Australasias most diversified media organisation

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Australasias most diversified media organisation
International Roadshow Information
Pack September 2008
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Australasias most diversified media organisation
An excellent portfolio of broad based media
assets evolving with changes in consumer
behaviour and positioned for growth
Fairfax Media Limited
TV Production and Distribution
Australian Regional and Community Publications
Australian Metropolitan Publications
Australian Printing Operations
Fairfax Radio Network
Specialist Publications
New Zealand Publications
Online
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Combination of diversification, growth and
business improvements strategies have resulted in
a broader profit base
FY00 EBITDA
FY08 EBITDA
Other
Australian Regional Community Publications
Australian MetropolitanPublications
Aust Metropolitan Publications
Australian Printing
TV Production Distribution
FY03 EBITDA
Radio Network
Specialist Media
Online -Fairfax Digital -Trade Me NZ
Other
New Zealand Publications
Aust Metropolitan Publications
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A mix of media assets that will deliver good long
term year on year growth
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Underlying FY08 Results
2007 pro-forma includes the twelve month
results of Rural Press to 1 July 2007 and the
results of Southern Cross and Southern Star for
the eight months to 1 July 2007. Significant
items have been excluded Business segments
with offshore earnings
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Strong cost management discipline
Exclude savings on contracted newsprint price
reductions
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Fairfax Medias businesses are diverse
AUSTRALIAN REGIONAL AND COMMUNITY PUBLICATIONS

• As at 29 June 2008
• Approximately 24 of EBITDA
• Products
• Over 250 daily, weekly and monthly publications
  throughout Australia
• Economic Characteristics
• Vast majority of publications located in single
  newspaper cities and towns
• Attract a diverse range of advertising revenues
• Proven resilience through economic cycles
• Structural Outlook
• Good long term growth
• Bundling on national classified internet
  platforms provide market stability

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Fairfax Medias businesses are diverse
ONLINE

• As at 29 June 2008
• Approximately 14 of EBITDA
• Products
• Largest fully owned online network in Australasia
• 1 news sites in Australia and New Zealand
• 1 auctions, motors and real estate site in New
  Zealand
• 2 employment, real estate and motors sites in
  Australia
• 1 dating and holiday rentals sites in Australia
• Numerous niche websites
• Economic Characteristics
• Growth strongly correlated to the structural
  changes occurring in the media and advertising
  sectors
• Markets not expected to be effected to any large
  degree by fluctuations in the advertising cycles
• Structural Outlook
• Very strong growth

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Internet growth Fairfax has built the leading
online news network and digital marketplace in
the region
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Fairfax Medias businesses are diverse
AUSTRALIAN METROPOLITAN PUBLICATIONS

• As at 29 June 2008
• Approximately 20 of EBITDA
• Products
• Two daily metropolitan broadsheets, The Sydney
  Morning Herald and The Age (Melbourne)
• Numerous newspaper inserted high quality
  magazines
• Economic Characteristics
• Competitive markets
• Strongly correlated to advertising cycle
• Traditionally dependant upon high margin lineage
  classifieds. Revenue model changing
• Increase in display classifieds i.e. local
  Domains which are more sustainable
• Greater flexibility in advertising positioning
• Key supplier of content throughout the company
• Structural Outlook
• Low growth

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Fairfax Medias businesses are diverse
AUSTRALIAN PRINTING

• As at 29 June 2008
• Approximately 9 of EBITDA
• Products
• 17 printing plants located throughout Australia
• Economic Characteristics
• Prints all the newspaper products of the company
• Uses excess capacity for external printing
  customers
• Low cost operator in the market
• Customer base provides stable earnings
• Structural Outlook
• Significant portion of revenues underwritten by
  internal printing requirements

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Fairfax Medias businesses are diverse
SPECIALIST MEDIA

• As at 29 June 2008
• Approximately 10 of EBITDA
• Made up of two distinct niche media businesses

Fairfax Business Media
Agricultural Media

• Products
• National daily financial publication the
  Australian Financial Review plus numerous
  newspaper inserts and over the counter business
  and lifestyle magazines
• Business website afr.com.au
• Economic Characteristics
• Powerful market position
• Market demand linked to the business and share
  market cycles
• Structural Outlook
• Strong connection to niche audiences ensuring
  continued relevance and revenue growth

• Products
• Largest agricultural publisher in Australia with
  63 agricultural publications in Australia, New
  Zealand and USA
• Leading agri website www.farmonline.com.au
• Economic Characteristics
• Powerful market position
• Market closely related to agricultural cycles
• Recent rains will generate advertising demand
• Structural Outlook
• Strong connection to niche audiences ensuring
  continued relevance and revenue growth

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Fairfax Medias businesses are diverse
NEW ZEALAND PUBLICATIONS

