Fairfax NZ first-half earnings hold up even as revenue slips

Greg Hywood
Fairfax Media Group 12-month price history (NZX.com)

Fairfax Media Group's [ASX: FXJ] New Zealand unit, which includes the Dominion Post, Press and Sunday Star Times newspapers, kept its first-half earnings reasonably flat as recent cost-cutting measures offset weaker circulation revenues.

New Zealand earnings before interest, tax, depreciation and amortisation slipped 0.8 percent to $42.3 million in the six months ended Dec. 29 from the same period a year earlier, the Sydney-based parent company said in a statement. Revenue shrank 7.7 percent to $206.9 million, with a 5.9 percent decline in advertising sales to $140.5 million and an 8.7 percent drop in circulation revenue to $59.2 million.

In Australian dollar terms, the New Zealand unit lifted revenue 4.6 percent to A$182.2 million and EBITDA 10 percent to A$37.3 million.

"In the New Zealand business, weak retail sales have affected the performance of circulation," the company said in its report. "The advertising market remained stable, (local) government elections and the auto and property markets boosted the results against softer categories. Savings in staff expenses offset the decline in revenue."

The New Zealand unit was the middle of the pack for the wider group, whose Australian metropolitan segment boosted earnings 52 percent to A$81.5 million on a 9.8 percent fall in sales to A$428.6 million. The Australian community media unit's earnings dropped 22 percent to A$82.5 million on an 18 percent slide in revenue to A$305.5 million, and the radio segment posted a 9.9 percent decline in EBITDA to A$9.2 million on a 1.1 percent decrease in sales to A$54.5 million.

Stripping out one-off items including assets sales, Fairfax's underlying profit from continuing operations climbed 49 percent to A$86.4 million. Net profit dropped to A$193.8 million, or 8.2 cents per share, in six months ended Dec. 29, from A$386.3 million, or 16.4 cents, a year earlier. The 2013 result was bolstered by one-off proceeds from the sale of Fairfax's stake in New Zealand online auction site Trade Me.

"We have shown a determination to transform the business through cost reductions and driving new revenue streams," chief executive Greg Hywood said. "We have made decisions to balance revenue and cost with a focus on growing profits on a sustainable basis."

Revenue was down 3 percent in the first five weeks of the second half from a year earlier, a slower decline than the 5.5 percent drop in the previous year.

Fairfax finished the year with net cash of A$80 million from net debt of A$154 million a year earlier, and boosted operational cash flow to A$90.6 million from A$69.4 million.

The ASX-listed shares last traded at 71.5 Australian cents, and have gained 12 percent this year.

The board declared an interim fully-franked dividend of 2 Australian cents per share, payable on March 19 with a record date of March 5.

(BusinessDesk)

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