

Fairfax Media (ASX:FXJ)
1. About
On 7 December 2018, the takeover of Fairfax Media Limited by Nine Entertainment Limited (ASX:NEC) was completed and the Company was delisted from the ASX.
Prior to that, Fairfax Media Limited was an ASX-listed company operating and holding a portfolio of businesses across information, marketplace and entertainment assets.
Fairfax Media's business divisions included Australian Metro Media, Australian Community Media, Stuff (Fairfax New Zealand), Fairfax Events and Entertainment, and Corporate.
Fairfax Media also had a 60% shareholding in real estate media and technology services business Domain Holdings Australia (ASX:DHG); a 54.5% interest in radio broadcaster Macquarie Media Limited (ASX:MRN) with No. 1 stations in Sydney (2GB) and Melbourne (3AW); a 50% interest in Australia's leading subscription video on demand (SVOD) service Stan; and other investments.
2. Business model
The Group operates in following divisions:[1]
Divisions |
Revenue ($’000) |
% of Revenue |
% of Profit (bef. Int Tax,dep & Amort.) |
Profit drivers[2] |
Domain Group |
$357,273 |
21.2% |
42.9% |
Domain Group EBITDA of $117.6 M increased 4% for the year notwithstanding the impact of separation costs. Domain digital revenue increased 20% with growth in core digital and new transactions businesses. Print revenue was 13% lower reflecting the transition to a digital business, somewhat offset by the launch of the Domain glossy magazine format |
Metropolitan Media |
$490,210 |
29.1% |
19.4% |
Australian Metro Media revenue declined 6% with advertising revenue benefiting from improved digital performance supported by the Google programmatic ad sales partnership, as well as moderating print declines. Circulation revenue declines moderated in H2, benefiting from 9% growth in digital subscription revenue for the year, and cover price increases. Other revenues declined 5% reflecting the sale of Tenderlink in October 2016. Australian Metro Media expenses declined 8% for the year, with a 9% reduction in publishing costs largely from savings in staff, technology, and print production. |
Australian Community Media |
$400,187 |
23.8% |
20.9% |
Australian Community Media revenue 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. Declines in local and real-estate print revenue contributed to the reduced advertising revenue outcome. Circulation declines reflected lower retail volumes. Australian Community Media’s continued strong cost discipline delivered a 6% reduction in expenses and underpinned EBITDA margin of 16.3% for the year |
New Zealand Media |
$280,755 |
16.7% |
13.6% |
Fairfax Media Limited New Zealand business, Stuff, reported total revenue down 8% with digital revenue growth of 21%. Digital revenue benefited from strong growth from internet service provider Stuff Fibre and hyper-local social networking platform Neighbourly |
Radio |
$136,582 |
8.1% |
11.9% |
Fairfax Media’s 54.5% shareholding in the ASX-listed Macquarie Media Limited made a solid EBITDA contribution of $32.6 M. Macquarie Media’s reported revenue was flat. Underlying revenue increased 4% excluding disposals and one-time items, underpinned by robust growth from the primary stations. EBITDA increased by 3% with the EBITDA margin expanded from 23.0% to 23.8% |
Other |
$19,002 |
1.1% |
(8.6%) |
N/A |
3. Strategy
Key strategies include:[3]
Combined Fairfax / Nine Digital Assets and Brands
- Leverage combined assets to drive audience and revenue growth
Enhanced Sales Proposition
- Leverage cross-platform media sales proposition with unique and innovative advertising solutions
Domain
- Leverage expanded marketing platform to turbocharge Domain’s geographic expansion and revenue from transactions businesses
- Domain value acceleration through expanded marketing and cross - promotion
