The Motley Fool

Fairfax Media Limited still struggling with decline in print media

Fairfax Media Limited (ASX: FXJ) has today reported a slight fall in revenues for the 2016 financial year (FY16), as the media company continues to move away from non-digital media.

The fact the company only saw a 2% fall in statutory revenues, despite digital and non-print media contributing 40% of Fairfax’s earnings before interest, tax, depreciation and amortisation (EBITDA). The publisher says on current trends, that will be closer to 60% of total EBITDA, reflecting the growth of digital and non-print earnings.

Here’s a summary of the main points:

  • Revenue: $1,830.5 million – down 0.6%
  • Underlying EBITDA: $283.3 million – down 1.4%
  • Underlying EBIT: $213.2 million – down 4.2%
  • Underlying net profit after tax: $132.5 million – down 7.6%
  • Underlying earnings per share: 5.7 cents – down 5.7%
  • Impairments of $1 billion taken on assets

By divisions, you can see that apart from Domain and Fairfax’s 54.5% stake in radio broadcaster Macquarie Media Limited (ASX: MRN), all are facing declining revenues and earnings.

2016 financial results

Source: Fairfax Media

The good news is that Domain continues to go from strength to strength. The real estate portal may trail REA Group Ltd’s (ASX: REA) site, but it is growing faster and improving its margins too. Domain saw 33% growth in revenues – against REA’s 17.4%. The division also saw a 2% improvement in EBITDA margins from 38.5% last year to 40.5% in FY16. REA increased its margin by ~1.4% to 62% in the same period.

The biggest problem Fairfax faces is declining advertising revenues for its traditional print media businesses – and the company is struggling to cut its costs by a faster rate.

That’s reflected in the first five weeks of the 2017 financial year, with revenues down 8%-9% below last year. The booming property sector a year ago compared to the muted growth currently is also creating a drag on Domain’s revenues. New listing volumes were down 25% in Sydney and 11% in Melbourne the company says.

Foolish takeaway

The market has shown what it thinks of the Fairfax results – with the share price down 5.3% to 94.2 cents in early trading. Fairfax might need to consider splitting off Domain and corralling the print media businesses – with the market virtually assigning zero value to the legacy media assets and 100% to Domain.

How 1 Man Turned $10,000 Into Over $8 Million

Discover how one man turned a modest $10,600 investment into an $8,016,867 fortune. Learn more about this man and how you can start down the path toward financial independence. Simply click here to learn more. No credit card required.

Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.