Fairfax Media made a net profit after tax of $A282.1 million for its June 2010 financial year, reversing a $A380.1million loss in 2009.The turnaround was thanks to cost cutting, lower interest rates and stronger revenue in the second half, the Sydney-base
Fairfax Media made a net profit after tax of $A282.1 million for its June 2010 financial year, reversing a $A380.1million loss in 2009.
The turnaround was thanks to cost cutting, lower interest rates and stronger revenue in the second half, the Sydney-based company said.
The Fairfax Digital division was the star performer in both revenue and ebitda (see table below).
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Fairfax general manager of investor relations Frank Sufferini told NBR the Digital division includes Trade Me, but not Stuff.co.nz or any other New Zealand online property.
The Australian company - which now numbers Sam Morgan among its directors - would not break out specific Trade Me numbers, Mr Sufferini said.
But in the headline result, Fairfax Digital revenue increased 14% to $A212.4 million, and ebitda 22% to $A111 million.
And although not giving any dollar figures, Fairfax did say that Trade Me had a record year as revenue increased 14% (in line with the Digital Group as a whole) and ebitda increased 16% (lagging the group).
TradeMe earnings were expected to be “in the high single digits” in the first half of the 2011 financial year.
The auction site declined the opportunity to comment to NBR.
The New Zealand Media division, which does include Stuff (and 50 other local sites), plus the DominionPost, Waikato Times, Christchurch Press and other newspapers and magazines, saw revenue fall 6% and ebitda drop 10%.
“Metropolitan Media” which includes The Sydney Morning Herald and Melbourne Age, had a better time of it, squeaking into the black on revenue that fell 3%.
Monetising online content
At its results presentation, Fairfax said its 2011 goals included “monetising our content online and on emerging platforms” - immediately taken by Aussie media analysts as an indication that charges for web content were on the way (the company already paywalls AFR.com.au content).
The company’s other goals included “Greater sharing of editorial content and collaborating across print, online and mobile” and “More integrated selling”.
Trade Me, online transactions, iPad, video
In an internal memo to staff today (see full text below), Fairfax chief executive and managing director Brian McCarthy pushed new media themes.
"The smart editions of the papers are expected to receive circulation audit credit thereby assisting total circulation numbers," Mr McCarthy wrote.
"Over time, the iPhone, iPad and other e-reader platforms will enable us to distribute our content to new audiences, or migrate existing audiences from the papers."
Mr McCarthy - who came to Fairfax through its giant acquistion of Rural Press, and is seen by some as more old-school - also name-checked the Aussie conglomerate's New Zealand auction site.
"Trade Me, our classifieds businesses, and our online transactions businesses are key growth segments for Fairfax," he told staff.
He also under-lined the cross-platform theme, and multimedia.
"The online video market is experiencing rapid growth in online video downloads and revenues as advertisers increasingly allocate part of their TV advertising budgets to online," wrote Mr McCarthy.
"Growth is expected to continue as broadband speeds increase, whether through the NBN [National Broadband Netork] or private networks.
"We are investing in short-form video and have recently signed deals with both Ten and the ABC to expand the amount of video content on our sites."
RAW DATA: Brian McCarthy's memo to Fairfax staff
MESSAGE TO ALL STAFF FROM BRIAN MCCARTHY, CEO, FAIRFAX MEDIA
This morning Fairfax Media reported to the market a much-improved financial performance for the year ended June 30, 2010. The reported result, a net profit after tax of $270 million, was achieved in the face of challenging economic conditions and depressed advertising markets in both Australia and New Zealand. In the USA [where Fairfax owns several farming publications through its Rural Press acquisition], our performance was the best in a decade.
Our second half performance was particularly pleasing and we should all be proud of what has been achieved. I want to thank you all for your contribution during the last financial year. Across all our business units our staff pushed hard to achieve their objectives. Your work has returned the company to a sound financial position. Again, I thank all staff in every area of the company for their contribution.
The new financial year presents new challenges to us all, and it is important that we remain focussed on delivering our targets as we continue to grow our business. We have in place a large number of innovations and initiatives to drive our business throughout the year, and I'm confident we will be able to successfully execute these plans.
Over recent months, the Board and Management of Fairfax have been considering the company's strategy for the next three years. I would like to provide some early guidance.