Stan
- Move from 50% to 100% ownership/control
Macquarie Media Limited
- Maximise value of 54.5% ownership/control
Reduced Corporate Overheads
- Realise cost efficiencies
Combined Balance Sheet
- Utilise balance sheet strength and low gearing
4. Markets
The Group operates in the following industries:[4]
Industry (Australia) |
Industry Revenue (2018) |
Growth Rate (annual 13-18) |
Newspaper Publishing |
$3 billion |
(8.4%) |
Magazine and Directory Publishing |
$2 billion |
(9.8%) |
Radio Broadcasting |
$2 billion (2017) |
0.2% |
Internet Publishing and Broadcasting |
$2 billion |
13.4% |
5. Competition
Major competitors Include:[5]
- Twenty-First Century Fox Inc (NASDAQ:FOX)
- HT&E Ltd (ASX:HT1
- Nine Entertainment Co Holdings Ltd (ASX:NEC)
6. History
1941[6]
Purchased the Sydney Morning Herald
1951
Founded the Australian Financial Review
1955
Acquired a license for Sydney’s ATN7 television
1956
Became a public company
1960
Acquired the Newcastle Morning Herald, Newcastle Sun, and Canberra Times
1969
Acquired the Melbourne based Syme company
1971
Launched the National Times
1979
Rupert Murdoch took over The Herald and Weekly Times
1992
Listed on Australian Stock Exchange
2005
Acquired the privately owned online-dating service RSVP.com.au
2010
Fairfax Media acquired TenderLink.com, the Southern Hemisphere’s largest e-tendering service
2011
Acquired occupancy websites and extended online Holiday Rentals Business
2013
The Age and the Sydney Morning Herald compact editions launched
2015
Fairfax Media acquired Metro Media Publishing Holdings (MMPH)
2016
Brisbane Times launches 'MyBT Gold Coast'
Update on NZME & Fairfax NZ merger process and Adshel option
2017
Fairfax proceeds with domain separation end discussions with Private Equity
2018
Merger of Nine Entertainment and Fairfax media
7. Team
Board of Directors[7]
Nick Falloon – Chairman
Patrick Allaway
Jack Cowin
Greg Hywood – Chief Executive Officer and Managing Director
James Millar AM
Linda Nicholls AO
Mickie Rosen
Todd Sampson
Management Team
Greg Hywood – Chief Executive Officer & Managing Director
David Housego – Chief Financial Officer
Allen Williams – Managing Director, Managing Director, Australian Community and Printing
Brad Hatch – Director of Communications
Chris Janz – Managing Director, Australian Metro Publishing
Dhruv Gupta – Group Director, Strategy and Corporate Development
Gail Hambly – Group General Counsel & Company Secretary
Martin Jolly – Managing Director, Fairfax Events
Michelle Williams – Group Director, Human Resources
Robert Hutchinson – Product and Business Development Director and Group Product Strategist
Sinead Boucher – Chief Executive Officer, Stuff
8. Financials
2018 Full Year Results Presentation
Financial Year 2017/2018 (ended 24 June 2018 and 25 June 2017 ):[8]
Divisions |
Revenue ($’000) |
% Change |
Underlying EBITDA ($’000) |
% Change |
Domain Group |
$357,273 |
11.5% |
$117,567 |
3.9% |
Metropolitan Media |
$490,210 |
(6.1%) |
$53,148 |
8.3% |
Australian Community Media |
$400,187 |
(6.5%) |
$ 57,204 |
(21.6%) |
New Zealand Media |
$280,755 |
(9.6%) |
$37,283 |
(28.8%) |
Radio |
$136,582 |
(0.3%) |
$32,568 |
3.3% |
Other |
$19,002 |
32.6% |
($23,553) |
50.9% |
Total |
$ 1,684,009 |
(2.8%) |
$274,217 |
1.2% |
9. Risk
Major risks include:[9]
Interest Rate Risk
Interest rate risk refers to the risks that the value of a financial instrument or future cash flows associated with the instrument will fluctuate due to movements in market interest rates. Interest rate risk arises from interest-bearing financial assets and liabilities that the Group utilises. Non-derivative interest-bearing assets are predominantly short-term liquid assets. The Group’s borrowings which have a variable interest rate attached give rise to cash flow interest rate risk.
