Annual Report 2009
ABN 15 008 663 161
Building on our strengths
Australasia’s
most diversified
media company
434 publications
284 websites
15 radio stations
24 printing centres
Annual General Meeting
The annual general meeting will be held at
10.30am on Tuesday, 10 November 2009 at the
Four Seasons Hotel, 199 George Street, Sydney NSW 2000.
Table of contents
Chairman’s Report
Chief Executive Officer’s Report
Board of Directors
Directors’ Report
Auditor’s Independence Declaration
Remuneration Report
Corporate Governance
Management Discussion & Analysis Report
Consolidated Income Statements
Consolidated Balance Sheets
Consolidated Statements of Recognised
Income and Expense
Consolidated Cash Flow Statement
Notes to the Financial Statements
Income tax expense
1. Summary of significant accounting policies
2. Revenues
3. Expenses
4. Significant items
5.
6. Dividends paid and proposed and finance costs
7. Receivables
Inventories
8.
9. Assets held for sale
10. Other assets
11. Investments accounted for using the equity method
12. Available for sale investments
13. Held to maturity investments
14. Intangible assets
15. Property, plant and equipment
16. Derivative financial instruments
17. Pension assets
18. Deferred tax assets and liabilities
19. Other financial assets
20. Payables
21. Interest bearing liabilities
22. Provisions
23. Contributed equity
24. Reserves
25. Retained profits
26. Minority interest
27. Earnings per share
28. Commitments
29. Contingencies
30. Controlled entities
31. Acquisition and disposal of controlled entities
32. Business combinations
33. Employee benefits
34. Remuneration of auditors
35. Director and executive disclosures
36. Related party transactions
37. Notes to the cash flow statements
38. Financial and capital risk management
39. Segment reporting
40. Events subsequent to balance sheet date
Directors’ Declaration
Independent Audit Report
Shareholder Information
Five Year Performance Summary
Directory
Publications and Websites
2
4
6
8
13
14
23
32
34
35
36
37
38
54
55
56
57
58
59
60
60
60
61
63
64
64
68
71
75
78
80
80
80
82
84
87
88
89
89
90
91
92
98
99
101
102
103
106
107
108
119
123
124
125
127
129
130
131
Chairman’s Report
Faced with some of the toughest trading conditions in advertising markets ever experienced in Australia, particularly during the
second half of the financial year, the Board and management team have, I believe, delivered the best possible result in these
difficult circumstances.
On an underlying trading basis, earnings before depreciation, interest and tax total $605.0 million, 27.2% below the level reported
last year.
In this climate, the creditable result reflects the Board undertaking the investments in Fairfax Digital in Australia and the
acquisitions of Trade Me in New Zealand, Rural Press and Southern Cross Radio and the earnings that these companies have
contributed to our overall results.
When taking into consideration the Impairment and Significant Items charges that are further detailed in the Accounts, the
Company reported a net loss after tax of $380.0 million. The masthead, licences and goodwill impairment charges which totalled
$513 million have been closely reviewed by the Board and take into consideration the fall in value of our newspaper and other
businesses as a result of the present environment
As shareholders may also be aware, we announced in May this year that Directors’, the CEO and generally direct reports to the
CEO have accepted fee and salary freezes. This position will continue until economic conditions improve.
When I reported to you last year, I wrote extensively about the steps that we had taken to better position ourselves as one of the
world’s pre-eminent media companies. Some years ago, the Board made a conscious decision to diversify the Company outside
the mainstream revenue provided by the Australian Financial Review, Sydney Morning Herald, The Age and smaller regional
papers we owned. As a result of this diversification, we have largely withstood the downturn in traditional media that has been
experienced throughout the global market.
Today, as a result of the decisions made by our Board and management, we are one of the most diversified media companies
globally, with a range of media assets that complement each other. We are a strong, multi-disciplined media company with some of
the finest media assets in the world.
In future years, the way we distribute our very valuable content will continue to evolve and, as a result, enhance shareholder wealth
which we strive to achieve as a team.
Over this past year we have also undertaken a number of steps to strengthen the balance sheet of the Company, including:
•
•
•
•
The successful raising of $624 million in additional equity
The sale of the Southern Star TV Production and Distribution business for $108.4
Announcing in December 2008 a temporary reduction in the dividend payout ratio
Ensuring that we maintain strong operating cash flows.
These actions have reduced the net debt of the Company by $734 million over the financial year.
In December 2008, the Board addressed the pressures created by the economic decline and announced the Company would
temporarily reduce the dividend payout ratio to approximately 20% of underlying earnings in order to preserve capital and facilitate
debt reduction.
2
Chairman’s Report
During the year, the Company has distributed dividends representing over 16% of earnings, excluding impairment and significant
items. In view of the economic environment, Directors have resolved to retain funds in the business and not pay a final dividend.
The Board will continue to look very closely at the dividend issue but at this stage intends to retain the existing payout ratio until
economic and financial conditions permit a change.
The Board conducts a review of its structure, composition and performance annually. The Board may seek external advice to assist
in the review process. During this financial year a review of Board performance was conducted with the assistance of an external
consultant and the results and recommendations were discussed at the Board and various recommendations implemented.
During the year we also had a change to the Chief Executive Officer and Managing Director of the Company following the
resignation of David Kirk in December 2008.
In his more than three years in the role, David had been an outstanding CEO. He and his team, in partnership with the Board, led
the complete re-positioning of the company, from a metropolitan newspaper publishing business to a diversified media business.
He represented the interests of Fairfax Media externally with vigour, good humour and passion. I and the Board thank David for his
valuable contribution.
Brian McCarthy was appointed Chief Executive Officer and Managing Director. Brian is an excellent choice given his deep and
extensive media experience and highly successful track record as Managing Director of Rural Press Limited for 13 years. Brian is
the right person with the right experience at this time to run our diverse Company.
Ms Julia King will be retiring from the Board at the conclusion of the upcoming Annual General Meeting. We are very grateful for
her valued contributions during her 14 years as a Director and wish her all the best in the future.
I would like to thank my fellow Board members for their continued support during the year and congratulate Roger Corbett on his
appointment as Deputy Chairman of the Company. Roger is Chairman of the Audit and Risk Committee and an excellent Director.
His contributions at a Board level have been invaluable. Both Roger and I will be putting ourselves forward for re-election at the
upcoming Annual General Meeting and we look forward to your continued support.
I also want to thank our staff for their dedication and commitment to the Company and shareholders.
Shareholders can be assured that we take our environmental responsibilities seriously. A sub-committee of the Board has been
established to monitor and direct our efforts in environmentally friendly practices.
A great deal has already been achieved within the Company to create an environmentally friendly culture. Our new office buildings
located in Sydney and soon in Melbourne will have the highest environmental ratings possible. We encourage our staff to utilise
public transport and cycling to work by establishing specific bus arrangements and providing secure bicycle facilities in our offices
and we have a number of initiatives planned to further reduce our carbon footprint.
In closing I would like to stress that your Board and management team is committed to growing shareholder value and we are
confident that our unique mix of media assets, excellent management team and ongoing focus on operational excellence will be of
benefit to shareholders in the years to come.
Ronald J. Walker, AC CBE
Chairman
3
Chief Executive Officer’s Report
It is a great pleasure to report to Fairfax Media Limited shareholders in my first year as Chief Executive Officer and Managing
Director.
Fairfax Media is Australasia's most diversified media company with 434 publications, 284 websites, 15 radio licences and 24
printing centres in Australia, New Zealand and the United States.
From this base of quality media assets, it is our goal to provide readers, customers, employees and shareholders with all the
benefits of being associated with Fairfax Media.
Over the past financial year, the Company has faced a business environment unprecedented in its long history. Three factors have
had a major impact on Fairfax:
•
•
•
the speed of the economic slowdown, especially in the second half
cuts to discretionary advertising
responding to the online challenges
Even with these factors, the underlying earnings before depreciation, interest and tax (EBITDA) of $605 million was slightly above
market consensus. The net loss after tax of $380 million included impairment and significant items. Operating cash flow of over
$384 million reflected the fundamental strengths of the Company.
Despite the poor market conditions, we recorded a creditable result, and our achievements are a reflection of the calibre of our
management and staff. We place on record our appreciation for their contribution to this result.
During the 2009 year we have undertaken major initiatives to strengthen Fairfax Media for the future.
These initiatives were first, to strengthen the balance sheet of the Company. A decision was taken in late February 2009 to raise
equity and to use the proceeds from the raising to pay down a substantial portion of the syndicated Australian Dollar banking
facility that Fairfax Media had in place. The 3 for 5 accelerated non-renounceable pro-rata entitlement offer was successfully
completed in April 2009, raising a total of $624.6 million.
These funds, combined with the sale of the Southern Star business and the operating cash flows generated this year, has reduced
net debt to $1.78 billion, being $734 million lower than the level at June 2008.
Second, a new management structure was implemented.
This new structure provides for improved business opportunities by grouping operations around core functions such as
metropolitan, regional and community mastheads, printing, business media, and online. The structure facilitates improvement in
the way print and online work together, both commercially and editorially, for the benefit of our audiences and customers.
The attitudes and culture of our people are very important and this new structure, combined with our excellent Management
Development Programme, allows us to mentor, train and develop our employees to meet the challenges of the media environment.
Third, a number of new business opportunities were pursued. For example, we have now bundled the sales of both our print and
online metropolitan classifieds together in one team allowing our sales staff to sell both an online and/or print advertisement. We
made these changes following feedback from customers who wanted one sales relationship across our print and online products.
In regional markets, we started the roll-out of our My Career and Drive classified brands across our mastheads and online sites.
This followed the successful integration of Domain in regional markets the previous year.
4
Chief Executive Officer’s Report
We announced the launch of a website, the nationaltimes.com.au to showcase opinion and commentary of Australia's political and
national affairs. This website revives The National Times brand, which was synonymous with intelligent and thought-provoking
journalism. It will feature the best of our opinion writers, commentary and analysis, coupled with guest commentaries from
politicians, academics and other public figures.
To further strengthen and broaden national coverage of federal politics, we have merged the Canberra bureau of our metropolitan
newspapers The Sydney Morning Herald and The Age. While each masthead has maintained a small dedicated staff, a team of
reporters working across both papers has been created to enrich our coverage.
Fourth, the cost base of the Company needed to be lower and a number of wide-ranging cost initiatives were undertaken. By
utilising technology, changing business processes and a programme of continuous improvement, we have successfully reduced
costs during the year by 4.3%. In the second half, costs are down 7.5% on the previous corresponding period on a like-for-like
basis.
These are but a few examples of business processes implemented in Fairfax Media Limited in the 2009 year.
The impact of the economic downturn had a greater impact upon our business units during the second half of the year,
The publishing operations, which make up approximately 80% of the Company’s revenues, were impacted by lower classified and
display advertising revenues. This flowed through to lower EBITDA.
In the online businesses. Fairfax Digital increased revenue with EBITDA down slightly as we continued to invest in new websites.
In New Zealand the TradeMe business increased revenue and EBITDA.
Revenue and EBITDA for the Printing and Broadcasting business units were down on a like-for-like basis.
Across the Company we continue to focus on the occupational health and safety of staff. Our work safety programmes and
resources have reduced lost time injuries during the year. In the year under review we assisted numerous communities,
organisations and charities through support, sponsorships and partnerships.
Importantly, the Company continues to invest in new technology in line with the needs of the business.
In conclusion, I believe the broad range of initiatives undertaken, the quality of our media assets, our diversified business base and
the commitment of our management and staff places Fairfax Media in a wonderful position to benefit from any improvement in
economic conditions.
Brian McCarthy
Chief Executive Officer and Managing Director
5
Board of Directors
Board of Directors
MR RONALD WALKER, AC CBE
NON-EXECUTIVE CHAIRMAN, APPOINTED TO THE BOARD 4 FEBRUARY, 2003
Mr Walker has been prominent in public life for more than 40 years. He was founder and chairman of one of Australia’s largest
private chemical companies between 1963 and 1976, was co-founder, director and major shareholder of Hudson Conway Limited,
and was co-founder and major shareholder of Crown Casino Limited, and WAM Interactive Limited.
Mr Walker served two terms as Lord Mayor of Melbourne from 1974 to 1976.
Mr Walker is currently the Chairman, Australian Grand Prix Corporation; Member, Formula One Commission UK; Director, Football
Federation Australia; Chairman, Microsurgery Foundation at St Vincent’s Hospital and Director, Australian Tissue Engineering
Centre at St Vincent’s Hospital. He has served Australia in many capacities over many years in public life including: Chairman,
Cancer Institute; Chairman, Heart Foundation Appeal; Chairman, Save the Children Fund; Chairman, Aborigines Advancement
League; Chairman, Australian Ballet Foundation; Chairman, Australia Business Arts Foundation; Commissioner, Melbourne 1996
Olympic Games Bid; Member, Sydney 2000 Olympics Bid; Trustee, National Gallery of Victoria for nine years; Founding Chairman,
Victorian Major Events Company for ten years; and Chairman, Melbourne 2006 Commonwealth Games.
In 1977 Mr Walker was made a Commander of the Order of the British Empire (CBE) for service to the Commonwealth. He
became an officer of the Order for Australia (AO) for service to the community 1987, and was made a Companion of the Order of
Australia (AC) in 2003 for services to business, arts, tourism and the community.
MR ROGER CORBETT, AO
NON-EXECUTIVE DIRECTOR, APPOINTED TO THE BOARD 4 FEBRUARY, 2003
Mr Corbett has been involved in the retail industry for more than 40 years. In 1984, Mr Corbett joined the Board of David Jones
Australia as Director of Operations. In 1990, he was appointed to the Board of Woolworths Limited and to the position of Managing
Director of BIG W. On 1 January 1999, Mr Corbett was appointed Chief Executive Officer of Woolworths Limited and retired from that
position at the end of September 2006. Mr Corbett is a Director of the Reserve Bank of Australia, a Director of Wal-Mart Stores and
a Director of PrimeAg Australia Limited. He is also the President of the University of Sydney Medical Foundation; Chairman of the
Council and Member of the Executive of Shore School; Chairman of the Salvation Army Advisory Board; a Director of Outback
Stores; a member of the Dean’s Advisory Group of the Faculty of Medicine at the University of Sydney; a member of the Advisory
Committee of the Australian Graduate School of Management; and Chairman of the Advisory Committee of the Westmead Children’s
Hospital.
MR DAVID EVANS
NON-EXECUTIVE DIRECTOR, APPOINTED TO THE BOARD 22 JUNE, 2005
Mr Evans has over three decades of experience in the television industry in Australia, the US and the UK. Mr Evans is also on the
Board of Directors of Village Roadshow Limited and BSkyB in the UK. He was President and CEO of Crown Media Holdings, Inc,
the owner of Hallmark Channels in the USA. Mr Evans has also served as Executive Vice President of News Corporation, and
President and Chief Operating Officer of Fox Television, also in the USA.
MR JOHN B FAIRFAX, AO
NON-EXECUTIVE DIRECTOR, APPOINTED TO THE BOARD 9 MAY, 2007
Mr John B Fairfax was a Board member of Rural Press from 1988 and Chairman from 1990 until the merger with Fairfax Media
Limited. He has significant experience as a company director and in the media and agricultural industries. He has been Chairman
of Marinya Media Pty Limited since 1988, Councillor of the Royal Agricultural Society of New South Wales since 1990, Councillor
since 1979, and President since 1993 of The Girls and Boys Brigade, Patron since 2008 of The Red Room Company Limited and
Trustee of Reuters Founders Share Company Limited since 2005.
Previously Mr Fairfax was Deputy Chairman of Fairfax (then John Fairfax Limited) from 1985 – 87 and Director from 1979 – 87,
Director of David Syme & Co Ltd 1981 – 87, Chairman of the Media Council of Australia from 1980 – 82, Chairman of the Newspaper
Advertising Bureau 1985 – 87, Chairman of the Australian section of the Commonwealth Press Union 1987 – 92, Director of St
Lukes’ Hospital 1973 – 76 and also 1981-95, Chairman of Cambooya Investments Limited 1991 – 2002, Director of Australian Rural
Leadership Foundation Limited 1992 – 98, Director of Crane Group Limited 1996 – 2003 and a Director of Westpac Banking
Corporation Limited 1996 – 2003.
6
Board of Directors
MR NICHOLAS J FAIRFAX
NON-EXECUTIVE DIRECTOR, APPOINTED TO THE BOARD 9 MAY, 2007
Mr Nicholas Fairfax was a Director of Rural Press Limited from August 2005 until 9 May, 2007. He has been a Director of Marinya
Media Pty Ltd since 2005, a Director of Cambooya Pty Ltd since 2002 and a Director of the Vincent Fairfax Family Foundation since
2004. Mr Fairfax is a Director of Tickets Holdings Pty Limited, Chairman of Elaine Education Pty Limited and a member of UTS
Faculty of Business Executive Council.
MRS JULIA KING
NON-EXECUTIVE DIRECTOR, APPOINTED TO THE BOARD 17 JULY, 1995
Mrs King has had more than 30 years’ experience in media marketing and advertising. She was Chief Executive of the LVMH
fashion group in Oceania and developed the businesses in this area. Prior to joining LVMH she was the Managing Director of Lintas
Advertising. She has been on the Australian Government’s Task Force for the restructure of the Wool Industry, the Council of the
National Library and the Heide Museum of Modern Art. Mrs King is a Director of Servcorp Australian Holdings Pty Limited, Opera
Australia and Carla Zampatti Limited.
MR BRIAN MCCARTHY
CHIEF EXECUTIVE OFFICER AND MANAGING DIRECTOR, APPOINTED TO THE BOARD 10 DECEMBER, 2008
Mr McCarthy commenced as CEO and Managing Director of Fairfax Media Limited in December 2008. Prior to joining the Board of
Fairfax Media Limited, Mr McCarthy occupied the position of Deputy Chief Executive Officer and Chief Executive Officer Australia,
Fairfax Media Limited from May 2007 to December 2008. Mr McCarthy was the Managing Director and CEO of Rural Press Limited
from 1994 until its merger with Fairfax Media Limited in 2007.
