Fairfax Media (FXJ) On The Way Back
Fairfax Media Limited (FXJ) is an Australian multi-platform media group with a broad range of activities including news publishing, information and entertainment, advertising sales in newspaper, magazine and online formats, and radio broadcasting.
FXJ conducts its core activities throughout Australia and New Zealand. Its major newspaper brands are The Sydney Morning Herald, The Age and The Australian Financial Review.
Additionally, FXJ owns a range of business magazines, websites, and regional and community newspapers.
Stayz sale part of restructure
This week FXJ announced the sale of Australian holiday rentals site, Stayz, to HomeAway for $220 million.
The sale is part of a focus on restructuring the business in response to an ongoing deterioration in advertising revenue.
Earlier this year the group consolidated its Australian publishing businesses under the Australian Publishing Media division in an effort to drive efficiencies and simplify its business model.
Also, the Domain and Digital Ventures businesses were separated into standalone divisions, allowing the group to devote increased resources and management attention to areas of the business likely to drive its future growth.
FXJ’s FY13 results revealed a net loss of $16.4 million and a 5.9% slide in revenue to $2.2 billion. On an underlying basis, net profit fell 28.6% 108.3 million.
This accounts for the divestments of Trade Me Group, US Agricultural and Victorian Community Publications, as well as continued impairments of mastheads, goodwill and licenses.
The asset sales and impairments were needed, however, to streamline the business and repair the balance sheet.
Net debt to EBITDA fell from 1.8x in FY12 to 0.4x in FY13. Also, interest cover increased from 4.5x to 6.4x. On both measures, FXJ is comfortably ahead of its debt covenants.
Following the Stayz sale the balance sheet is in even stronger shape. FXJ said it is on track to achieve cost savings of $1.6 billion in FY14.
This will help alleviate pressure on the Metro and Regional businesses, which were suffering falling revenue at the start of FY14.
In a positive, however, the group is expanding its digital footprint, with The Sydney Morning Herald and The Age experiencing strong growth in digital subscriptions.
So it appears the FXJ is growing by shrinking, shedding non-core assets and driving cost efficiencies to offset weak revenue. At the same, the investment into its digital capabilities is yielding early success, helping to improve sentiment towards the stock.