Fairfax Profit Surges After Selling Stake in Trade MeDavid Fickling and Angus Whitley
Fairfax Media Ltd., Australia’s second-largest newspaper publisher, said first-half profit rose fourfold after a gain from selling its stake in auction website Trade Me Ltd.
Net income in the six months ended December rose to A$386.3 million ($395 million), most of it generated by asset sales, from A$97 million a year earlier, Sydney-based Fairfax said in a statement today. Excluding such gains, profit fell 39 percent to A$83 million.
Fairfax sold Trade Me to cut debt and focus on its publishing business, which will next month convert the Sydney Morning Herald and Age broadsheets to tabloids. The company will start charging online readers to offset what it has called a “structural decline” in newspapers.
“The economic environment continues to be stressed,” Fairfax said in today’s statement. “A sustained improvement in consumer sentiment is required in order to see an uplift in a number of our key advertising categories.”
Fairfax shares fell 2.8 percent to 53 Australian cents at the close in Sydney, trimming this year’s advance to 3.9 percent. The S&P/ASX 200 Index has risen 7.1 percent this year.
Chief Executive Officer Greg Hywood last year wrote down the value of mastheads by A$2.8 billion and started firing 1,800 workers and closing print sites to end losses. Fairfax today posted a one-time profit of A$283.5 million on the sale of its remaining 51 percent stake in Trade Me for A$616 million.
Group sales fell 7.1 percent to A$1.1 billion in the six-month period, Fairfax said. Revenue at Metro Media, which includes the Sydney Morning Herald, fell 7.4 percent, while sales at the publisher’s regional unit declined 5.8 percent.
The company’s ability to cut costs and set up pay barriers for the digital versions of its newspapers will be “key share price drivers”, Samantha Carleton, an analyst at Credit Suisse Group AG in Sydney, said in a Feb. 4 note to clients.
The company also publishes the Australian Financial Review.
Gina Rinehart, Asia’s richest woman, is Fairfax’s biggest shareholder, owning a 15 percent stake, according to data compiled by Bloomberg. She failed in June to get a seat on the board for herself after disagreeing on conditions including signing Fairfax’s Charter of Editorial Independence.
News Corp., the media company controlled by Rupert Murdoch, is Australia’s biggest newspaper publisher.