeds to go to Fairfax.
One of the real estate company’s biggest areas of growth was digital advertising revenue, up 18.8% to $232.1m.
Fairfax confirmed it would spin off Domain as a separate entity on the ASX in July, following the news it had not received a binding offer from equity houses TPG Capital and Hellman & Friedman to purchase the overall business.
After axing 125 editorial jobs in a major metro media newsroom restructure, Australian Metro Media’s annual revenue fell 9% to $522.2m.
The redundancies were part of plans to provide the publishing giant with $30m in annual savings.
Restructuring and redundancy charges cost $43.8m down from $62.7m the previous year and publishing costs were reduced by 12%, with savings in staff, technology, and print production.
EBITDA climbed 25.9% to $49.1m “reflecting transformation efforts”, according to Hywood.
Metro advertising revenue was down 17%, to $225.5m.
Hywood said: “Australian Metro Media’s next-generation publishing model was fast-tracked during the year with new talent and capability brought in to further reshape the business.
“This involved resetting the publishing cost base as well as making significant enhancements to the product suite.
“The 12% reduction in Metro publishing costs for the year reflected an acceleration in cost out in the second half,” he added.
Unaudited figures of paying digital subscribers revealed 21% year-on-year growth, with 236,000 subscribers across three papers (The Sydney Morning Herald, The Age, and The Australian Financial Review.)
Fairfax is expected to roll out new products and applications across its mastheads in the coming months.
Australian Community Media’s total revenue fell 11.7% to $428.2m, with a12.3% decline in advertising revenue.
Macquarie Media Limited fell 1.1% to $137m, however its EBIDTA increased by 26%.
In June this year, Fairfax refuted speculation it was seeking offers to realise its investment in Macquarie Media, after it received a request for due diligence by a consortium of investors led by John Singleton and Mark Carnegie.
Fairfax currently has a 54.5% shareholding in Macquarie Media.
New Zealand Media total revenue was down 7% to $325m.
“Today’s result shows Fairfax is in great shape. We have delivered strong value for shareholders through growth and transformation initiatives,” Hywood state in a statement.
“The strategy we commenced five years ago has successfully maximised cash flows of our publishing assets and with that built growth businesses in Domain and Stan.
“Our three publishing businesses are modern, cost efficient and sustainable across digital and print. In the context of the global structural change impacting upon the media industry, the fact that our publications remain profitable and sustainable is an outstanding achievement,” he said.
“Our ongoing cost reduction programs underpinned a 6% decline in group operating expenses, not withstanding continued investment in our growth businesses.
“As we enter FY18, our immediate focus is on the successful separation of Domain, an initiative we believe demonstrates the success of our strategy and will deliver our shareholders great value over time.”
Hywood might have got no bonus, but you’d have to say that his bonus is keeping a hugely overpaid job. Hywood’s spin is out of control. “Resetting the cost base”, “cost out”, etc etc. What he means is that his main effort again this year was sacking experienced staff and replacing them a smaller number of inexperienced – cheaper- staff. His claims of innovation go unquestioned, despite the lack of evidence. His claims of a new publishing “model” go untested despite the lack of evidence. He relies totally on Domain, which he does not run.
Now Hywood will need to explain how Domain actually works and, one suspects, why TPG and H&F looked but did not make an offer. There’s a clue in the fact that despite claims to the contrary, Domain’s profit margins are falling. REA’s are much higher and did not fall this year despite a writedown. Of course, there’s also the problem that the print titles are very unwell. Their collapse will certainly cause severe damage to Domain.
Finally, Hywood will have to explain how the real estate deal in Domain works. Is it true that the incentives for advertising in Domain are not charged to the P&L? If they are on the balance sheet, will the “float” allow the agents to cash in? If so, what happens to the incentive????
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“Next-gen publishing model”, “innovation”, “significant enhancements to the product suite” ? Really? Where? What? Sounds like all those significant new revenue streams that Hywood was spinning madly about a few years back that have come to nought (Marketing services for small business, Data, Events….). Why, indeed, do none of the so-called smart analysts ever question him on this puffery….
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Bad set of numbers if you read the whole report:
– Non-Domain digital ad revenue dropped by $12.4MM (both print and digital mastheads in permanent decline now).
– Domain margin shrinking fast (and will further deteriorate as REA holds revenue in cyclical downturn).
– Domain profit actually dropped year on year
Profit gains purely from cost cutting in metro. Fairfax is in permanent decline.
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Never fear! All this yet-to-be unveiled innovation and new products will save the day!
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“The strategy we commenced 5 years ago”…..
Yet no actual mention of what the supposed growth strategy was all about;
https://mumbrella.com.au/fairfax-boss-greg-hywood-going-get-content-marketing-business-188456
Absolute joke of a performance on every front for what was always a flimsy press release at best. Hired and then had to discreetly fire his overhyped mates; Adam Warden and Andrew McEvoy after they sent what Fairfax had backwards.
All that’s left to talk about now is Domain – the last thing left that Hywood is now selling off. The Catalano / Domain story is surely the final chapter in “killing fairfax”.
Stan gets a token mention without anything meaningful to report yet again on the financials.
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It’s ok the new product is almost here. Having less content and ads will surely save the day. Using WordPress is also unique in market.
http://www.brisbanetimes.com.au/redesign
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Fairfax claims big growth in subscriptions which I think is very odd. I loved my SMH and AFR but I have not had subscription to either for about five years and rarely buy either at the station on the way to work.
The news value is near zero and the commentary banal. In fact the AFR seemed very proud to have a prominent gossip writer who was permanently parading his drunkenness. Let’s hope that they die away and something more aligned with readers emerges.
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Ha! Noticeable bias to properly stories. A coincidence of course.
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So they’ve moved sites to wordpress? Just like News (and numerous other publishers) did years ago. WOW!! Such innovation !!
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Amazingly dreadful that Brisbane thing
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Allure Media and HuffPo get a single line mention in the Annual Report which demonstrates how little return there is from these dud investments. The actual revenue though is still unknown as the ‘diversified’ businesses now sit under the Metro Media reporting line so it’s impossible to understand whether Allure’s stable of click-bait crap is another King Content style business or a successful strategy
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If, and I stress IF, this ‘shining example’ is such a rip-roaring success, then how come he has got rid of all the people that created it?
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