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Fairfax CEO Greg Hywood talks asset values

CEO answers questions on Nine relationship, Stan’s outlook and his future

James Manning with Greg Hywood

Fairfax Media chief executive Greg Hywood said on the morning of the half-year results release that it was an important day for Fairfax Media. Speaking to Mediaweek after the analysts call, we asked Hywood how the day ranked to any number of other company milestones in recent years for the publishing group. “Very high,” he responded. “Today we have delivered a very good financial performance. Our publishing businesses remain absolutely solidly in the black and that is a very good performance given the structural stresses that have been going on in the industry globally.”

However, the big news of the week was Fairfax confirming the plan to separately list Domain and give shareholders some return for their patience with the Fairfax Media stock as the company restructured.

“We have got Domain into a position where it can stand alone and that is proof that the strategy that we have been focused on in recent years is absolutely delivering.”

But the results were not all about Domain, with Hywood reminding us some of the other achievements: “Look at our metro publishing business. That is still a 10% EBITDA margin business, the regional business is 15% and New Zealand 20%. These are really, really strong publishing performances.

“In radio our EBITDA was up 11%. Within our digital ventures business, Stan has now got 700,000 active subscribers and remains on track for cash breakeven in FY18. Across the board you can see that Fairfax is delivering. It’s got a very high market cap, relative to other media companies in this market, and we are pleased with the performance.”

When asked if the analyst ratings given to the Fairfax metro media business are too harsh, Hywood said: “Five years ago we said we are on a print-to-digital transformation, and we had to make all the decisions about how much to invest and how much cost we would take out. We were thinking we could have to transform that business into digital only.

“The fact that we have maintained those businesses in the black, all the way, is something not many global publishing players have been able to do and it is testimony to how well we are managing it.

“If people are judging the publishing business harshly, it would be incorrect. They should be looking at it as something of a success story. What we have done is not just a matter of transforming the publishing business, it is using the two key assets – the audience and the marketing inventory – and driving new businesses. We have driven Domain very strongly and we are driving Stan very strongly. We have also driven our events business strongly and we are also doing that on our fledgling JV with our Drive brand.”

With the decision to split Domain from the publishing business, Hywood said the relationship between the two would remain incredibly close. “We have very strong relationships between the two now. Fairfax will have 60-70% of Domain and the linkages between the publishing digital and print businesses will continue.”

Two hurdles the Domain float has to jump are shareholder approval and how the Australian Taxation Office rules on the gain for shareholders. The shareholder vote should see almost unanimous support for the plan. When asked if Fairfax had advice if it could get a favourable outcome from the ATO, Hywood told Mediaweek: “We have engaged with the ATO. One thing we will not be doing is providing our shareholders with some sort of tax liability.”

As to a potential hookup with Nine, Hywood said: “When it became clear the media legislation could change, all the media companies have been talking to each other about those sorts of things. The one thing that I do know is that we are exploring those sorts of synergies. As to any over-arching deal or anything else there has been speculation of, it is just not there…it is not happening. We do have a good relationship with Nine and clearly we do explore where we could maximise value for each other’s businesses.”

Has Hywood changed his mind on print?

“We have always been very frank about our print to digital journey. Print one day down the track won’t be a viable proposition. We have said we will explore all the options along that journey. One option would be weekend-only printing and 24/7 digital. We don’t need to go there yet and we think there will be seven-days-a-week printing for some years yet for The Sydney Morning Herald and The Age and six-days-a-week for some years yet for The Australian Financial Review. They are very viable commercial propositions. It is too early to go to weekend only. The issue for us is making the right decisions for the business and for the shareholders.”

Would Fairfax sell Stan now?

With Stan seemingly on a steep growth trajectory, we asked Hywood if anybody wants to buy now, instead of waiting when the price will only be more expensive later.

“People are always interested in good assets. People have always been interested in Domain and people have been interested in Stan. These are assets that are there for Fairfax shareholder value and we won’t be doing anything with those assets that doesn’t maximise that value. Stan has a way to go to be cash-flow positive.”

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