Fairfax New Zealand posted its first annual loss in four years as it wrote off than $100 million from the value of its mastheads and buildings and more than doubled its bill to pay out redundancies in 2016, all while resuming dividends to its Australian parent and lifting executive pay.
The Wellington-based unit of ASX-listed Fairfax Media Group reported a loss of $75.3 million in the year ended June 30, 2016, compared with a profit of $21.9 million a year earlier and marking the first time the books were in the red since 2012.
The bottom line was weighed down by impairment charges of $106.8 million as the publisher of The Dominion Post, The Sunday Star-Times, The Press and stuff.co.nz website wrote off $66.8 million from the value of its mastheads, $26.3 million from buildings, plant and equipment, and $4.7 million from software and websites.
Redundancy costs also featured highly at $19.3 million, up from $9.4 million in 2015, and the media group’s provisioning for redundancy costs in the 2017 year was $3.2 million as at June 30, compared with $4.8 million at the end of the 2015 year. Key management salaries rose to $2.4 million from $1.9 million.
Fairfax Media’s New Zealand division has been in a state of flux over the past year as it seeks to merge with rival publisher and radio station operator NZME in an effort to fend off what it sees as its biggest threat in the form of Google and Facebook, which dominate online advertising.
The prospect of that took a knock when the Commerce Commission ruled against such a deal in a draft decision, citing concerns over the concentration of power and influence under the umbrella of one publisher.
In trying to talk the regulator around, Fairfax and NZME have downplayed the size of likely job cuts among frontline reporters. Just 10% to 13% of between $136.5 million and $218.7 million in estimated savings over five years is to come from "a reduction in duplicated journalist roles".
Group chief executive Greg Hywood has said if the merger does not go ahead, it will be "endgame" for the New Zealand assets, which Fairfax bought for $1.19 billion from Rupert Murdoch’s Independent Newspapers Ltd in 2003, and the company has confirmed it received an unsolicited bid from a mystery buyer in a deal reported to have been between $100 million and $120 million.
Fairfax New Zealand resumed payments to its shareholder in 2016 and dividends of $31.4 million were paid in the year.
It suspended them a year earlier when its Australian parent injected $76.5 million when the New Zealand division rolled out a new model for its national newsrooms, under which regional newspaper editors were replaced by regional editorial managers based in Auckland, Wellington and Christchurch, trying to drive digital platforms, which it sees as replacing dwindling revenue from its newspapers. The mastheads, once valued at $1.12 billion, are now valued at just $175.2 million as at June 30, 2016.
When announcing the group’s annual earnings in August, the New Zealand division posted underlying earnings before interest and tax of $A43.4 million, compared with $A54.3 million in 2015, on a 10% fall in revenue to $A322.6 million. At the time, Fairfax Media booked an $A981.8 million write-down in the value of mastheads and other assets in Australia and New Zealand.
The New Zealand holding company’s trading revenue fell 9% to $351.5 million in the 2016 financial year while trading expenses jumped 21% to $430.6 million. Stripping out depreciation, amortisation, redundancy costs, finance charges, and the impairment charge, expenses were down 8.5% at $291.1 million, implying underlying earnings of $60.4 million, from $68 million a year earlier.