Mr McCarthy has extensive experience in the media industry. He joined Regional Publishers in 1976 and later became General
Manager of Upper Hunter Publishers Pty Limited. Mr McCarthy was the General Manager of The Maitland Mercury between 1984
and 1987 and General Manager - Special Projects for Rural Press Limited between 1987 and 1994. Mr McCarthy was a Director of
Pacific Area Newspaper Publishers’ Association from 1993-2001. He has been a Director of The Newspaper Works Limited since
2006, a newspaper industry body.
MR ROBERT SAVAGE
NON-EXECUTIVE DIRECTOR, APPOINTED TO THE BOARD 25 JUNE, 2007
In addition to his particular expertise in the management of information technology and systems, Mr. Savage brings to the Fairfax
Media Board his experience as a senior executive in Australia and the Asian region, including experience in people management
and organisation effectiveness issues and several years experience as a Non-Executive Director and Chairman across a wide range
of Australian companies. Mr Savage was formerly Chairman and Managing Director of IBM Australia and New Zealand. He is
Chairman of David Jones Limited and Perpetual Limited, was Chairman of Mincom Limited until sold in May 2007, and was a
Director of Smorgon Steel Group Limited until August, 2007, when it merged with OneSteel Limited.
MR PETER YOUNG, AM
NON-EXECUTIVE DIRECTOR, APPOINTED TO THE BOARD 16 SEPTEMBER, 2005
Over the last thirty years Mr Young has been an investment banking executive in Australia, New Zealand and the U.S.A.
Until recently he served as Chairman of Investment Banking for ABN AMRO in Australia and New Zealand. From 1998 to 2002, Mr
Young was Executive Vice Chairman, ABN AMRO Group (Australia and New Zealand) and Head of Telecommunications, Media &
Technology Client Management for Asia Pacific. He is currently the Chairman of Transfield Services Infrastructure Fund, Chairman
of the AIDA Fund Limited, and Chairman of Delta Electricity. He is involved in several other community, environmental and artistic
activities.
7
Directors’ Report
The Board of Directors presents its report together with the financial report of Fairfax
Media Limited (the Company) and of the consolidated entity, being the Company and its
controlled entities for the period ended 28 June 2009 and the auditor’s report thereon.
Directors
The Directors of the Company at any time during the financial year or up to the date of this report are as follows. Directors held office
for the entire period unless otherwise stated:
MR RONALD WALKER, AC, CBE
Non-Executive Chair
MR BRIAN MCCARTHY
Chief Executive Officer and Managing Director
Appointed to the Board on 10 December 2008
MR ROBERT SAVAGE
Non-Executive Director
MR PETER YOUNG, AM
Non-Executive Director
MR DAVID KIRK, MBE
MR ROGER CORBETT, AO
Non-Executive Director
MR DAVID EVANS
Non-Executive Director
MR JOHN B FAIRFAX, AO
Non-Executive Director
MR NICHOLAS FAIRFAX
Non-Executive Director
MRS JULIA KING
Non-Executive Director
Company Secretary
Executive Director and Chief Executive Officer
Resigned as CEO and from the Board on 5 December 2008.
A profile of each Director at the date of this report is included
on pages 6 and 7 of this report.
ALTERNATE DIRECTOR
Mr Patrick Joyce, Investment Director at Marinya Media Pty
Limited, is an alternate Director for Messrs John B and
Nicholas Fairfax.
The Company Secretary, Ms Gail Hambly, was appointed to the position of Group General Counsel and Company Secretary in
1993. Before joining Fairfax Media Limited she practised as a solicitor at a major law firm. She has extensive experience in
commercial, media and communication law. Ms Hambly is a member of the Media and Communications Committee and the Privacy
Committee for the Law Council of Australia, a member of the Advisory Board for the Centre of Media and Communications Law at
the Melbourne Law School and a member of the Institute of Chartered Secretaries and Administrators and Chartered Secretaries
Australia. Ms Hambly is also a Director of theatre company, Company B Limited. She holds degrees in Law, Economics, Science
and Arts.
Corporate structure
Fairfax Media Limited is a company limited by shares that is incorporated and domiciled in Australia.
Principal activities
The principal activities of the consolidated entity during the course of the financial year were publishing of news, information and
entertainment, advertising sales in newspaper, magazine and online formats, and radio broadcasting. Television production and
distribution was a principal activity up until the completion of the sale of the Southern Star Group in April 2009.
There were no significant changes in the nature of the consolidated entity during the year other than the matters set out as significant
changes in the state of affairs below.
Consolidated result
The consolidated loss attributable to the consolidated entity for the financial year was $380,050,000 (2008 Profit: $386,878,000).
8
Directors’ Report
Dividends
A final 75% franked dividend of 10 cents per ordinary share and debenture in respect of the year ended 29 June 2008 was paid on 2
October 2008. This dividend was shown as approved in the previous annual report.
An interim 75% franked dividend of 2 cents per ordinary share and debenture in respect of the year ended 28 June 2009 was paid on
19 March 2009.
The Board has not approved the payment of a final dividend in respect of the year ended 28 June 2009.
Distributions to holders of Stapled Preference Securities (SPS) were paid as follows: $4.8138 per share paid 31 October 2008 and
$3.3580 per share paid 30 April 2009.
Review of operations
Revenue for the Group decreased 11% to $2,610 million generating a net loss after tax of $380.1 million (2008: profit $386.9 million).
Earnings per share decreased to a loss of 21.6 cents (2008: profit 22.9 cents).
Further information is provided in the Management Discussion and Analysis Report on page 32.
Significant changes in the state of affairs
Significant changes in the state of affairs of the consolidated entity during the financial year were as follows:
• On 20 August 2008, the Company agreed to sell Southern Star Group Limited's 75% interest in UK-based Carnival Film &
Television Ltd to NBC Universal together with certain library and distribution rights of Carnival productions for a total sale
price of approximately £22.3 million.
• On 20 January 2009, the Company agreed to sell the Southern Star television production and distribution business to
Endemol for $75 million plus an earn-out. The sale completed on 6 April 2009. The Company retained ownership of
Southern Star Factual, the UK-based natural history, science and documentary production business.
• On 3 April 2009, the Company successfully completed the 3 for 5 accelerated non-renounceable pro-rata entitlement offer
that was announced in February 2009, raising a total of $624.6 million. The Company used the proceeds of the entitlement
offer to pay down a substantial part of a syndicated bank facility maturing in 2011 and 2012.
• On 27 May 2009, Fairfax Media Group Finance Pty Limited settled on the purchase and cancellation of $32.3 million of its
fixed rate A$ medium term notes due 27 June 2011.
Likely developments and expected results
The consolidated entity’s prospects and strategic direction are discussed in the Chairman’s and the Chief Executive Officer’s reports
on pages 2 – 5 of this report.
Further information about likely developments in the operations of the consolidated entity and the expected results of those
operations in future financial years has not been included in this report because disclosure of the information would be likely to result
in unreasonable prejudice to the consolidated entity.
Environmental regulation and performance
The Company commissions regular independent expert audits in respect of environmental compliance. Recommendations resulting
from these audits and reports have been, or are being, implemented. No material non-compliance with environmental regulation has
been identified relating to the 2008-09 financial year.
The consolidated entity’s level of carbon emissions for the 2008-09 financial year is expected to be under the threshold level that
would require the Company to report under the National Greenhouse and Energy Reporting legislation this year. The Company
expects that it will need to report on the Group’s total carbon emissions in the 2009-10 financial year. The Group’s main source of
carbon emissions overall is from electricity consumption at its larger sites. The relocation of staff from the Darling Park headquarters
to One Darling Island in Pyrmont, a new, more energy efficient building during the last financial year, has resulted in reduced
emissions. Additional efficiencies will be realised when The Age relocates to a new, more energy efficient building in the Southern
Cross Station precinct in Melbourne at the end of calendar 2009. Other reductions in carbon emissions have been realised with the
closure of certain printing facilities.
9
Directors’ Report
Events after balance date
There have not been any after balance date events.
Remuneration Report
A remuneration report is set out on pages 14 – 22 and forms part of this Directors’ Report.
Directors’ Interests
The relevant interest of each Director in the equity of the Company, as at the date of this report is:
Ordinary shares
Opening
Post
Post
Post
Closing
Year End
Year End
Year End
Balance
Acquisition
Disposals
Balance
Acquisitions
Disposals
Balance
RJ Walker
RC Corbett
D Evans
JB Fairfax
N Fairfax
JM King
DE Kirk *
BK McCarthy
R Savage
P Young
1,035,251
40,091
52,448
969,610
59,115
109,934
216,482,782
18,943,999
2,412,351
1,480,130
46,068
21,135
-
-
-
-
-
1,110,791
857,489
1,480,703
2,004,861
99,206
162,382
235,426,781
3,892,481
67,203
487,577
1,755,326
953,196
350,000
2,358,522
19,996
21,415
27,903
109,702
-
-
47,899
131,117
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,004,861
99,206
162,382
235,426,781
3,892,481
67,203
487,577
2,358,522
47,899
131,117
TOTAL
222,976,519
23,532,213
1,830,703
244,678,209
-
244,678,209
*The closing and post year end balance represents the number of shares held by Mr Kirk at 5 December, 2008, when he resigned
from the Board and forfeited unvested shares in the employee share plans.
No Director holds options over shares in the Company.
RJ Walker and P Young acquired stapled preference shares of 3,338 and 630 respectively during the period.
10
Directors’ Report
Directors’ meetings
The following table shows the number of Board and Committee meetings held during the financial year ended 28 June, 2009 and the
number attended by each Director or Committee member.
MEETINGS ***
Personnel Policy and
No. Held
No. Attended
No. Held
No. Attended
No. Held
No. Attended
No. Held
No. Attended
Audit & Risk
Nominations
Remuneration
11
11
11
11
11
11
3
8
11
11
11
10
9
10
11
11
3
7
9
11
6
6
-
-
6
-
-
-
6
6
6
6
-
-
6
-
-
-
5
6
2
-
2
-
2
2
-
-
-
-
2
-
2
-
2
2
-
-
-
-
6
6
6
6
-
-
-
-
-
6
5
5
6
6
-
-
-
-
-
6
R J Walker**
R C Corbett
D Evans
JB Fairfax
NJ Fairfax
JM King
DE Kirk*
BK McCarthy*
R Savage
P Young
* Mr Kirk and Mr McCarthy attend the Audit & Risk and Personnel Policy & Remuneration Committee meetings as invitees of the Committees.
** Mr Walker, Chairman, is an ex officio member of all Board committees.
*** The number of meetings held refers to the number of meetings held while the Director was a member of the Board or Committee.
Options
There are no unissued shares under option as at the date of this report. No options over unissued shares were granted during or
since the end of the financial year. There were no movements in options during the financial year. No shares were issued during or
since the end of the financial year as a result of the exercise of an option.
Indemnification and insurance of officers and auditors
The Directors of the Company and such other officers as the Directors determine, are entitled to receive the benefit of an indemnity
contained in the Constitution of the Company to the extent allowed by the Corporations Act 2001, including against liabilities incurred
by them in their respective capacities in successfully defending proceedings against them.
During or since the end of the financial year, the Company has paid premiums under contracts insuring the Directors and officers of
the Company and its controlled entities against liability incurred in that capacity to the extent allowed by the Corporations Act 2001.
The terms of the policies prohibit disclosure of the details of the liability and the premium paid.
Each Director has entered into a Deed of Indemnity and Access which provides for indemnity against liability as a Director to the
extent allowed by the law.
There are no indemnities given or insurance premiums paid during or since the end of the financial year for the auditors.
No officers are former auditors
No officer of the consolidated entity has been a partner of an audit firm or a Director of an audit company that is the auditor of the
Company and the consolidated entity for the financial year.
11
Directors’ Report
Non-audit services
Under its Charter of Audit Independence, the Company may employ the auditor to provide services additional to statutory audit
duties where the type of work performed and the fees for services do not impact on the actual or perceived independence of the
auditor.
Details of the amounts paid or payable to the auditor, Ernst & Young, for non-audit services provided during the financial year are set
out below. Details of amounts paid or payable for audit services are set out in Note 34 to the financial statements.
The Board of Directors has received advice from the Audit & Risk Committee and is satisfied that the provision of the non-audit
services did not compromise the auditor independence requirements of the Corporations Act 2001 because none of the services
undermine the general principles relating to auditor independence as set out in Professional Statement F1, including reviewing or
auditing the auditor’s own work, acting in a management or a decision-making capacity for the Company, acting as advocate for the
Company or jointly sharing economic risk and rewards.
A copy of the auditor’s independence declaration under section 307C of the Corporations Act 2001 is on page 13 of this report.
During the financial year, Ernst & Young received or were due to receive the following amounts for the provision of non-audit
services:
Subsidiary company and other audits required by contract or regulatory or other bodies:
•
Australia
$272,840
• Overseas
$268,946
Other assurance and non-assurance services:
•
Australia
$119,814
• Overseas
$24,311
Rounding
The Company is of a kind referred to in Class Order 98/100, issued by the Australian Securities and Investments Commission,
relating to the “rounding off” of amounts in the Directors’ Report. Amounts contained in the Directors’ Report have been rounded off
in accordance with that Class Order to the nearest thousand dollars, or in certain cases, to the nearest dollar.
Signed on behalf of the Directors in accordance with a resolution of the Directors.
Brian McCarthy
Chief Executive Officer and Managing Director
Ronald Walker
Chairman
1 September, 2009
12
Auditor’s Independence Declaration
13
Remuneration Report
1. Introduction
This report forms part of the Company’s 2009 Directors’ Report and describes the Fairfax Group’s remuneration arrangements for
Directors and prescribed senior executives in accordance with the requirements of the Corporations Act 2001 and Regulations. The
report also contains details of the equity interests of Fairfax Directors and prescribed senior executives.
2. Personnel Policy and Remuneration Committee
The Board has a formal Charter for the Personnel Policy and Remuneration Committee (PPRC) which prescribes the responsibilities,
composition and meeting rules of the Committee. Under the Charter, the Committee must be comprised of a majority of non-
executive Directors who are independent. The members of the PPRC are Peter Young (Chairman), Roger Corbett, David Evans and
John B Fairfax. All members except John B Fairfax are independent. The PPRC met six times during the year.
The Committee’s primary responsibilities are to:
(a) review and approve Fairfax employee remuneration strategies and frameworks in consultation with the CEO;
(b) oversee the development and implementation of employee remuneration programs, performance management and succession
planning with the goal of attracting, motivating and retaining high quality people, in consultation with the CEO;
(c) review and recommend to the Board for approval the goals and objectives relevant to the remuneration of the CEO, assist the
Board to evaluate the performance of the CEO in light of those goals and objectives, and to recommend to the Board the CEO’s
remuneration (including incentive payments) based on this evaluation;
(d) review the principles to apply to contractual terms of employment for direct reports to the CEO including base pay, incentives,
superannuation arrangements, retention arrangements, termination payments, performance goals and performance based
evaluation procedures and succession plans;
(e) make recommendations to the Board on Directors’ fees and review and recommend the aggregate remuneration of non-
executive Directors to be approved by shareholders; and
(f) review the Group’s framework for compliance with occupational, health, safety and environmental regulation and its performance
against the framework.
The CEO attends PPRC meetings but not when his own remuneration arrangements are being discussed.
The Committee commissions reports from independent remuneration experts on market relativities and other matters relating to
remuneration practices to assist it with setting appropriate remuneration levels and processes.
3. Remuneration of Non-Executive Directors
Under the Company’s Constitution, the aggregate remuneration of non-executive Directors is set by resolution of shareholders. The
aggregate was last reviewed by shareholders at the 2007 Annual General Meeting and set at $2,000,000 per annum. Within this
limit, the Board annually reviews Directors’ remuneration with advice from the PPRC. The Board also considers survey data on
Directors’ fees paid by comparable companies, and expert advice commissioned from time to time.
Fees to non-executive Directors reflect the demands and the responsibilities of each Director including service on Board
Committees. By resolution of the Board, until suspension of the Employee Share Plans in May 2009, each non-executive Director
has sacrificed at least 25% of his or her annual Director’s fees for the purchase of shares in the Company’s Employee Share Plan.
Under this Plan, shares are purchased on-market by an independent trustee that holds the shares on behalf of the Directors and
employees who have salary sacrificed to participate in the Plan. Share acquisition dates are pre-set by the trustee. For the 2009-10
financial year, the proportion of the Directors’ fees sacrificed for share purchases may change depending on the provisions of the
new legislation to govern employee share plans foreshadowed in the May 2009 Federal Budget. Directors have resolved that there
will be no increase in directors fees for the 2009-10 year.
14
Remuneration Report
At the date of this report, the Board has set Board and committee fees as follows:
Chairman of the Board *
Other Non-Executive Director
Chair of Audit & Risk Committee
Members of Audit & Risk Committee
Chair of Personnel Policy & Remuneration Committee
Members of Personnel Policy & Remuneration Committee
Chair of the Nominations Committee
Members of Nominations Committee
$
336,000
120,000
40,000
30,000
30,000
20,000
30,000
20,000
* Ronald Walker, as Chairman of the Board, does not receive committee fees.
The fees above do not include statutory superannuation payments.
3.1 RETIREMENT BENEFITS FOR NON-EXECUTIVE DIRECTORS
The Company makes superannuation contributions on behalf of non-executive Directors in accordance with statutory requirements.
In 2004, the Company discontinued its retirement benefits scheme for non-executive Directors and froze existing entitlements at that
time. Other than statutory superannuation contributions outlined above, non-executive Directors who did not have five years service
on the Board as at 30 June 2004 are not eligible for other retirement benefits. Non-executive Directors who had served on the Board
for at least five years as at 30 June 2004 and who therefore had already qualified for benefits under the previous scheme are, on
retirement, entitled to a retirement benefit equivalent to the lesser of:
(a) three times the relevant Director’s annual Directors fee as at 30 June 2004; or
(b) the maximum allowable without shareholder approval under the Corporations Act and the ASX Listing Rules.
4. Remuneration of the Chief Executive Officer
The remuneration details for the CEO are set out in section 5.6 of this report.
