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Fairfax announces record profit and 34% increase in earnings per share pre abnormals RESULTS FOR THE FINANCIAL YEAR ENDED 30 JUNE 2000 Financial Performance
Products
Capital Management
STATEMENT BY MR FRED HILMER, CHIEF EXECUTIVE OFFICER With earnings per share and EBIT at record levels, this is an excellent result for the Company. The result has been driven by strong growth in our revenues, expansion of our businesses, and our ability to capture significant operating leverage as a result of the business and management improvements that have been implemented over the last two years. I want to thank the staff for their contribution to this excellent result, and the hard work it reflects. The result is consistent with our aspiration to be a growth company in the best sense of the term. This means delivering increasing value to shareholders, readers, viewers and advertisers, while providing our employees the opportunity to contribute and grow in a worthwhile endeavour. Two years ago, our main emphasis was on growth via improved productivity, particularly cost reduction. Costs remain a continuing focus. However, the Group is now delivering significant additional growth via product and service improvements and innovations. Further improvements in this vein are planned for The Age, as the new printing plant at Tullamarine comes on stream in late 2001, and for other publications and services. We will also be building on our rapidly growing online initiatives. At the same time, we are exploring growth opportunities beyond our existing geographic and product footprints, though this is an exercise we will carry out prudently and continue over a number of years. The highlight of this year’s performance was revenue growth at the top levels of industry performance. In the 2000 financial year, total revenues increased 17.5% to $1.34 billion. On a like-for-like basis, excluding the effects of acquisitions, publishing revenues were up 14.7% over last year to $1.28 billion. Both circulation and advertising revenues for publishing showed strong gains (of 6.7% and 16.6%, respectively) due to our focus on both volume growth and yield management. Classifieds and display were strong, with increases in both volumes and yields. Magazines also performed well, with revenues up 14.4%. Fairfax Regional and Community publications had revenue gains of 17.5%. f2 revenues of $55.4m represented a growth of 122% with internet revenues up 159% to $20.5m. Fairfax continues to maintain its focus on margins, ensuring an appropriate balance between revenues and costs. On a like for like basis, publishing EBIT margins increased from 24.1% to 28%. Costs for the group as a whole increased to $963.0 million. On a like-for-like basis, excluding the effects of acquisitions, publishing costs rose by 10.2% to $857.3 million. The effects of significant increases in volume and new product initiatives accounted for over half of this increase. Staff costs, which account for over 40% of total operating expenses, increased by 16% to $396.0 million. On a like-for-like basis, publishing staff costs increased by 7.9%, half of which related to variable staff costs incurred due to the outstanding growth in volumes. Newsprint prices have remained stable and are not expected to increase significantly during the 2001 financial year. We have continued to invest in f2 at planned levels. Our aim is to build attractive businesses in the long term both by complementing our existing businesses and by providing the opportunity to enter new fields. We continue to concentrate on four strategic areas: CitySearch directories; financial services; classified supersites; and auctions and shopping. The businesses benefited significantly from our leading position in online news sites, and the traffic they generated, and increased navigational integration throughout the f2 network. The four major components of our business – General Newspapers, Fairfax Business Publications, Group Operations, and f2 – are discussed in further detail below. General Newspapers The 2000 financial year was marked by strong profitability in all of our general newspapers, with healthy growth in advertising and circulation revenues, and in advertising volumes. For The Sydney Morning Herald, advertising revenue was up 14.9%, driven by a display volume increase of 12.7%, and a classified volume increase of 5.5%. The Age showed strong growth in advertising revenues, up 11.9%, with classified volumes up 4.3%, and display volumes up 9.4%. The Sun Herald enjoyed advertising revenue increases of 23.3%, and advertising volume growth of 14.0%. While circulation revenues continue to increase, overall circulation is in line with industry trends. The Age has shown firmer circulation on weekdays, and The Sydney Morning Herald’s weekday circulation has steadied. Readership figures were stronger in the last quarter of the year for The Sydney Morning Herald, and The Sun Herald, and were steady for The Age. Regional publications are strong, with The Newcastle Herald continuing to register substantial circulation gains. Extensive product innovations, particularly with The Sydney Morning Herald, have provided new platforms for revenue growth, capitalising on the paper’s superb audience and demographic reach. The new and revamped colour insert sections – Domain, Good Living and Money – have been well received in the market. The Age’s new colour magazine inserts for key readership and advertisers, e)mag and Uncorked, have had early success. When Tullamarine comes on line, further enhancements can be extended to The Age. Fairfax Business Publications Fairfax Business Publications made a major contribution to our growth in publishing this year, with revenues on a like for like basis up 25.4% due to growth in both advertising revenue (up 29.0%) and circulation revenue (up 18.4%). Circulation and readership levels for The Australian Financial Review are at record levels, with particularly strong sales of the Weekend Edition. The Australian Financial Review implemented significant content improvements such as the Market Wrap, covering all aspects of market news, and Boss magazine, which broke new ground in the area of management. BRW and Shares and Personal Investor magazines performed well, reflecting the growing interest in comprehensive business and personal investment topics. The acquisition of Strategic Publishing Group in December, 1999 was a significant development that has added to our regional reach, and yielded immediate gains in revenues. The Australian Financial Review Market Wrap on CNBC, shown each weeknight on pay television systems throughout Australia and Asia, adds to the reach of the masthead