• As at 29 June 2008
• Approximately 19 of EBITDA
• Products
• Nine regional daily and two Sunday national
  newspapers
• Over 50 community newspapers
• Over 21 magazine titles
• Economic Characteristics
• Vast majority of publications located in single
  newspaper cities and towns
• Diverse range of advertising revenues
• Publications linked to local economic conditions
• Structural Outlook
• Good medium to long term revenue growth

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Fairfax Medias businesses are diverse
FAIRFAX RADIO NETWORK

• As at 29 June 2008
• Approximately 2 of EBITDA

• Products
• Four talk back and three metropolitan music
  stations
• 22 licences in South Australia and Queensland
• Economic Characteristics
• Good positions in local radio markets
• Market closely linked to local economic
  conditions
• Provides promotional benefits in Sydney and
  Melbourne, assists national reach into the
  Brisbane and Perth markets
• Structural Outlook
• Good medium to long term revenue growth

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Fairfax Medias businesses are diverse
TV PRODUCTION and DISTRIBUTION
(currently being sold)

• As at 29 June 2008
• Approximately 2 of EBITDA

• Products
• Australias largest independent television
  production and distribution group
• Economic Characteristics
• Continued drive by media companies for quality TV
  production content
• Structural Outlook
• Good forward revenue momentum on recent
  production and distribution successes

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Debt Structure
Ratios At 29 June 2008

Net debt to EBITDA
2.9x
4.5x
EBITDA to Interest Expense

• Ratios all well within covenant limits
• Average interest rate of 8.23 on net debt (exc
  SPS)
• No refinancing exposure for at least 18 months
• A475 million in undrawn facilities

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Debt Structure Maturity
Committed Facility Maturity Profile (inc SPS)
Staple Preference Security (SPS)
Eurobond Issue
US Private Placement III
AUD m's
A Bank Syndication (8 Banks)
1,000
CBA A200m Bank Facility
NZD Redeemable Preference Shares
Chullora Financing
750
ASB NZD Facility
Domestic MTN A200m
US Private Placement II
500
250
0
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
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Debt Structure Sources of Debt
Source of Committed Debt Facilities
Chullora Financing
Staple Preference Security (SPS)
4
9
US Private Placement II
10
ASB NZ Facility
1
Eurobond Issue
A Domestic MTN
16
6
NZD Redeemable Preference
Share
5
CBA Bank Facility
6
US Private Placement III
9
A Bank Syndication (8 Banks)
34
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Fairfax Media has superior operating fundamentals
and is better positioned than international peers

• Australian publishers have superior operating
  fundamentals and are better positioned to respond
  to changing consumer behaviour than US/UK
  publishers for 3 key reasons
• Differences in market structure
• Industry adaptiveness and circulation stability
• Superior online positions

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Differences in the structure of the Australian
media market
Structural issues and long-term growth outlook

• Australian regional media market characteristics
  are fundamentally different from the US/UK and
  provide Fairfax with greater protection against
  structural change
• Australias sparse population distribution has
  created highly concentrated but disparate and
  uniquely defined urban markets served by a
  limited number of dominant newspaper titles
• Ownership of the Australian newspaper market is
  highly concentrated
• In comparison, key segments of the US and UK
  newspaper markets are highly competitive with
  fragmented ownership

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Australias population and major urban areas are
much more sparsely dispersed than either the US
or UK
Structural issues and long-term growth outlook
Australia
United States
United Kingdom
Persons per km2

• Australia is a large country with a small
  population and low density
• Majority of population lives either in large
  cities or small population areas
• Urban areas are sparsely dispersed, but
  predominantly near the coast

• The US has a large population and much greater
  population density than Australia
• US population is also distributed among very
  large cities or small population areas
• Urban areas are much less dispersed than in
  Australia, esp. on the Eastern seaboard

• The UK has a large population living in a very
  small land area
• Only 2 large cities majority of population lives
  in regional cities
• Result has been very high density and
  concentration of urban areas

Source CIA fact book, CIESIN (Columbia
University), ABS, UN
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US and UK newspaper markets are much more
fragmented, competitive and less concentrated
than Australian markets
Structural issues and long-term growth outlook

• Number of titles by market
• Most newspaper markets in Australia are single
  daily newspaper markets
• By comparison, the UK is dominated by 10 large
  national dailies and many metro/regional markets
  in the US are served by multiple daily newspapers
  or small circulation titles

Australia
US (size vs AUS)
UK (size vs AUS)

• Newspaper revenue concentration
• Ownership of the Australian newspaper market is
  much more concentrated than in the US or UK
• Share of total newspaper advertising revenue for
  top 5 newspaper companies by market
• Australia 75 (approx)
• US 25 (approx)
• UK 55 (approx)