The key terms of Mr McCarthy’s Executive Services Agreement with the Company include a base salary (including superannuation
and other benefits except as set out below), which is currently $1.3 million per year. The base salary will increase to $1.5 million on
1 October, 2009. Mr McCarthy is also eligible for a performance bonus (“Performance Bonus”) of up to 100% of base salary
depending on achievement of defined performance criteria set at the beginning of each financial year. The performance targets are
approved by the Personnel Policy and Remuneration Committee (“PPRC”) of the Board each year. Sixty seven percent of the
Performance Bonus is determined by achievement of financial targets for the Group. The remaining thirty three percent is based on
other Key Performance Indicators set by the PPRC each year depending on the operational and strategic goals of the Group.
In addition to the base salary and Performance Bonus, under the Long Term EBIS (details of which are set out in section 5.2 of this
report), Mr McCarthy receives the equivalent of 100% of his total fixed remuneration as an allocation of Company shares each year.
These shares vest on the terms set out in section 5.2. The terms are set out in a draft Executive Service Agreement, the signing of
which has been delayed until clarification of the taxation treatment of shares allocated under employee share plans following the
changes announced in the 2009 Federal Budget.
15
Remuneration Report
5. Remuneration of Senior Executives
The objectives of the Company’s executive remuneration framework are to align executive remuneration with the achievement of
strategic objectives, the creation of value for shareholders, and to be in line with market. The PPRC aims to ensure that the
executive remuneration framework addresses the following criteria:
• Fairly remunerate capable and performing executives;
• Attract, retain and motivate talented, qualified and experienced people in light of competitive employment markets;
• Align remuneration with achievement of business strategy;
• Align interests of executives and shareholders;
• Deliver competitive cost outcomes;
• Comply with regulatory requirements; and
• Be transparent and fair.
The executive remuneration framework established by the PPRC comprises a mix of fixed and performance-based components:
• A fixed remuneration package which includes base pay, superannuation and other benefits; and
• Performance incentives.
The combination comprises the executive’s total remuneration.
The fixed remuneration package includes all employee benefits and related fringe benefits tax, for example, motor vehicle, parking
and superannuation. It represents the total cost to the Company.
Payment of performance-based incentives is determined by the financial performance of the Company, the financial performance of
the business unit relevant to the executive and the personal performance of the individual executive against objectives set at the
beginning of the year.
The CEO conducts performance reviews with his direct reports generally in July each year and presents the outcomes and proposed
incentive payments to the PPRC. The PPRC reviews and approves the remuneration packages and bonus payments to the CEO’s
direct reports annually, generally in August. On the recommendations of the CEO, the PPRC also reviews and approves the key
performance indicators for the CEO’s direct reports for the following year. Performance evaluations in accordance with this
framework have taken place for senior executives for the 2008-2009 financial year during July to August 2009.
5.1 PERFORMANCE BASED SHORT TERM INCENTIVES (“BONUS”) FOR SENIOR EXECUTIVES
Annual bonus payments for senior executives depend on achievement of annual financial performance criteria for the Group as well
as specific strategic and operational criteria. The bonus criteria for the CEO are set each year by the Board after considering
recommendations from the PPRC.
Each senior executive has a target bonus opportunity depending on the accountabilities of the role and impact on Company or
business unit performance. For most senior executives reporting directly to the CEO the on-target bonus opportunity for 2009 was
20% of the executive’s fixed remuneration package and the maximum bonus opportunity was 50% of the fixed remuneration package.
Generally, the bonus opportunity consists of three components: 20% is based on Group EBITDA and earnings per share, 60% is
based on business unit financial performance and 20% is based on other key performance indicators (KPIs). For corporate
executives whose duties are not confined to one business unit, generally 50% of the bonus opportunity is based on corporate
financial performance.
For the period ended 28 June 2009, the KPIs linked to the incentive plans for senior executives were based on Group performance,
individual business unit performance and personal objectives. The KPIs required performance in increasing revenue, reducing
operating costs and achieving specific targets relating to other key strategic non-financial measures linked to drivers of the Group’s
performance, including circulation, readership and market position. Specific measures for individuals include EPS, EBITDA, revenue,
circulation, readership and occupational health and safety targets.
16
Remuneration Report
The Board sets Group profit targets annually as part of the budget and strategic planning process. Using a profit target ensures
reward is linked to achievement of the business plan and value creation for shareholders. Incentives are leveraged for performance
above the threshold to provide incentive for executive over performance.
5.2 EQUITY-BASED INCENTIVE SCHEMES (EBIS)
Senior executives whose roles and skills are critical to the strategy of the Group are eligible to participate in the Company’s equity-
based incentive scheme.
2006-2007 EBIS
In 2006, the Company replaced the previous equity incentive scheme with a new scheme (the 2006-2007 EBIS) that was designed
to more closely align shareholders’ interests with the Company’s remuneration principles. The 2006-2007 EBIS applied for bonuses
earned in the 2006 and 2007 financial years. Under the 2006-2007 EBIS, one third of the annual bonus earned on the achievement
of KPIs, as detailed in Section 5.1 above, was deferred. The deferred amount was remitted to the trustee of the Employee Share
Plan who purchased shares on market and allocated shares in the Plan to the relevant executive. Each participating executive’s
allocated shares vest three years after the allocation date subject to ongoing employment requirements and achievement of hurdles.
2008 AND ONGOING LONG TERM EBIS
In August 2007, the Board approved a new long-term EBIS (Long Term EBIS) for the CEO, his direct reports and a wider group of
senior executives whose performance is critical to the overall performance of the Group. The Long Term EBIS commenced operation
for the 2008 financial year. It aims to reward executives for creating growth in shareholder value. Participants in the Long Term EBIS
receive a percentage of their total fixed remuneration as an allocation of Company shares (Allocation), as part of the performance
review process. The number of Company shares to which a participant is entitled will depend on the participant’s role and
responsibilities.
Company shares for the Allocations are to be purchased on market by the trustee of the Employee Share Plan and held by the
trustee in trust until the Allocation vests or is forfeited.
For an Allocation to vest, there are two performance hurdles, both linked to the Company’s return to shareholders. The hurdles are
measured at the end of the three year vesting period. In addition, if an Allocation does not vest at the end of the three year period, a
re-test of the performance hurdles will occur at the end of the fourth year, and if satisfied, the Allocation will vest.
Fifty percent of an Allocation will vest on achievement by the Company of the total shareholder return (TSR) target. TSR will be
measured against the S&P/ASX 300 Consumer Discretionary Index and shares will vest against the capital weighted percentile
thresholds set out in the table below:
TSR performance
% of Allocation that vests
Under 50th percentile
50th percentile
50th to 75th percentile
Above 75th percentile
Nil
50% of Allocation
Straight line pro rata
100%
The other fifty percent of the Allocation will vest on achievement of the earnings per share (EPS) target. EPS will be measured by the
compound annual growth rate (CAGR) of the Company’s EPS and vesting will be according to the table below:
EPS performance
% of Allocation that vests
Less than 7% CAGR
7% CAGR
Nil
25%
7% to 10% CAGR
Straight line pro rata
10% CAGR or above
100%
17
Remuneration Report
OTHER TERMS OF THE 2008 AND ONGOING LONG-TERM EBIS
On termination of an executive’s employment, vesting rights will depend on the circumstances of the termination. If an executive
resigns, unvested allocations will be forfeited however the Board has discretion to allow vesting. On termination for fraud or
misconduct, allocations will be forfeited. If an executive is terminated without cause, for example made redundant or dies or is
permanently disabled, then vesting will be at the Board’s discretion and subject to the achievement of the performance hurdles. In
the circumstances of an offer to acquire the Company, vesting will be at the Board’s discretion.
SUSPENSION OF THE 2008 AND ONGOING LONG-TERM EBIS
The EBIS is presently suspended pending review of the revised tax treatment of employee share plans as a consequence of
announcements made in the 2009 Federal Budget. The terms of the EBIS will be reviewed once the relevant legislation is enacted.
The financial performance of the Company in key shareholder value measures over the past five years is shown below:
Underlying operating revenue
Net profit before significant items
Earnings per share before significant items
Dividends per share
*Total Shareholder Returns (TSR)
AIFRS
AIFRS
AIFRS
AIFRS
AGAAP
$m
$m
Cents
Cents
%
2009
2,600
241.3
12.4
2.0
(52.1)
2008
2,909
395.9
23.4
20.0
(34.7)
Restated
2007
2006
2005
2,117.6
1,907.8
1,873.4
267.8
23.2
20.0
34.2
234.3
24.5
19.5
(5.70)
237.6
25.8
23.5
23.20
* TSR comprises share price appreciation and dividends, gross of franking credits, reinvested in the shares (source: Bloomberg)
5.3 RETENTION ARRANGEMENTS
In 2005, retention arrangements were put in place for two key executives to ensure their retention and successful contribution during
the transition to the new CEO at the time. The two key executives, Sankar Narayan and Gail Hambly received $300,000 each in
Company shares, which were purchased on market by the trustee of the Employee Share Plan and held in the Plan until they vested.
The shares vested over a three year period. Vesting was contingent on the executive continuing to be employed by the Company on
the date of vesting and on achievement of the executive’s personal KPIs within his or her area of responsibility. The KPIs were
chosen as the most appropriate to drive the successful delivery of business outcomes. The first tranche of 25% of the shares vested
on 1 October 2006, the second tranche of 25% vested on 1 October 2007 and the final tranche of 50% vested on 1 October 2008.
5.4 RETIREMENT BENEFITS FOR EXECUTIVES
Except for a small number of long serving executives who are members of a defined-benefit superannuation plan, retirement benefits
are delivered through defined contribution superannuation plans. The defined-benefit fund (which is closed to new entrants) provides
defined lump sum benefits based on years of service, retirement age and the executive’s remuneration at the time of retirement.
18
Remuneration Report
5.5 EXECUTIVE SERVICE AGREEMENTS
The terms of employment of the CEO are set out in section 4 and this section 5.5 below.
The remuneration and other terms of employment for the highest paid executives and key management personnel (disclosed in
section 5.7 pursuant to section 300A of the Corporations Act) are set out in written agreements. Except for Ms Withers, who had a
fixed term contract and who retired on 30 June 2009, these service agreements are unlimited in term but may be terminated without
cause by written notice by either party or by the Company making payment in lieu of notice. They may also be terminated with cause
as set out below.
Each of these agreements sets out the arrangements for total fixed remuneration, performance-related cash bonus opportunities,
superannuation, termination rights and obligations and eligibility to participate in the equity-based incentive scheme.
As described in this section 5, executive salaries are reviewed annually. The executive service agreements do not require the
Company to increase base salary, pay incentive bonuses or continue the executive’s participation in the equity-based incentive
scheme. Key non-financial terms in the executive service agreements are set out below. Remuneration details are set out in
sections 5.6 and 5.7.
TERMINATION OF EMPLOYMENT WITHOUT NOTICE AND WITHOUT PAYMENT IN LIEU OF NOTICE
The Company may terminate the employment of the executive without notice and without payment in lieu of notice in some
circumstances. Generally this includes if the executive:
(a) commits an act of serious misconduct;
(b) commits a material breach of the executive service agreement;
(c) is charged with any criminal offence which, in the reasonable opinion of the Company, may embarrass or bring the Fairfax Group
into disrepute; or
(d) unreasonably refuses to carry out his or her duties including complying with reasonable, material and lawful directions from the
Company.
TERMINATION OF EMPLOYMENT WITH NOTICE OR WITH PAYMENT IN LIEU OF NOTICE
The Company may terminate the employment of the executive at any time by giving the executive notice of termination or payment in
lieu of such notice. The amount of notice required from the Company in these circumstances is set out in the table below. If the
Company elects to make payment in lieu of all or part of the required notice, payment is calculated on the basis of fixed remuneration
excluding bonuses and non-cash incentives.
Name of
Executive
Company
Employee
Termination
Termination
Notice Period
Notice Period
Post-Employment Restraint
Brian McCarthy
12 months
6 months
- 12 month no solicitation of employees or clients
- 6 months no work for a competitor of the Fairfax Group
Brian Cassell
12 months
4 months
- 12 month no solicitation of employees or clients
- 6 months no work for a competitor of the Fairfax Group
Gail Hambly
18 months
3 months
- 12 month no solicitation of employees or clients
- 6 months no work for a competitor of the Fairfax Group
Jack Matthews
12 months
6 months
- 12 month no solicitation of employees or clients
- 6 months no work for a competitor of the Fairfax Group
Sankar Narayan
12 months
4 months
- 12 month no solicitation of employees or clients
- 6 months no work for a competitor of the Fairfax Group
Joan Withers
6 months
6 months
- 12 month no solicitation of employees or clients
- 6 months no work for a competitor of the Fairfax Group
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Remuneration Report
5.6 REMUNERATION OF DIRECTORS
SHORT-TERM
Base Salary
POST EMPLOYMENT
Performance
Directors’
& Other
Cash
Termination
Super-
Long Service
Total *
Related
Fees
Benefits
Bonus
annuation
Leave
Expense
RJ Walker
RC Corbett
D Evans
JB Fairfax
NJ Fairfax
DE Kirk
JM King
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
2009
2008
336,000
336,000
180,910
151,667
160,000
147,333
140,000
140,000
173,526
173,667
-
-
150,000
150,000
-
-
-
-
-
-
-
-
-
-
762,086
-
-
-
-
-
-
-
-
-
-
-
1,650,038
864,960
-
-
-
-
BK McCarthy
2009
R Savage
P Young
2008
2009
2008
2009
2008
Total remuneration:
Directors
2009
-
-
1,200,000
298,220
1,224,776
780,000
150,000
152,977
175,564
154,000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
4,122,808
-
-
-
-
-
-
-
-
-
30,240
30,240
16,282
13,650
14,400
13,260
12,600
12,600
15,617
15,630
26,923
50,000
13,500
13,500
100,000
100,000
13,500
13,768
15,801
13,860
366,240
366,240
197,192
165,317
174,400
160,593
152,600
152,600
189,143
189,297
4,911,817
-
-
-
-
-
-
13,918
2,578,916
-
-
163,500
163,500
63,839
1,662,059
46,570
2,151,346
163,500
166,745
191,365
167,860
-
-
Total
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
50%
n/a
n/a
34%
44%
n/a
n/a
n/a
n/a
1,466,000
1,962,086
298,220
4,122,808
258,863
63,839
8,171,816
2008
1,405,644
2,874,814
1,644,960
-
276,508
60,488
6,262,414
In addition to the remuneration in table 5.6 above Brian McCarthy’s total cost to the Company includes the amortised cost of the fair value of rights to
shares issued of $407,408 (2008: $279,573) representing a total of $2,069,467 (2008: $2,430,919). David Kirk’s total cost to the Company of
$72,842 includes a credit for the reversal of the prior year amortised cost of the fair value of rights to shares following his departure (2008: $834,967)
representing a total of $4,984,660 (2008: $3,413,883). Non-Executive Directors are not participants in any performance related share arrangements
(refer section 3 of the remuneration report).
20
Remuneration Report
5.7 KEY MANAGEMENT PERSONNEL
The following are the key management personnel for the financial year in addition to the directors listed above.
Brian McCarthy
Sankar Narayan
Brian Cassell
Gail Hambly
Jack Matthews
Joan Withers **
Title
CEO
Chief Financial Officer*
Chief Financial Officer*
Group General Counsel and Company Secretary
CEO Fairfax Digital
CEO Fairfax New Zealand
There were no changes to the key management personnel between the end of the financial year and the date of this report.
* Sankar Narayan was replaced by Brian Cassell in May 2009.
** Joan Withers was replaced by Allen Williams on 1 July 2009
REMUNERATION OF THE COMPANY & GROUP EXECUTIVES WHO RECEIVED THE HIGHEST REMUNERATION OR ARE KEY
MANAGEMENT PERSONNEL
POST
SHORT-TERM
EMPLOYMENT
Base Salary
Performance
& Other
Cash
Termination
Super-
Long Service
Total excluding
Related
Company
Group
Benefits
Bonus
Payment
annuation
Leave Expense
shares
Total
S Narayan
J Matthews
G Hambly
J Withers
L Price
B Cassell
B McCarthy
2009 (cid:57) (cid:57)
627,178
2008 (cid:57) (cid:57) 734,642
2009 (cid:57) (cid:57)
576,554
2008 (cid:57) (cid:57) 547,363
2009 (cid:57) (cid:57)
490,855
2008 (cid:57) (cid:57) 490,993
(cid:57) 680,955
2009
(cid:57) 564,759
2008
2009 (cid:57) (cid:57)
164,531
2009 (cid:57) (cid:57) 500,000
2008 (cid:57) (cid:57)
1,224,776
- 1,197,843
55,899
-
1,880,920
288,000
75,000
155,000
92,125
150,000
-
-
-
-
-
65,396
13,426
1,101,464
48,445
46,114
59,145
5,850
705,849
3,950
752,427
8,327
650,452
59,045
36,017
736,055
-
162,580
174,382
-
-
-
-
506,869
14,773
-
-
-
843,535
739,141
686,173
90,960
780,000
-
-
100,000
8,395
699,355
100,000
46,570
2,151,346
n/a
43%
27%
31%
32%
38%
n/a
24%
16%
26%
44%
TOTAL 2009
3,040,073
258,085 1,867,292
278,262
22,572
5,466,284
2008
3,562,533
1,547,382
-
270,555
99,963
5,480,433
Amortised cost to the Company of the fair value of rights to shares issued:
S Narayan $34,302 credit (2008 $317,053 expense), J Matthews $157,660 (2008:$106,687), G Hambly $180,874 (2008: $180,863), L Price
$132,545 and B Cassell $122,632. Sankar Narayan’s total cost to the Company includes a credit for the reversal of the prior year amortised
cost of the fair value of rights to shares following his departure.
Total cost to the Company after inclusion of the amortised cost of the fair value of rights to shares:
S Narayan $1,915,222 (2008: $1,418,517), J Matthews $863,510 (2008: $859,114), G Hambly $831,326 (2008: $916,918), J Withers $843,535
(2008: $739,141), L Price $818,718 and B Cassell $ 821,987.
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Remuneration Report
5.8 OPTIONS
During the year ended 28 June 2009:
• no options were granted to Directors or key management personnel (2008:nil);
• no options held by Directors or key management personnel vested (2008:nil);
• no options held by Directors or key management personnel lapsed (2008:nil); and
• no options held by Directors or key management personnel were exercised (2008:nil).
