Fairfax eyes $60m cost savings in digital overhaul
A wide-ranging review across its Australasian news platforms, including print, online, mobile and radio - as well as the removal of duplication within its administration and corporate arm - will help propel the publisher of The Age and Sydney Morning Herald to total savings of $311 million by 2015.
It comes as Fairfax informed the market that revenues were down between 9 per cent and 10 per cent in the second half, although radio and the online real estate site Domain had bucked the trend to post double-digit growth. Chief executive Greg Hywood unveiled the fresh cost savings target at an investor briefing on Thursday, with the extra $60 million coming on top of the $251 million in reduced costs already nominated last year as part of its "Fairfax of the Future" restructure.
The fresh attack on its cost base comes as Mr Hywood also hosed down speculation Fairfax would soon end its print publications of its flagship mastheads The Age and the Herald, saying the business remains committed to the print editions, while a new metered paywall for the newspapers would help forge new digital revenue streams.
"We are confronting reality," Mr Hywood said at the briefing, "and we are taking the actions we need to take to get through a period of transition from a legacy print business to a media company that prospers in a competitive market.
The extra savings outlined on Thursday formed an integral part of the next stage of Fairfax's transition, Mr Hywood said, in the face of continued choppy trading conditions which would see earnings fall through the second half.
The shake-up will include plans to reduce duplication across the company's 431 publications, 337 websites and almost 100 apps and seven radio stations.
Mr Hywood said overall group revenue had slipped 9 per cent to 10 per cent in the current half with the company's Metro Media and Regional divisions down 11 per cent. Radio remained a strong performer, up 10 per cent, while its digital real estate platform Domain lifted revenues by 16 per cent.
Fairfax earnings before interest and tax, depreciation and amortisation (EBITDA) for the second half of 2012-13 would be between $129 million and $135 million, Mr Hywood said, against first-half EBITDA of $205.3 million.
Fairfax also had a suite of high-growth businesses, which Mr Hywood said would be further exploited to drive revenue, as revenue from its traditional print businesses waned.
Boosting digital revenue would be the introduction of a metered paywall for its key metro papers, The Age and the Herald, from July 2 ranging from $15 to $44 per month.
Fairfax shares closed 1¢ weaker at 59¢
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Fairfax said it will deliver an extra $60 million in annual cost savings by September as part of a wider restructure, bringing total targeted savings to $311 million by 2015 (on top of $251 million previously announced under its "Fairfax of the Future" program).
The company cited unprecedented change in the global media landscape and falling revenues (down about 9–10% in the second half). Fairfax is transitioning from a legacy print business to a digital-focused media company and is reducing duplication across its operations to protect margins.
The review covers Fairfax’s Australasian news platforms—print, online, mobile and radio—as well as administration and corporate functions. The company plans to reduce duplication across 431 publications, 337 websites, nearly 100 apps and seven radio stations.
No. CEO Greg Hywood said Fairfax remains committed to the print editions of The Age and the Herald, while also introducing digital initiatives to build new revenue streams.
Fairfax will introduce a metered paywall for its key metro papers, The Age and the Herald, from July 2. The metered paywall pricing is stated to range from $15 to $44 per month to help boost digital revenue.
Fairfax reported group revenue down about 9–10% in the current half. Metro Media and Regional divisions were down roughly 11%, while radio was up about 10% and the digital real estate platform Domain grew revenues by around 16%.
Fairfax expected second-half EBITDA for 2012–13 to be between $129 million and $135 million, compared with first-half EBITDA of $205.3 million.
The announcements signal a major shift toward cutting costs and growing digital revenue to offset weaker traditional print sales. The company warned of choppy trading and falling earnings through the second half; Fairfax shares closed 1¢ weaker at 59¢ on the day of the update. Investors should note the focus on savings and digital growth, which management says are intended to stabilise the business during the transition.
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