and its content. The joint venture with NewsAlert LLC enables financial and business-to-business websites to publish customised news and market data throughout the Asia Pacific region. Group Operations The significant upgrades in print operations are proceeding to plan. The construction of the new plant at Tullamarine, Melbourne, is proceeding well. With volumes at Chullora, Sydney, already at record levels, the decision to provide additional printing capacity will enable The Sydney Morning Herald, The Sun Herald and The Australian Financial Review to proceed further with a strategy of more colour, new editorial and advertising supplements, and other improvements. Operational improvements have focused on time, cost and quality. Increased volume has been handled while improving ontime running and reducing costs. Cost reductions have been achieved through materials and service procurement savings. More effective use of existing capacity has reduced cost per printed page. A rationalisation of printing capacity has provided increased colour and quality to products such as The Illawarra Mercury and The Sun Herald. f2 f2 continued its development as a leading online company. f2 enjoyed strong revenue growth, up 122% to $55.4 million, and incurred a loss before interest and taxes of $40.7 million, at the mid-point of indicated levels. Online revenues increased by 159% while offline revenues (print directory) grew by 18% on a like for like basis. Transaction revenues (the majority of which were generated by SOLD.com.au) grew by 100%, exceeding $1million for the first time. Other key areas of revenue growth included:
This very strong revenue growth was supported by significant increases in traffic and visitors to the f2 network of sites. Total page views to the network increased by over 136%, to 75.2 million in June 2000, while the number of site visits increased by 100%. Increased cross promotion from the print products and further navigational integration among the sites has been an important contributor to this growth f2 continues to leverage the traffic volumes generated by the highly popular newspaper web sites, particularly smh.com.au, theage.com.au, and afr.com.au which collectively attract around 6.5 million page views per week. f2 news sites are collectively the most popular in Australia, and are at the forefront of adapting new technologies, such as streaming video and audio, to augment their content and coverage. Costs were up 143% year-on-year reflecting both additional costs associated with acquisitions of new businesses and continued investment for growth in the key areas of CitySearch directories, classified super sites (automotive, real estate and employment), financial services and auctions/shopping. With the base established, the focus is on continuing revenue growth. f2’s is focused on four core business areas: CitySearch Directories CitySearch.com.au and Big Colour Pages were acquired in two tranches for a total of approximately $13 million. These businesses are being substantially improved and repositioned as a combined print/online phone and Internet directory business. During the last year, as the repositioning has progressed, the business has incurred losses of approximately $17 million. These expenditures have provided an extremely cost-effective entry into what is believed to be a highly prospective business. Our goal is to build on our strong position in new generation directories, a market currently estimated at about $1 billion. During last year, CitySearch and Big Colour Pages began a national rollout of its online Internet and telephone directories for Brisbane, Adelaide, Perth, the Sunshine and Gold Coast, Townsville, Cairns and Darwin, adding to the established city guides and directories in Sydney, Melbourne and Canberra. In the past year, the number of paying businesses listed with CitySearch.com.au has grown from 4,000 to about 10,000. Classified Supersites Mycareer.com.au (employment), drive.com.au (automobiles) and domain.com.au (real estate), are consistently leaders in their categories. These sites benefited from further integration with co-branded Drive, MyCareer and Domain print products, which build additional brand awareness and provide a low cost source of traffic. Financial Services In financial services, f2 further developed its major brands, including tradingroom.com.au and moneymanager.com.au, generating traffic of over 8 million page views per month. To expand its financial services leadership, f2 and Macquarie Bank announced a major joint venture, which will begin business in the first quarter of calendar 2001, to provide a wide range of transaction based investment products and services. Auctions and Shopping Since its launch last July, SOLD.com.au has attracted over 120,000 registered users, more than 220 retail merchants, and has completed more than 160,000 successful auctions, with gross merchandise sales exceeding $16 million. SOLD.com.au now has more Australian buyers and sellers, and more local listings per month, than any other site. According to the traffic measures from Red Sheriff and ACNielsen NetRankings, SOLD.com.au is the leading internet auction site in Australia. New Distribution Consistent with our approach of putting our content into other media distribution networks, f2 is pursuing new ways to distribute its content through alliances and new delivery platforms such as broadband and WAP (wireless application protocol). We are disappointed with the policy framework for media and broadband content. However, we believe that markets, technology and the drive of talented people will inevitably overcome the effects of poor regulation – and we will, in our determination to pursue new platforms for growth, continue to explore the opportunities before us. The Year Ahead The current financial year has begun positively, with revenue continuing to grow solidly year-on-year. We look forward with enthusiasm to providing outstanding coverage of the Sydney 2000 Olympic Games before a worldwide audience while maintaining our focus on business performance, product improvement and growth. * * * The Board is pleased to announce a final dividend of 7.0 cents per share (payable on 17 October 2000), bringing the total dividend for the year to 11.5 cents, up 9.5% on last year’s 10.5 cents. This dividend will be fully franked. 5 September 2000 -- ENDS -- Download Announcement as Word.doc | Appendix 4B (rule 4.13(a)) Half yearly/preliminary final report | Financial Results Briefing 30 June 2000 PowerPoint presentation
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Fairfax > Corporate Affairs & Media Releases > Announcements > FULL YEAR RESULTS
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