Fairfax defends big loss, fall in revenue

Fairfax Media chief executive Greg Hywood says the diversified publishing house delivered a "more than credible" fiscal 2011 result in the midst of deteriorating conditions in the second half.

Moreover, the company has earmarked $85 million in savings over the next two years, and hoped $30 million would come from exploring printing and distribution options, including a potential tie-up with News Ltd.

Fairfax has also announced plans to partially float its New Zealand-based online auction and classifieds business TradeMe in a bid to reduce debt and increase dividends.

While Fairfax booked a statutory full year loss of $390.9 million in fiscal 2011, compared with net profit of $282 million in the prior year, the result was impacted by a $650.7 million impairment charge.

Fairfax said the writedown related to the carrying value of its mastheads, goodwill and customer relationships. Restructuring costs of $23.9 million were also included in the statutory result.

Underlying net profit after tax was $273.7 million, Fairfax said in a statement on Friday, down 1.8 per cent on the prior year.

Revenue was down 0.7 per cent at $2.47 billion.

Mr Hywood said conditions turned sour in November, as interest rate rises, as well as global economic woes and concerns at home, impacted heavily on consumer sentiment and resulted in a "prolonged cyclical downturn".

"In this environment, our performance has been more than credible," Mr Hywood told journalists during a media briefing on Friday.

"Our revenues have held up in this current environment and our cost control was tight.

"Also, it is important to note that our multiplatform strategy is gaining traction."

In a reflection of the sharp change between the first and second half, Fairfax said first half advertising revenue was up five per cent on the prior corresponding half, but fell 3.1 per cent in the second half of fiscal 2011.

Fairfax said the vast majority of the impairment and restructuring charges were non-cash in nature and had no impact on the operating strength or debt levels of the company.

Media stocks have fallen considerably in recent times as global economic woes and weak consumer confidence at home hit retail spending and dampened the advertising market.

Fairfax said underlying earnings before interest, tax, depreciation and amortisation (EBITDA) was $607.4 million in fiscal 2011, just above company guidance of $600 million and down five per cent from the prior year.

In terms of current trading, Fairfax said the year to date had shown "some improvement".

Advertising revenues were down four per cent compared with the prior year, Fairfax said, and appeared to be "stabilising from the last quarter of the 2001 financial year when advertising revenues were down six per cent".

"Visibility in advertising markets remains opaque and general economic trends do not give us confidence that we will see any significant rebound in revenues in the current half," Fairfax said.

Fairfax said it intended to sell between 30 per cent and 35 per cent of TradeMe, with the timing of the IPO dependent on market conditions and price.

Mr Hywood said Fairfax did not need to sell TradeMe, but he believed it was in the interests of the company.

"We believe that TradeMe is a good standalone business and would benefit from governance arrangements that gave it greater access to capital," Mr Hywood said.

Mr Hywood said the sale process for Fairfax's radio stations, which include Sydney's 2UE and Melbourne's 3AW among others, was ongoing.

A dividend of 1.5 cents per share was declared, fully franked.

Fairfax Media shares were trading nine cents higher at 86 cents at 1008 AEST.