Fairfax Media looks set to spin off Domain in the hope of extracting full value from its lucrative real estate business, leaving a slimmed down company that says it is committed to print media for several years.
Fairfax has confirmed it is conducting a strategic review of Domain with a view to listing it on the Australian Securities Exchange by the end of 2017.
The publisher of The Sydney Morning Herald and The Age would retain a 60-70 per cent stake in Domain, preserving a valuable revenue stream while opening the real estate business up to further investment.
"It's got the scale of revenue, it's got the earnings, it's got the audience," chief executive Greg Hywood said.
"We looked at the fact that it was ready to go now, that it was ready to get its own valuation and I thought the business needed to attract investors that otherwise wouldn't invest."
Completion of the long-rumoured move, which Fairfax said will boost shareholder returns, is also subject to talks with the Australian Taxation Office and a shareholder vote.
Fairfax and Domain would have a similar relationship to that of rival News Limited and ASX-listed real estate classifieds business REA Group.
The Rupert Murdoch-controlled media giant owns 61.6 per cent of REA.
Stock holders have already seen the value of their investment increase, with Fairfax shares rising eight per cent to a five month high of 94 cents after emerging from a trading halt on Wednesday morning.
Domain is the Fairfax's most profitable venture, despite its previously flagged 13 per cent drop in earnings before interest, tax, depreciation and amortisation (EBITDA) to $57 million in the half year to December.
Overall half year EBITDA fell 9.9 per cent to $145 million, while net profit more than trebled to $83.7 million due to lower impairments than 12 months earlier.
Earnings from Australian metro media - which includes the SMH, The Age and The Australian Financial Review - dropped 12 per cent.
Despite a further 16.6 per cent decline in advertising revenue and need to put up prices, Mr Hywood said there were no plans to make titles digital-only.
"We all know that print has an endgame somewhere down the track ... (but) our view is that, for some years yet, full six- and seven-day publishing is the best commercial outcome for shareholders," Mr Hywood said.
"That may change over time - but not yet."
A slimmed down Fairfax would retain its 50 per cent stake in Stan, the Netflix rival it jointly owns with Nine Entertainment.
Mr Hywood said Stan was now the leading local streaming service with more than 700,000 active subscribers at February 13.
"The business is on a clear path to profitability and expects to reach cashflow break even during FY18," Mr Hywood said.
FAIRFAX MEDIA'S MIXED PERFORMANCE
* Half year net profit of $83.7m , up from $27.4m
* Revenue down 4.7pct to $913m
* Interim dividend unchanged at 2 cents, partially franked
