Fairfax NZ returns to profit in 2017 as redundancy costs, impairment charges tumble
Fairfax New Zealand, which trades under the Stuff moniker, was back in black in 2017 after the cost of laying off staff tumbled by 80 percent and as a $100 million-plus impairment charge on the value of its newspaper mastheads and buildings a year earlier wasn't repeated.
The Wellington-based media organisation reported a profit attributable to ASX-listed parent Fairfax Media Group of $18.2 million in the 12 months ended June 30, turning from a restated loss of $56.1 million a year earlier when the publisher of the Dominion Post, Sunday Star-Times, Press and stuff.co.nz website wrote $66.8 million off the value of its mastheads, $26.3 million from buildings, plant and equipment, and $4.7 million from software and websites. The loss attributable to non-controlling interests was another $2.2 million, its accounts show.
Fairfax's local unit has been trying new strategies to arrest the decline in its sales, which shrank 6.1 percent to $333.7 million in the latest year. That's seen it adopt a digital-first strategy, and mount an unsuccessful attempt to merge with rival NZME. The newspaper publisher is now reducing its footprint across the country, scaling down to a tabloid-format for its daily broadsheets, and reducing print runs for some provincial newspapers.
Restructuring costs fell to $3.8 million in the latest financial year from $19.3 million a year earlier. As at June 30, Fairfax NZ had redundancy provisions of $1.3 million, down from $3.2 million a year earlier. The company doesn't break out its wage bill in the income statement, although its cashflow report shows spending on suppliers and staff dropped 6.3 percent to $304.9 million.
While those costs were down, Fairfax NZ's executive expenses jumped to $4 million from $2.4 million in 2016. The media group lost two senior managers in early 2017, with chief executive Simon Tong and chief marketing officer Campbell Mitchell departing in the lead up to the Commerce Commission's rejection of the proposed NZME merger, which has been challenged in the High Court and is awaiting judgment.
The latest accounts show Fairfax NZ paid $4.1 million in cash to lift its stake in the hyper-local Neighbourly website to 70 percent from 45 percent, which saw $15 million of goodwill arise from the transaction. The company has since taken full ownership of Neighbourly, although the statements don't disclose how it paid.
Neighbourly's membership has swelled to more than 500,000 from 62,000 and the website was singled out by group chief executive Greg Hywood as a now-profitable business that created a "real opportunity the future" of the New Zealand division. Fairfax NZ's share of profits from its associates and joint ventures was $74,000 in the year, turning from a loss of $1.3 million in 2016.
Fairfax NZ accelerated its amortisation of software in the year, rising to $6.7 million from $5.2 million. The company's gross carrying amount of software and websites totalled $64.6 million as at June 30, with accumulated amortisation and impairments of $41.5 million. That included $16.1 million of additions and $5.7 million of capitalisation from work in progress in the latest year.
Sinead Boucher took over the reins as New Zealand chief executive earlier this year and played a key role in redirecting the publisher's focus in a digital-first strategy when she was head of news. Under her watch the local unit has also branched out into complementary businesses, taking a controlling stake in NZ Fibre Communications, known as Stuff Fibre, and a minority stake in electricity provider Future Energy New Zealand, creating the ability to bundle content, telecommunications, and energy in a single package.
Fairfax NZ today announced a video-on-demand Stuff Pix service will be launched next year, with Stuff Fibre partnering with MuviNow Australia. It will be headed up by former Quickflix NZ boss Paddy Buckley.
The New Zealand unit didn't declare a dividend during the financial year, but since the June 30 balance date has since paid a $17 million dividend to its Australian parent.