Fairfax NZ unshackled from debt

Fairfax New Zealand has been unshackled from related party debt and the associated interest costs, while also receiving a $76.5 million injection from its Sydney-based parent.

The Wellington-based New Zealand holding company lifted net profit 71% to $22.5 million in the 12 months ended June, as finance costs tumbled to $10 million from $51.6 million a year earlier, according to financial statements lodged with the Companies Office.

The cheaper interest expense stemmed from a series of related-party transactions in August last year, when Fairfax New Zealand repaid a $401 million loan, which attracted annual interest of 10.8%, and was itself paid an outstanding debt of $493 million.

The end result left Fairfax New Zealand with virtually no related party borrowings, and minimal trade-based receivables and payables with other entities in group.

A month later, the New Zealand unit received a capital injection of $76.5 million, which helped bump up the company's equity to $308 million from $209.6 million a year earlier. The Australian parent last poured in new equity totalling $607.4 million in 2010 and 2011, leading up to an 80% writedown in the value of its mastheads the following year.

The New Zealand division also ended a four-year run of paying dividends to the parent, totalling $439.5 million. Most of that came in 2013 when Fairfax sold its controlling stake in online auction site Trade Me Group.

Like other publishers, ASX-listed Fairfax Media Group has had to contend with shrinking advertising revenue as its audience switches to a digital platform where they can source free news.

Fairfax said in August its New Zealand earnings before interest, tax depreciation and amortisation fell 12% to $70.3 million in the year ended June, while ad sales dropped 6% to $252.4 million and circulation revenue decreased 3% to $114 million.

The New Zealand holding company's statements show trading revenue slipped 4.2% to $386.1 million, while trading expenses dropped 11% to $355.6 million.

Fairfax New Zealand spent $9.4 million on redundancies in the 2015 year, more than the $6.3 million provision it took in 2014, and up from $6.4 million the year before. The publisher provided for another $4.8 million in redundancy costs in the 2016 year.

The local media unit says it was rolling out a new model for its national newsrooms, dropping regional newspaper editors for regional editorial managers based in Auckland, Wellington and Christchurch to try and drive digital platforms.

In December last year, Fairfax New Zealand bought a 22.5% stake in information-sharing website, Neighbourly, which helped lift the value of its investments in joint venture and associates to $4.6 million from $1.2 million a year earlier. Since then, Fairfax increased its stake in Neighbourly to 45%.

Fairfax Media Group's ASX-listed shares rose 1.2% to 86.5Ac today, and have slipped 2.3% this year.

(BusinessDesk)