Foreign Currency Risk
Foreign currency risk refers to the risk that the value or the cash flows arising from a financial commitment, or recognised asset or liability will fluctuate due to changes in foreign currency rates. The Group’s foreign currency exchange risk arises primarily from:
- borrowings denominated in foreign currency
- firm commitments and/or highly probable forecast transactions for receipts and payments settled in foreign currencies and prices dependent on foreign currencies respectively
The Group is exposed to foreign exchange risk from various currency exposures, primarily with respect to:
- United States Dollars
- New Zealand Dollars
Credit Risk
Credit risk is the risk that a contracting entity will not complete its obligations under a financial instrument and cause the Group to make a financial loss. The Group has exposure to credit risk on all financial assets included in the Group’s balance sheet. To help manage this risk, the Group:
- has a policy for establishing credit limits for the entities it deals with;
- may require collateral where appropriate; and
- manages exposures to individual entities it either transacts with or enters into derivative contracts with (through a system of credit limits)
Liquidity Risk
Liquidity risk is the risk that the Group cannot meet its financial commitments as and when they fall due. To help reduce this risk to the Group:
- has a liquidity policy which targets a minimum level of committed facilities and cash relative to EBITDA
- has readily accessible funding arrangements in place
- staggers maturities of financial instruments
References
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Annual Report 2018, P.73
https://www.listcorp.com/asx/fxj/fairfax/news/annual-report-2018-1951139.html -
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Annual Report 2018, P.61
https://www.listcorp.com/asx/fxj/fairfax/news/annual-report-2018-1951139.html -
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Full Year Results,Investor Presentation 2018 P. 10
https://www.listcorp.com/asx/fxj/fairfax/news/full-year-results-presentation-1951137.html -
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http://www.ibisworld.com.au/industry/default.aspx?indid=169
http://www.ibisworld.com.au/industry/default.aspx?indid=170 http://www.ibisworld.com.au/industry/default.aspx?indid=638
http://www.ibisworld.com.au/industry/default.aspx?indid=2240 - ^ http://www.hoovers.com/company-information/cs/competition.fairfax_media_limited.b448e7b554eaac8f.html
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http://www.fundinguniverse.com/company-histories/john-fairfax-holdings-limited-history/ http://www.smh.com.au/news/business/fairfax-buys-online-dating-service/2005/07/11/1120934155856.html
http://fairfaxmedia.com.au/shareholders/Tenderlinkacquisition13-12-10.pdf
http://fairfaxmedia.com.au/shareholders/FairfaxMediaacquiresOccupancyandExtendsOnlineHolidayRentalsBusiness.pdf
http://fairfaxmedia.com.au/shareholders/040313_Compactlaunch.pdf
http://www.fairfaxmedia.com.au/pressroom/au---nz-press-room/au---nz-press-room/fairfax-media-acquisition-of-mmph
http://www.fairfaxmedia.com.au/pressroom/au---nz-press-room/au---nz-press-room/brisbane-times-launches-mybt-gold-coast
https://www.listcorp.com/asx/fxj/fairfax/news/fairfax-proceeds-with-domain-separation-ends-pe-discussions-1626007.html
https://www.listcorp.com/asx/fxj/fairfax/news/fxj-update-on-nzme-and-amp-fairfax-nz-merger-option-process-1474414.html
https://www.asx.com.au/asxpdf/20180726/pdf/43ws6ypcbz1d7j.pdf -
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http://www.fairfaxmedia.com.au/Company/board-of-directors
http://www.fairfaxmedia.com.au/Company/executive-management -
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Annual Report 2018, P. 73
https://www.listcorp.com/asx/fxj/fairfax/news/annual-report-2018-1951139.html -
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Annual Report 2018, P. 99 - 102
https://www.listcorp.com/asx/fxj/fairfax/news/annual-report-2018-1951139.html