Fairfax writes down goodwill, mastheads by $A2.8 billion but pays dividend

BUSINESSDESK: Fairfax Media – the Australian media group that took more than $A1 billion of charges against goodwill and mastheads in 2010 – has written down the value of those assets by a further $A2.8 billion, widening its annual loss.

It will still pay a 1 Australian cent dividend.

The loss was $A2.73 billion, or A$1.162 per share, in the 12 months ended June 24, from a loss of $A401 million, or 17 Australian cents, a year earlier, the Sydney-based company says.

Sales fell 6% to $A2.32 billion, resulting in a 17% decline in earnings before interest, tax, depreciation and amortisation fell to $A506 million.

Operating cashflow plunged to $A267.6 million from $A431.4 million.

The value of the New Zealand mastheads – which include the Dominion Post, the Press and Sunday Star Times newspapers – took a big hit, being written down to $A137.8 million from $A733.5 million, while kiwi goodwill of $A5.9 million was wiped out.

By contrast, online auction Trade Me's goodwill was bumped up to $A574 million from $A559.3 million, even though Fairfax sold down its stake.

The Australian regional media mastheads, which account for about a third of Fairfax's earnings, were written down by $A607 million to $A483.5 million, while $A400 million of that unit's goodwill was slashed to just $A4.5 million.

Across the whole group, titles, mastheads, radio licences and trade names were written down by $A1.98 billion and goodwill by $A790 million.

The plunging value of print assets comes amid predictions of more tough times for newspaper advertising. PwC last month estimated New Zealand's newspaper ad spend will fall to $483 million by 2016 from $840 million in 2007.

Despite the loss, the board declared a 1 Australian cent dividend, down from 1.5 cents a year earlier. That takes the full-year pay-out to 3 cents, unchanged from 2011.

The shares fell 5.3% to 53 Australian cents on the ASX and have shed 20% this year. That values the group at $A1.35 billion by market capitalisation, almost half analysts' consensus $A2.48 billion enterprise valuation.

In June, Fairfax signalled a radical overhaul, shutting down printing operations and laying off staff as it looks to focus its efforts on making its digital businesses profitable. It flagged restructuring costs rose to $A199.5 million in the 2012 from $A36.8 million a year earlier.

"These results reflect a challenging trading environment," chief executive Greg Hywood says. "We continue to drive significant change through the business, consistent with our strategy, and we are responding to a stressed economic environment."

The New Zealand media assets saw advertising fall 6.8% and circulation 5.6%, for a 5.8% fall in sales to $443.2 million. Ebitda dropped 9.9% to $78.1 million.

Trade Me boosted sales 18% to $146.2 million for an 11% increase in earnings to $110.3 million, according to Fairfax's accounts.

Fairfax's metropolitan unit, which includes the Sydney Morning Herald and Melbourne Age papers, saw editda fall by a third to $A62.8 million as advertising sales dropped 17% and circulation declined 3.4%, reducing total revenue 13% to $A565.2 million.

The Australian Financial Review advertising fell 12% and gross sales 9.3% to $A130 million for a 50% slump in ebitda to $A6 million.

The regional media unit saw advertising fall 2.2% and circulation 1.1% as gross sales declined 2.4% to $A573.8 million and ebitda dropped 9% to $A159.1 million.

The broadcasting business reported a 48% decline in ebitda to $A13.9 million on a 13% fall in sales to $A97.3 million.