Domain digital earnings to partially offset print decline: Fairfax

Growth in digital earnings from Fairfax’s Domain real estate business is expected to offset some of the dramatic decline in its print earnings, Fairfax Media has revealed as part of an investor day briefing.

Amid speculation among analysts and its own publications, it was considering spinning off its digital platform, Fairfax Media disclosed graphs with key financial data on its real estate business, Domain for the first time. 

As part of the restructuring earlier this year Fairfax separated its Domain real estate business from the publishing businesses to highlight its growth potential and its value in case the post-Trade Me Fairfax needs quick and easy capital raising from a sale or spin-off.

It revealed revenue of about $141 million last financial year and earnings before interest, tax, depreciation and amortisation of $45 million.

The investors were told Domain had reached the "tipping point" where digital profit growth was offsetting declines in print, said Fairfax chief executive and managing director Greg Hywood.

Domain was by far the biggest contributor to Fairfax Media's exposure to around $335 million of real estate advertising and listings services revenue over the 2012 financial year. Domain's print business brought in $74.3 million and Domain digital bringing in $66.4 million.  

From Melbourne Anthony Catalano’s Metro Media Publishing group contributes $81 million to Fairfax's real estate advertising and services business.

Around $48 million is generated from primarily regional and rural print revenues (but with online a growing part of this business as well).

The remaining $65 million comes from other digital ventures such as commercial real estate listings and NSW community newspapers.

The forecast for the first half of the 2013 financial year is for digital revenues to grow by 14% year-on-year rising from $32.9 million to $37.5 million while print revenues are forecast to decline from $40.5 million to $28.8 million.

Digital revenues are also expected to make a far bigger contribution to earnings – while print earnings decline.

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Fairfax Media is forecasting Domain digital earnings to rise 27% year-on-year for the first half of 2013 while print earnings are forecast to fall 33% year-on-year. 

According to Fairfax Media chief executive Greg Hywood and Domain general manager Tony Blamey Domain’s digital growth is being driven by its market-leading positions in the affluent suburbs of Melbourne and Sydney, growing national coverage, increasing demand for its products from real estate agents and consumers and “delivering for estate agents”. 

"You will see that we are a force to be reckoned with in the real estate advertising sector in this country – with exposure to more than $300 million of real estate-related revenue," says Hywood.

"We believe that we have the brand, the expertise and the commitment to really build this business – and we invite you to make your own judgments about Domain’s value and the opportunity ahead."

Domain derives 89% of its revenues from NSW and Victoria.

Domain has 7,500 agent subscribers - figure which has been steadily rising over the past two years – and claims 75% market penetration.