Fairfax Media’s chief executive Greg Hywood says a focus on transformation has put the company in a “strong position” as it moves into an “exciting new phase”, with its metropolitan publishing division delivering another year of growth.
The company’s total earnings before interest, tax, depreciation and amortisation are up 1.2 per cent year-on-year to $274.2 million.
The publishing arms performed well, reflecting strategic and pro-active management. Australian Metro Media, which includes The Sydney Morning Herald, The Age and The Australian Financial Review, recorded an 8 per cent rise in EBITDA, increasing margins from 9.4 per cent to 10.8 per cent. The regional publishing arm, Australian Community Media, also achieved an underlying EBITDA margin of 16.3 per cent for the year.
“Over the past seven years, we have taken the big decisions,” Mr Hywood said. “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.
“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.”
Fairfax spent much of the 2018 financial year in a transformational state. Corporate overheads were reduced by 51 per cent, with change to continue into financial year 2019. Further cost reductions were made in publishing costs associated with staff, technology and print production.
Next year, the company hopes to achieve an “annualised run-rate below $20 million in corporate overheads”.
Each publishing division substantially reduced operation costs during the financial year. Metro Media costs were reduced 7.5 per cent, with 9 per cent minimised in publishing costs. Australian Community Media was similarly able to reduce costs by 6 per cent.
The company’s total revenue fell 3.1 per cent year-on-year. Net losses after tax of $63.8 million were recorded, after writedowns and one-offs. The company achieved a net profit of $83.9 million in 2017.
The results could potentially be the last Fairfax releases before its planned merger with Nine Entertainment. If the merger is approved by shareholders and the Australian Competition and Consumer Commission, the two companies will be joined by the end of the year.
Fairfax’s “ongoing emphasis on digital publishing” has rewarded The Australian Financial Review, The Sydney Morning Herald and The Age, with data showing the mastheads collectively increasing their digital subscribers by 10 per cent year-on-year to 313,000.
Australian Metro Media advertising revenues made gains in the second half of the financial year, aided by the Fairfax and Google programmatic ad deal, signed in December 2017. While circulation revenues declined, a stronger second half result moderated the figure
Australian Community Media’s total revenue slipped 9 per cent, despite its strong underlying EBITDA.
Fairfax’s New Zealand company, Stuff Limited, saw revenue declines of 7.5 per cent in local currency terms. The diversification of revenue streams has resulted in digital and non-print revenue representing 18 per cent of Stuff’s total revenue, led by the strong growth of Stuff Fibre and Neighbourly.
The Kiwi business saw EBITDA fall 27 per cent, while cost adjustments improved 6 per cent. A one-off provision, one-time items and investment in Stuff Fibre saw underlying operating expenses finish at 4 per cent.
Real estate company Domain has continued to grow since its split from Fairfax in November 2017. The publisher retains a 60 per cent stake in the business.
“Residential depth revenue increased 24 per cent, benefiting from a 21 per cent increase in residential mobile inquiries and higher penetration of Platinum products,” said Mr Hywood. “This strong residential performance fuelled higher core digital revenue growth along with an increased contribution from developers and commercial.”
An EBITDA increase of 3.9 per cent to $117.6 million was achieved despite the separation, while digital EBITDA increased 15 per cent.
Domain’s digital revenue increased 20 per cent. The launch of the company’s glossy print magazine somewhat offset the 13 per cent drop in print revenue.
Stan, Fairfax Media’s joint video on-demand streaming venture with Nine Entertainment, reached its goal of 1.1 million subscriber in the financial year.
“Stan’s subscriber growth, combined with the first price increases since launch three years ago, underpinned 72 per cent growth in subscription revenue to reach just under $100 million. The year to June finished with a revenue run-rate of around $120 million. The strength of the operating model is reflected in revenue growth far outpacing the increase in operating costs, driving a 50 per cent reduction in EBITDA losses between Q1 and Q4 FY18,” Mr Hywood said.
Macquarie Media’s revenue remained flat, with EBITDA increasing 3 per cent, lifting the margin from 23 per cent to 23.8 per cent.