Company Overview - Fairfax Media Limited is an Australia-based multi-platform media, marketing services and real estate services company. The Company is engaged in publishing of news, information and entertainment; advertising sales in print and digital formats, and radio broadcasting. The Company's segments include Australian Community Media, Metropolitan Media, New Zealand Media, Radio and other. The Australian Community Media segment is engaged in newspaper publishing and online for Australian regional, community and agricultural media. Its Metropolitan Media segment includes metropolitan news, sport, lifestyle and business media across platforms, such as print, online, tablet and mobile, as well as classifieds for metropolitan publications and transactional businesses. The New Zealand Media segment includes newspaper, magazine and general publishing, and online for New Zealand media. The Radio segment includes metropolitan radio networks. Its other segment includes corporate and other entities.



FXJ Dividend Details
 
Strong advertising performance drove Metropolitan Media business: Fairfax Media Limited (ASX: FXJ) reported a revenue increase by 9.7% to $458 million in the first half of 2016. The Metropolitan Media business segment comprising Domain, Digital Ventures and Life Media & Events businesses, witnessed an increase mainly driven by the solid Advertising revenue rise of 15.6% year on year (yoy) to $287.3 million at the back of MMP acquisition coupled with Domain and Digital Ventures growth despite ongoing print advertising performance pressure. Moreover, digital subscriptions rose by 14.3% during the period, offsetting the print circulation decrease to a certain extent. However, the Australian Metropolitan Media segment’s costs plunged by 7.6% yoy due to consolidation on the back of operational investments in the Domain segment, but decrease in publishing costs by 4% have partly offset the rising costs.
 

Australian Metropolitan Media business performance (Source: Company Reports)
 
Investments in domain group paying off: Domain group comprises digital and print segments. The digital segment comprises Domain online, Commerce Australia, APM price finder, Commercial Real Estate and All homes. Print business comprises The Sydney Morning Herald, The Canberrea Times, The Age and MMP. Domain group’s digital revenue rose by 37% on a yoy basis, driven by Domain.com.au revenue increase by 38% yoy on the back of solid Premium depth revenue increase by 57% yoy which is accounting 75% of Domain.com.au’s revenue. Domain agent subscribers rose by 14% to 11,000 while online listings surged 6% to 364,000 as National online listings penetration improved to 88% as compared to 80% in the prior corresponding period. The audience position for Domain having average daily unique browsers on main site and mobile site doubled during the period to over 600,000 for the first half of 2016, as compared to 300,000 in pcp. Domain maintained its top consumer ratings for its app in Australia while management estimates that its Homepass investments would fulfil the next steps of the consumer apps by integrating into agent CRM systems. Domain’s HomePriceGuide got greater than 2 million people. Overall, the Domain Group segment witnessed an average of 39.2 million visits every month during the period, representing an increase of 99% against pcp. In fact, the segment’s mobile visits improved even more by 149%.
 

Domain group performance against its major competitor (Source: Company Reports)
 
Strategy implementation drove Digital Ventures business: Digital Ventures revenues surged 22.1% to $17.3 million in the first half of 2016 as the group’s value creation strategy efforts are delivering results. Advertising segment revenue surged by 39.8% during the period with the Weatherzone B2C revenue rising by 45% mainly driven from the app growth. Fairfax has been making investments in digital opportunities as well as enhancing its scale and value of its present assets. Allure Media delivered solid increase in the segment while the group also introduced new sites like Who What Wear, Byrdie and MyDomaine under the segment.
 

Digital Ventures business performance (Source: Company Reports)
 
Weak Australian and New Zealand media performance: Advertising revenue under the Australian Community Media segment plunged by 12.1% yoy during the period on the back of poor performance of the supermarket-related print retail advertising despite better real estate print business. Circulation revenues under the Australian Community Media segment was also under pressure and fell 7.8% on a yoy basis due to decrease in retail volumes. As a result, the overall Australian Community Media segment plunged 11.2% yoy during the period. On the other hand, the group is improving the Costs under the segment which fell by 8.7% yoy driven by its Transformation initiatives. Fairfax estimates to deliver an annualized cost reduction forecasts of $60 million by fiscal year of 2016 end. With regards to the New Zealand media segment highlights, overall revenues fell by 7.6% on a yoy basis while EBITDA fell by 11.7% yoy. However, the digital revenue under the segment witnessed an increase of 43% driven by mobile and native advertising.  Advertising revenue under the segment fell 9.2% due to challenging New Zealand markets in Supermarket, retail and employment advertising despite better real estate and health sector performances. New Zealand media segment’s Circulation revenue division also fell by 3.3% yoy due to poor retail performance. But, Fairfax even controlled its New Zealand media segment costs by 6.7% during the period.
 