5.9 LOANS TO DIRECTORS AND KEY MANAGEMENT PERSONNEL
During the year ended 28 June 2009, there were no loans to Directors or to key management personnel (2008: nil).
5.10 HEDGING RISK ON SECURITIES FORMING PART OF REMUNERATION
The rules of the Employee Share Plans prohibit employees from creating any encumbrance on unvested share rights. Under the
Board approved Fairfax Securities Trading Policy, Designated People (as defined on page 31) are not permitted to enter a financial
transaction (whether through a derivative, hedge or other arrangement) which would operate to limit the economic risk of an
employee’s holding of unvested Company securities which have been allocated to the employee as part of his or her remuneration.
Employees who are found not to have complied with the Securities Trading Policy risk disciplinary sanctions which may include
termination of employment.
22
Corporate Governance
The Company’s compliance with the ASX Corporate Governance Council’s Corporate Governance
Principles and Recommendations, 2nd edition (“ASX Recommendations”) is set out in the following table.
Compliance
Pages
Principle 1: Lay solid foundations for management and oversight
1.1 Establish the functions reserved to the Board and those delegated to senior executives
and disclose those functions
1.2 Disclose the process for evaluating the performance of senior executives
1.3 Provide the information indicated in the Guide to reporting on Principle 1
(cid:57)
(cid:57)
(cid:57)
Principle 2: Structure the Board to add value
2.1 A majority of the Board should be independent Directors
(cid:57)
(cid:57)
2.2 The chair should be an independent Director
2.3 The roles of chair and chief executive officer should not be exercised by the same individual (cid:57)
2.4 The Board should establish a nomination committee
2.5 Disclose the process for evaluating the performance of the Board, its committees and
individual Directors
(cid:57)
(cid:57)
25
14-18
16
26
26
26
26
26
2.6 Provide the information indicated in Guide to reporting on Principle 2
(cid:57)
6-7, 11, 26-27
Principle 3: Promote ethical and responsible decision making
3.1 Establish a code of conduct and disclose the code or a summary of the code as to:
•
the practices necessary to maintain confidence in the Company’s integrity;
the practices necessary to take into account their legal obligations and the reasonable
•
expectations of shareholders; and
the responsibility and accountability of individuals for reporting and investigating reports
•
of unethical practices.
3.2 Establish a policy concerning trading in company securities by Directors, senior executives
and employees and disclose the policy or a summary of that policy
3.3 Provide the information indicated in Guide to reporting on Principle 3
Principle 4: Safeguard integrity in financial reporting
4.1 The board should establish an audit committee
4.2 Structure the audit committee so that it:
• consists of only non-executive Directors;
• consists of a majority of independent Directors;
•
is chaired by an independent chair, who is not chair of the Board; and
• has at least three members.
4.3 The audit committee should have a formal charter
4.4 Provide the information indicated in Guide to reporting on Principle 4
Principle 5: Make timely and balanced disclosure
5.1 Establish written policies and procedures designed to ensure compliance with ASX
Listing Rule disclosure requirements and to ensure accountability at a senior executive
level for that compliance and disclose those policies or a summary of those policies
5.2 Provide the information indicated in Guide to reporting on Principle 5
(cid:57)
(cid:57)
(cid:57)
(cid:57)
(cid:57)
(cid:57)
(cid:57)
(cid:57)
(cid:57)
(cid:57)
(cid:57)
(cid:57)
(cid:57)
(cid:57)
27
27
27
31
27, 31
28
25
25
25
25
28
6-7, 11, 28
29
29
23
Corporate Governance
Compliance
Pages
Principle 6: Respect the rights of shareholders
6.1 Design a communications policy for promoting effective communication with shareholders
and encouraging their participation at general meetings and disclose the policy or a
summary of the policy
6.2 Provide the information indicated in Guide to reporting on Principle 6
Principle 7: Recognise and manage risk
7.1 Companies should establish policies for the oversight and management of material
business risks and disclose a summary of those policies
(cid:57)
(cid:57)
(cid:57)
7.2 Board should require management to design and implement the risk management and
(cid:57)
29
29
29-30
29-30
internal control system to manage the company’s material business risks and report to it
on whether those risks are being managed effectively. The Board should disclose that
management has reported to it as to the effectiveness of the company’s management
of its material business risks.
7.3 Board should disclose whether it has received assurance from the chief executive (or
equivalent) that the declaration provided in accordance with section 295A of the
Corporations Act is founded on a sound system of risk management and internal
control and that the system is operating effectively in all material respects in relation
to financial reporting risks.
7.4 Provide the information indicated in Guide to reporting on Principle 7
Principle 8: Remunerate fairly and responsibly
8.1 The Board should establish a remuneration committee
8.2 Clearly distinguish the structure of non-executive Directors’ remuneration from that of
executive Directors and senior executives
8.3 Provide the information indicated in Guide to reporting on Principle 8
(cid:57)
29-30
(cid:57)
(cid:57)
(cid:57)
(cid:57)
29-30
14
14-18
11, 14-15, 22
24
Corporate Governance
The key corporate governance principles of the Fairfax Group are set out below. This section of the Annual Report, which is publicly
available on the Company’s website at www.fxj.com.au, contains summaries of the Fairfax Board Charter, Nomination Committee
Charter, Code of Conduct, Audit and Risk Committee Charter, Charter of Audit Independence, policy on market disclosure and
shareholder communications, risk management policy and Securities Trading Policy (including policy on hedging unvested securities
issued as part of remuneration). The Personnel Policy and Remuneration Committee Charter is summarised in the Remuneration
Report.
BOARD OF DIRECTORS
The Board of Directors is responsible for the long-term growth and profitability of the Group.
The Board has adopted a Board Charter which sets out the responsibilities of the Board and its structure and governance
requirements. Under the Board Charter, the powers and responsibilities of the Board are to:
(a) set the strategic direction of the Fairfax Group;
(b) provide overall policy guidance and ensure that policies and procedures for corporate governance and risk management are in
place to ensure shareholder funds are prudently managed and that the Group complies with its regulatory obligations and ethical
standards;
(c) set and monitor performance against the financial objectives and performance targets for the Group;
(d) determine the terms of employment and review the performance of the Chief Executive Officer (CEO);
(e) set and monitor the Group’s programs for succession planning and key executive development with the aim to ensure these
programs are effective;
(f) approve acquisitions and disposals of assets, businesses and expenditure above set monetary limits; and
(g) approve any issues of securities and entry into material finance arrangements, including loans and debt issues.
Subject to the specific authorities reserved to the Board under the Board Charter and to the authorities delegated to the Board
committees, the Board has delegated to the CEO responsibility for the management and operation of the Fairfax Group. The CEO is
responsible for the day-to-day operations, financial performance and administration of the Fairfax Group within the powers
authorised to him from time-to-time by the Board. The CEO may make further delegation within the delegations specified by the
Board and is accountable to the Board for the exercise of these delegated powers.
Membership of the Board and its committees at the date of this report is set out below.
Director
Membership Type
Audit & Risk
Nominations
Remuneration
COMMITTEE MEMBERSHIP
Personnel Policy &
RJ Walker
DE Kirk*
BK McCarthy*
RC Corbett
D Evans
JB Fairfax
N Fairfax
JM King
R Savage
Independent Chair
CEO
CEO
Independent
Independent
Non-Independent
Non-Independent
Independent
Independent
P Young
Independent
-
-
-
Chair
-
-
Member
-
Member
Member
Member
-
-
-
Member
-
Member
Chair
-
-
-
-
-
Member
Member
Member
-
-
-
Chair
* Mr Kirk resigned from the Company and the Board on 5 December, 2008. Mr McCarthy was appointed to the Board on 10 December,
2008.
25
Corporate Governance
The qualifications and other details of each member of the Board are set out on pages 6-7 of this report.
Except for the Chief Executive Officer, Mr John B Fairfax and Mr Nicholas Fairfax, all Directors (including the Chair) are considered
by the Board to be independent, non-executive Directors.
The Constitution requires that the Board has a minimum of 3 Directors and maximum of 12 or such lower number as the Board may
determine from time to time. The Board has resolved that presently the maximum number of Directors is 9.
The Constitution authorises the Board to appoint Directors to vacancies and to elect the Chair. One third of Directors (excluding the
Chief Executive Officer and a Director appointed to fill a casual vacancy and rounded down to the nearest whole number) must retire at
every annual general meeting. Other than the Chief Executive Officer, no Director may remain in office for more than three years or the
third annual general meeting following appointment without resigning and being re-elected. Any Director appointed by the Board must
stand for election at the next general meeting of shareholders.
Any Director may seek independent professional advice at the Company’s expense. Prior approval by the Chair is required, but
approval must not be unreasonably withheld.
The Board has a Nominations Committee which reviews potential Board candidates when necessary. The Committee is comprised of a
majority of non-executive Directors who are independent. The Committee may seek expert external advice on suitable candidates.
The Board has adopted a formal Nominations Committee Charter. Under the Charter, the purpose of the Committee is to identify
individuals qualified to become Board members and recommend them for nomination to the Board and its Committees; to ensure
Board performance is reviewed regularly and to ensure the Board has an appropriate mix of skills.
The Committee uses the following principles to recommend candidates and provide advice and other recommendations to the Board:
•
•
A majority of Directors and the Chair should be independent; and
The Board should represent a broad range of expertise consistent with the Company’s strategic focus.
Duties of the Nominations Committee include:
• making recommendations to the Board on the size and composition of the Board;
•
•
•
•
recommending individuals qualified to be Board members, taking into account such factors as it deems appropriate;
identifying Board members to fill vacancies on the Committees;
recommending the appropriate process for the evaluation of the performance of each director and the Board; and
other duties delegated to it from time to time relating to nomination of Board or Committee members or corporate governance.
The Board conducts a review of its structure, composition and performance annually. The Board may seek external advice to assist
in the review process. During this financial year a review of Board performance was conducted with the assistance of an external
consultant and the results and recommendations were discussed at the Board and various recommendations implemented.
INDEPENDENT DIRECTORS
Under the Board Charter, the majority of the Board and the Chair must be independent. A Director must notify the Company about
any conflict of interest or potential material relationship.
Directors have determined that all Directors except the Chief Executive Officer, Mr John B Fairfax and Mr Nicholas Fairfax, are
independent. In assessing whether a Director is independent, the Board has considered Directors’ obligations to shareholders, the
requirements of applicable laws and regulations, criteria set out in the Board Charter and the ASX Recommendations. The Board
has not set specific materiality thresholds, considering it more effective to assess any relationship on its merits on a case-by-case
basis, and where appropriate with the assistance of external advice. The ASX Recommendations, in summary, state that the Board
should consider whether the Director:
•
is a substantial shareholder or officer or associated with a substantial shareholder of the Company;
• was employed in an executive capacity by the Group within the last three years;
• within the last three years, was a principal of a material professional adviser or a material consultant or an employee materially
associated with a service;
26
Corporate Governance
•
•
is, or is associated with a material supplier or customer of the Group; and
has a material contractual relationship with the Group other than as a Director.
Mr John B Fairfax has a relevant share interest of approximately 9.7% in the Company and Mr Nicholas Fairfax has a family
relationship with Mr John B Fairfax. On this basis, the Board has concluded that, given the shareholding criteria in the ASX
Recommendations, neither is an independent Director.
CODE OF CONDUCT
All Directors, managers and employees are required to act honestly and with integrity.
The Company has developed and communicated to all employees and Directors the Fairfax Code of Conduct. The Code assists in
upholding ethical standards and conducting business in accordance with applicable laws. The Code also sets out the responsibility of
individuals for reporting Code breaches.
The Fairfax Code of Conduct aims to:
•
•
•
•
provide clear guidance on the Company’s values and expectations while acting as a representative of Fairfax;
promote minimum ethical behavioural standards and expectations across the Group, all business units and locations;
offer guidance for shareholders, customers, readers, suppliers and the wider community on our values, standards and
expectations, and what it means to work for Fairfax;
raise employee awareness of acceptable and unacceptable behaviour and provide a means to assist in avoiding any real or
perceived misconduct.
Supporting the Code of Conduct is the Company’s range of guidelines and policies. These policies are posted on the Company
intranet, are communicated to employees at the time of employment and are reinforced by training programs.
The Code of Conduct is a set of general principles relating to employment with Fairfax, covering the following areas:
•
•
•
•
•
•
business integrity - conducting business with honesty, integrity and fairness; reporting concerns without fear of punishment; making
public comments about the Company and disclosing real or potential conflicts of interest;
professional practice - dealings in Fairfax shares; financial interests; protecting company assets and property; maintaining privacy
and confidentiality; undertaking employment outside Fairfax; personal advantage, gifts and inducements, recruitment and selection;
and company reporting;
health, safety and environment;
equal employment opportunity and anti-harassment;
compliance with company policies; and
implementation of and compliance with the Code of Conduct.
The Code of Conduct is to be read in conjunction with the codes of ethics for each masthead and the other Fairfax policies as
amended from time to time.
27
Corporate Governance
AUDIT AND RISK COMMITTEE
The Board has had an Audit and Risk Committee since listing on the ASX in 1992. The Committee operates in accordance with a
Charter which sets out its role and functions. In summary, the Committee’s role is to advise and assist the Board on the
establishment and maintenance of a framework of risk management, internal controls and ethical standards for the management of
the Fairfax Group and to monitor the quality and reliability of financial information for the Group. To carry out this role, the
Committee:
•
•
•
recommends to the Board the appointment of the external auditor, reviews its performance, independence and effectiveness,
approves the auditor’s fee arrangements and enforces the Company’s Charter of Audit Independence;
ensures that appropriate systems of control are in place to effectively safeguard the value of assets;
ensures accounting records are maintained in accordance with statutory and accounting requirements;
• monitors systems designed to ensure financial statements and other information provided to shareholders is timely, reliable and
accurate;
formulates policy and oversees key finance and treasury functions;
oversees policies and procedures aimed to ensure the Group has an effective business risk plan;
ensures appropriate policies and procedures are in place for compliance with all legal, regulatory and ASX requirements;
•
•
•
• monitors compliance with regulatory and ethical requirements;
•
•
•
reviews the external audit process with the external auditor, including in the absence of management;
reviews the performance of internal audit with input into the performance review and remuneration of the Internal Audit Manager;
reviews and approves the internal audit plan and receives summaries of significant reports by internal audit;
• meets with the Internal Audit Manager including in the absence of management if considered necessary; and
•
does anything else it considers necessary to carry out the above functions.
Under its Charter, all members of the Committee must be non-executive Directors. Executives may attend by invitation. The Chair of
the Committee is required to be independent and have relevant financial expertise and may not be the Chair of the Board. The
members of the Audit and Risk Committee and details of their attendance at Committee meetings are set out on page 11.
The Chair of the Committee may, at the Company’s expense, obtain external expert advice, obtain assistance and information from
officers of the Group, and engage other support as reasonably required from time to time.
CHARTER OF AUDIT INDEPENDENCE
The Board has also adopted a Charter of Audit Independence which is posted on the Company’s website at www.fxj.com.au.
The purpose of this Charter is to provide a framework for the Board and management to ensure that the external auditor is both
independent and seen to be independent. The purpose of an independent statutory audit is to provide shareholders with reliable and clear
financial reports on which to base investment decisions. The Charter sets out key commitments by the Board and procedures to be
followed by the Audit and Risk Committee and management aimed to set a proper framework of audit independence.
To promote audit quality and effective audit service by suitably qualified professionals, the Board ensures that the auditor is fairly
rewarded for the agreed scope of the statutory audit and audit-related services. The auditor is required to have regular
communications with the Committee, at times without management present. Audit personnel must be appropriately trained, meet the
required technical standards and maintain confidentiality.
Restrictions are placed on non-audit work performed by the auditor. Non-audit fees above a fixed level may not be incurred without
the approval of the Chair of the Audit and Risk Committee.
The Company requires rotation of the senior audit partner for the Company at least every five years.
The Audit and Risk Committee requires the auditor to confirm annually that it has complied with all professional regulations and
guidelines issued by the Australian accounting profession relating to auditor independence and that it has no financial or material
business interests in the Company outside of the supply of professional services.
28
Corporate Governance
MARKET DISCLOSURE AND SHAREHOLDER COMMUNICATIONS
The Company has a Market Disclosure Policy which sets out requirements aimed to ensure full and timely disclosure to the market
of material issues relating to the Group to ensure that all stakeholders have an equal opportunity to access information.
The Policy reflects the ASX Listing Rules and Corporations Act continuous disclosure requirements.
The Market Disclosure Policy requires that the Company notify the market, via the ASX, of any price sensitive information (subject to the
exceptions to disclosure under the Listing Rules). Information is price sensitive if a reasonable person would expect the information to
have a material effect on the price or value of the Company’s securities or if the information would, or would be likely to, influence
investors in deciding whether to buy, hold or sell Fairfax securities.
The Chief Executive Officer, Chief Financial Officer, General Manager Investor Relations and Group General Counsel/Company
Secretary are designated as Disclosure Officers who are responsible for reviewing potential disclosures and deciding what
information should be disclosed.
Only the Disclosure Officers may authorise communications on behalf of the Company to the ASX, media, analysts and investors. This
safeguards the premature exposure of confidential information and aims to ensure proper disclosure is made in accordance with the law.
The Disclosure Officers are also authorised to determine whether a trading halt will be requested from the ASX to prevent trading in an
uninformed market.
The onus is on all staff to inform a Disclosure Officer of any price sensitive information as soon as becoming aware of it. The
Executive Leadership Team is responsible for ensuring staff understand and comply with the policy.
As well as its Listing Rules and statutory reporting obligations, the Company actively encourages timely and ongoing shareholder
communications.
To ensure ready access for shareholders to information about the Company, Company announcements, annual reports, analyst and
investor briefings, financial results and other information useful to investors such as press releases are placed on the Company’s website
at www.fxj.com.au as soon as practical after their release to the ASX. Several years worth of historical financial information is available on
the website. The results briefings given to analysts by senior management are webcast on the website.
The full text of notices of meetings and the accompanying explanatory materials are posted on the website for each annual general
meeting. The Chair’s and the Chief Executive Officer’s addresses, proxy counts and results of shareholder resolutions at the meeting
are also posted on the website.
