Fairfax is slipping in revenue, seeing a 3.3 per cent decrease to $873.2m in the past half year, from $902.9m in the prior corresponding period, while print revenue across its Australian titles continue to fall.

While Fairfax plans to keep expanding in the online space with its websites and apps, the company says it has had new discussions with its rival publisher News Corp, with the assistance of third party advisors to seek industry wide efficiencies in print and distribution.

Greg Hywood, CEO and managing director of Fairfax says, “We have progressed our recent positive discussions with News Corp Australia to seek industry wide efficiencies in printing and distribution. We have had successful collaborations around shared trucking and printing titles for News in Queensland. Building on this collaboration we have jointly appointed advisers to pursue deeper strategic opportunities.”

Underlying earnings at Fairfax before interest, tax, depreciation and amortization (EBITDA) was $169.9m, up 1.3 per cent. Fairfax had an underlying EBIT of $119.8m down 5.5 per cent and net profit after tax of $76.3m, down 9.9 per cent from the pcp. The company had significant items after tax totalling $38.7m loss. Statutory NPAT was $38.5m, less than half of what it was in the pcp, $83.7m.

Fairfax says it is the largest producer of newsprint publications in Australia and New Zealand. Its printing operations for the half year produced an external print revenue growth of 18 per cent to with new and returning customers. Total print revenue slipped to $109.9m from $117.8m, decreasing by 6.8 per cent, while internal print revenue shrank to $83.3, down by 12.5 per cent from $95.2m.

Print EBITDA was $4.1m, down 26.4 per cent from $5.5m in the same period the year before. Print EBITDA for the Australian metropolitan media sector was at $1.8m, down 12.3 per cent from $2.1m the year before, while the Australian community media segment had an EBITDA of $1.6m, rising by 16.8 per cent from $1.3m the year before.

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Fairfax now has 6.3 million print readers, with 4 million reading national and metro newspapers, 1.5 million reading inserted magazines and 3.1 million reading regional or community newspapers. In contrast, the total digital audience for Fairfax consists of 10.4 million Australians.

Hywood says, “This is a good result we are presenting to the market today. It shows the solid performances of our businesses – virtually across the board – and demonstrates the strength of the Fairfax Media portfolio. Fairfax is strongly positioned due to the success of growth and transformation initiatives we have implemented over the past five years. Domain’s digital growth is continuing; Metro publishing has delivered increased earnings; the Radio business is showing the benefits of the merger; and Stan is going from strength to strength.

“For the half-year, the Fairfax Group delivered operating EBITDA of $146.9 million, an increase on the prior year. This reflected the strong performance of Domain and Macquarie Media, and good cost outcomes in Australian Metro Media. Group revenue of $873 million was a modest 3 per cent lower than the prior year. Our ongoing cost and efficiency focus delivered a 4 per cent reduction in expenses, notwithstanding continued investment in growth initiatives at Domain and Stuff. Net profit of $76.3 million was down 10 per cent, with earnings per share of 3.3 cents. This result reflects the increase in minority interests associated with the separation of Domain from 22 November 2017 and the improved Macquarie Media results.

“We are pleased with what the Group Publishing businesses are achieving, Our three publishing businesses are profitable and generating valuable cash flows. Each has benefited from an ongoing emphasis on digital publishing; a continuing focus on cost and efficiency; maximisation of print earnings; and development of new revenue opportunities. We expect greater industry cooperation will deliver significant benefits.”

The Australian metro media segment in Fairfax  saw EBITDA growth of 8 per cent, from $27.7m in FY17 H1 to $30m in FY18 H1. Publishing costs were down 11 per cent, with expenses cut across staff, technology and print production. Metro publishing advertising revenue declined by 15 per cent, going from $124.3m the year before to $107.6m in the past half. Circulation revenue slipped by 3.9 per cent, going from $114.8m to $110.3m. Meanwhile, Fairfax metro media experienced 11 per cent growth in digital subscription revenue, making for 283,000 paid digital subscribers across its main titles, the Sydney Morning Herald, The Age and the Financial Review.

Hywood says, “Metros are in good shape – the best they’ve been in recent history. And there’s more to come. Initiatives to deliver rapid innovation across consumer products and advertising are well underway – and we haven’t let up on driving cost efficiency. Metro’s impressive 11 per cent decline in costs – largely from savings in staff, technology and print production – more than offset the decline in revenue of 9 per cent.

[Related: Fairfax switches to Kodak Sonora news plates]

“Overall circulation revenue was modestly lower, benefiting from strong growth in paid digital subscriptions and increases in cover prices, offset by declines in print circulation volumes. Net paid digital subscriptions for The Sydney Morning Herald, The Age and The Australian Financial Review recorded their strongest reported uplift in four years, increasing by almost 50,000 from August to more than 283,000. We are encouraged by positive trends in consumers’ willingness to pay for trusted and quality content, as evidenced by strong trends in Australia and overseas markets. All three titles delivered growth, with the Financial Review delivering a particularly strong B2B uplift.

“Metro’s next-generation publishing model is delivering a step-change for consumers with the launch of new websites and apps to grow engagement and drive subscriptions and revenue. Strong foundations for advertising growth have been established including via a world-first sales and technology partnership with Google to meet the growing demand for premium programmatic inventory. Print earnings are being maximised.”

The Australian community media sector including Australian regional, community and agricultural newspapers, saw its advertising revenue decline by 9 per cent from $152.7m in FY17 H1 to $138.7m in FY18 H1 with slips in local and real estate print revenues. Circulation revenue also decreased by 11 per cent from $41.4m to $36.9m, reflecting lower retail volumes. Agriculture related advertising revenue remained stable year-on-year. In the past half year, Fairfax closed six community titles and one specialty magazine, which it says will create a positive contribution to its EBITDA in the second half.

Classified business Domain Holdings Australia saw 22 per cent growth in its digital revenue, from $114.3m in the year before to $138.7m while its print revenue dropped by 11.6 per cent from $48.6m to $43m. Total expenses lifted by 18 per cent, with 26 per cent more being invested in digital but 5 per cent less being spent on print. For Domain in print, EBITDA decline by 26.5 per cent from $14.2m to $10.5m. Domain demerged from Fairfax in November, with the news company retaining 60 per cent holdings.

Hywood says, “Domain’s first half result demonstrates its strong platform for growth. It is underpinned by a first-class management team, currently led by Executive Chairman Nick Falloon. Domain’s strategy is well established and its implementation continues apace, building on the achievement of breadth and scale. Our 60 per cent stake in Domain remains a key strategic asset and its strong fundamentals underpin our great confidence.”

Fairfax says trading in the first seven weeks of FY18 H2 saw revenues around 4 per cent to 5 per cent below last year and publishing trends were broadly consistent with FY18 H1. Domain’s total revenue growth was 11 per cent. The company plans to continue cost saving measures.

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