Fairfax riding a 'perfect storm'

03:21, Aug 23 2012

Fairfax Media has written down the value of its New Zealand mastheads by A$608 million (NZ$782m) as part of a group-wide A$2.8 billion write-down of the trans-Tasman company's book value.

Fairfax chief executive Greg Hywood told investors this afternoon that the business was still profitable while riding a "perfect storm" of cyclical advertising declines and audiences shifting from print to digital.

The company today reported its overall revenue was down 6 per cent to A$2.328bn for the full year to June 24.

Excluding writedowns and significant items, underlying net profit after tax from trading was down 26 per cent on the previous year, to A$212m.

Hywood said the company's management was not planning for a recovery in the advertising market until at least 2015.

Early 2013 financial year revenue was already tracking at a level 10 per cent lower than 2012, he said.

While Fairfax's New Zealand media segment's revenue result was in line with the overall decline of 6 per cent, the margin on earnings before interest, tax, depreciation and amortisation (Ebitda) was only down 1 per cent due to "disciplined cost management", said Hywood.

Ebitda itself was down 9.9 per cent in New Zealand from $58.5m to $52.7m, while Fairfax's overall Ebitda was down 17 per cent on last year to $506m.

The company's New Zealand segment booked $70,000 worth of restructuring and redundancy charges in 2012, compared to $7.1m last year.

Meanwhile Fairfax's Australian metropolitan mastheads had $912m shaved off their value and its regional media segment was written down by $961m.

The writedowns were based on the cashflow outlook of Fairfax's businesses over the next three years.

Hywood said investment in digital media was paying dividends, with $250m of revenue now coming from the company's digital businesses.

More income would be generated by the introduction of paid subscriptions for its online Australian titles.

Fairfax's ASX share price has dropped from A95 cents in October last year to A56 cents at today's opening. It has since dropped to 52.5 cents on today's news.