At the annual general meeting, shareholders are encouraged to ask questions and are given a reasonable opportunity to comment on matters
relevant to the Company. The external auditor attends the annual general meeting and is available to answer shareholder questions about the
audit and the audit report.
RISK MANAGEMENT AND INTEGRITY OF FINANCIAL REPORTING
The Board has overseen the development of a risk management and internal compliance and control system.
The system draws upon the ASX Corporate Governance Council’s Revised Supplementary Guidance to Principle 7 and seeks to
provide a consistent approach to identifying, assessing, and reporting risks, whether they be related to company performance,
reputation, safety, environment, internal control, compliance or other risk areas.
Key aspects of the Company’s risk management and internal compliance and control system are summarised as follows:
• Risks are assessed at least annually and revised periodically for each division through the business planning, budgeting,
forecasting, reporting and performance management processes.
•
•
•
The Board, through the Audit and Risk Committee, receives regular reports from management (and independent advisers where
appropriate) on key risk areas such as treasury, health safety and environment, regulatory compliance, taxation, finance and internal
audit and the effectiveness of the risk management system.
The process for assessing and reporting on risks, internal controls and internal compliance is being standardised, enhanced and
formalised across the Group. This is an ongoing process.
Formal risk assessments are required as part of business case approvals for one-off projects or initiatives of a significant nature.
Project teams are responsible for managing the risks identified.
29
Corporate Governance
• Under the direction of the Audit and Risk Committee, Internal Audit conducts a program of internal control reviews over key areas, based
on their importance to the Company, and provides independent assurance over the internal control assessments undertaken by
management.
The Company’s risk framework is overseen and monitored by both the Board and the Audit & Risk Committee.
As part of the risk framework, specific policies and approval processes have been developed to cover key risk areas such as
material investments and contracts, treasury, capital expenditure approval, occupational health and safety and environmental
processes.
The Company’s Internal Audit function comprises the Internal Audit Managers and a team of professionals who work through a
schedule of prioritised risk areas across all the major business units to provide an independent risk assessment and evaluation of
operating and financial controls. The Internal Audit function is independent from the external auditor and the Internal Audit Managers
may meet with the Audit & Risk Committee in the absence of management. Internal Audit reports its results to each meeting of the
Audit & Risk Committee and the Internal Audit Managers attend the meetings.
The Board has received written assurances from the Chief Executive and the Chief Financial Officer that in their opinion:
(a) The financial statements and associated notes comply in all material respects with the accounting standards as required by the
Corporations Act 2001.
(b) The financial statements and associated notes give a true and fair view, in all material respects, of the financial position as at 28
June, 2009, and performance of the Company and consolidated entity for the period then ended as required by the
Corporations Act 2001.
(c) There are reasonable grounds to believe the Company will be able to pay its debts as and when they become due and payable.
(d) The financial records of the Company have been properly maintained in accordance with the Corporations Act 2001.
(e) The statements made above regarding the integrity of the financial statements are founded on a sound system of financial risk
management and internal compliance and control which, in all material respects, implements the policies adopted by the Board.
(f) The risk management and internal compliance and control systems of the Company and consolidated entity relating to financial
reporting compliance and operations objectives are operating efficiently and effectively, in all material respects. Management
has reported to the Board as to the effectiveness of the Company’s management of its material business risks.
(g) Subsequent to 28 June 2009, no changes or other matters have arisen that would have a material effect on the operation of the
risk management and internal compliance and control systems of the Company and consolidated entity.
These statements to the Board are underpinned by the requirement for appropriate senior executives to provide a signed letter of
representation addressed to the Chief Executive Officer and Chief Financial Officer verifying material issues relating to the
executive’s areas of responsibility and disclosing factors that may have a material effect on the financial results or operations of the
Group.
REMUNERATION
Information about the Board’s Personnel Policy and Remuneration Committee (PPRC), the PPRC Charter, the Company’s
remuneration policies for non-executive Directors and the remuneration policies for the CEO and senior executives is set out in the
Remuneration Report beginning on page 14.
30
Corporate Governance
TRADING IN COMPANY SECURITIES
Directors must not trade directly or indirectly in Fairfax securities while in possession of price sensitive information. Price sensitive
information is information which has not been made public, usually about the Group or its intentions, which a reasonable person
would expect to have a material effect on the price or value of Fairfax securities or which would be likely to influence an investment
decision in relation to the securities.
The Fairfax Securities Trading Policy regulates dealings by Directors and certain senior employees (“Designated People”) in Fairfax
securities (including shares, convertible notes derivatives, and options). The purpose of the Policy is to ensure that Designated
People comply with the legal and company-imposed restrictions on trading in securities whilst in possession of unpublished price
sensitive information. The Policy sets out black out periods when no trading is to be undertaken and a process for authorisation of trading
at other times. Designated People means Directors, the CEO, the Company Secretary, employees who report directly to the CEO
and those employees who are notified that they are subject to the Policy.
A Designated Person must not trade in breach of the Policy either directly or indirectly through another entity, such as a partner, child,
nominee or controlled company acting on his/her behalf. Under the Policy, Designated People are prohibited from trading in Fairfax
securities without approval under the Policy or when in possession of price-sensitive information about Fairfax. In addition, Designated
People must not tip anyone else on Fairfax securities, engage in short term speculative trading in Fairfax securities or trade in Fairfax
derivatives.
Black-out periods occur before the announcement of the half-yearly and annual results, other trading updates and the annual general
meeting during which Designated People will not be authorised to trade. Before trading outside black-out periods, Directors must obtain
approval from the Chair (or the chairman of the Audit & Risk Committee for approvals for the Chair). Other Designated People must obtain
approval from the Company Secretary who will consult with the Chair.
Directors must notify the Company Secretary of any change in the Director’s interest in Company securities so as to ensure compliance
with the disclosure requirements of the ASX Listing Rules.
The Policy prohibits Designated People from entering into any financial transactions that operate to limit the economic risk of unvested
Fairfax securities which have been allocated to an employee as part of his/her remuneration prior to the securities vesting. Any breach of
this prohibition risks disciplinary sanctions.
31
Management Discussion & Analysis Report
TRADING OVERVIEW
Economic conditions during the past financial year have been very weak, which in turn resulted in large falls in advertising demand
from the September/October period and accelerating particularly during the early part of the second half of the financial year.
Volumes in all areas of the company’s activities were impacted to some degree. Publishing volumes were down and the rate of
growth in the online transaction businesses was below previous levels. A consequence of the slowing conditions and volume
reductions was general pressure on yields in most parts of the business.
Australia and New Zealand advertising volumes followed similar patterns of decline. Classified advertising, particularly employment
advertising, experienced the most significant volume decline with the major metropolitan publications experiencing greater falls than
the regional and community titles. Radio experienced similar declines to the regional/community titles thus mitigating the full effects
of the downturn on the major metropolitan titles.
A significant amount of business restructuring was implemented during the year in anticipation of an extended economic downturn.
Non recurring restructure and redundancy costs were incurred as a result with some benefit realised during the year and the full
impact of the savings to be achieved in subsequent years. The downturn in trading also resulted in a non cash write down of the
carrying value of the Group’s mastheads, licences and goodwill.
These non recurring costs, together with write downs of the goodwill associated with the Southern Star television production
business sold during the year, amounted to an after tax charge of $662 million in the year.
Including these non recurring costs, the net loss attributable to members of the Company was $380 million. Excluding impairments
and non recurring restructure charges, the underlying net profit after tax was $242 million, down from $395 million in the prior year.
CASH FLOW
Operating cash flow remains strong in relation to the Company’s profitability with $385 million generated during the year.
Capital expenditure decreased slightly to $107 million compared to $115 million last year and well below the $117 million
depreciation charge. The increase was mainly due to upgrades to printing plants in Australia and New Zealand and investments
being made to improve both the editorial and financial systems across the Company. All of these investments meet our strict financial
criteria and will generate significant benefits into the future.
FINANCIAL POSITION
Impairment charges and the equity raising completed in April 2009 have generated the major changes in the balance sheet over the
past financial year. These changes have occurred in the Intangibles, Debt and Contributed Equity classification.
Intangible assets have decreased by $604 million, largely reflecting the non cash impairment charges recognised this financial year.
The impact of the decline in advertising volumes on earnings, coupled with the very uncertain trading outlook for calendar 2009,
encouraged us to take action to strengthen the balance sheet via the issue of equity capital to shareholders.
In April 2009 we completed a three for five accelerated non-renounceable pro-rata entitlement offer, raising a net $613 million. A
total of 832.9 million shares were issued at a price of $0.75 with the proceeds applied to reduce borrowings. Existing debt facilities
were retained however and funding flexibility has been maintained for the medium term in anticipation of capital markets returning to
normal.
The company also issued 5.5 million shares at $2.83 per share as part of the Dividend Reinvestment Plan, offset by the purchase of
5.0 million shares at various rates for the unvested employee incentive scheme.
The Southern Star television production business was sold in April 2009 with the proceeds also applied to reduce outstanding
drawings under loan facilities.
With the net cash from operations after dividend payments, the cash from the equity raisings and the proceeds from the sale of
Southern Star, the company’s net debt was reduced by $734 million over the course of the year. The Company remains well within
all covenant limits at 28 June 2009.
As can be seen from the graph below, the Company does not face any significant refinancing exposure for at least the next three
years.
32
Management Discussion & Analysis Report
** A$300m
SPS could
be
converted
to equity in
April 2011
* 2010 &
2011
maturities
covered by
over
A$1,000m of
cash and
undrawn
committed
facilities
AUD $m
1,000
750
500
250
0
Eurobond Issue
US Private Placement III
A$ Bank Syndication
CBA Bank Facility
NZD Redeemable Preference Share
A$ Domestic MTN
ASB NZ$ Facility
US Private Placement II
Chullora Financing
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Unfortunately, in May 2009 the company’s S&P credit rating was downgraded from BBB- to BB+ due to the impact of lower revenue
levels and the uncertain advertising outlook. Although it will take a period of sustained compliance with S&P’s strict ratings metrics,
the company believes it will be able to restore its investment grade rating in two to three years.
DIVIDENDS
Total ordinary dividends of $181.7 million were paid during the year, a decrease of $117.7 million on last year.
These dividend payments are in line with the Board Policy announced in December 2008 whereby the dividend payout ratio was
decreased to approximately 20% until the company’s trading performance and balance sheet position are improved.
Dividends of $25.0 million were paid on the Stapled Preference Shares which was in line with the amount paid in 2008.
No final dividend has been declared for the year.
FRANKING
With the combination of the downturn in trading levels and the restructuring and redundancy costs incurred, the company’s income
tax payments in 2009 were substantially lowered. Accordingly, the level of franking credits has been significantly reduced and it is
anticipated that dividends in the immediate future will be substantially unfranked. Franking levels are expected to be gradually
restored to levels consistent with the proportion of Australian income during 2010.
33
Consolidated Income Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Revenue from operations
Other revenue and income
Total revenue and income
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
Note
2(A)
2(B)
$'000
$'000
2,599,132
2,900,755
$'000
152
$'000
1,445
10,390
33,252
40,512
126,509
2,609,522
2,934,007
40,664
127,954
Share of net profits of associates and joint ventures
11(C)
2,050
8,735
-
-
Expenses from operations excluding impairment, depreciation,
amortisation and finance costs
Depreciation and amortisation
3(A)
3(B)
(2,097,050)
(2,097,973)
(85,926)
(86,003)
(117,556)
(108,295)
(7,363)
(9,514)
Property, plant and equipment, intangible and investment impairment
(569,091)
(1,382)
(214,000)
Finance costs
3(C)
(179,291)
(211,919)
(2)
Net (loss)/profit from operations before income tax expense
Income tax (expense)/benefit
Net (loss)/profit from operations after income tax expense
Net loss/(profit) attributable to minority interest
Net (loss)/profit attributable to members of the Company
Earnings per share (cents per share)
Basic (loss)/earnings per share (cents per share)
Diluted (loss)/earnings per share (cents per share)
5
26
27
27
-
(5)
32,432
26,754
(351,416)
523,173
(266,627)
(29,672)
(135,683)
21,452
(381,088)
387,490
(245,175)
59,186
1,038
(612)
-
-
(380,050)
386,878
(245,175)
59,186
(21.6)
(21.6)
22.9
22.5
The above Income Statements should be read in conjunction with the accompanying Notes.
34
Consolidated Balance Sheets
Fairfax Media Limited and Controlled Entities as at 28 June, 2009
CURRENT ASSETS
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative assets
Assets held for sale
Income tax receivable
Other current assets
Total current assets
NON-CURRENT ASSETS
Receivables
Investments accounted for using the equity method
Available for sale investments
Held to maturity investments
Intangible assets
Property, plant and equipment
Derivative assets
Pension assets
Deferred tax assets
Other financial assets
Other non-current assets
Total non-current assets
Total assets
CURRENT LIABILITIES
Payables
Interest bearing liabilities
Derivative liabilities
Provisions
Current tax liabilities
Total current liabilities
NON-CURRENT LIABILITIES
Interest bearing liabilities
Derivative liabilities
Deferred tax liabilities
Provisions
Pension liabilities
Other non-current liabilities
Total non-current liabilities
Total liabilities
NET ASSETS
EQUITY
Contributed equity
Reserves
Retained profits
Total parent entity interest
Minority interest
TOTAL EQUITY
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
Note
$'000
$'000
$'000
$'000
37(B)
69,124
93,864
1,680
680
7
8
16
9
10
7
11
12
13
14
15
16
17(A)
18(A)
19
10
20
21
16
22
21
16
18(A)
22
17(A)
23
24
25
26
358,210
499,126
1,652,813
1,277,111
40,055
173
6,062
35,978
-
44,801
3,519
2,222
-
11,610
-
-
-
25,829
-
-
-
-
-
-
509,602
655,142
1,680,322
1,277,791
2,474
46,668
2,157
13,216
3,683
45,690
3,547
14,686
398,566
401,122
-
-
-
-
-
-
5,888,547
6,492,640
863,719
152,742
-
875,181
59,417
5,542
7,948
12,507
14,044
16,839
-
-
-
-
114,907
128,561
10,706
9,200
1,175
-
122
8,890
2,924,215
-
3,143,723
-
7,085,605
7,637,959
3,353,942
3,584,928
7,595,207
8,293,101
5,034,264
4,862,719
330,045
14,946
15,900
300,479
183,557
26,757
128,692
2,454
15,816
1,006
159,837
5,456
-
-
7,202
-
641,939
512,160
22,148
1,724,708
2,496,133
47,730
116,595
49,003
2,685
757
121,251
148,931
45,398
-
3,894
1,941,478
2,815,607
2,583,417
3,327,767
-
-
9,867
401
-
-
10,268
32,416
-
-
7,385
14,279
37,564
-
-
7,643
703
-
-
8,346
45,910
5,011,790
4,965,334
5,001,848
4,816,809
4,928,122
4,318,409
4,934,237
4,324,524
(163,381)
237,604
(186,063)
821,987
3,987
63,624
1,750
490,535
5,002,345
9,445
4,954,333
11,001
5,001,848
-
4,816,809
-
5,011,790
4,965,334
5,001,848
4,816,809
The above Balance Sheets should be read in conjunction with the accompanying Notes.
35
Consolidated Statements of Recognised Income and Expense
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Amounts recognised directly in equity
Cashflow hedge reserve, net of tax
Net investment hedge reserve, net of tax
Foreign currency translation reserve, net of tax
Changes in fair value of available for sale assets, net of tax
Actuarial loss on defined benefit plans, net of tax
Tax benefits recognised directly in equity
Reclassification of tax benefits to equity
Net income/(expense) recognised directly in equity
Net (loss)/profit from continuing operations after income tax expense
Total recognised income and expense for the financial period
Total recognised income and expense attributable to minority interest
Total recognised income and expense attributable
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
(8,021)
(586)
22,046
24,281
28,219
(250,865)
833
(5,093)
7,502
-
22,854
(381,088)
(358,234)
1,038
(801)
(4,315)
8,427
7,833
(193,394)
387,490
194,096
(612)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(245,175)
(245,175)
-
-
59,186
59,186
-
to members of the Company
(357,196)
193,484
(245,175)
59,186
The above Statements of Recognised Income and Expense should be read in conjunction with the accompanying Notes.
36
Consolidated Cash Flow Statement
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
Note
$'000
$'000
$'000
$'000
2,957,559
3,192,965
-
673
Payments to suppliers and employees (inclusive of GST)
(2,327,923)
(2,461,003)
(77,029)
(76,173)
Interest received
Dividends and distributions received
Finance costs paid
Net income taxes paid
4,673
3,411
25,177
8,837
(182,962)
(69,861)
(209,511)
(136,219)
40,512
-
(2)
4,180
26,509
100,000
(6)
(26,636)
Net cash inflow/(outflow) from operating activities
37(A)
384,897
420,246
(32,339)
24,367
Cash flows from investing activities
Payment for purchase of controlled entities,
associates and joint ventures (net of cash acquired)
Payment for purchase of businesses, including mastheads
Payment for property, plant, equipment and software
Proceeds from sale of property, plant and equipment
Proceeds from sale of investments and other assets
Payments for convertible notes
Loans advanced to controlled entities
Loans advanced to other parties
Loans repaid by controlled entities
(59,191)
(586,735)
(6,738)
(8,189)
-
-
(1,389)
-
(106,284)
(115,403)
(409)
(7,031)
16,431
108,449
(1,100)
-
(17,056)
-
5,181
6,481
-
-
-
-
4
-
-
(400,316)
-
-
-
-
-
-
-
150,085
Net cash (outflow)/inflow from investing activities
(65,489)
(698,665)
(400,721)
141,665
Cash flows from financing activities
Proceeds from issue of shares
Proceeds from issue of shares to minority interest shareholders
Share issue costs
Payment for shares acquired by employee share trust
Proceeds from borrowings and other financial liabilities
Repayment of borrowings and other financial liabilities
Repayment of medium term notes
Payments of facility fees
Dividends and distributions paid to shareholders including SPS*
Dividends paid to minority interests in subsidiaries
624,640
91,808
624,640
91,808
80
(12,131)
(12,443)
-
-
(14,621)
22,511
352,763
(750,884)
(150,149)
-
(12,131)
(12,443)
-
-
(14,621)
-
-
-
-
-
-
-
-
-
-
(268,844)
(570)
(166,006)
-
(243,226)
-
(27,132)
(1,908)
(191,012)
(461)
Net cash (outflow)/inflow from financing activities
(348,740)
10,387
434,060
(166,039)
Net (decrease)/increase in cash and cash equivalents held
Cash and cash equivalents at beginning of the financial year
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of the financial year
37(B)
(29,332)
(268,032)
1,000
93,864
4,592
69,124
366,307
(4,411)
680
-
93,864
1,680
(7)
687
-
680
* Under the terms of the DRP, $15.7 million (2008: $56.2 million) of dividends were paid via the issue of 5,558,472 ordinary shares
(2008: 12,820,970 ordinary shares). A cash dividend payment of $166.0 million (2008: $243.2 million) was made to ordinary
shareholders that did not elect to participate in the DRP.
