Fairfax racks up $63.8m loss, but CEO says business is now in ‘good shape’

Fairfax brought in revenue of $1.688bn during the 2018 financial year, a 3.1% drop from the prior corresponding period, the company’s statutory results revealed today. The results also showed a net loss after tax of $63.8m, compared to a net profit of $83.9m last year.

CEO Greg Hywood, however, said the company’s underlying results – which exclude significant items – show the company’s strong position after “big decisions”, addressing “legacy cost issues” and “structural change”.

Fairfax has delivered good cost outcomes, says Hywood

Significant items after tax cost the company $188.7m.

Significant items excluded from the underlying results include $36m in restructuring and redundancy costs.

The underlying results show EBITDA (earnings before interest, tax, depreciation and amortisation) of $274.2m, up 1.2%, but a net profit after tax of $124.9m, down 12.4%.

The company is carrying a net debt of $135.7m, but has a net cash position of $9.5m for wholly-owned entities.

Domain is carrying a net debt of $127.1m, while Macquarie Media has a net debt of $18.2m.

Hywood, however, said Fairfax was in good shape.

“Today’s results shows the strong position of the Fairfax Media portfolio. Each of our businesses has maintained a growth focus and delivered good cost outcomes which will underpin future performance.

“Over the past seven years, we have taken the big decisions. We have built businesses such as Domain and Stan. We have maximised the growth drivers of our core assets. We have addressed legacy cost issues to give our business time to adjust to the structural change it confronted. We have hit our stride for growth,” he said.

During the company’s mid-year financial results, which were reported in February, Hywood flagged the company would be looking to take advantage of any opportunities arising from media consolidation.

Today, this has almost come to fruition, with Nine intending to buy Fairfax, as long as the deal secures the necessary regulatory approvals.

Hywood used the full-year financial results to again spruik the benefits of the deal.

“Fairfax is in good shape – and that’s the reason Fairfax shareholders have the opportunity to benefit from a step-change in growth through the proposed combination of our company with Nine Entertainment Co,” he said.

“We have long believed that media consolidation provided enormous potential to leverage increased scale of audiences and marketing inventory to grow our assets. Fairfax has consistently supported media deregulation because we saw the long-term benefits for shareholders.

“This is an exciting new phase in our development. It puts the important work we do through our journalism on an even stronger and more sustainable footing in the future.”

Fairfax’s segment results, excluding significant items (Click to enlarge)

Australian Metro Media

Australian Metro Media – which is responsible for mastheads including The Sydney Morning Herald, The Age, Brisbane Times, WA Today and The Australian Financial Review – suffered from a 9.6% decline in advertising revenue (down to $203.9m) and a 3.0% decline in circulation revenue (down to $220.1m).

Overall, revenue was down 6.1% to $490.2m, but the business also cut costs by 7.5%.

Australian Metro Media’s EBITDA was therefore up 8.3% to $53.1m.

Hywood said all of Fairfax’s publishing arms are emerging from a period of great change, but are now profitable with valuable cash flows.

In particular, he said Australian Metro Media is a “remarkable transformation success story”.

Australian Metro Media performance in FY18

Hywood alluded to the various rounds of redundancies and cost-cutting initiatives, hinting they may finally have paid off.

“For the past six years, we have taken the business through radical change,” he said. We have reached the point where we can see a strong future for the business.

“Advertising revenue benefited from improved H2 digital performance supported by the Google programmatic ad sales partnership, as well as moderating print declines.

“Circulation revenue declines moderated in H2, benefiting from strong growth in digital subscriptions with 9% growth in revenue for the year, and increases in cover prices. Net paid digital subscriptions for The Sydney Morning Herald, The Age and The Australian Financial Review recorded growth year-on-year across all three mastheads to 313,000. The Financial review is having particular success in B2B.

“Metro expenses declined 7.5% for the year, with a 9% reduction in publishing costs, largely from savings in staff, technology and print production.”

Australian Community Media

Australian Community Media is Fairfax’s regional publishing arm and produces titles including The Newcastle Herald, The Canberra Times and Illawarra Mercury.

Total revenue for the business unit was down 8.8% to $351.4m, after an 11% decline in regional advertising and a 10.6% decline in revenue from circulation.

EBITDA tumbled 21.6% to $57.2m.

Australian Community Media’s financials

Hywood was, as ever, optimistic, despite the company having to close various titles throughout the year.

