Fairfax Media Annual Report 2017 Information
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FAIRFAX MEDIA ANNUAL REPORT 2017 MEDIA ANNUAL FAIRFAX FAIRFAX MEDIA ANNUAL REPORT 2017 INFORMATION | MARKETPLACES | ENTERTAINMENT FAIRFAX MEDIA’S INFORMATION BRANDS, MARKETPLACES AND ENTERTAINMENT. AUSTRALIANS AND NEW ZEALANDERS LOVE FAIRFAX MEDIA’S QUALITY INDEPENDENT JOURNALISM, DEEPLY ENGAGING CONTENT AND RICH EXPERIENCES. Every day millions of people go to our quality journalism and content, interact with our platforms and enjoy our great experiences and entertainment. We have been capturing people’s attention for 186 years. Our business is at the heart of conversations that matter and creating connections that count. We are the trusted source, informing and enriching with our newspapers, websites, radio stations, events and dynamic digital venues for commerce and information. Our journalists perform their jobs with independence, insight and integrity. Everyone in our business is passionate. Our customers and audiences are at the centre of everything we do. Great minds are at work at Fairfax Media. We are at the forefront of the contemporary media environment, driving innovation. We are growing shareholder value by engaging audiences, communities and businesses, sparking big ideas and monetising a range of business models. Fairfax Media’s thriving, modern, diversified portfolio – spanning media, marketing services, real estate services, data, entertainment, and beyond – sustains the important work we do in the communities we serve. INDEPENDENT. ALWAYS. 2017: A SNAPSHOT INFORMATION AUSTRALIAN AUSTRALIAN NEW ZEALAND METRO MEDIA COMMUNITY MEDIA MEDIA LEADING METROPOLITAN LEADING RURAL AND LEADING NZ NEWSPAPERS, NEWSPAPERS, DIGITAL REGIONAL NEWSPAPERS, DIGITAL MEDIA AND EVENTS MEDIA AND EVENTS DIGITAL MEDIA AND EVENTS Leading local digital brand Stuff Australia’s number one masthead The modern and efficiently maintained strong momentum, The Sydney Morning Herald, The operated network of more than fuelling 29% digital revenue growth. Age, The Australian Financial Review, 150 mastheads and events A strong membership strategy built other titles, digital assets and events, maintained high penetration around Stuff and hyper-local leverage high-quality content to build and engagement with local website Neighbourly is driving and maintain engaged multiplatform communities. Continued efficiency audience, data and engagement. audiences. Paid digital subscribers and optimisation of business groups Neighbourly grew members 55% for the SMH, The Age and the Financial is maximising cash flow generation. to 470,000. Significant progress Review reached around 236,000 Upskilling of editorial and sales teams was made in reducing costs, while and support a growing digital is delivering increased monetisation diversifying revenue with investment subscription revenue base. Cost of digital audiences, growth in digital in digital, events and acquisitions. initiatives largely offset continuing advertising revenue, and a stronger The New Zealand Commerce print advertising declines. New position as a provider of digital Commission’s refusal to authorise product development and technology marketing services and solutions the Fairfax NZ/NZME merger is the innovation underpin Metro’s next- for local businesses. subject of a High Court appeal. generation publishing model. -9% +21% +26% -11% -9% -19% -7% +29% -8% TOTAL DIGITAL EBITDA TOTAL OPERATING EBITDA TOTAL DIGITAL EBITDA REVENUE SUBSCRIPTION REVENUE COSTS REVENUE REVENUE REVENUE MARKETPLACES ENTERTAINMENT DOMAIN GROUP STAN MACQUARIE MEDIA REAL ESTATE MEDIA AUSTRALIA’S LEADING LEADING NATIONAL NEWS, AND SERVICES LOCAL SVOD SERVICE TALK, SPORT & MUSIC Domain is increasingly powered Stan is leveraging its world-class RADIO NETWORK by digital earnings, with 82% of differentiated subscription video Fairfax has a 54.5% investment EBITDA from digital and non-print on demand (SVOD) content in ASX-listed radio broadcaster sources. Core digital audience underpinned by its exclusive Macquarie Media, which operates strength is being leveraged across SHOWTIME output deal, best a national radio network with the products and services spanning of global studios and networks, number one stations in Sydney all facets of Australian property, and original local productions. (2GB) and Melbourne (3AW). complementary businesses and Sales of several local productions The merger of the former Fairfax transactional services. Significant into international markets has Radio Network and Macquarie investment has driven performance enabled Stan to accelerate its Radio Network has delivered and facilitated the extension of the plans for original productions. cost and operational synergies, business beyond listings to include Assisted by mass market consumer created a cost-efficient national data, utilities connections, mortgage reach through Fairfax and Nine sales and programming footprint broking, home improvement and Entertainment assets, the jointly- with new advertiser opportunities, maintenance. Domain has achieved owned investment is achieving and network sales upside from the scale of revenue, earnings and ongoing subscriber momentum, leadership positions in key markets. audience it needs to operate on with active subscribers approaching Content syndication is driving a stand-alone basis. 