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Fairfax in ‘good shape’ after $63m loss

Wednesday, 15 August 2018
By Print21
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Fairfax Media posted a net loss after tax of $63.8 million for the 2018 financial year, compared to a net profit of $84 million the previous year, but CEO Greg Hywood says the company is now in “good shape” ahead of its proposed buyout by Nine.

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

‘Fairfax is in good shape’: Fairfax CEO Greg Hywood

“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 going for growth.

“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.

Revenue for the year was $1.688bn, down 3.1% from the prior corresponding period.

Hywood says the deal to share printing facilities with News Corp is the beginning of a new era of industry cooperation.

“Our three publishing businesses are emerging from a period of great change. Each is profitable, generating valuable cash flows, and positioned with distinct markets, products and strategy to leverage growth. What they have in common is an ongoing emphasis on digital publishing; continuing focus on cost and efficiency; initiatives to maximise print earnings; and a focus on developing new revenue opportunities.

“Our printing agreements with News Corp herald a new era of greater industry cooperation. The arrangement delivers us greater cost variabilisation, reduced capital intensity, and further extend the cash-generating life of print. As announced on 18 July 2018, we expect the combination of the new arrangements and the changes to Fairfax’s printing network to result in an annualised full-year benefit of approximately $15 million.”

The company’s Australian Metro Media division is “a remarkable transformation success story,” Hywood said.

“For the past six years we have taken this business through radical change. We have reached the point where we can see a strong future for the business. This is the second consecutive year of EBITDA growth for Metro, up 8% for the year, with margins increasing from 9.4% to 10.8%.

“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.

Total revenue from Australian Community Media 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,” Hywood said. “Declines in local and real-estate print revenue contributed to the advertising revenue result. Circulation declines reflected lower retail volumes.”

New Zealand business Stuff saw total revenue decline around 7.5% in local currency terms. Digital revenue growth of 21% was offset by lower print advertising.

 

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