No wonder Fairfax Media says it will get an extra $60 million in cost reductions above the quarter of a billion already promised from the continuing restructure of its print and digital operations. Its revenue is sliding, along with profits.
The claim was made in an investor day in Sydney yesterday for the company which followed a day after Rupert Murdoch and his executives were in the same city trying to interest local investors in the virtue of remaining an investor in the about to split off new News Corporation (to be called News Corporation after the June 28 split).
Based on what was said and reported at and about the two briefings, Fairfax shareholders and other investors got more information about the dire outlook for print media in this country from the Fairfax briefing than they received from Mr Murdoch and his mob.
Fairfax provided quite a bit of information – and made it clear that the analogue print business continues to weaken, while the digital side, especially the Domain property business, is still growing strongly and now has profit margins close to double that from its papers.
The contrast to the briefing at News was telling – the reports suggest Mr Murdoch and his executives produced little new information about how the Australian newspapers (and pay TV and internet businesses) are trading. Seeing there’s a further $US1.2 to $1.4 billion in impairment charges against News Ltd papers this financial year, you’d have to say the trading performance in the Murdoch empire is weak.
Fairfax Investor Day Briefing
The bottom news from Fairfax wasn’t good either, but at least it was laid out for investors to see. And the message from CEO Greg Hywood was hardly upbeat.
He said that consistent with previous guidance to the market in the "current half up to the third week of May overall group revenues were 9 to 10 per cent lower than the previous corresponding period".
Mr Hywood told the meeting that the company’s Metro Media business, which covers the company’s flagship publications such as The Age and Sydney Morning Herald, is tracking down 11%, regional papers are down 11% and its New Zealand division down 4%.
Radio though is doing better, with Fairfax radio (which owns 4BC in Brisbane, 2UE in Sydney and Melbourne’s 3AW) seeing revenues up 10%.
The star (which was apparent from the amount of time devoted to it yesterday) is the digital real estate operation Domain where revenues are up 16% so far this year and 17% for the full financial year.
Investors were told that Domain had revenue of $140.7 million in financial 2012 and an EBITDA of $44.6 million with an EBITDA margin of 34%. If revenues are up 17%, then Domain is heading for revenue of close to $165 million. That would see EBITDA top the $51 million mark for the year to the end of this month.
Mr Hywood said the growth in digital earnings for Domain was offsetting the decline in print. Print EBITDA margins for Domain were below digital at 30%.
He said digital revenue for Domain was up 17% year on year with that growth accelerating in the second half. Overall digital EBITDA is up 25% year on year. The margin was also up three percentage points to 37% (heading towards double that of the print businesses).
Fairfax said it was now expecting to report second half EBITDA in the range of $129 million to $135 million. A year ago it reported a higher figure of around $230 million. That means EBITDA will be down around 30% for the full year to about $360 million, give or take a few million. That would be an actual fall of around $150 million.
In 2011-12 Fairfax reported net earnings of$205 million which were down 26%. In the first half of 2012-13 it reported net earnings of $83 million (down 39%). Fairfax has no chance of reaching the 2011-12 net profit level given the slide in second half revenues and EBITDA.
In opening trade, Fairfax shares were down 4.2% to 57.5c. They ended the day at 57c.
Given that glum outlook, it was no wonder Mr Hywood promised higher savings – which would total $331 million by the 2015 financial year.
As part of the strategy update, Fairfax released details of digital subscription (paywall) for its popular news websites at the Sydney Morning Herald and the Melbourne Age (the Australian Financial Review already has a paywall).
He said Fairfax would use what’s called the domestic metres paywall which will have a bundling package and range from $15 to $44 per month. At the entry level, a charge of $15 a month will allow web-only desktop and mobile site. At the top end a $44 charge will deliver a full subscription across a range of platforms including tablet, mobile, desktop and the physical newspaper.
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