“ACM’s continued strong cost discipline delivered a 6% reduction in expenses and underpinned EBITDA margin of 16.3% for the year,” he said.

“Total revenue declined 9% with relatively stable contribution from agricultural titles, benefiting from strong agricultural commodity prices and digital investment in the sector. This was offset by weakness in regional advertising and circulation, with some impact from the closure of several unprofitable mastheads. Declines in local and real estate print revenue contributed to the advertising revenue result. Circulation declines reflected lower retail volumes.”

The business unit, he said, was well-managed, profitable and generated significant cash.

“Its strong connections with rural and regional communities underpin the momentum it is achieving with B2B revenues and local news subscription initiatives.”

Macquarie Media 

Macquarie Media’s financial performance

Macquarie Media includes talkback stations 2GB and 3AW, as well as the recently revamped Macquarie Sports Radio.

Revenue declined marginally to $136.6m, while EBITDA climbed 3.3% to $32.6m.

Hywood focussed on the financials, and said in a release to the ASX: “Macquarie Media’s reported revenue was flat. Underlying revenue increased 4% excluding disposals and one-time items, underpinned by robust 9% growth from the primary stations. Macquarie Media’s move to develop Macquarie Sports Network is aimed at improving its secondary market performance.

“Expenses reduced 2%. EBITDA increased by 3% with the EBITDA margin expanding from 23% to 23.8%. H2 performance was impacted by the non-recurrence of ACMA licence fee relief and the launch of Macquarie Sports Network.


Domain released its own financial results to the ASX earlier this week, reporting a $6.2m loss in its statutory results, largely due to costs incurred during its separation from Fairfax.

Fairfax still controls 60% of Domain.

Domain’s financial results breakdown

During Domain’s results on Monday, the real estate content, listings and advertising platform instead preferred to focus on its pro-forma results, which provide a view of what the financials would look like had the company been a separately listed entity for the full financial year.

In the pro forma results, which exclude significant items, Domain reported revenue of $357.3m, up 11.5% and EBITDA (earnings before interest, tax, depreciation and amortisation) of $115.7m, up 12.5%.

The company’s net profit after tax in its pro forma results was $52.9m, up 7.7% and the company carries a net debt of $126.5m.

In Fairfax’s breakdown of its results, Hywood highlighted Domain’s 20% digital revenue growth, its increase in residential mobile enquiries and higher contributions from the developers and commercial segment.

Despite some challenges, Hywood said Domain was in excellent shape.

“Print revenue declined 13% reflecting the transition to a digital business somewhat offset by the launch of the Domain glossy magazine format,” he said.

“Reported expenses increased 15.7% reflecting investment in the business and the impact of separation costs included for the first time. Underlying costs on DHG’s reported pro forma basis increased 11% as a result of continued investment in staff, workspace and new transactions businesses, offset by a reduction in print expenses of 15%.

“The EBITDA increase of 3.9% to $117.6n was achieved notwithstanding the impact of separation costs. Digital EBITDA increased 15%. On a like-for-like basis, as reported by DHG, Group EBITDA margins increased from 32.1% to 32.4%.”

Hywood is also looking forward to the arrival of Google’s Jason Pellegrino, who is set to become CEO of Domain at the end of this month.

Pellegrino starts with Domain within a matter of weeks

“Later this month, Jason Pellegrino starts as CEO and his mission is to take the business to its next stage of growth. Domain is in terrific shape. It has large audiences, increasing depth penetration, geographic expansion and is broadening into the property ecosystem. We have great confidence in Domain’s future.”


Stan is currently a joint venture between Nine and Fairfax, but in its financial results this morning, Fairfax did not breakdown the streaming services full financials.

Hywood highlighted Stan’s 1.1m-plus “active” subscribers, and record quarterly gross and net subscriber additions.

On the financials, Hywood said: “Stan’s subscriber growth, combined with the first price increases since launch three years ago underpinned 72% growth in subscription revenue to reach jus under $100m. The yea to June finished with a revenue run-rate of around $120m. The strength of the operating model is reflected in revenue growth far outpacing the increase in operating costs, driving a 50% reduction in EBITDA losses between Q1 and Q4 FY18.”

He said Stan was strongly positioned to continue its growth trajectory and will benefit from strategic alignments with global studios and networks.


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