- Fairfax books annual net profit A$83.9 mln as expenses slide
- But revenue declines sharply across its newspapers
- Seven West logs annual loss of A$744 mln
(Adds Fairfax CEO comment, analyst reaction)
Australia's Fairfax Media Ltd (FXJ) swung to an annual net profit on the back of deep cost cuts and a robust performance from its online property classifieds business, but advertising revenue declined sharply across its newspapers.
The pressure on Australia's media power houses was also evident at Seven West Media (SWM), which logged a A$744 million ($582 million) annual net loss on Wednesday after booking a slew of impairments.
Traditional media companies have been struggling to adapt as consumers seek out free online alternatives and advertisers concentrate their spending on rivals like Facebook Inc
and Google Inc . Fairfax, which has just seen two private equity firms walk away from takeover bids, as well as Seven West and an arm of Rupert Murdoch's News Corp
are lobbying for legislative changes they say will allow more consolidation to help them better compete. The publisher of The Sydney Morning Herald and The Australian Financial Review managed its best showing in three years with an annual net profit of A$83.9 million versus a loss of A$772.6 million a year ago. But newspaper revenue slid 9 percent with overall revenue down 5 percent.
The net profit result was helped by a A$1.2 billion-plus cut in expenses and a strong contribution from the Domain real estate classifieds business, which now accounts for 42 percent of the company's pretax profit and which it plans to list.
"When you take away the fact that Domain revenue is up, it just shows you how newspaper businesses are under tremendous challenge," said Morningstar media analyst Brian Han.
Underlying pretax profit, which strips out one-off items, came in at A$271.1 million, down 4.3 percent on the year.
Fairfax Chief Executive Greg Hywood said on a call with analysts that the newspapers remained profitable in a difficult period of global structural change, as cost cuts had largely offset declines in print advertising revenues.
Whether major media companies will be successful in winning changes to legislation remains to be seen as the ruling coalition will require support from independent politicians to get reforms through.
Australian media firms are currently subject to a "two out of three" rule that does not allow one organisation to own all three main media types - newspapers, television and radio - in any given city.
Fairfax also gave a more specific timeline for its Domain IPO, saying it planned to have the unit listed by the end of November with Fairfax to keep a 60 percent stake.
Fairfax shares were flat in early afternoon trading, in line with the broader market. Seven West shares were down 1.6 percent.
($1 = 1.2781 Australian dollars)
