On August 01, 2016, the market got some shock waves with Fairfax Media (ASX: FXJ) flagging an impairment charge close to about A$1 billion for fiscal 2016 with regard to its publishing assets at the back of weekday printing review and move to have a separate reporting structure for the online real estate classifieds unit, Domain property. The key things being discussed are about -
Speculations on the future of Domain division: There are plans of having a separate reporting structure for the online real estate classifieds unit, Domain property in order to be transparent and to establish true value of the unit. The move to have this change in accounting structures seem to have raised speculations about selling off Domain or spinning it off. However, the company does not intend to sell the unit as emphasised by the Chief Executive Officer, Greg Hywood, who stated that the Domain remains an integral and growing part of Fairfax as it is a major contributor to earnings. On the other hand, the move to have separate reporting structure has been backed by Ausbil Investment Management whose fund owns 7.8 per cent of FXJ.
Market headwinds and asset write-down: The company has announced for writing down the value of its publishing assets at the back of market realities dealing with fall in advertising revenues. FXJ has reviewed the weekdays’ printing business and is planning to adopt a changing business model. The company had earlier suggested to have a weekend-only publishing model for some print titles such as the Sydney Morning Herald and the Melbourne Age. The company like other media companies is victim to issues with regard to the challenges in print advertising while the online revenues are witnessing a sluggish growth. Particularly, with the shift to cheaper online alternatives, the print advertising revenue has seen an enormous drop. In the above direction, the company already slashed hundreds of print jobs.
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Results for FY16H1 and FY15H1 (Source: Company Reports)
Speculations about reporting a net loss: The company may report biggest annual net loss since 2012. There are expectations that the impairment charge since 2009 with the write-downs may be of the order of A$5.6 billion (as per data from Thomson Reuters). FXJ’s Australian Metropolitan Media division is expected to report for a $484.9 million pre-tax impairment and the Australian Community Media is expected to witness a $408.8 million pre-tax impairment. In addition, New Zealand business is set to report a $95.3 million pre-tax impairment. However, the company believes that there would not be any impact on the dividend payments.
FXJ shares plummeted about 2% on August 01, 2016. The company will announce its financial results on August 10, 2016.
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