Fairfax Media shares jump
Shares in Fairfax Media touched their highest level in more than two years after the trans-Tasman media group reported a sharp improvement in first-half profit.
The company reported net profit after significant items and tax of A$193.8 million (NZ$210m), despite a 1.2 per cent decline in revenues.
Excluding profit from several business sales, it booked an underlying profit of A$93.1m, up 12.1 per cent on the same period last year.
On the ASX, shares in Fairfax Media jumped 22 per cent to A87 cents, easing to A85.5c by late afternoon.
It reported a 48.5 per cent increase in net profit year-on-year for continuing businesses to $86.4m – a result that some thought could not be delivered, chief executive Greg Hywood said.
The revenue declines had been largely offset by cost-cutting, but also by a drive towards new income streams including events, marketing and digital subscriptions, Hywood said.
Many of these new strategies were "counterintuitive" such as reducing circulation by 30 per cent and raising prices at the Sydney Morning Herald and the Age.
"The traditional approach to circulation in Australia ... was that you boost circulation as much as you could possibly do by a whole host of virtual giveaways," Hywood said.
"It was very controversial but what we found was ... we had 30 per cent less circulation but year-on-year we've increased circulation revenue 10 per cent."
Market share and readership were retained, "which just proved we were getting rid of papers people weren't reading".
But Hywood said this would not work for all markets.
Digital subscriptions which Fairfax has introduced in some Australia markets, would be a decision for Fairfax New Zealand, he said.
In the first half, revenues for the New Zealand operations, including the Dominion Post, stuff.co.nz and The Press, fell 6.6 per cent to NZ$205.4m.
However, in Australian dollars revenues rose 4.6 per cent, outpacing Fairfax's Australian metropolitan media, where revenue fell 9.8 per cent.
The New Zealand arm's operating profit was A$37.3m or NZ$42.3m, a 10.4 per cent improvement in Australian dollars, boosted by advertising from local government elections and stabilising property and auto advertising markets.
Asked whether there was a limit to how much cost-cutting could be done to the organisation, Hywood said the company was increasingly finding new sources of revenue.
"People said a few years ago there's no way traditional media companies have got anything other than a bleak future because print advertising goes down and you can't offset it with digital advertising.
"But that's incredibly simplistic."
New opportunities before the company included a scale-up of its events business, and the enormous amounts of data that it could use to identify potential customers for advertisers.
"We have an on-the-ground sales force with brand and reputations that we can lay out for small to medium enterprise digital marketing solutions ... and then there's content marketing.
"You put it all together and you're reshaping the model."
The company declared an interim dividend of A2c per share.