Shares in embattled media group Fairfax Media Limited (ASX: FXJ) rallied 1.2% to $1.025 this morning even as the All Ordinaries (Index:^AXAO) (ASX:XAO) fell 0.3% after management posted its full year results and confirmed the spin-off of its Domain Group business.
The divestment of the online property business is expected to add significantly to the value of Fairfax and was the key reason why a number of suitors circled the company recently. Those takeover talks have since broken down but at least Fairfax's shareholders can look forward to "Plan B".
It is particularly encouraging then to see the Domain business continue to perform strongly with digital revenue jumping 18.8% to $232.1 million, as its mobile app continues to go from strength-to-strength. Mobile visits are up 20% while the average time spent on its app has surged 82% from a year before.
Mobile is a key battle ground for Domain as it seeks to dethrone market leader REA Group Limited (ASX: REA). The market wasn't too taken by REA's result released last Friday, as its Asian business failed to deliver to expectations.
Dare I say it? Domain may actually be gaining market share at the expense of REA group in Australia. While REA Group did post double-digit revenue growth, it was primarily from price increases. This bodes well for Domain as it will provide the challenger with more flexibility when it comes to pricing its services.
Meanwhile, Fairfax's legacy publishing business also reported some positives. While total revenue slipped 9% to $522.2 million, cost cuts helped lift its earnings before interest, tax, depreciation and amortisation (EBITDA) by 25.9% to $49.1 million. This means EBITDA margin is up 2.6 percentage points to an impressive 9.4%.
But don't expect the revenue decline for publishing to abate anytime soon. Management said FY18 results are more in-line with the second half of the last financial year and that print revenue is tipped to fall approximately 14% while digital revenue is up around 22%.
Given how depressed Fairfax's share price has been shareholders are happy to celebrate the little victories, although I don't see compelling value in the stock above $1.05 – and it's pretty close to that.
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