No sign of any improvement in the fading US newspaper business as Gannett, the country’s biggest group confirms that being cast adrift from the rest of the business in 2014 was in effect a slow death sentence. In fact the latest quarterly results for Gannett shows the path awaiting Fairfax Media (FXJ) should it listen to greedy shareholders and sell off all its Domain real estate business.
At first the smaller loss for the March quarter than forecast saw Gannett Co shares jump nearly 8% in early trading but that optimism ran of steam and they ended the week at $US8.36, a fall of more than 5%, which valued the company at just under $US1 billion ($A1.3 billion).
By way of comparison, that’s around $A1 billion less than Fairfax Media’s current market value of $A2.33 billion – the difference being the value the market places on the Domain real estate website and associated businesses which some analysts reckon is worth $A2 billion or more. Fairfax plans to float 30% to 40% of Domain to its existing shareholders (replicating the current structure of rival REA Group).
Gannett reported a net loss of $US2.1 million for the quarter, down sharply from a profit of $US39.6 million in the first quarter of 2016. Revenue rose to $US773.5 million, up from $US659.4 million. Gannett maintained its revenue guidance for 2017, expecting it to be in the range of $US3.15 billion to $US3.22 billion, up from $US3.07 billion in 2016.
Profit on a conventional accounting basis wasn’t mentioned (all too hard the company said). But Gannett’s own “adjusted” (ie. non-complying) profit estimate was raised by $US30 million. Much of that from one off factors which would be significant items in America and Australia and not part of ’normal’ profit.
So on a valuation basis, the comparison with Gannett, whch owns USA Today, America’s third biggest selling newspaper, is a bit invidious. But up to several years ago, Gannett-owned stakes in several faster growing online businesses (cars and jobs, a bit like Fairfax) and TV stations.
The TV newspaper business and website operations were spun off in 2014 from the other side of the company (imitating the split in the Murdoch empire into 21st Century Fox (and video and content) and News Corp (newspapers, book publishing and 61% of REA Group, which has saved News Corp).
Isn’t it odd that these greedy shareholders, such as Thorney Investments, are not moaning publicly about the way News Corp continues to maintain its structure with the 61% owned REA Group firmly inside the tent.
The answer is that through the two class shareholding structure, the Murdochs control 39% of the voting shares, which is all that matters.
Perhaps someone should buy control of Fairfax, restructure the shareholding structure along the lines of the News Corp (and 21st Century Fox) structure) and move its domicile to the US (where non-voting shares are accepted) and keep Domain (and tell the greedy shareholders to go away).
Shares of Gannett have declined 8% in the year to date and over 45% over the last 12 months. By comparison, the S&P 500 index has gained nearly 8% in the year so far and 15% in the last 12-months.
Because of the speculation about Domain’s future, Fairfax shares have done better than that – they are up 14.7% so far this year, and 29% in the past 12 months. The ASX 2000 is up more than 12%.