Improving radio business: As per the Macquarie media limited highlights (wherein Fairfax has 54.5% stake), revenues surged 28.5% yoy during the first half of 2016, driven by 29% yoy rise in Advertising revenues. EBITDA margin for the segment enhanced to 17.3% during the period as compared to 16.4% in the pcp. During March of last year, Fairfax Radio Network merged with Macquarie Radio Network and even finished the Cost and operational synergies implementation. Accordingly, Macquarie Media forecasts its EBITDA for fiscal year of 2016 to be in the range of $20 million to $25 million.
 
Balance sheet highlights: Fairfax Media received $67 million during the first half of 2016 from asset sales and investments including Chullora sale and Tullamarine Printing sites. The group made net investments of $19 million which comprises the group acquisition of Huffington Post, Open Air Cinema, Bodypass, Homepass and Nabo. Fairfax Media intends to continue to strengthen its portfolio even for second half and estimates to incur a capital expenditure of over $90 million in fiscal year of 2016. Meanwhile, FXJ overall interest bearing liabilities were decreased to $164 million during the first half of 2016 and has an early repayment of Syndicated Facility. The group estimates a net interest expense of $11 million for fiscal year of 2016. Fairfax has a net cash position of $6.2 million as of December 2015. Standard & Poor’s issued a BB+ credit rating for the group with a stable outlook.  
 
Value investments and agreements: Fairfax launched Stan over a year ago to leverage the growing video-on-demand boom in Australia. Stan has penetrated more than 700,000 households in Australia and built over 400,000 active subscribers (as of February 19, 2016 report). Stan made an elite multi-year deal with CBS’s SHOWTIME making it the official site for SHOWTIME in Australia. Meanwhile, the group’s investments in Weatherzone also paid off during the period, which was able to generate 45% B2C revenue growth, as well as built a strong user base having 2.2 million app users and 2.6 million desktop users. It has also been reported that Fairfax Media has signed an advertising agreement with online fantasy betting provider TopBetta, which will promote its fantasy sports and racing tournaments across Fairfax’s Australian Community Media network of 140 websites.
 

Diversified portfolio (Source: Company Reports)
 
Stock performance: The shares of Fairfax Media Limited have been correcting by over 9.3% (as of March 18, 2016) during this year to date as the group’s Metro print advertising business has been under pressure on the back of shifting trends in the print advertising industry towards digital advertising. Moreover, the challenging conditions impact on sectors like retail also hampered FXJ business in the first half of 2016. On the other hand, the group’s Domain business is well positioned to capture the booming online market in the real estate sector. The group’s digital business is leveraging the shifting trends in the industry and has been delivering significant growth. FXJ has been making strategic investments to strengthen its portfolio further and offset print advertising impact on its performance. The group’s efforts to control costs via transformation program would contribute to its bottom line in the coming months. As per the recent updates, FXJ’s journalists who planned to strike for few days in view of the company’s announcement relating to cost cutting by virtue of some editorial job cuts across news and business divisions are back to work while publication has not been impacted. Nonetheless, Fairfax stock recovered over 6.5% (as of March 18, 2016) in the last five days and we believe that the positive momentum in the stock would be seen further in the coming months. FXJ stock also has a decent dividend yield. Based on the foregoing, we reiterate our “BUY” recommendation on this stock at the current price of  $0.835
 
 
FXJ Daily Chart (Source: Thomson Reuters)

---

Disclaimer
The advice given by Kalkine Pty Ltd and provided on this website is general information only and it does not take into account your investment objectives, financial situation or needs. You should therefore consider whether the advice is appropriate to your investment objectives, financial situation and needs before acting upon it. You should seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice) as necessary before acting on any advice. Not all investments are appropriate for all people. Kalkine.com.au and associated pages are published by Kalkine Pty Ltd ABN 34 154 808 312 (Australian Financial Services License Number 425376).The information on this website has been prepared from a wide variety of sources, which Kalkine Pty Ltd, to the best of its knowledge and belief, considers accurate. You should make your own enquiries about any investments and we strongly suggest you seek advice before acting upon any recommendation. Kalkine Pty Ltd has made every effort to ensure the reliability of information contained in its newsletters and websites. All information represents our views at the date of publication and may change without notice. To the extent permitted by law, Kalkine Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss or data corruption). If the law prohibits this exclusion, Kalkine Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services. There may be a product disclosure statement or other offer document for the securities and financial products we write about in Kalkine Reports. You should obtain a copy of the product disclosure statement or offer document before making any decision about whether to acquire the security or product. The link to our Terms & Conditions has been provided please go through them and also have a read of the Financial Services Guide. On the date of publishing this report (mentioned on the website), employees and/or associates of Kalkine Pty Ltd currently hold positions in:  BHP, BKY, KCN, PDN, and RIO. These stocks can change any time and readers of the reports should not consider these stocks as advice or recommendations.
Copyright
Copyright © 2016 Kalkine Pty Ltd ABN 34 154 808 312. No part of this website, or its content, may be reproduced in any form without the prior consent of Kalkine Pty Ltd.
Kalkine is a trading name of Kalkine Pty Ltd ABN 34 154 808 312, which holds Australian Financial Services Licence No. 425376.