New Zealand Markets closed

Fairfax confident despite huge loss: CEO


Fairfax Media has reported a $2.73 billion net loss after a massive write-down on the value of its newspaper mastheads in view of the depressed outlook for advertising revenue.

The result, for the year to June 24, was seven times the size of the $390.9 million loss in 2010/11.

Fairfax, publisher of the Sydney Morning Herald and Age newspapers, saw revenue slip from $2.5 billion to $2.33 billion as chief executive Greg Hywood said the advertising market was the worst he had seen for the media industry since the 1970s.

Mr Hywood gave up half his $840,000 bonus for 2011/12, citing the difficult conditions facing the company, which is slashing costs and cutting hundreds of jobs during the biggest restructure in its 180-year history.

His total salary package, including shares, was $2.36 million.

The profit result was hit by $2.9 billion of write-downs, including $2.8 billion of write-downs on masthead carrying value and goodwill and $106 million on Fairfax's Tullamarine and Chullora printing presses, which will be closed in 2014.

Underlying net profit fell to $212 million from $283 million a year earlier, while underlying earnings before interest, tax, depreciation and amortisation (EBITDA) fell 17 per cent to $506 million.

Despite saying revenue for the start of 2012/13 was down 10 per cent on the previous year and that core ad markets were likely to deteriorate further, Mr Hywood said Fairfax had a strong business and was committed to growth.

"No CEO enjoys standing up to deliver a result in these conditions, notwithstanding that, there is good reason for confidence," he said.

"Our task is to grow new revenue streams and ensure we are leveraged to any cyclical upturn (in advertising expenditure)."

For the first time, Fairfax reported separately the performance of its metropolitan print and digital businesses.

Print includes the Sydney Morning Herald, The Age and classifieds while digital includes online news, online classifieds and Fairfax's transaction sites such as dating service RSVP.

Print revenue was $564.2 million, down from $652 million in 2010/11, while digital revenue was $251.8 million, up from $220.5 million a year earlier.

"The Age and the Sydney Morning Herald are profitable, both in print and in their digital performance as well," Mr Hywood said.

Across the Fairfax group, digital now accounts for 17 per cent of revenue.

Regional newspapers achieved EBITDA of $159.1 million, delivering 30 per cent of group earnings.

Fairfax has embarked on a three-year cost-cutting program of asset sales, restructuring and redundancies.

Restructuring and redundancy costs for 2011/12 were $200 million, while full-time staff numbers were reduced by 390 to 8,416.

BBY analyst Mark McDonnell said Fairfax's cost-cutting strategy was a concern.

"The core problem is the lack of revenue growth in this business," he said.

While the digital businesses had delivered 20 per cent growth in revenue, it was still too small a number to be meaningful.

Mr McDonnell said the write-downs, which Mr Hywood dismissed as meaning "nothing" to the performance of the company, were significant.

"There is now a view that those assets will produce less cashflow than was previously expected," he said.

"This is happening right across the media space."

Fairfax shares closed down 5.5 cents, or 10 per cent, to 51 cents.

There were reports late on Thursday that mining magnate Gina Rinehart was seeking to reduce her 15 per cent stake in Fairfax Media to around 10 per cent.

Ms Rinehart, who is Fairfax's largest single shareholder, is understood to have engaged Morgan Stanley to sell the parcel of about 117 million shares at 50 cents each and the broker has been approaching potential institutional buyers.

Ms Rinehart, Australia's richest person and the richest woman in the world, cut her stake in Fairfax to 15 per cent, from a peak of around 19 per cent, in July as part of a public stand-off with the Fairfax board over board representation and editorial independence.

Fairfax shares on Thursday closed down 9.7 per cent at 51 cents, a shade above its record low of 49.5 cents earlier in August.

AAP was unable to reach Morgan Stanley for comment.