We’ve seen modest results from two major local media companies this week – Fairfax Media (FXJ) and Seven West Media (SWM) – which don’t provide much in the way of confidence about their longer term outlooks.
Both companies are essentially running on the spot – growth is not really an option at the moment because of the constraints of the industries they operate in, the rising and myriad competitors and the sluggish nature of the economy – with the exception of property.
If it wasn’t for the current property, especially housing, boom, Fairfax in particular would be in dire trouble.
Seven West finally got around to writing down the value of its TV licences, newspaper and magazine mastheads and licences that have been in the book at over inflated values for more than a year – ever since the share price started dropping a year ago.
The write-down of more than $1 billion saw the company, 35% controlled by Kerry Stokes and his Seven Group Holdings (which he controls 69%) take a near $1 billion net loss as underlying profit dipped on a fall in ad revenues in the half – but the annual dividend of 12 cents a share is being maintained (the company will pay a steady 6 cents a share interim).
Fairfax Media announced plans to reward its long suffering shareholders (who have been feeling the pain of a weak share price now for several years, much longer than those in Seven West Media) by repurchasing up to 121 million shares, or 5% of the company’s stock through a share buyback over the next twelve months. It starts on March 23.
Interestingly the buyback was announced 10 days after Gina Rinehart quit the stock in a sell down late one Friday afternoon.
As well the company is maintaining its 2 cents a share interim dividend.
Fairfax Media reported an underlying net profit of $86 million for the six months to December, down 0.6% from the previous corresponding period. Net profit including significant items fell 86.4% to $26.3 million – thanks to one-off restructuring and redundancy charges as well as $18.3 million in write-downs.
Fairfax Media CEO, Greg Hywood said the newspaper and website publisher needed to both maintain balance sheet strength and reward shareholders.
"We retain considerable flexibility to continue to invest – both in our existing businesses and via acquisition – as we continue the transformation of the company," Mr Hywood said.
FXJ 1Y – Fairfax rewards suffering shareholders after modest result
Total revenue in the first half was down 12.9% to $943.3 million as print ad revenues fell 10% in the company’s old heartland, the metro newspapers (including The Sydney Morning Herald and Melbourne Age, plus The Australian Financial Review). This fall was a slower rate of decline than the 24% seen a year ago.
Digital advertising revenue grew by 14.8% to $106 million in the half. Print subscription revenue fell marginally to $99.5 million, while digital subscription revenue jumped from $9.7 million to $15.8 million.
The star was once again the Domain property business (a competitor to REA Group, 62% owned by News Corp). Domain’s earnings before interest, tax, depreciation and amortisation jumped by nearly 22%, despite heavy investment in the business in the half year. Digital advertising for the property website rose 37.8%.
Revenue for the first seven weeks of the second half of the 2015 financial year has fallen between 2% and 3% cent below the same period last year.
"This is a solid performance. Print advertising started slowly in January," Mr Hywood said.
“Our focus in the second half is on continuing Domain’s momentum, delivering growth options across the business, both organic and acquired, while delivering further sustained cost reduction."
Fairfax Media shares rose 2.2% to 91 cents yesterday.
