Fairfax profits tumble 54% as company flags it will ‘take advantage’ of media consolidation
Fairfax Media brought in revenue of $877.1m in the first half of the 2018 financial year, with a net profit after tax of $38.5m – a 54% drop on the $83.7m it made in the prior corresponding period, its statutory results revealed today.
Chief executive and managing director Greg Hywood was pleased with the results, but said Fairfax will “take advantage” of any media consolidation opportunities and said advisers had been appointed to pursue more strategic opportunities with rival News Corp.
Fairfax remains optimistic
Significant items after tax in the statutory results totalled a $38.7m loss.
The underlying results for the six months to December 2017 show EBITDA [earnings before interest, tax, depreciation and amortisation] of $146.9m, which is up 1.3% from the six months to December 2016. EBIT [earnings before interest and tax] was $119.8m, down 5.5%.
The underlying results also showed a decline in net profit after tax, down 9.9% to $76.3m.
Hywood again flagged Fairfax was open to mergers and acquisitions, declaring: “We will take advantage of opportunities arising from media consolidation as and when it occurs. Any decisions we take will be in the best interests of our shareholders.”
Hywood also said the results being presented to market today were solid.
“Fairfax is strongly positioned due to the success of growth and transformation initiatives we have implemented over the past five years,” he said.
“Domain’s digital growth is continuing; Metro publishing has delivered increased earnings; the Radio business is showing the benefits of the merger; and Stan is going from strength to strength.”
He went on to explain how cost-cutting initiatives and the Domain separation had factored into the results.
“For the half year, the Fairfax Group delivered operating EBITDA of $146.9m, an increase on the prior year. This reflected the strong performance of Domain and Macquarie Media, and extremely good cost outcomes in Australian Metro Media.
“Group revenue of $873m was a modest 3% lower than the prior year.
“Our ongoing cost and efficiency focus delivered a 4% reduction in expenses, notwithstanding continued investment in growth initiatives at Domain and Stuff.
“Net profit of $76.3m was down 10%, with earnings per share of 3.3c. This result reflects the increase in minority interests associated with the separation of Domain from 22 November 2017 and the improved Macquarie Media results.
“We will pay an interim dividend of 1.1c per share, 100% franked. We note Domain declared a 4c per share dividend for the half.”
Domain
Hywood again stressed the successful separation of Domain and its strong post-Antony Catalano leadership team.
Earlier this week, Domain released its first financial results since being spun out of Fairfax, reporting revenue of $112.7m and a net loss after tax of $3.4m in its statutory results.
Executive chairman Nick Falloon using it as an opportunity to dispel any market fears about how the company will perform without embattled former CEO Catalano at the helm.
Hywood: has great confidence in Domain
He told investors Catalano’s departure had not dented the Domain business at all, and there would be no impact on its future as a result.
Hywood used the Fairfax results to re-iterate its commitment to the post-Catalano business.
“Domain’s first half result demonstrates its strong platform for growth. It is underpinned by a first-class management team, currently led by executive chairman Nick Falloon. Domain’s strategy is well established and its implementation continues apace, building on the achievement of breadth and scale,” he said.
“Our 60% stake in Domain remains a key strategic asset and its strong fundamentals underpin our great confidence.”
Publishing
Hywood said Fairfax’s publishing assets are in good shape, with the company’s focus on digital publishing, cost and efficiencies, and new revenue opportunities helping them to remain profitable.
Greater industry collaboration, particularly with News Corp, would further bolster Fairfax’s position, he said.
“We have progressed our recent positive discussions with News Corp Australia to seek industry-wide efficiencies in printing and distribution. We have had successful collaborations around shared trucking and printing titles for News in Queensland. Building on this collaboration, we have appointed advisers to pursue deeper strategic opportunities.”
He said the company’s metro publishing arm – which includes brands such as The Sydney Morning Herald, The Age and The Australian Financial Review – was in the best shape it had been in years, noting “we haven’t let up on driving cost efficiency”.
“Metro’s impressive 11% decline in costs – largely from savings in staff, technology and print production – more than offset the decline in revenue of 9%. Publishing advertising revenue declined 15%,” Hywood said.
New Zealand
Despite ongoing battles in the New Zealand court system about the proposed merger between Stuff (formerly Fairfax NZ) and NZME, Hywood said the company has confidence in the brand’s digital longevity.
To accelerate this, he said, the company will sell or close 35% of its print publications in the country.
“We have enormous confidence that Stuff is heading towards sustained growth as its digital business continues its strong momentum. We have acted decisively to bring this forward, and are announcing today a plan to exit around 35% of our NZ print publications through sale or closure. The rationalisation of these smaller community titles and free inserts will deliver additional EBITDA contribution over a full year – and bring forward the time when increased in digital revenue outweigh declines in print.”
On the NZ paper closures, it’s not all doom and gloom:
https://www.flametreemedia.com.au/blogs/survey-finds-small-publishers-confident-but-heres-4-realities-that-will-bite-in-2018
And of the 28 papers going on the sales block, I estimate about a third may survive under new owners.
Stuff’s rural papers, for example, provide excellent niche content.
Unfortunately, as Stuff moves unashamedly to a digital-facing business, print can be drag. That is not to say, though, that print is all over red rover.
It is far too simplistic to just call it game over.
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So the Domain ceo exit was actually just a cost saving? Remarkable how rapidly roosters become feather dusters.
Fairfax ceo says the news media are in good shape. Not the ones I’m used to reading. SMH is very rarely on the news and AFR has virtually no business news these days.
All up these businesses look frail. Plus it now appears that Domain is actually dependent on the news brands that are rapidly dying.
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Management consultants have fucked Fairfax, and it sounds like they will now work on News LTD. Meanwhile, they’re buying agencies…
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All of which prompts again the perennial question, “How much longer can Fairfax stagger on?” One thing’s for sure, if the New York Times and the Washington and Huffington Posts folded, there would be a lot of blank columns in what is left of the Sydney Morning Herald.
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Wondering whether fairfax management work in a sealed office. The language Hywood uses in his public statements is so far removed from the evident facts that I reckon it’s like Jonestown.
Hywood and his board clearly think it’s ok to say that the once mighty ness brands are rubbish and performing well. Any person with eyes and a brain knows that neither is remotely true.
As for Domain we now know that the wunderkind ceo who was so well rewarded was not in fact contributing much at all.
The signs are that the whole house of cards is teetering.
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