I am a great fan of Domain.com.au and the value of its business to home buyers. Its owners newspaper publisher Fairfax Media recognising the value of the business to its bottom line is making changes to make it shine better outside its main bread and butter of selling newspapers. Let’s hope that if it doesn’t give it the needed support that it will sell it to someone who will make it realise its maximum value.
Fairfax restructure gives a new home for Domain that will make its value more explicit
- April 4, 2013
Fairfax Media’s organisational restructure is primarily about eliminating duplication of management functions that sit behind and support the group’s stable of media brands, but one fascinating by-product is that the group’s Domain online and print real estate listings and search business will be visible as a separate profit centre for the first time.
In the new structure there are five divisions. Australian publishing media, which contains all of the group’s print and online news-oriented assets including The Sydney Morning Herald, The Age, the Financial Review and regional media; digital ventures, which will house Fairfax’s transaction-oriented online businesses, including Stayz and RSVP; Fairfax Radio; Fairfax New Zealand; and finally Domain, which will will house the Domain business and the group’s Metro Media Publishing real estate and specialist publishing joint venture.
It’s the movement of Domain into the spotlight that might interest Fairfax followers
The big Australian publishing media division will in turn have four units – news media, business media, life (or lifestyle) media and community media – but the key support functions for them including sales, marketing, business planning and information technology management will be rationalised to create a unified support platform.
That will deliver additional cost savings as Fairfax deals with the structural shift from print media to online media, pressure on revenue that accompanies the change, and a cyclical downturn in activity and advertising demand that began during the 2008-09 global financial crisis.
Chief executive Greg Hywood said in February that the group was on track to deliver annual cost savings of $251 million a year by June 2015, but that more savings were being sought: this restructure delivers some of them.
It’s the movement of Domain into the spotlight that might interest Fairfax followers most however.
Morgan Stanley estimated in August last year that Fairfax’s digital metropolitan media business was worth $704 million, and that within that the successful Domain business was worth $474 million. That was based on a multiple of 12 times estimated earnings. Estimates of Domain’s profitably will be replaced by harder numbers now.
Morgan Stanley attributed no value to the group’s less successful Drive and myCareer online brands, which are under review by Hywood, and have not been broken out like Domain in the restructure.
Morgan Stanley’s argument last year was that the value of Fairfax’s digital business was not being reflected in the group’s share price, which hit a low of 36 cents in mid-October. The shares have recovered and were trading at 60.5 cents early Thursday afternoon, but that still only values Fairfax at $1.4 billion, making Domain a key and potentially not fully recognised asset.
Domain would have dedicated management, Hywood said on Thursday, adding that its elevation as a “stand-alone division” recognised the significance of the real estate sector for the group. It should also make the value of Domain more explicit, inside Fairfax, but also to potential acquirers: in a tough media market that can’t hurt.