Fairfax Media has taken another step towards a radical revamping of its metro and regional newspapers by slashing their value by $894.7 million, a precursor towards closing the Monday-to-Friday editions of The Age and The Sydney Morning Herald, and the weekend edition of The Australian Financial Review.
This morning’s decision follows comments made in early May, which first revealed that the company was thinking seriously about about reducing its print runs to its most profitable days. CEO Greg Hywood pointed out that the cost of doing this was now around $150 million. The Fin generates most of its revenue on weekdays, while at the SMH and Age, 65% of revenues are generated on the weekends.
In an announcement to the ASX this morning, Fairfax revealed the impairments as part of a move to separate the Domain online property business from the rest of the company. The separation will please big shareholders and many analysts who have been pressing Fairfax to take this step.
The impairments mean that Fairfax no longer believes the print assets in Australia and NZ will generate enough revenue, cash-flow and earnings in the coming year to justify their current book values. News Corp has been forced to make similar impairments to its Australian newspaper assets in recent years for the same reason. In the case of Fairfax, it’s also linked to the separation of Domain into a standalone business.
Hywood appeared to brush down expectations of a sale of Domain. “Domain makes a significant earnings contribution and remains an integral and growing part of Fairfax. We have no plans for that to change,” he said in the statement.
From those comments and the figures contained in attachments to the announcement, it is clear Fairfax board and management see the future of the company as an online property play, with assets in other media, such as the Stan streaming video joint venture with Nine Entertainment, the news websites and other digital ventures, and then the metro and community/regional papers. The market is expected to boost the Fairfax share price once it sees the broken-out balance sheet value for Domain separated from the millstones that are the print assets.