Fairfax Media chief executive Greg Hywood is confident the 186-year publisher has a strong future even if it does not participate in the industry consolidation that is expected should the government get its media ownership changes through Parliament.
For the 12 months to June 30, Fairfax reported a net profit of $83.9 million, compared with a $772.6 million loss in the previous year, which included write-downs on the value of its publishing assets. Revenue across the group was down 4.8 per cent to $1.7 billion. Underlying profit grew 7.6 per cent to $142.6 million.
Earnings before interest tax, depreciation and amortisation were down 4.3 per cent to $271.1 million, beating the company’s previous forecast from its preliminary and unaudited range guidance of between $262 million and $266 million.
“We’ve got ourselves into a very strong position,” Mr Hywood said.
“We’re very confident around our ability to go it alone with no change. If there’s opportunities for consolidation that improve shareholder value, we obviously have to consider everything that might be put to us.”
Fairfax has spent years restructuring its traditional media assets and putting capital into growing real estate classifieds and services business Domain, which it plans to spin off. Fairfax will keep 60 per cent while the remainder goes to existing shareholders.
“The result is good; the publications are in the black, they’re sustainable, metro publishing has actually improved its performance. We’re a business that absolutely believes we’ve got our hands around the publishing business and are managing it,” Mr Hywood said.
“The transformation of our business from a business which was predominantly print and using the cash those publishing businesses generate to secure the future of the company through creating growth businesses, I think, is a really good story.”
While revenue declined in Fairfax’s traditional publishing unit, Australian Metro Media, which houses The Australian Financial Review, The Sydney Morning Herald and The Age, earnings before interest, tax, depreciation and amortisation improved by 25.9 per cent to $49.1 million. Subscription revenues across the three newspapers increased 21 per cent and grew its paid digital subscribers to 236,000. Advertising revenue in metro publishing declined 17 per cent.
“Five years ago it was still basically a print dominated business, with print processes and culture. It just was, it was a legacy culture,” Mr Hywood said.
“Now, it’s a digital business with a successful, profitable print add-on, and all the processes and culture around being a digital news and information business has been embedded. It’s a big change and we’re really proud of the fact the editorial team has embraced and adjusted.”
Mr Hywood admitted some of the decisions, particularly redundancies, were difficult but said they were needed to keep the publishing business standing on its own two feet.
“Clearly, we are committed to journalism at scale. The at-scale component is important, we need enough bodies reporting to make sure we can deliver a quality and quantity of journalism, particularly around our Sydney, Melbourne and business communities that gives us a competitive advantage,” he said.
Domain revenue increased by 8.1 per cent to $320.3 million while EBITDA declined 5.7 per cent to $113.1 million, which Mr Hywood said reflected the company’s choice to reinvested in the business during the constrained listings in the first half.
Fairfax expects Domain to begin trading in mid-November.
“This was about getting the right valuation and we wanted to put enough into the market to make sure there was enough liquidity to have a very success free float,” Mr Hywood said.
“Our focus at the moment is about the Domain separation. What we try to do is not spread ourselves too thinly. If you look at the Domain business, what we’ve learnt is that investment off the core is what’s most successful for us.”
Stan, Fairfax’s 50-50 joint-venture with Nine Entertainment also performed strongly in the year, hitting 800,000 subscribers as it closes in on breaking even.
“[Stan] is clearly getting to a level of scale very rapidly and not far from where we get to that break-even point,” Mr Hywood said.
“The business plan is on track, the acquisition profile is strong, we’ve put price increases in the market, a new tiered pricing structure into the market, the market has accepted that and the content line up is really strong.”
Martin Currie Australia analyst Patrick Potts said the result was in line with expectations.
“[Fairfax is] probably better positioned than a lot of traditional publishers around the place … it’s heading in the right direction,” Mr Potts said.
“Domain was a little bit softer than expected, but there’s a few things going on ahead of separating the business out. It’s understandable and it’s been a pretty soft listings environment. The other thing that stood out was the metro publishing division which delivering good growth in earnings, which is a bit a surprise.”