Fairfax Media’s sagging shares received a seven per cent boost after the company announced plans to sell part of its New Zealand TradeMe business.
The diversified publishing house also said advertising markets were stabilising and flagged $85 million in cost cuts over the next two years. It reported a statutory loss of $390.9 million for the 12 months to June 26, 2011, a sharp turnaround from the $270.3 million profit in the prior year.
But the result was impacted by a $650.7 million impairment charge, which reflected writedowns in the carrying value of its mastheads, customer relationships and goodwill. Underlying net profit after tax was $273.7 million, Fairfax said, down 1.8 per cent from the prior year.
Chief executive Greg Hywood said it was a good result achieved in difficult circumstances, given the downturn in advertising markets in the second half of fiscal 2011.
“In this environment, our performance has been more than creditable,” he said during a media briefing on Friday. “Our revenues have held up in this current environment and our cost control was tight.”
While Fairfax did not offer specific earnings guidance, it said trading so far in fiscal 2012 had shown some improvement and the ad market appeared to be stabilising. But it cautioned that “general economic trends do not give us confidence that we we’ll see any significant rebound in revenues in the current half”.
Ad revenue declined six per cent in the final quarter of fiscal 2011, Fairfax said, compared with a four per cent drop so far in the current year.
Fairfax said it was looking to offer between 30 per cent and 35 per cent of its New Zealand auctions and classifieds business TradeMe through an initial public offering to reduce debt and increase dividends.
Mr Hywood declined to put a value on how much the sale would fetch. The timing of the sale would depend on market conditions, he said.
Mr Hywood said former Fairfax chief executive David Kirk had agreed to be chairman of the new TradeMe board.
The company has earmarked $85 million in savings over the next two years, and hoped $30 million will come from exploring printing and distribution options, including potentially sharing printing facilities with News Ltd.
Mr Hywood described discussions with News Ltd, the Australian arm of Rupert Murdoch’s News Corporation, as “very fruitful and productive and done with intent”.
Cost reductions had also been achieved through outsourcing some sub-editing roles for its newspapers to a third party, Pagemasters, a subsidiary of Australian Associated Press.
Fairfax closed up 5.5 cents, or 7.1 per cent, at 83 cents and was the third-best performer on the S&P/ASX50.
It stock closed at an all time low of 69.5 cents on Monday and is well down from the $4 level it was trading above in 2007.
Tyndall Investment Management senior research analyst Michael Maughan said a cautious, but encouraging, outlook statement, and confirmation a slice of TradeMe would be offered to the market, met with a positive response.
“When you are a cyclical stock, and you come out with numbers that are at least in line, if not a little bit above market expectations, people are pretty happy,” he said.
Mr Hywood said the sale process for Fairfax’s radio stations, which include Sydney’s 2UE and Melbourne’s 3AW among others, was ongoing.