The media environment continues to evolve rapidly due to changes in consumer behaviour, technology changes and fragmentation of markets. Media companies all over the world face challenges in adapting their businesses to this new environment.
Fairfax Media's existing strategy comprises three broad elements: defending and growing our newspapers, driving growth in our internet businesses and adapting to be a multi-platform company. These three elements of our strategy continue to remain relevant today. However, over the last few years, our focus was on diversifying our business and earnings mix into new markets, geographies and online segments.
Having come through the economic downturn in 2009 it was appropriate to revisit our strategy to reflect the changing business, industry and market environment.
Twelve months ago I invited all staff to contribute ideas and have a say in the future direction of Fairfax. We received contributions from staff in all parts of the company, and I thank you for your genuine input. Since that time, senior management and the Directors have spent a considerable amount of time working through the challenges and opportunities for Fairfax.
What is clear is that in a rapidly changing and competitive media environment, we must play to our strengths. Fairfax's mission is to utilise its trusted media brands to connect people and the communities in which we participate for the benefit of all of our stakeholders - our customers, employees and shareholders. In pursuing this goal we will build on our expertise in the areas of news, information and entertainment content, and our market positions in classifieds and online transactions.
Our revised strategy retains the three elements mentioned above, but it is important we now adapt our business to ensure we are best positioned in the new media environment to capitalise on our strengths and continue to grow the company.
For the next few years, we have identified three key priorities:
1. We must adapt to being a true multi-platform company.
2. We must evolve our news products and transform our metro business model.
3. We must expand our positions in growth segments.
In terms of the first priority, to remain relevant, Fairfax must be able to deliver news, information and entertainment content across a range of platforms as the consumption habits of our audiences change. Advertising customers also want to be able to follow our audiences across a range of platforms and deal with Fairfax in a more flexible manner.
There are a number of initiatives we will pursue, including a new organisation structure; greater sharing of editorial content and collaborating across print, online and mobile; more integrated selling; and monetising our content online and on emerging platforms
These initiatives draw upon our strengths, which include our trusted brands, strong connections with our customers and communities, the integrity and quality of our journalism and the depth of our content.
In terms of our second key priority, taken as a whole, our metro news businesses reach more readers than ever before. Our news brands continue to lead the news agenda in print, online, mobile and on-air as evidenced by the recent election coverage. Nevertheless, as the supply of news, information and other content proliferates, and demand fragments across platforms, the business model for news is increasingly challenged. Many of our international peers have experienced large declines in paid circulation and readership and their print editions are barely profitable.
We must continually evolve all of our metro news assets so they remain relevant and profitable. This will be achieved by undertaking a series of business efficiency initiatives focussed on protecting revenues and reducing costs over time. We will continue to focus on editorial excellence, subscriptions and effective promotions to maintain paid circulation. Quality journalism is, and will remain, a core competency of the company.
The smart editions of the papers are expected to receive circulation audit credit thereby assisting total circulation numbers. Over time, the iPhone, iPad and other e-reader platforms will enable us to distribute our content to new audiences, or migrate existing audiences from the papers.
In terms of the third priority, to keep pace with the changing media environment, we must continue to establish positions in new growth segments. This comprises investing in both internal and external opportunities.
Trade Me, our classifieds businesses, and our online transactions businesses are key growth segments for Fairfax.
The online video market is experiencing rapid growth in online video downloads and revenues as advertisers increasingly allocate part of their TV advertising budgets to online. Growth is expected to continue as broadband speeds increase, whether through the NBN or private networks. We are investing in short-form video and have recently signed deals with both Ten and the ABC to expand the amount of video content on our sites.
We will continue to capitalise on the quality and size of our online news websites and audience to create new revenue streams. In particular, we will continue to invest in transactional businesses, thereby reducing our emphasis on advertising revenue.
I shall provide more detail to staff once I have had the opportunity to talk to all members of the executive management team in relation to these initiatives.
In summary, we are confident these are the right initiatives to adapt Fairfax and position it for growth in the new media environment. The initiatives will involve some parts of our business more than others. We will be talking with you about them in the months ahead.
We will update you as we progress with implementation and further refine our strategy. Our strategy needs to be flexible and to evolve as the new media environment also changes.
These are exciting times that will challenge us all. I ask for your support as we work through the details and timing of the implementation of our strategy.
Brian McCarthy
CEO and Managing Director
