Fairfax's NZ unit posts 12% fall in earnings as print ad sales decline

Fairfax Media's New Zealand division posted a 12% drop in first-half earnings as the publisher of stuff.co.nz and the Dominion Post, Press and Sunday-Star Times newspapers said gains in its online revenue didn't offset the ongoing advertising decline in its traditional print publications.

Earnings before interest, tax, and depreciation fell to $30.3 million in the six months ended December 27, from $34.4 million a year earlier, the Sydney-based company said in a statement. Sales from its New Zealand business were down 7.4% to $181.4 million, with the dominant advertising revenue falling 9.2% to $119.8 million.

Advertising revenue was impacted by weak market conditions in New Zealand, Fairfax said in slides accompanying its earnings presentation. Supermarket, retail and employment advertising declines were offset by strong performance in real estate and health, it said.

The New Zealand division increased digital revenue 43% without disclosing any detail. It also said its flagship stuff.co.nz website retained its top spot among domestic websites, lifting its unique audience 4.6% to 1.8 million in January from the same month a year earlier, ahead of online auction site Trade Me, a former Fairfax subsidiary, which posted a 9.4% decline to 1.7 million. Rival news service nzherald.co.nz, owned by APN News & Media, increased its audience 22% to 1.5 million.

Fairfax's New Zealand holding company was released from related party debt last year and received a $76.5 million capital injection from its parent, having unveiled plans to roll out a new model for its newsrooms in ditching regional newspaper editors for regional editorial managers based in Auckland, Wellington and Christchurch to try to drive digital platforms.

The company this week announced plans to cut 70 sub-editing jobs in New Zealand, effectively ending a strategy where Fairfax had outsourced the processing of Australian content to a hub on this side of the Tasman.

Fairfax's New Zealand division cut costs by 6.7% to $150.6 million in the half, which it described as "strong cost management" while investing in its digital business.

The Australian media group is placing an increased focus on digital business, with online revenue accounting for about 20% in the period, twice as much as it did five years ago.

Fairfax's net profit increased 4.2% to $A26.3 million on a 1.6% gain in revenue to $A958.1 million. Chief executive Greg Hywood singled out the Domain real estate website in driving digital revenue growth and earnings.

Since the balance date, Fairfax's revenue is tracking 1-2% below the same period a year earlier due to "continued weak print trends" though Domain is still performing strongly, the company said.

The board declared an interim dividend of 2Ac per share, payable on March 18.

The ASX-listed shares last traded at 83Ac, and have declined 9.8% this year. The stock is rated an average 'buy' based on nine analyst recommendations compiled by Reuters, with a median target price of $A1.03.

(BusinessDesk)