Total cash dividends for the year totalled $191.0 million (2008: $268.8 million); this includes $25.0 million (2008: $25.6 million) made to
stapled preference shareholders (SPS).
The above Cash Flow Statements should be read in conjunction with the accompanying Notes.
37
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
1. Summary of significant accounting policies
The principal accounting policies adopted in the preparation of the financial report are set out below. These policies have been
consistently applied to all the years presented, unless otherwise stated. The financial report includes separate financial statements for
Fairfax Media Limited as an individual entity and the consolidated entity consisting of Fairfax Media Limited and its controlled entities.
The financial report is for the period 30 June 2008 to 28 June 2009 (2008: the period 2 July 2007 to 29 June 2008). Reference in this
report to 'a year' is to the period ended 28 June 2009 or 29 June 2008 respectively, unless otherwise stated.
(A) BASIS OF PREPARATION
The financial report is a general-purpose financial report, which has been prepared in accordance with the requirements of the
Corporations Act 2001, Australian Accounting Standards and other authorative pronouncements of the Australian Accounting
Standards Board. The financial report also complies with Australian Accounting Standards as issued by the Australian
Accounting Standards Board and International Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board.
As at 28 June 2009, the consolidated entity has net current liabilities of $132.3 million. The consolidated entity has sufficient
committed but unused facilities at the balance sheet date to finance its liabilities as and when they fall due, including maturing
liabilities as disclosed in Note 21(B). In the opinion of the directors, Fairfax Media Limited will be able to continue to pay its debts as
and when they fall due. As a result the financial report of the Company and its controlled entities has been prepared on a going
concern basis.
Historical cost convention
These financial statements have been prepared on a going concern basis and on the basis of historical cost principles except for
derivative financial instruments and certain financial assets which are measured at fair value. The carrying values of recognised
assets and liabilities that are hedged with fair value hedges are adjusted to record changes in the fair values attributable to the risks
that are being hedged.
Comparatives
Certain comparative amounts have been reclassified to be consistent with current year presentation.
(B) PRINCIPLES OF CONSOLIDATION
(i) Controlled entities
The consolidated financial statements incorporate the assets and liabilities of the Company, Fairfax Media Limited, and its
controlled entities. Fairfax Media Limited and its controlled entities together are referred to in this financial report as the Group
or the consolidated entity.
Controlled entities are fully consolidated from the date on which control is transferred to the Group. They are de-consolidated from
the date that control ceases.
The purchase method of accounting is used to account for the acquisition of controlled entities by the Group (refer to Note 1(C)).
All inter-entity transactions, balances and unrealised gains on transactions between Group entities have been eliminated in full.
Minority interest in the earnings and equity of controlled entities is shown separately in the consolidated income statement and
balance sheet respectively.
(ii) Associates and joint ventures
Investments in associates and joint ventures are accounted for in the consolidated financial statements using the equity method.
Associates are entities over which the Group has significant influence and are neither subsidiaries or joint ventures.
38
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
The Group’s share of its associates’ and joint ventures’ post-acquisition profits or losses are recognised in the income
statement, and its share of post-acquisition movements in reserves is recognised in reserves. The cumulative post-acquisition
movements are adjusted against the carrying amount of the investment. Dividends received from associates and joint ventures
are recognised in the consolidated financial statements as a reduction in the carrying amount of the investment.
When the Group’s share of losses in an associate or joint venture equals or exceeds its interest in the associate or joint venture,
the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the associate or
joint venture.
Unrealised gains on transactions between the Group and its associates and joint ventures are eliminated to the extent of the Group’s
interest in associates and joint ventures.
(C) ACCOUNTING FOR ACQUISITIONS
The purchase method of accounting is used to account for all business combinations, including business combinations involving
entities or businesses under common control, regardless of whether equity instruments or other assets are acquired. Cost is
measured as the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange
plus costs directly attributable to the acquisition. Where equity instruments are issued in an acquisition, the fair value of the
instruments is their published market price as at the date of exchange unless, in rare circumstances, it can be demonstrated that
the published price at the date of exchange is an unreliable indicator of fair value and that other evidence and valuation methods
provide a more reliable measure of fair value. Transaction costs arising on the issue of equity instruments are recognised
directly in equity.
Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are measured initially at their
fair values at the acquisition date. The excess of the cost of acquisition over the fair value of the net identifiable assets
acquired represents goodwill (refer to Note 1(E)(i)).
(D) IMPAIRMENT OF ASSETS
Goodwill and intangible assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment, or more frequently if events or changes in circumstances indicate that they might be impaired. Assets that are subject
to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may
not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable
amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their present value using a post-tax discount rate that reflects current market
assessments of the time value of money and the risks specific to the asset. Where an asset does not generate largely independent
cash inflows, the recoverable amount is determined for the cash-generating unit to which the asset belongs. A cash generating unit
is the grouping of assets at the lowest level for which there are separately identifiable cash flows. Non-financial assets other
than goodwill that suffered an impairment are reviewed for possible reversal of the impairment at each reporting date.
At each balance date, the Group assesses whether there is any indication that an asset may be impaired. Where an
indicator of impairment exists, the Group makes a formal estimate of recoverable amount. Where the carrying amount of an asset
exceeds its recoverable amount the asset is considered impaired and is written down to its recoverable amount.
(E) INTANGIBLES
(i) Goodwill
Goodwill represents the excess of cost of an acquisition over the fair value of the Group's share of the net identifiable assets of
the acquired subsidiary/associate at the date of acquisition. Goodwill on acquisitions of subsidiaries is included in intangible
assets. Goodwill on acquisitions of associates is included in investments in associates. Goodwill is allocated to cash-generating
units for the purposes of impairment testing (refer Note 1(D)). Goodwill is not amortised. Instead, goodwill is tested for impairment
annually, or more frequently if events or changes in circumstances indicate that it might be impaired, and is carried at cost less
accumulated impairment losses. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating
to the entity sold.
39
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(ii) Other intangible assets
Mastheads and tradenames
The newspaper mastheads and tradenames have been assessed to have indefinite useful lives. Accordingly, they are not
amortised, instead they are tested for impairment annually, or whenever there is an indication that the carrying value may be
impaired, and are carried at cost less accumulated impairment losses.
The Group's mastheads and tradenames operate in established markets with limited license conditions and are expected to continue
to complement the Group's new media initiatives. On this basis, the directors have determined that mastheads and tradenames
have indefinite lives as there is no foreseeable limit to the period over which the assets are expected to generate net cash inflows
for the Group.
Radio licences
Radio licences, being commercial radio licences held by the consolidated entity under the provisions of the Broadcasting Services
Act 1992, have been assessed to have indefinite useful lives. Accordingly, they are not amortised, instead they are tested for
impairment annually, or whenever there is an indication that the carrying value may be impaired, and are carried at cost less
accumulated impairment losses.
Web-Sites
Internal and external costs directly incurred in the development of web-sites are capitalised and amortised using a straight-line
method over the assessed useful lives of the web-sites. Capitalised web-site costs are reviewed annually for potential impairment.
Computer software
Acquired computer software licences are capitalised as an intangible as are internal and external costs directly incurred in the
purchase or development of computer software, including subsequent upgrades and enhancements when it is probable that they
will generate future economic benefits attributable to the consolidated entity. These costs are amortised using the straight-line
method over three to five years.
Other
Other intangibles, where applicable, are stated at cost less accumulated amortisation and impairment losses. The useful lives of the
intangible assets are assessed to be either finite or indefinite and are examined on an annual basis and adjustments, where
applicable, are made on a prospective basis.
Other intangible assets created within the business are not capitalised and are expensed in the income statement in the period the
expenditure is incurred.
Intangible assets are tested for impairment annually (refer to Note 1(D)).
(F) FOREIGN CURRENCY
(i) Currency of presentation
All amounts are expressed in Australian dollars, which is the parent entity and consolidated entity’s presentation currency. Items
included in the financial statements of each of the Group’s entities are measured using the currency of the primary economic
environment in which the entity operates (the functional currency).
(ii) Transactions and balances
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the dates of the
transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at
reporting date exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in the income
statement, with the exception of differences on foreign currency borrowings that provide a hedge against a net investment in a
foreign operation and qualifying cash flow hedges, which are deferred in equity until disposal. Tax charges and credits attributable
to exchange differences on borrowings are also recognised in equity.
40
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Translation differences on non-monetary items that are measured in terms of historical cost in a foreign currency are translated
using the exchange rate as at the date of the initial transaction. Translation differences on non-monetary items, such as available
for sale financial assets, are translated using the exchange rates at the date when the fair value was determined and included
in the asset revaluation reserve in equity.
(iii) Group entities
The results and financial position of all the Group entities that have a functional currency different from the presentation currency
are translated into the presentation currency as follows:
•
•
•
assets and liabilities for each balance sheet presented are translated at the closing rate at the date of that balance sheet;
income and expenses for each income statement are translated at average exchange rates; and
all resulting exchange differences are recognised as a separate component of equity.
On consolidation, exchange differences arising from the translation of the borrowings designated as hedges of the net investment in
foreign entities are taken directly to a separate component of equity, the net investment hedge reserve.
On disposal of a foreign entity, or borrowings that form part of the net investment are repaid, the deferred cumulative amount of the
exchange differences in the net investment hedge reserve relating to that foreign operation is recognised in the income
statement as part of the gain or loss on sale. Goodwill and fair value adjustments arising on the acquisition of a foreign entity are
treated as assets and liabilities of the foreign entity and translated at the closing rate.
(G) REVENUE RECOGNITION
Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Group and the amount of the
revenue can be reliably measured. Advertising and circulation revenue from the sale of newspapers, magazines and other
publications is recognised on publication net of expected returns and pricing adjustments. Revenue from rendering of services is
recognised when control of a right to be compensated for the services has been attained and the stage of completion of the service
contract can be reliably measured. Stage of completion is measured by reference to the services performed to date as a percentage
of total estimated services to be performed for each contract. If a contract outcome cannot be reliably measured, revenue is
recognised only to the extent that costs have been incurred.
Revenue from dividends and distributions from controlled entities are recognised by the Company when they are declared by the
controlled entities.
Interest is recognised as it accrues, taking into account the effective yield on the financial asset.
Revenue from the contribution of services and materials during the production of television programs and the licensing of copyright
is recognised when the program is available for delivery, the contract is fully executed and the collectability is reasonably assured.
Revenue from the provision of production services is recognised in accordance with the agreement for the project and is brought to
account on a stage-of-completion basis. Revenue from royalties due from the ownership of a program copyright is recognised
on an accrual basis in accordance with the agreement and is only brought to account where the amount of the royalty can be
reliably estimated and collection is reasonably assured.
(H) INCOME TAX AND OTHER TAXES
The income tax expense or benefit for the period is the tax payable on the current period’s taxable income based on the national
income tax rate for each jurisdiction adjusted by changes in deferred tax assets and liabilities attributed to temporary differences
and to unused tax losses. Deferred tax assets and liabilities are recognised for temporary differences at the balance sheet date
between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
41
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Deferred income tax liabilities are recognised for all taxable temporary differences:
•
•
except where the deferred income tax liability arises from the initial recognition of an asset or liability in a transaction that is not
a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss; and
in respect of taxable temporary differences associated with investments in subsidiaries, associates and interests in joint
ventures, except where the timing of the reversal of the temporary differences can be controlled and it is probable that the
temporary differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and
unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary
differences, and the carry-forward of unused tax assets and unused tax losses can be utilised:
•
except where the deferred income tax asset relating to the deductible temporary difference arises from the initial recognition of
an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
•
in respect of deductible temporary differences associated with investments in subsidiaries, associates and interests in joint
ventures, deferred tax assets are only recognised to the extent that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available against which the temporary differences can be utilised.
The carrying amount of deferred income tax assets is reviewed at each reporting date and reduced to the extent that it is no longer
probable that sufficient taxable profit will be available to allow all or part of the deferred income tax asset to be utilised.
Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is
realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance
sheet date. Income taxes relating to items recognised directly in equity are recognised in equity.
Goods and Services Tax (GST)
Revenues, expenses and assets are recognised net of the amount of GST except:
(i) where the GST incurred on a purchase of goods and services is not recoverable from the taxation authority, in which case the
GST is recognised as part of the cost of acquisition of the asset or as part of the expense item as applicable; and
(ii) receivables and payables are stated with the amount of GST included.
This net amount of GST recoverable from, or payable to, the taxation authority is included as part of receivables or payables in the
balance sheet.
Cashflows are included in the cash flow statement on a gross basis and the GST component of cashflows arising from investing
and financing activities, which are recoverable from, or payable to the taxation authority are classified as operating cashflows.
Commitments and contingencies are disclosed net of the amount of GST recoverable from, or payable to, the taxation authority.
Tax consolidation - Australia
Fairfax Media Limited (the head entity) and its wholly-owned Australian entities have implemented the tax consolidation legislation
as of 1 July 2003. The current and deferred tax amounts for each member in the tax consolidated group (except for the head entity)
have been allocated based on stand-alone calculations that are modified to reflect membership of the tax consolidated group.
On adoption of the tax consolidation legislation, the entities in the tax consolidated group entered into a tax sharing agreement which,
in the opinion of the directors, limits the joint and several liability of the wholly-owned entities in the case of a default of the head
entity, Fairfax Media Limited.
42
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
The entities have also entered into a tax funding agreement under which the wholly-owned entities fully compensate Fairfax Media
Limited for any current tax payable assumed and are compensated by the Company for any current tax receivable and deferred tax
assets relating to unused tax losses or unused tax credits transferred to Fairfax Media Limited under the tax consolidation legislation.
Assets or liabilities arising under tax funding arrangements with the tax consolidated entities are recognised as amounts receivable
from or payable to other entities in the group. The amounts receivable/payable under the tax funding arrangements are due upon
demand from the head entity. The head entity may also require payment of interim funding amounts to assist with its obligations to
pay tax instalments.
(I) LEASES
(i) Finance leases
Assets acquired under finance leases which result in the consolidated entity receiving substantially all the risks and rewards of
ownership of the asset are capitalised at the lease’s inception at the lower of the fair value of the leased property or the estimated
present value of the minimum lease payments. The corresponding finance lease obligation, net of finance charges, is included
within interest bearing liabilities. The interest element is allocated to accounting periods during the lease term to reflect a constant
rate of interest on the remaining balance of the liability for each accounting period. The leased asset is included in property, plant
and equipment and is depreciated over the shorter of the estimated useful life of the asset or the lease term.
(ii) Operating leases
Leases where the lessor retains substantially all the risks and benefits of ownership of the asset are classified as operating leases.
Net rental payments, excluding contingent payments, are recognised as an expense in the income statement on a straight-line basis
over the period of the lease.
(iii) Onerous property costs
Property leases are considered to be an onerous contract if the unavoidable costs of meeting the obligations under the contract
exceed the economic benefits expected to be received under it. Where a decision has been made to vacate the premises or there
is excess capacity and the lease is considered to be onerous, a provision is recorded.
(J) CASH AND CASH EQUIVALENTS
Cash and cash equivalents includes cash on hand, deposits held at call with financial institutions and other short term investments
with original maturities of three months or less that are readily convertible to cash and subject to insignificant risk of changes in value.
Bank overdrafts are shown within interest bearing liabilities in current liabilities on the balance sheet.
(K) TRADE AND OTHER RECEIVABLES
Trade receivables are initially recognised at fair value and subsequently measured at amortised cost which is the original invoice
amount less an allowance for any uncollectible amount. Collectability of trade receivables is reviewed on an ongoing basis and a
provision for doubtful debts is made when there is objective evidence that the Group will not be able to collect the debts.
Interest receivable on related party loans is recognised on an accruals basis.
(L) INVENTORIES
Inventories including work in progress are stated at the lower of cost and net realisable value. The methods used to determine cost
for the main items of inventory are:
•
•
•
raw materials (comprising mainly newsprint and paper on hand) are assessed at average cost and newsprint and paper in
transit by specific identification cost;
finished goods and work-in-progress are assessed as the cost of direct material and labour and a proportion of manufacturing
overheads based on normal operating capacity; and
in the case of other inventories, cost is assigned by the weighted average cost method.
43
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Program copyright
Expenditure incurred in relation to film and television program copyright is capitalised and allocated against future licensing revenue.
Licensing revenue forecasts are reviewed when events or changes in circumstances indicate that forecasts are unachievable,
and the remaining capitalised balance is written down to net realisable value. Costs of developing new program concepts are
expensed if the program does not proceed.
(M) AVAILABLE FOR SALE INVESTMENTS
Available for sale financial assets are investments in listed equity securities in which the Group does not have significant influence
or control. They are stated at fair value based on current quoted prices and unrealised gains and losses arising from changes in the
fair value are recognised in the asset revaluation reserve. The assets are included in non-current assets unless management
intends to dispose of the investment within twelve months of the balance sheet date.
(N) INVESTMENTS AND OTHER FINANCIAL ASSETS
The Group classifies its investments in the following categories: financial assets at fair value through profit or loss, loans and
receivables, held to maturity investments and available for sale financial assets. The classification depends on the purpose for
which the investments were acquired. Management determines the classification of its investments at initial recognition and,
in the case of assets classified as held to maturity, re-evaluates this designation at each reporting date.
The consolidated entity classifies and measures its investments as follows:
(i) Financial assets at fair value through profit and loss
This category has two sub-categories: financial assets held for trading and those designated at fair value through profit and
loss on initial recognition. The policy of management is to designate a financial asset at fair value through profit and loss if there
exists the possibility it will be sold in the short term and the asset is subject to frequent changes in fair value. These assets
are measured at fair value and realised and unrealised gains and losses arising from changes in fair value are included in the
income statement in the period in which they arise.
