Fairfax News and Media Company has posted losses of A$2.732 billion for the financial year 2011/12, after writing down its media businesses and plants and equipment (including printing presses in Tullamarine and Chullora that are to be shut down in 2014) by almost A$3 billion. The losses announced on Thursday for the year to June were seven times higher than those for the same period in 2010-11, which stood at $390.9 million. Fairfax is Australia’s oldest news publisher, and its titles include the country’s oldest paper, The Sydney Morning Herald
The company’s write-down of mastheads and goodwill comes in light of the woeful financial forecasts predicted for the next three years. In a statement following the release of the company’s full-year financial results, Fairfax Chief Executive Greg Hywood said: "The assessment of the carrying value of our intangible assets - mastheads, goodwill and customer relationships - is based on the three-year outlook for each of our business units. That outlook worsened considerably over the course of the second half of the year as the cyclical downturn became more pronounced, and our confidence in a sustained improvement in market conditions reduced."
Commenting on the present state of the advertising market, Hywood expressed his belief that never in his 30-year career had it been in such a bad condition, but he also added that the present drop in advertising revenue was part of a “cycle” and would “inevitably pass.”
Company earnings before interest, tax, depreciation and amortization (EBITDA) were A$506 million, down 16.7 percent on the previous financial year. Meanwhile overall revenue had decreased 6 percent to A$2.328 billion and net profit after tax stood at A$205 million.
For the first time ever, the full-year report divided the performance of Fairfax Metro businesses into print and digital, to highlight that the print titles remained profitable and to show that digital generated revenues of A$250 million. In fact, 20 percent of the company’s revenue growth was produced by its digital businesses, though in the grand scheme of things the increase was too small to make any meaningful difference. Fairfax’s digital interests include online news and classifieds and RSVP, Australia’s biggest dating site, though it has not been revealed whether the upturn in Fairfax’s digital fortunes is due mainly to its standalone digital assets or to its news sites.
Fairfax’s share prices underwent their biggest one-day percentage drop in three and a half years, nose-diving by 10 percent to A$0.51, but avoided reaching the all-time low recorded at the beginning of August. Over the course of the past five years share values have fallen by nearly 90 percent, leaving investors increasingly nervous.
In the hours after news of the publisher’s heavy losses broke it was reported that Fairfax’s majority shareholder, iron ore billionaire Gina Rineheart, was planning to sell a large portion of her stake in the company. Rineheart had already reduced her stake in the company from 19 to 15 percent after arguing with the board about editorial control, and on Thursday morning was said to have engaged Morgan Stanley to handle the sale of 117.3 million shares in Fairfax. However later lack of demand quickly forced the financial services firm to pull the block trade. Apparently no buyer could be found for the shares, offered at 50¢ each; according to Fairfax-owned Australian Financial Review, no institutional buyers were interested in anything above 45¢ a share. Had it gone through, the sale would have represented around 5 percent of the company, or A$59.5 million.
Other major Australian publishers are struggling in the increasingly hostile news media market. Last week APN News and Media, which publishes 20 daily and more than 100 non-daily newspapers in Australia and New Zealand, reported a net loss of A$319 million, due to an impairment charge of A$485 million on its flagship New Zealand title, The New Zealand Herald. APN’s New Zealand publishing arm has already reduced staff numbers by 400 in the past three years and is looking to cut another 100 jobs by the end of 2012. Seven West Media announced its 2012 full-year results only a few days before Fairfax. While The West Australian has seen Monday-Saturday circulation increase by 0.2 percent, total newspaper revenue is down by 5.2 percent, to A$68 million. Across the company advertising revenue had fallen by 6.5 percent.
Despite the crippling losses suffered by Fairfax, Hywood is optimistic about the company’s future, and insists that “there is good reason for confidence.” The Fairfax for the Future project will see the publisher continue to invest in digital businesses and press on with its plans to introduce paywalls at every title and convert its broadsheet papers to tabloid format.
There is concern that these plans will do little to combat the publisher’s primary problem, a lack of revenue growth. Others worry that the cost-cutting measures at the company, including the reduction of 1,900 jobs over a three-year period, will cause irreparable damage to the editorial quality of Fairfax’s news titles. Former The Age employee Andrea Carson writes: “research into investigative journalism over seven decades suggests size does change the style of content of general newspapers, although less so with financial publications … When some Australian broadsheets have converted to tabloid, as happened with The Courier-Mail in 2006 and the Adelaide Advertiser in the late 1990s, their award-winning contributions to investigative journalism faded away.