Fairfax Media has today announced its results for the half-year to December 2016, amid speculation around the fate of Domain and a potential merger with Nine Entertainment Co.
CEO Greg Hywood today joins Mediaweek’s James Manning live on Sky Business News at 2pm to follow up.
Group results
Fairfax Media Limited has announced its results for the half-year to December 2016.
Chief executive and managing director Greg Hywood said: “For the half, the Fairfax Group delivered net profit of $84.7 million, up 6% compared to the prior year. Earnings per share growth of 9% benefited from the share buy-back program.
“Group operating EBITDA of $145 million was achieved from revenue of $903 million.
“Domain Group delivered strong digital advertising growth of 15%, notwithstanding a challenging listings environment.
“Our cost reduction programs underpinned a 5% decline in operating expenses, notwithstanding continued investment in our growth businesses.
“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.
“Metro publishing advertising revenue declined 16%, impacted by weakness in retail and motoring categories,” Hywood said.
“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 of $22 million 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.
“Metro publishing costs improved 9%. We expect to maintain a similar run-rate in the second half.
“Last week we announced a new management structure for the Metro publishing business, with the appointment of Chris Janz as managing director of Australian Metro Publishing. 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.
“While we have considered many options, the model we have developed involves continuing to print our publications daily for some years yet. This is the best commercial outcome for shareholders based on current advertising and subscription trends.
“Allen Williams has become managing director, publishing transition. He will continue overseeing cost transformation and remains responsible for Australian Community Media and Printing & Distribution.”
The company didn’t provide an outlook in its notes, but did comment that trading in the first two weeks of February saw revenues around 6% below last year.
Trading in January saw revenues around 10% below last year in a slower than usual start across the media industry.
New real estate listings have seen some early signs of improvement in February following the weak FY17 H1 performance.
The Fairfax Group continues to implement cost savings measures.
Domain update
Fairfax Media confirmed a strategic review of the Domain Group in preparation for Domain’s potential separation into a new Fairfax-controlled Australian Securities Exchange-listed entity.
The separation would result in Fairfax continuing to own a controlling majority of Domain (between 60% and 70%), while issuing shares in Domain to Fairfax shareholders at the time the separation is implemented. The potential separation would be expected to complete this calendar year.
Fairfax Media chairman Nick Falloon said: “This strategic initiative arises from the board’s determination to maximise returns for Fairfax shareholders from Domain Group, which is positioned for strong long-term growth.”
Falloon noted that a separation would result in:
A separately ASX-listed entity establishing direct valuation for Domain;
Boards and management teams that will be better able to develop distinct strategies, manage capital structures and conduct investment decisions for their respective businesses; and
The opportunity for Domain to attract new shareholders with different investment criteria.
Fairfax Media CEO Greg Hywood said: “The separation of Domain would further reshape the Fairfax portfolio by adopting a more flexible corporate structure to maximise shareholder value. Importantly, Fairfax would continue to benefit from the strong long-term growth profile of Domain through its continuing shareholding of 60% to 70%. The current intention is that no new capital will be raised.”
New Fairfax board member
Fairfax Media chairman Nick Falloon announced the appointment of Mickie Rosen as a non-executive director of the company effective March 1 2017.
Falloon said: “Mickie has extensive operational, strategic, and investment experience at the intersection of media and technology. She has worked for both large established companies and early stage startups. She currently advises a range of companies globally, is a senior advisor to Boston Consulting Group, and is a director of Pandora Media in the USA.
“In her most recent operational role, Mickie served as senior vice-president of Yahoo’s global media and commerce division. Prior to Yahoo!, she was a partner with Fuse Capital, a digital media venture capital firm, and was the head of entertainment for Fox Interactive Media where she led strategic initiatives in digital, including serving as a lead on envisioning, structuring, and negotiating the creation of Hulu. Mickie has also held executive roles with The Walt Disney Company and leading movie information and ticketing company, Fandango. She built the foundation of her career at McKinsey & Company.”