(ii) Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active
market and are included in receivables in the balance sheet and measured at amortised cost using the effective interest method.
(iii) Other financial assets
These assets are non-derivatives that are either designated or not classified in any of the other categories and measured at
fair value. Any unrealised gains and losses arising from changes in fair value are included in equity, impairment losses are
included in profit and loss. Investments in partnerships are carried at cost less impairment loss.
(iv) Held to maturity investments
Held to maturity investments are non-derivative financial assets with fixed or determinable payments and fixed maturities that the
Group’s management has the positive intention and ability to hold to maturity. These assets are measured at amortised cost using
the effective interest method.
Financial assets other than derivatives are recognised at fair value or amortised cost in accordance with the requirements
of AASB 139 Financial Instruments: Recognition and Measurement. Where they are carried at fair value, gains and losses on
remeasurement are recognised directly in equity unless the financial assets have been designated as being held at fair value
through profit and loss, in which case the gains and losses are recognised directly in the income statement.
All financial liabilities other than derivatives are carried at amortised cost.
44
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
The Group uses derivative financial instruments such as forward foreign currency contracts, and foreign currency and interest rate
swaps to hedge its risks associated with interest rate and foreign currency fluctuations. Derivatives, including those embedded in
other contractual arrangements, are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently remeasured to their fair value. The method of recognising the resulting gain or loss depends on whether the derivative
is designated as a hedging instrument, and if so, the nature of the item being hedged.
The measurement of the fair value of forward exchange contracts is calculated by reference to current forward exchange rates for
contracts with similar maturity profiles. The fair value of interest rate swap contracts is determined by reference to market values
for similar instruments.
Hedge accounting
For the purposes of hedge accounting, hedges are classified as either fair value hedges (hedges of the fair value of recognised
assets or liabilities or a firm commitment) or cash flow hedges (hedges of highly probable forecast transactions).
Fair value hedge
Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in the income statement,
together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. Any gain or loss
attributable to the hedged risk on remeasurement of the hedged item is adjusted against the carrying amount of the hedged item and
recognised in the income statement. Where the adjustment is to the carrying amount of a hedged interest-bearing financial instrument
the adjustment is amortised to the income statement such that it is fully amortised by maturity.
When the hedged firm commitment results in the recognition of an asset or a liability, then, at the time the asset or liability is
recognised, the associated gains or losses that had previously been recognised in equity are included in the initial measurement of
the acquisition cost or other carrying amount of the asset or liability.
Cash flow hedge
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is recognised
in equity in the hedging reserve. The gain or loss relating to the ineffective portion is recognised immediately in the income statement.
Gains or losses that are recognised in equity are transferred to the income statement in the same year in which the hedged firm
commitment affects the net profit and loss, for example when the future sale actually occurs.
The consolidated entity’s interest rate swaps and cross currency swaps held for hedging purposes are generally accounted for
as cash flow hedges.
Hedge accounting is discontinued when the hedging instrument expires or is sold, terminated or exercised, or no longer qualifies
for hedge accounting. At that point in time, any cumulative gain or loss on the hedging instrument recognised in equity is retained
in equity until the forecasted transaction occurs. If a hedged transaction is no longer expected to occur, the net cumulative gain or
loss recognised in equity is transferred to the income statement.
Derivatives that do not qualify for hedge accounting
For derivatives that do not qualify for hedge accounting, any gains or losses arising from changes in fair value are taken directly
to the income statement.
(O) OTHER ASSETS
Film investments
Costs associated with acquiring film investments are capitalised and allocated against future licensing revenue. Licensing revenue
forecasts are reviewed regularly and when lower than the capitalised balance the remaining amount is written down to its recoverable
amount. Classification of film investments between current and non current is based on when the amounts will be allocated.
45
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Distribution advances and costs
Advances and costs incurred for television program distribution rights are capitalised and allocated against future licensing revenue.
An allowance for unrecoupable advances and costs is recorded where the amount is not expected to be fully recoverable out of
future licensing revenue. Classification of distribution advances and costs between current and non current is based on when
the amounts will be allocated.
(P) PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment is recorded at cost less depreciation and where applicable an impairment provision. Directly
attributable costs arising from the acquisition or construction of fixed assets, including internal labour and interest, are also
capitalised as part of the cost.
Recoverable amount
All items of property, plant and equipment are reviewed annually to ensure carrying values are not in excess of recoverable amounts.
Recoverable amounts are based upon the present value of expected future cashflows.
Depreciation and amortisation
Land is not depreciated. Depreciation on other assets is calculated using the straight line method to allocate their cost, net of their
residual values, over their estimated useful lives, as follows:
Buildings
Printing presses
up to 60 years
up to 20 years
Other production equipment
up to 15 years
Other equipment
up to 40 years
The assets’ residual values and useful lives are reviewed and adjusted, if appropriate, at each balance sheet date. An asset’s
carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount. Gains and losses on disposals are determined by comparing the proceeds with carrying amount. These are
included in the income statement.
(Q) TRADE AND OTHER PAYABLES
Liabilities for trade creditors and other amounts are carried at amortised cost which is the fair value of the consideration to be paid
in the future for goods and services received. Loans payable to related parties are carried at amortised cost and interest payable is
recognised on an accruals basis.
(R) PROVISIONS
Provisions are recognised when the Group has a legal, equitable or constructive obligation to make a future sacrifice of economic
benefits to others as a result of past transactions, or past events, it is probable that a future sacrifice of economic benefits will be
required and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating
losses.
Provisions are measured at the present value of management's best estimate of the expenditure required to settle the present
obligation at the balance sheet date using a discounted cash flow methodology. The risks specific to the provision are factored
into the cash flows and as such a risk-free government bond rate relative to the expected life of the provision is used as a discount
rate. If the effect of the time value of money is material, provisions are discounted using a current pre-tax rate that reflects the
time value of money and the risks specific to the liability. The increase in the provision resulting from the passage of time is
recognised in finance costs.
A provision for dividends is not recognised as a liability unless the dividends are declared, determined or publicly recommended
on or before balance date.
46
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(S) INTEREST BEARING LIABILITIES
Subsequent to initial recognition at fair value, net of transaction costs incurred, interest bearing liabilities are measured at amortised
cost. Any difference between the proceeds (net of transaction costs) and the redemption amount is recognised in the income
statement over the period of the borrowings using the effective interest method.
Finance lease liabilities are determined in accordance with the requirements of AASB 117 Leases (refer to Note 1(I)).
Borrowing costs
Borrowing costs include interest, amortisation of discounts or premiums relating to borrowings, amortisation or ancillary costs
incurred in connection with arrangement of borrowings and foreign exchange losses net of hedged amounts on borrowings,
including trade creditors and lease finance charges.
Borrowing costs are expensed as incurred unless they relate to qualifying assets. Qualifying assets are assets which take more
than 12 months to get ready for their intended use or sale. In these circumstances, borrowing costs are capitalised to the cost of
the asset. Where funds are borrowed generally, borrowing costs are capitalised using a weighted average capitalisation rate.
There were no borrowing costs capitalised during either of the past two financial years.
(T) EMPLOYEE BENEFITS
(i) Wages, salaries, annual leave and long service leave
Current liabilities for wages and salaries, holiday pay, annual leave and long service leave are recognised in the provision for
employee benefits and measured at the amounts expected to be paid when the liabilities are settled.
The employee benefit liability expected to be settled within twelve months from balance date is recognised in current liabilities.
The non-current provision relates to entitlements, including long service leave, which are expected to be payable after twelve
months from balance date and are measured as the present value of expected future payments to be made in respect of services,
employee departures and periods of service. Expected future payments are discounted using market yields at balance date on
national government bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.
Employee benefit on-costs are recognised and included in employee benefit liabilities and costs when the employee benefits to
which they relate are recognised as liabilities.
(ii) Share-based payment transactions
Share based compensation benefits can be provided to employees in the form of shares and/or options. No options have been
issued by the Company since the 2001 financial year.
The cost of share based payments is recognised over the period in which the performance and/or service conditions are
fulfilled (the vesting period), ending on the date on which the relevant employees become fully entitled to the award (the vesting
date).
At each reporting date until vesting, the cumulative charge to the income statement is the product of (i) the grant date fair value of
the award; (ii) the current best estimate of the number of awards that will vest, taking into account such factors as the likelihood of
employee turnover during the vesting period and the likelihood of non-market performance conditions being met; and (iii) the expired
portion of the vesting period.
The market value of shares issued to employees for no cash consideration under the Long Term Incentive Share Plan is recognised
as an employee benefits expense over the vesting period (refer to Note 33).
Shares purchased, but which have not yet vested to the employee as at reporting date are offset against contributed equity of the
Group (refer to Note 1(U)).
47
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(iii) Defined benefit superannuation plans
Fairfax Media Limited and certain controlled entities participate in a number of superannuation plans.
An asset or liability in respect of defined benefit superannuation plans is recognised in the balance sheet, and is measured as the
present value of the defined benefit obligation at the reporting date plus unrecognised actuarial gains (less unrecognised actuarial
losses), less the fair value of the superannuation fund's assets at that date and any unrecognised past service cost. The present
value of the defined benefit obligation is based on expected future payments which arise from membership of the fund to the
balance date, calculated annually by independent actuaries using the projected unit credit method. Consideration is given to expected
future wage and salary levels, experience of employee departures and periods of service. Actuarial gains and losses are recognised
in retained earnings in the periods in which they arise.
Contributions made by the Group to defined contribution superannuation funds are charged to the income statement in the
period the employee’s service is provided.
(iv) Termination benefits
Termination benefits are payable when employment is terminated before the normal retirement date, or when an employee accepts
voluntary redundancy in exchange for these benefits. The Group recognises termination benefits when it is demonstrably committed
to either terminating the employment of current employees according to a detailed formal plan without possibility of withdrawal or
providing termination benefits as a result of an offer made to encourage voluntary redundancy.
(v) Bonus plans
The Group recognises a provision and an expense for bonuses where contractually obliged or where there is a past practice
that has created a constructive obligation.
(U) CONTRIBUTED EQUITY
Ordinary shares are classified as equity. Stapled preference shares are classified as equity (refer Note 23(C)).
Incremental costs directly attributable to the issue of new shares or options are recognised in equity as a reduction from the
proceeds. Incremental costs directly attributable to the issue of new shares for the acquisition of a business are not included in the
cost of the acquisition as part of the purchase consideration.
If the Group reacquired its own equity instruments, e.g. under the Long Term Incentive Plan, those instruments are deducted
from equity.
Debentures
Debentures have been included as equity as the rights attaching to them are in all material respects comparable to those attaching to
the ordinary shares. Such debentures are unsecured non-voting securities that have interest entitlements equivalent to the dividend
entitlements attaching to the ordinary voting shares and rank equally with such shares on any liquidation or winding up. These
interest entitlements are treated as dividends.
The debentures are convertible into shares on a one-for-one basis at the option of the holder provided that conversion will not result
in a breach of any of the following:
(i) any provision of the Foreign Acquisitions and Takeovers Act 1975;
(ii) any undertaking given by the Company to the Foreign Investment Review Board or at the request of the Foreign Investment
Review Board from time to time; or
(iii) any other applicable law including, without limitation the Broadcasting Act 1942.
48
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(V) EARNINGS PER SHARE
Basic earnings per share
Basic earnings per share (EPS) is calculated by dividing the net profit attributable to members, adjusted to exclude costs of
servicing equity other than ordinary shares, by the weighted average number of ordinary shares outstanding during the financial
year, adjusted for any bonus elements in ordinary shares issued during the financial year.
Diluted earnings per share
Diluted earnings per share is calculated by dividing the basic EPS earnings adjusted by the after tax effect of interest and other
financing costs associated with dilutive potential ordinary shares and the effect on revenues and expenses of conversion to
ordinary shares associated with dilutive potential ordinary shares by the weighted average number of ordinary shares and dilutive
potential ordinary shares adjusted for any bonus issue.
(W) SEGMENT REPORTING
A business segment is a group of assets and operations engaged in providing products or services that are subject to risks and
returns that are different to those of other business segments. A geographical segment is engaged in providing products or services
within a particular economic environment and is subject to risks and returns that are different from those of segments operating in
other economic environments. Business segments are the consolidated entity’s primary reporting format.
(X) SIGNIFICANT ACCOUNTING ESTIMATES AND JUDGEMENTS
The carrying amounts of certain assets and liabilities are often determined based on estimates and assumptions of future events.
The key estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of certain
assets and liabilities within the next financial year are:
(i) Impairment of goodwill and intangibles with indefinite useful lives
The Group tests annually whether goodwill and intangible assets with indefinite useful lives are impaired. This requires an estimation
of the recoverable amount of the cash generating units to which the goodwill and intangibles with indefinite useful lives are
allocated. The assumptions used in this estimation of recoverable amount and the carrying amount of goodwill and intangibles
with indefinite useful lives are detailed in Note 14.
(ii) Income taxes
The Group is subject to income taxes in Australia and jurisdictions where it has foreign operations. Significant judgement is required
in determining the worldwide provision for income taxes. There are many transactions and calculations undertaken during the
ordinary course of business for which the ultimate tax determination is uncertain.
(iii) Share-based payment transactions
The Group measures the cost of equity-settled transactions with employees by reference to the fair value of equity instruments at the
date at which they are granted. The fair value is determined by an external valuer using a binomial model, using the assumptions
detailed in Note 33.
The Group measures the cost of share-based payments at fair value at the grant date using the Monte Carlo formula taking into
account the terms and conditions upon which the instruments were granted, as discussed in Note 33.
(iv) Defined benefit plans
Various actuarial assumptions are required when determining the Group’s superannuation plan obligations. These assumptions and
the related carrying amounts are discussed in Note 17.
49
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(v) Held to maturity investments
The Group follows the AASB 139 guidance on classifying non-derivative financial assets with fixed or determinable payments and
fixed maturity as held to maturity. This classification requires significant judgement. In making this judgement, the Group evaluates
its intention and ability to hold such investments to maturity.
If the Group fails to keep these investments to maturity other than for specific circumstances explained in AASB 139, it will be
required to reclassify the whole class as available for sale. The investments would therefore be measured at fair value not amortised
cost which would result in a corresponding entry in the fair value reserve in shareholders’ equity. Furthermore, the entity would not
be able to classify any financial assets as held to maturity for the following two financial years.
(Y) ROUNDING OF AMOUNTS
The consolidated entity is of a kind referred to in Class Order 98/0100, as amended by Class Order 04/667, issued by the Australian
Securities and Investments Commission relating to the “rounding off” of amounts in the financial report. Amounts in this report have
been rounded to the nearest thousand dollars in accordance with that Class Order, unless otherwise indicated.
(Z) NEW ACCOUNTING STANDARDS AND UIG INTERPRETATIONS
Certain new accounting standards and interpretations have been published that are not mandatory for 28 June 2009 reporting
periods. The Group and the Company's assessment of the impact of these new standards and interpretations is set out below:
Reference
Title
Summary
Application
date of
standard*
Impact on Group financial
report
AASB 8 and
AASB 2007-3
Operating Segments and
consequential amendments to
other Australian Accounting
Standards
New standard replacing AASB 114 Segment
Reporting, which adopts a management
reporting approach to segment reporting.
1 January
2009
AASB 123
(Revised) and
AASB 2007-6
Borrowing Costs and
consequential amendments to
other Australian Accounting
Standards
The amendments to AASB 123 require that all
borrowing costs associated with a qualifying
asset be capitalised.
1 January
2009
AASB 101
(Revised) and
AASB 2007-8
Presentation of Financial
Statements and consequential
amendments to other
Australian Accounting
Standards
1 January
2009
Introduces a statement of comprehensive
income. Other revisions include impacts on
the presentation of items in the statement of
changes in equity, new presentation
requirements for restatements or
reclassifications of items in the financial
statements, changes in the presentation
requirements for dividends and changes to the
titles of the financial statements.
AASB 8 is a disclosure
standard so will have no direct
impact on the amounts
included in the Group's
financial statements. The
amendments may have an
impact on the Group’s
segment disclosures in fiscal
2010.
These amendments to AASB
123 require that all borrowing
costs associated with a
qualifying asset be capitalised.
The Group has no borrowing
costs associated with
qualifying assets and as such
the amendments are not
expected to have any impact
on the Group's financial report.
These amendments are only
expected to affect the
presentation of the Group’s
financial report and will not
have a direct impact on the
measurement and recognition
of amounts disclosed in the
financial report. The Group has
not determined at this stage
whether to present a single
statement of comprehensive
income or two separate
statements.
Application
date for
Group*
29 June 2009
29 June 2009
29 June 2009
50
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Reference
Title
Summary
AASB 2008-1
Amendments to Australian
Accounting Standard – Share-
based Payments: Vesting
Conditions and Cancellations
The amendments clarify the definition of
'vesting conditions', introducing the term 'non-
vesting conditions' for conditions other than
vesting conditions as specifically defined and
prescribe the accounting treatment of an award
that is effectively cancelled because a non-
vesting condition is not satisfied.
Application
date of
standard*
1 January
2009
Impact on Group financial
report
The Group has share-based
payment arrangements that
may be affected by these
amendments. However, the
Group has not yet determined
the extent of the impact, if any.
Application
date for
Group*
29 June 2009
AASB 2008-2
Amendments to Australian
Accounting Standards –
Puttable Financial Instruments
and Obligations arising on
Liquidation
The amendments provide a limited exception
to the definition of a liability so as to allow an
entity that issues puttable financial instruments
with certain specified features, to classify those
instruments as equity rather than financial
liabilities.
1 January
2009
These amendments are not
expected to have any impact
on the Group’s financial report
as the Group does not have on
issue or expect to issue any
puttable financial instruments
as defined by the
amendments.
The Group has not yet
concluded on which
accounting policy to adopt.
