Shrinking Fairfax Eyes Consolidation
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Fairfax Media’s December half year more of the same - saw weak revenue, weakening print ads, more progress on digital subscriptions, indifferent digital revenue growth and more of the same over the rest of 2017-18.
Stuff, the renamed NZ operations of Fairfax remains in limbo with another appeal underway against the regulatory ‘no’ to the merger with rival publisher, NZME. The first appeal was dismissed by New Zealand’s highest court in late December.
But yesterday’s announcement from Fairfax though contained bad news for NZ and its shrinking newspaper base - Stuff is taking (or rather Fairfax’s Sydney HQ is) a an axe to its papers as Mr Hywood explained:
“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 increases in digital revenue outweigh declines in print,” Hywood said.
Investors loved the news and the shares rose more than 5% to 69.5 cents.
Half year revenue of $877.1 million was down 3.9% from the prior corresponding period. Excluding one off items, earnings before interest, tax, depreciation and amortisation (EBITDA) was $146.9 million up 1.3%; Earnings before interest and tax (EBIT) of $119.8 million down 5.5%; and Net profit after tax of $76.3 million down 9.9%. Interim dividend was set at 1.1 cents a share.
Costs fell 4% thanks to cuts in staff and other moves. “This result reflects the increase in minority interests associated with the separation of Domain from 22 November 2017 and the improved Macquarie Media results,” Mr Hywood said.
The Metro papers saw revenue fall 9%, but EBITDA rise 8.4%, the Community papers saw a 6% slide in revenues and a 15.6% slump in EBITDA, Stuff saw a 8% fall in revenue and a 27% slide in EBITDA (in Australian dollars), and Macquarie Media saw a 1.3% fall in revenue, but a 22.6% jump in EBITDA. Domain announced on Monday that revenue rose 12.5% and EBITDA was up 2.2%.
And looking to the second and current half, Fairfax said "Trading in the first seven weeks of FY18 H2 saw revenues around 4% to 5% below last year. Domain’s digital revenue growth was 21% and total revenue growth was 11%. Publishing trends were broadly consistent with FY18 H1.”
The most intriguing part of the announcement (apart from the hacking across the Tasman) was the increasing co-operation with News Corp. Mr Hywood noted in his statement "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 jointly appointed advisers to pursue deeper strategic opportunities.”
Glenn Dyer has been a finance journalist and TV producer for more than 40 years. He has worked at Maxwell Newton Publications, Queensland Newspapers, AAP, The Australian Financial Review, The Nine Network and Crikey.
At the AFR he was a finance writer, Finance Editor, News Editor and Chief of Staff. At the Nine Network he was supervising producer of Business Sunday for more than 16 years. He has also written for other online and analogue print publications here and overseas.