Fairfax announces loss ahead of merger

Fairfax about to merge with Nine

Fairfax has announced an annual loss ahead of its merger with Nine, but insists the media business in ‘good shape’.

In an ASX announcement, Fairfax reported full-year revenue of $16.88 billion, down 3.1 per cent on the previous year, with a net loss of $63.8 million, compared with a net profit of $83.9 million the previous year. Underlying net profit was $124.9 million, again 12.4 per cent lower year-on-year.

The media group also reported a 1.2 per cent rise in underlying earnings to $274.2 million.

Chief executive and managing director, Greg Hywood, said Fairfax is in "good shape".

“We have long believed that media consolidation provided enormous potential to leverage increased scale of audiences and marketing inventory to grow our assets. Fairfax has consistently supported media deregulation because we saw the long-term benefits for shareholders,” he said.

“This is an exciting new phase of our development. It puts the important work we do through our journalism on an even stronger and more sustainable footing for the future.”

Hywood also reported Metro achieved its second consecutive year of EBITDA growth, while Stan broke through the 1.1 million active subscriber mark. Fairfax Group delivered an operating EBITDA of $274.2 million, a result driven by growth at Domain, Australian Metro Media, Macquarie media, as well as lower corporate costs. EBITDA for Metro is up eight per cent, the second consecutive year of growth.

Domain also delivered a 20 per cent digital revenue growth, with an EBITDA increase of 3.9 per cent to $117.6 million.

Hywood expected the recently announced print production agreement with News Corp and the changes to Fairfax’s printing network to result in an annualised full year benefit for the publishing group of about $15 million, with benefits expected towards the end of the 2019 financial year.

“Advertising revenue benefitted from improved H2 digital performance supported by the Google programmatic ad sales partnership, as well as moderating print declines,” Hywood said.

“Circulating revenue declines moderated in H2, benefitting from strong growth in digital subscriptions, with nine per cent growth in revenue for the year, and increases in cover prices. New paid digital subscriptions for The Sydney Morning Herald, The Age and the Australian Financial Review recording growth year-on-year across all three mastheads to 313,000.”

Nine Network and Fairfax sent shockwaves through the media industry in July after revealing the companies are joining forces to become Australia's biggest integrated media company.

The $4 billion merger represents one of the biggest moves in Australian media history. And while the merger needs approval by the Australian Competition and Consumer Commission (ACCC), industry experts say the changes to media ownership laws - introduced by the Turnbull government - will likely see it pass.  

Following completion of the proposed transaction, Nine shareholders will own 51.1 per cent of the combined entity with Fairfax shareholders owning the remaining 48.9 per cent.

The combined business will include Nine’s free-to-air television network, a portfolio of high growth digital businesses, including Domain, Stan and 9Now, as well as Fairfax’s mastheads and radio interests through Macquarie Media, according to the ASX statement.

As media commentators say the Fairfax/Nine merger will change the face of the media landscape in Australia, the MEAA is calling for the ACCC to block the merger.

Follow CMO on Twitter: @CMOAustralia, take part in the CMO conversation on LinkedIn: CMO ANZ, join us on Facebook: https://www.facebook.com/CMOAustralia, or check us out on Google+:google.com/+CmoAu 

 

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