If you had to focus on just one factor that helps explain the current industrial action by Fairfax Media journalists over the company’s cutting of 125 jobs and $30 million in costs, it is the finances of the businesses — especially an accelerating slide in revenue so far in 2017 as compared to the same time a year ago. While CEO Greg Hywood went on at length about what a bright shining jewel Fairfax’s Domain property website business was and would be once floated off later this year, the less shiny reality was in the now usual trading update given in his presentation to a Sydney finance conference on Thursday morning.
In short, outside of Domain it is not good, and from what Hywood said this morning in his presentation, Fairfax’s group revenue position has worsened appreciably compared to this time last year.
“Overall Group revenues are 6% below last year for the first 17 weeks of FY17 H2 (26 December 2016 to 23 April 2017). Revenue across our current reporting segments:
• Domain overall revenue is up 10% with its total digital business up 18%;
• Metro Media is down around 11%;
• Australian Community Media is down around 11%;
• New Zealand Media is down around 3% including currency impact;
• Macquarie Media is down around 7%.”
While that is about what the company said was the position in the first six weeks of the year back in its interim profit statement in February, it is much worse than for the start of the 2016 calendar year when Hywood told the same conference:
“Overall group revenues for continuing businesses are up just under 1% for the 1 January 2015 to 26 April 2015 period compared to the prior corresponding period.
“Revenues across our current reporting segments:Metro Media, which includes Domain, is up around 7%. Publishing revenues are down 7%.
“Domain’s overall revenue is up 54% including the benefit of acquisitions (MMP from February 2015 and Allhomes from October 2014), with its total digital business up around 32% and domain.com.au up around 27%.”
As you can see growth has slowed sharply in Domain because of the change in the comparative base, but the situation in Metro Media is worsening — an 11% fall in revenue against 7%. That is why the cost cutting has happened, the jobs lost and now the one-week strike.
The company’s being made more attractive for a private equity takeover (preferably TPG Capital) and subsequent slice-up. No PE firm could give a tinker’s cuss about the bulk of the news reporting Fairfax does, only the bits of the company that can compete for ad revenue. Senior management know that this is the best chance they’ll have to get a nice large go-away payout post acquisition, so there are all for it. Same for the board and shareholders – it’s by far their best hope.
It is not clear, or I am not aware at least, about how the success of Fairfax journalism is tied to the fortunes of Domain……not internal links but operating business links…..By selling off Domain, it is suggested that linkages are insignificant or can be restructured in more bespoke ways……but that is the unknown future…..More generally, I can’t see how these sackings are a positive thing in any way for Fairfax…..anytime a business cuts without identifying its alternative growth areas of investment is a statement of decline….There is a financial narrative to this…..Looking from a helicopter though, one may say that Fairfax is exiting the Domain business and the journalism business…..Maybe this is only about Private Equity and financial engineering ultimately, as already put forth..
If Hywood was rewarded with a $2.5M bonus when overall group revenues were reduced by 6% just imagine what his reward will be after even greater revenue slumps next year.
That’s the way it works, isn’t it…the more you lose, the greater the CEO’s bonus?
Some other executives as well apparently. You would think that shareholders would invoke the two strikes thing on the renumeration of them wouldn’t you?
Is it not about time that managers – those people at the top with the ridiculously generous salaries and bonuses actually did the work they are paid to do – manage. Is it not their responsibility to watch the bottom line and decide on innovative ways to increase revenue. It seems to me that it is not the journalists who should be sacked, but management, who have clearly not done the job they are extremely well-paid to do. It should also be their duty to encourage and foster excellence in their reporters. I do not understand why in Australia when things are not going well that it is the workers down the line who pay the price, no matter how hard they have worked or how well they do their jobs. God help us if Fairfax disappears, leaving us with only the Murdochs publishing daily newspapers. I despair. As for bonuses – isn’t the salary they are paid the incentive to actually do the job.