The full-year result included other significant items totalling $140 million.
The media company will pay a dividend of 1 cent per share.
The carrying value of the mastheads has more than halved, from $3.3bn at June 26, 2011 to $1.3bn at 24 June 2012.
Net assets also took a big hit, more than halving from $4.4bn to $2bn.
Fairfax said the $2.8bn impairment, previously tipped by The Australian, was linked to the outlook becoming worse in the second half as the "cyclical downturn became more pronounced".
Analysts surveyed by Bloomberg forecast adjusted net income of $200.8m, and operating profit of $390.6m, on the back of sales of $2.3bn.
The market reacted negatively to the news, taking Fairfax shares down by 3.54 per cent as trading opened and shaving 2 cents off to 54c.
Chief executive Greg Hywood said: "These results reflect a challenging trading environment. We continue to drive significant change through the business, consistent with our strategy, and we are responding to a stressed economic environment.
"Strengthening the balance sheet has been a priority for Fairfax Media this year," Mr Hywood said.
"Proceeds from the partial IPO of Trade Me, and subsequent sell down to 51 per cent, were principally applied to debt reduction."
Net debt was reduced by $574m to $914m.
Ebitda was down 16.7 per cent on last year, but slightly above June guidance and market consensus.
Net operating profit after tax decreased 26 per cent to $205m, and earnings per share were down 25 per cent to 8.7 cents.
Mr Hywood said The Financial Review Group, which contains The Australian Financial Review, "underperformed in 2012 with a difficult second half".
He said the Metro Media division, home of The Age and The Sydney Morning Herald, remained "profitable" and generated revenues that exceeded $250m.
On a conference call with investors, My Hywood today said Fairfax will introduce a "digital metered subscription model" at the Metro Media division in March 2013.
CCZ media analyst Roger Colman questioned if The Australian Financial Review's output did enough to justify its 275 staff, and unfavourably compared the volume of their work-output with the client notes produced by an estimated 40 analysts in Australia.
My Hywood commented: "I have much respect for analysts but we're in a broader market...The Australian Financial Review will live or die on the quality of what it can do for a range of audiences. It's a complex exercise."
The CEO told analysts he did not expect a meaningful recovery in the company's business until 2015, and would manage operations accordingly until the forecast upturn materialised.
Analysts told Mr Hywood the market could not value the digital business accurately because Fairfax would not break down its revenues into digital and classified, and break out revenues from digital standalone assets.
Analysts have struggled to determine how much revenue is being generated by the newspaper mastheads, in comparison to websites such as dating website RSVP.
Mr Hywood said, "We're not breaking it down", but acknowledged that Fairfax's property website was a big contributor.
In a spirited defence of the company's digital strategy, under a barrage of questions from analysts who were seeking more detail on digital revenues, Mr Hywood took a veiled swipe at News Limited (publisher of The Australian).
"We are the company that has the largest news audience in this country bar none. Other companies might sell more newspapers, but we have the largest total news audience," Mr Hywood said.
In response to a question about the possibility of selling its radio assets, Mr Hywood said, "If anyone wanted to buy this company, they can go on the exchange and buy it."
Fairfax issued a profit downgrade two months ago, and warned that earnings in the second half would be down 8 per cent compared to the prior corresponding period.
Fairfax’s writedown follows similar moves by News Corporation, the parent of News Ltd, and APN News & Media. News Corp's $US2.8bn ($2.66bn) writedown was mainly linked to its Australian publishing business. APN took a $400m hit on its New Zealand assets.
There were strong hints at Seven West Media’s full-year results yesterday that the media company would also issue a writedown in the next 12 months, conceding it had “little headroom”.
The results come amid the most turbulent and uncertain period in Fairfax's history, with a major restructure under way and clashes between the board and the company's biggest shareholder, Gina Rinehart, destabilising the business. Investors are deeply unhappy about the ongoing rift and the company's plummeting share price.
Mrs Rinehart is demanding two board seats for her 14.9 per cent stake in the company, but the board will not consider her request until she signs its governance principles. Fairfax executives claim the sticking point is a principle related to editorial independence.
Today's full-year result will be keenly watched by Mrs Rinehart and may trigger the world's richest woman to renew calls for board seats as well as improvements to the company’s performance. She has previously questioned the chairmanship of Roger Corbett, and asked him to resign at the company's November AGM if "performance milestones" are not achieved by then.
Fairfax is targeting cost-savings of $235 million, and will axe almost one-fifth of its workforce over the next three years as well as close two print facilities under Mr Hywood's 'Fairfax of the Future' vision, which is reshaping the company structure for a distribution model based on digital media.
Brokers in recent weeks have been pitching a break-up of Fairfax Media's biggest assets to fund managers.
In one potential scenario, a break-up of the company could lead to its flagship mastheads such as The Age and The Sydney Morning Herald being owned by Mrs Rinehart, but advisers to Fairfax continue to believe the numbers on a break-up play would not deliver the best returns for investors and have routinely dismissed the talk.
No comments:
Post a Comment