Fairfax Media has announced a close to $1bn write-down of assets before its full-year results next week as the publisher of the Sydney Morning Herald and the Age continues to lose money on the historic print mastheads.
The media company, which now makes 50% of its profits from Domain, will also separate the profitable property website from its struggling newspaper division.
Domain’s operating results will be shown as a separate reporting segment and will not be included in the Australian metro media division which houses all the company’s metropolitan and national newspapers, including the Australian Financial Review and the Canberra Times as well as the websites.
Fairfax Media’s CEO, Greg Hywood, said the company also had plans to extend Domain “beyond listings to capture the immense opportunity in the broader real estate ecosystem”.
The newspaper division had been separated to provide a “clearer picture of the operational performance of the business as it transitions to a new sustainable publishing model over time”, Hywood said in a statement.
Under Fairfax’s sustainable publishing model the company has significantly reduced its editorial workforce, making hundreds of journalists, artists and photographers redundant in order to lower costs.
The editor of industry publication Mumbrella, Alex Hayes, said the billion-dollar write-off was announced ahead of the Fairfax results on Wednesday 10 August.
“In the industry it’s been rumoured that Fairfax would hive off Domain as a completely separate company and float it on the stock market itself, unleashing its full potential where it is not weighed down by legacy print, which is obviously struggling,” Hayes said.
“By separating it away from publishing it’s going to give a much clearer indication of what Domain earns and what the publishing assets are worth.
“The $1bn write-down is basically saying our assets aren’t worth as much as they used to be so we’re devaluing them. We’ve seen a lot of media companies, including Fairfax, write down assets in their results but I’ve never seen it announced ahead of time.
Fairfax expected to book impairment charges of $989m pre-tax ($922.7m post-tax) in financial year 2016 relating to publishing assets and adjustments to segment reporting, the company said.
Hywood said the write-down reflected the market realities facing the newspaper business.
“The considerable work done to transform the publishing business has created flexibility and optionality around the future, and we are confident in our plans to transition to our new sustainable publishing model,” he said.
Hayes said the decline in print advertising revenue was no surprise to anyone. “It’s quite obvious on Wednesday that they are going to announce that print advertising is well down again on last year,” he said.