800,000 and growing. audience share and revenue upside. +8% +19% -6% ~800K +150% +25% -1% #1 +26% TOTAL DIGITAL EBITDA ACTIVE SUBSCRIPTION OPERATING TOTAL STATIONS IN EBITDA REVENUE REVENUE SUBSCRIBERS REVENUE COSTS REVENUE SYDNEY AND MELBOURNE Participants running in City2Surf 2016 CHAIRMAN’S REPORT NICK FALLOON FAIRFAX MEDIA IS AT THE FOREFRONT OF MODERN MEDIA. WE ARE COMMITTED TO DELIVERING ON OUR STRATEGY TO BUILD SHAREHOLDER VALUE BY OPERATING OUR LEADING DIVERSIFIED PORTFOLIO OF INFORMATION BRANDS, MARKETPLACES AND ENTERTAINMENT ASSETS. At the outset I would like to thank you continuing businesses, which was 4% for your investment in Fairfax. Your lower than the $283.3 million in the Company is achieving its multi-year prior year. Earnings before interest transformation program. We have and tax (EBIT) of $230.3 million for significantly reduced costs, simplified continuing businesses was 8% higher. operations and embraced innovation Earnings per share (EPS) of 6.2 cents by generating a mix of revenues compares with 5.7 cents in the prior from digital, newspapers, property year. The Company will pay total services, marketing, radio, events, dividends for the year of 4 cents per entertainment and more, connecting share, consistent with the prior year. with 70% of Australians and 90% of Underlying net profit after tax New Zealanders. of $142.6 million for continuing Fairfax recognised that, to thrive businesses compares with $132.5 in the new media world, we had to million in the prior year. After stay ahead of the change that was taking into account significant sweeping through media companies items, the Company reported a net globally. Not adapting was not profit after tax of $83.9 million. an option. The result includes a total significant In the 2017 financial year, Fairfax items loss after tax of $58.7 million, delivered total Group revenue of which includes non-cash impairments $1,732.6 million, which was 5% lower relating to publishing, as well as than the prior year. This is a reflection write-downs of other assets and of continued challenges in the print restructuring and redundancy advertising environment, cyclical charges. The Company maintained weakness in key metropolitan real a solid balance sheet, finishing the estate listings for much of the year, year with net debt of $118 million. somewhat offset by strong digital DIGITAL POWERHOUSE subscription growth and solid yield uplift from Domain Group. We are the leading digital publisher in Australia and New Zealand, reaching Group expenses decreased 6% a combined audience of around 13 to $1,460.9 million, a reflection million. This strong digital position of sustained cost discipline and is a reflection of a strategic decision efficiency, notwithstanding to move with consumer trends and continued investment to grow, embrace modern technologies particularly in Domain. to deliver quality, independent Fairfax delivered underlying earnings journalism, compelling content before interest, tax, depreciation and engaging experiences. Our and amortisation (EBITDA) of $271.1 mastheads provide attractive, brand- million in the 2017 financial year for safe environments for advertisers. 3 Domain’s performance is increasingly Our objectives remain: companies. The Domain separation powered by digital earnings, with • Growing by building on core will be detailed in a Scheme booklet 82% of EBITDA from digital sources strengths and maximising including an Independent Expert’s in the 2017 financial year. Domain’s opportunities; Report, which is expected to be success is the result of a deliberate available in late September. first-to-mobile product strategy • Transforming through cost efficiency and business model Our Australian Metro Media, to capitalise on the migration innovation; Australian Community Media and of audiences to mobile. This has New Zealand Media publishing catapulted the business to within • Building value through strategic businesses have each made near reach of the major competitor decision-making and portfolio considerable progress in transforming on measures of agents and listings. management. to become modern, cost-efficient Domain now operates with dedicated In his report to you, Chief Executive and sustainable across digital and management capability and resources.