Source IBIS Australian Newspaper
Report (2008), Adage, Zenith, World press trends
2007, Annual reports, Analyst reports, internal
estimates
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Industry Adaptiveness and Circulation Stability

• Fairfax newspapers continue to retain high levels
  of utility for both consumers and advertisers
• Fairfax has better adapted its newspaper products
  to meet changing consumer and advertiser needs
• Circulations for key Fairfax titles remain stable

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Fairfax has better adapted its newspaper products
Structural issues and long-term growth outlook

• Fairfax has better adapted its newspaper products
  to meet changing consumer
• and advertiser needs
• Greater use of colour relative to US and UK peers
• Development of classified display environment and
  geographically segmented products for advertisers

Source Based on internal qualitative
review of a sample of newspapers from each market
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Fairfax has better adapted its newspaper products
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Fairfax newspaper circulations remain stable
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Superior Online Positions

• Fairfax has established stronger online positions
  vs. its US/UK peers
• A far superior online news position relative to
  its overseas peers
• Created national classified brands (e.g. Domain,
  MyCareer) that more effectively compete against
  online entrants than their overseas peers
• As a result, Fairfax has captured a much greater
  share of online classifieds and display revenues

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Australian publishers have far superior online
news positions than their US/UK peers
Structural issues and long-term growth outlook
5
Australia Online News Approx million UBs/ month
4
3
2
1
0
Ninemsn
Telegraph
Australian
Herald Sun
Daily
The
news.com.au
Fairfax - SMH
Fairfax- Age
Pure-play online
Fairfax Media
Other Newsprint Media

• Australia
• Fairfax has online news leadership in Australia
  and has expanded its news brand online
• Six of the top 7 online news sites are owned by
  newspaper publishers
• Ninemsns 2 position derived from traffic to
  hotmail email
• Newspapers have also succeeded in building
  super-regional online news sites

• US
• Online news is dominated by cable TV players
  (e.g., CNN, MSNBC) and online news aggregators
  (e.g., Yahoo! and AOL)
• New York Times is the only newspaper publisher in
  the top 5 online news sites
• Cable TV and news aggregators outperformed
  newspapers online by developing national online
  news platforms and brands

• UK
• Online news in the UK is dominated by the BBC
• Newspapers (e.g., the Sun, the Guardian) and
  online news aggregators (e.g., Google, Yahoo!)
  battle for the distant 2 position
• Newspapers have generally been unsuccessful in
  expanding their brand and audience online

Source Netratings, Comscore, internal analysis
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Fairfax has outperformed international publishers
in successfully extending its newspaper brands to
online
Structural issues and long-term growth outlook

• The ratio of online unique browsers to daily
  print circulation is a proxy for measuring a
  publishers success in translating its print news
  brand to online
• Fairfax has been much more successful than its
  domestic competitors and international peers

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Ratio of Newspapers monthly online UBs vs daily
circulation
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Monthly UBs / Avg Circulation
15
Avg. 9.3
10
Avg. 6.8
5
Avg. 1.7
0
Sun
NYT
WSJ
Daily Mail
LA Times
Guardian
Daily
Telegraph
Daily
Telegraph
The Times
Herald Sun
USA Today
Washington
Post
Fairfax - Age
Fairfax - SMH
Source WAN world press trends 2007, Net ratings,
internal analysis
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US/UK publishers have failed to capture national
online real estate positions, while Fairfax has a
strong 2 position
Structural issues and long-term growth outlook
Real estate classifieds example
Other Newsprint Media
Pure-play online players / Industry bodies and
agencies
Fairfax Media
Source Netratings, Comscore, internal analysis
31
Fairfax has an equal 2 position in online
employment, while US/UK publishers captured 1
and 2 positions respectively by forming JVs
Structural issues and long-term growth outlook
Employment classifieds example
Fairfax (MyCareer)
Pure-play online players / Industry bodies and
agencies
Fairfax Media
Other Newsprint Media
Source Netratings, Comscore, internal analysis
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Fairfax has captured a much greater share of
online classifieds and display revenues

• Fairfax has capitalised on its strong online
  positions to capture a much greater share of
  total online classifieds and display revenues vs.
  its US/UK peers
• Fairfax has extended its strong position in
  newspaper publishing into online and captured key
  market positions in online news and classifieds
• As with the newspaper market, the online market
  is also much more concentrated in Australia -
  the top 5 newspaper publishers are estimated to
  capture 40-45 of total online classifieds and
  display market revenues
• By comparison, in the US and UK, the top 5
  newspaper publishers capture a much smaller
  proportion of total online classifieds and
  display market revenues

Source IBIS Australian Newspaper
Report (2008), Adage, Zenith, Annual reports,
Analyst reports, internal estimates
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Fairfax Media recent financial history(Excluding
significant items)
REVENUE
EBITDA
Am
Am
NPAT
EARNINGS PER SHARE
Am
cents