29 June 2009
29 June 2009
1 July 2009
AASB 3
(Revised)
Business Combinations
AASB 127
(Revised)
Consolidated and Separate
Financial Statements
Amendments to Australian
Accounting Standards arising
from AASB 3 and AASB 127
Cost of an Investment in a
Subsidiary, Jointly Controlled
Entity or Associate
AASB 2008-3
Amendments
to International
Financial
Reporting
Standards
The revised standard introduces a number of
changes to the accounting for business
combinations, the most significant of which
allows entities a choice for each business
combination entered into – to measure a non-
controlling interest (formerly a minority interest)
in the acquiree either at its fair value or at its
proportionate interest in the acquiree’s net
assets. This choice will effectively result in
recognising goodwill relating to 100% of the
business (applying the fair value option) or
recognising goodwill relating to the percentage
interest acquired. The changes apply
prospectively.
Under the revised standard, a change in the
ownership interest of a subsidiary (that does
not result in loss of control) will be accounted
for as an equity transaction.
1 July 2009
29 June 2009
If the Group changes its
ownership interest in existing
subsidiaries in the future, the
change will be accounted for
as an equity transaction. This
will have no impact on
goodwill, nor will it give rise to
a gain or a loss in the Group’s
income statement.
Amending standard issued as a consequence
of revisions to AASB 3 and AASB 127.
1 July 2009
Refer to AASB 3 (Revised)
and AASB 127 (Revised)
above
29 June 2009
29 June 2009
1 January
2009
The main amendments of relevance to
Australian entities are those made to IAS 27
deleting the ‘cost method’ and requiring all
dividends from a subsidiary, jointly controlled
entity or associate to be recognised in profit or
loss in an entity's separate financial statements
(i.e., parent company accounts). The
distinction between pre- and post-acquisition
profits is no longer required. However, the
payment of such dividends requires the entity
to consider whether there is an indicator of
impairment.
AASB 127 has also been amended to
effectively allow the cost of an investment in a
subsidiary, in limited reorganisations, to be
based on the previous carrying amount of the
subsidiary (that is, share of equity) rather than
its fair value.
Recognising all dividends
received from subsidiaries,
jointly controlled entities and
associates as income will likely
give rise to greater income
being recognised by the parent
entity after adoption of these
amendments.
In addition, if the Group enters
into any group reorganisation
establishing new parent
entities, an assessment will
need to be made to determine
if the reorganisation meets the
conditions imposed to be
effectively accounted for on a
‘carry-over basis’ rather than at
fair value.
51
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Reference
Title
Summary
Improvements to IFRSs
Amendments
to International
Financial
Reporting
Standards
IFRIC 16
Hedges of a Net Investment in
a Foreign Operation
AASB Int.17
and AASB
2008-13
Distributions of Non-cash
Assets to Owners and
consequential amendments to
Australian Accounting
Standards AASB 5 and AASB
110
AASB Int 18
Transfers of Assets from
Customers
The improvements project is an annual project
that provides a mechanism for making non-
urgent, but necessary, amendments to IFRSs.
The IASB has separated the amendments into
two parts: Part 1 deals with changes the IASB
identified resulting in accounting changes; Part
II deals with either terminology or editorial
amendments that the IASB believes will have
minimal impact.
This interpretation proposes that the hedged
risk in a hedge of a net investment in a foreign
operation is the foreign currency risk arising
between the functional currency of the net
investment and the functional currency of any
parent entity. This also applies to foreign
operations in the form of joint ventures,
associates or branches.
The interpretation outlines how an entity
should measure distributions of assets, other
than cash, as a dividend to its owners acting in
their capacity as owners. This applies to
transactions commonly referred to as spin-offs,
split offs or demergers and in-specie
distributions
Application
date of
standard*
1 January
2009 except
for
amendments
to IFRS 5,
which are
effective from
1 July 2009.
1 January
2009
Impact on Group financial
report
The Group has not yet
determined the extent of the
impact of the amendments, if
any.
Application
date for
Group*
29 June 2009
29 June 2009
The Interpretation is unlikely to
have any impact on the Group
since it does not significantly
restrict the hedged risk or
where the hedging instrument
can be held.
1 July 2009
The interpretation is unlikely to
have any impact on the Group.
29 June 2009
This interpretation provides guidance on the
transfer of assets such as items of property,
plant and equipment or transfers of cash
received from customers. The interpretation
provides guidance on when and how an entity
should recognise such assets and discusses
the timing of revenue recognition for such
arrangements and requires that once the asset
meets the condition to be recognised at fair
value, it is accounted for as an exchange
transaction.
Applies
prospectively
to transfers of
assets from
customers
received on or
after 1 July
2009
The Group has not yet
determined the extent of the
impact of the amendments, if
any.
29 June 2009
AASB 2008-8 Amendments to Australian
Accounting Standards -
Eligible Hedged Items
AASB 2009-2 Amendments to Australian
Accounting Standard-
Improving Disclosures about
Financial Instruments (AASB
4,AASB 7, AASB 1023 &
AASB 1038)
The amendment to AASB 139 clarifies how the
principles underlying hedge accounting should
be applied when (i) a one-sided risk in a
hedged item is being hedged and (ii) inflation
in a financial hedged item existed or was likely
to exist.
The main amendment to AASB 7 requires fair
value measurements to be disclosed by the
source of inputs, using the following three-level
hierarchy: - quoted prices in active markets for
identical assets or liabilites(level1) - inputs
other than quoted price included in level 1 that
are observable for the asset or liability, either
directly or indirectly; and- inputs for the assets
or liabilities that are not based on observable
market data. The amendments to AASB 4,
AASB 1023 and AASB 1038 comprise editorial
changes resulting from the amendments to
AASB 7.
1 July 2009
The Group has not yet
determined the extent of the
impact of the amendments, if
any.
29 June 2009
1 January
2009
The Group has not yet
determined the extent of the
impact of the amendments, if
any.
29 June 2009
52
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Application
date of
standard*
1 July 2009
Impact on Group financial
report
The Group has not yet
determined the extent of the
impact of the amendments, if
any.
Application
date for
Group*
29 June 2009
1 January
2010
No major impact expected on
the Group.
28 June 2010
1 January
2010
The Group has not yet
determined the extent of the
impact of the amendments, if
any.
28 June 2010
Reference
Title
Summary
AASB 2009-4 Amendments to Australian
Accounting Standards arising
from the Annual Improvements
Project (AASB 2 and AASB
138 and AASB Intp 9 & 16)
AASB 2009-5 Further amendments to
Australian Accounting
Standards arising from the
Annual Improvement Project
(AASB 5,8,101,117, 118, 136
& 139)
Amendments to IFRS 2
Amendments
to International
Financial
Reporting
Standards
The amendments to some Standards result in
accounting changes for presentation,
recognition or measurement purposes, while
some amendments that relate to terminology
and editorial changes are expected to have no
or minimal effect on accounting. The main
amendment of relevance is that made to IFRIC
16 which allows qualifying hedge instruments
to be held by and entity or entities within the
group, including the foreign operation itself, as
long as the designation, documentation and
effectiveness requirements in AASB 139 that
relate to a net investment hedge are satisfied.
More hedge relationships will be eligible for
hedge accounting as a result of the
amendment.
The amendments to some Standards result in
accounting changes for presentation,
recognition or measurement purposes, while
some amendments that relate to terminology
and editorial changes are expected to have no
or minimal effect on accounting.
The amendments clarify the accounting for
group cash settled share based payment
transactions in particular the scope of AASB 2
and the interaction between IFRS2 and other
standards. An entity that receives goods or
services in a share based payment
arrangement must account for those goods or
services no matter which entity in the group
settles the transaction and no matter whether
the transaction is settled in shares or cash.
The amendments also incorporate guidance
previously included in IFRIC 2 and IFRIC
11/IFRS 2-Group and Treasury Share
Transactions. As a result, IFRIC 8 & 11 have
been withdrawn.
*designates the beginning of the applicable annual reporting period unless otherwise stated
53
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
2. Revenues
(A) REVENUE FROM OPERATIONS
Revenue generated from sales of:
Newspapers and magazines
Broadcasting
Television production
Online and other
Total revenue from sale of goods
Revenue from printing and other services
Total sales revenue
(B) OTHER REVENUE AND INCOME
Interest income
Wholly owned controlled entities
Other corporations
Dividend/distribution revenue
Wholly owned controlled entities
Other corporations
Net gain on sale of property, plant and equipment
Net gain on foreign exchange
Other
Total other revenue and income
Total revenue and income
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
1,977,187
2,276,638
106,320
57,046
359,371
77,538
98,176
327,508
2,499,924
99,208
2,779,860
120,895
2,599,132
2,900,755
-
-
-
152
152
-
152
-
-
-
1,445
1,445
-
1,445
-
-
40,270
26,368
4,430
25,044
242
141
-
36
757
-
5,167
-
128
2,430
2,933
2,717
-
-
-
-
-
100,000
-
-
-
-
10,390
33,252
40,512
126,509
2,609,522
2,934,007
40,664
127,954
54
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
3. Expenses
(A) EXPENSES BEFORE IMPAIRMENT, DEPRECIATION,
AMORTISATION AND FINANCE COSTS
Staff costs excluding staff redundancy costs
Staff redundancy costs
Newsprint and paper
Distribution and other production costs
Promotion and advertising costs
Rent and outgoings
Repairs and maintenance
Communication costs
News services
Computer costs
Fringe benefits tax, travel and entertainment
Royalties and copyright payments
Professional fees
Other
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
939,358
79,727
265,161
289,810
115,143
68,115
32,139
25,663
18,843
22,316
30,030
24,826
951,943
11,423
311,807
313,006
108,572
62,434
32,426
24,056
16,522
19,917
34,886
44,985
26,424
11,631
35,654
7,446
-
-
158
3,989
2,051
1,931
70
7,005
1,126
123
-
2
343
1,538
6,769
931
31
5,884
2,263
10
40,849
145,070
35,947
130,049
10,614
20,804
9,942
15,190
Total expenses before impairment, depreciation, amortisation,
and finance costs
2,097,050
2,097,973
85,926
86,003
(B) DEPRECIATION AND AMORTISATION
Depreciation of freehold property
Depreciation of plant and equipment
Amortisation of leasehold property/buildings
Amortisation of software
Amortisation of customer relationships
Total depreciation and amortisation
(C) FINANCE COSTS
Finance costs
External corporations/persons
Finance lease
Total finance costs
(D) DETAILED EXPENSE DISCLOSURES
Operating lease rental expense
Defined contribution fund expense
Share based payments expense
Net foreign exchange loss
5,199
80,227
2,905
27,307
1,918
4,860
79,834
2,303
19,385
1,913
117,556
108,295
174,503
4,788
207,124
4,795
179,291
211,919
48,965
58,222
2,237
2,152
43,583
56,053
4,429
-
-
2,523
181
4,659
-
7,363
2
-
2
3,199
2,439
2,237
-
-
7,183
41
2,290
-
9,514
5
-
5
507
2,460
4,429
-
55
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
4. Significant items
The profit after tax from operations includes the following items where
disclosure is relevant in explaining the financial performance of the
consolidated entity.
Property - Comprising:
Property costs associated with the relocation from Darling Park to the new
facility at One Darling Island, Pyrmont
Onerous lease property costs *
Income tax benefit
Property loss, net of tax
Intangible and investment impairments - Comprising:
Impairment of mastheads, licences, goodwill and investments
Loss on sale of Southern Star Group
Income tax benefit
Intangibles and investment impairments, net of tax
-
(2,398)
(8,857)
2,657
(6,200)
-
719
(1,679)
-
-
-
-
(512,987)
(38,721)
6,558
(545,150)
-
-
-
-
(214,000)
-
-
(214,000)
Property, plant and equipment impairment and restructuring - Comprising:
Impairment of property, plant and equipment
Restructuring and redundancy charges
Income tax benefit
Property, plant and equipment impairment and restructuring, net of tax
(23,228)
(85,694)
32,668
(76,254)
778
(10,419)
2,893
(6,748)
Gain on repurchase of medium term notes
5,167
-
-
-
-
-
-
Net significant and non-recurring items after income tax expense
(622,437)
(8,427)
(214,000)
* Onerous lease property costs include costs resulting from excess space due to restructure and relocation to new premises in the Group
and the resulting write off of assets and fixtures that could not be relocated.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
56
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
5. Income tax expense
Income tax expense is reconciled to prima facie income tax payable as follows:
Net (loss)/profit before income tax expense
(351,416)
523,173
(266,627)
32,432
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
Prima facie income tax at 30% (2008: 30%)
Tax effect of differences:
Share of net losses/(profits) of associates and joint ventures
Capital gains taxable/(not taxable)
Non assessable dividends
Over provision in prior financial years
Overseas tax rate and accounting differentials
(105,425)
156,952
(79,988)
9,730
21
9,397
(9)
(1,476)
(6,017)
(74)
-
1,652
-
(8,592)
(2,633)
(5,763)
(20,428)
(13,876)
-
Temporary differences not recognised on intangible and other asset write-offs
151,004
-
64,200
Non-deductible items
Non-deductible depreciation and amortisation
Intragroup provision transfers
Other
Income tax expense/(benefit)
Current income tax expense/(benefit)
Deferred income tax expense/(benefit)
Over provision in prior financial years
2,286
16
-
1,402
29,672
21,473
16,791
(8,592)
2,555
-
-
252
135,683
156,532
(18,216)
(2,633)
430
-
(1,645)
(338)
(21,452)
(21,673)
5,984
(5,763)
-
-
(30,000)
(2,396)
-
-
1,519
-
(5,607)
-
(26,754)
(20,548)
(3,810)
(2,396)
Income tax expense/(benefit) in the income statement
29,672
135,683
(21,452)
(26,754)
57
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
6. Dividends paid and proposed
(A) ORDINARY SHARES
Interim 2009 75% franked dividend: 2 cents - paid 19 March 2009
(2008: 75% franked 10 cents - paid 31 March 2008)
30,382
151,418
30,382
151,418
Final 2008 75% franked dividend: 10 cents - paid 2 October 2008
(2007: fully franked 10 cents - paid 27 September 2007)
Total dividends paid - ordinary shares
151,354
147,964
151,354
147,964
181,736
299,382
181,736
299,382
(B) STAPLED PREFERENCE SHARES (SPS)
SPS dividend:
2009: $3.3580 per share - paid 30 April 2009
2009: $4.8138 per share - paid 31 October 2008
2008: $4.3341 per share - paid 30 April 2008
2008: $4.0404 per share - paid 31 October 2007
Total dividends paid - SPS
Total dividends paid
10,276
14,730
-
-
25,006
-
-
13,262
12,356
25,618
-
-
-
-
-
-
-
-
-
-
206,742
325,000
181,736
299,382
(C) DIVIDENDS PROPOSED AND NOT RECOGNISED AS A LIABILITY
Since balance date no dividends have been declared.
(D) FRANKED DIVIDENDS
Franking account balance as at balance date at 30% (2008: 30%)
Franking credits that will arise from the payment of income tax payable balances
as at the end of the financial year
Company
Company
2009
$'000
2008
$'000
1,158
10,030
-
7,927
Total franking credits available for subsequent financial years based on a tax rate of 30%
1,158
17,957
On a tax-paid basis, the Company’s franking account balance is approximately $1.2 million (2008: $10.0 million). The Company expects
to have sufficient franking account credits arising from payment of income tax payable.
58
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
7. Receivables
Current
Trade debtors *
Provision for doubtful debts
Loans to related parties **
Loans and deposits
Prepayments
Other
Total current receivables
Non-current
Loans to related parties ***
Loans and deposits
Prepayments
Other
Total non-current receivables
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
311,521
(9,839)
439,427
(9,515)
301,682
429,912
-
-
-
-
-
-
-
15,936
11,264
29,328
-
1,651,230
1,273,644
274
16,771
52,169
21
1,236
326
-
2,624
843
358,210
499,126
1,652,813
1,277,111
-
2,189
-
285
2,474
-
398,566
398,566
1,102
2,008
573
3,683
-
-
-
-
2,008
548
398,566
401,122
* Trade debtors are non-interest bearing and are generally on 7 to 45 day terms
** Loans to related parties current are non-interest bearing and are repayable at call
*** Loans to related parties non-current are interest bearing deriving interest of 9.5% p.a. and are repayable on 27 June 2015, although this term
may be extended upon mutual agreement of the parties
IMPAIRED TRADE DEBTORS
As at 28 June 2009, trade debtors of the Group with a nominal value of $9.8 million (2008: $9.5m) were impaired and fully provided for.
Refer to Note 38(C) for the factors considered in determining whether trade debtors are impaired.
As at 28 June 2009, an analysis of trade debtors that are not considered as impaired is as follows:
Not past due
Past due 0 - 30 days
Past due 31 - 60 days
Past 60 days
Consolidated
Consolidated
Company
Company
2009
$'000
158,656
115,251
14,246
13,529
2008
$'000
239,371
148,590
21,151
20,800
301,682
429,912
2009
$'000
2008
$'000
-
-
-
-
-
-
-
-
-
-
Based on the credit history of these receivables, it is expected these amounts will be received. All other receivables do not contain
impaired assets and are not past due.
59
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Movements in the provision for doubtful debts are as follows:
Balance at the beginning of the financial year
Additional provisions
Acquisition of controlled entities
Utilised
Exchange differences
Balance at the end of the financial year
8. Inventories
Raw materials and stores - at net realisable value
Finished goods - at cost
Work in progress - at cost
Total inventories
9. Assets held for sale
Freehold land and buildings
Total assets held for sale
Consolidated
Consolidated
2009
$'000
9,515
5,982
-
(5,691)
33
9,839
2008
$'000
5,711
4,081
2,469
(2,566)
(180)
9,515
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
37,019
2,962
74
40,055
39,225
3,852
1,724
44,801
-
-
-
-
-
-
-
-
6,062
6,062
2,222
2,222
-
-
-
-
A decision was taken prior to 28 June 2009 to sell two properties based in Australia and the UK. On remeasure of the properties
at the lower of carrying amount and fair value less costs to sell, an impairment charge of $1.2 million was recognised against the
assets. The sale of the Australian based property is due to settle in the next nine months. The UK property is being actively marketed.
10. Other assets
Current
Distribution advances and costs
Film investments
Provision for impairment of film investments
Total other current assets
Non-current
Distribution advances and costs
Provision for impairment of distribution advances and costs
Total other non-current assets
60
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
-
-
-
-
-
-
-
-
5,903
12,449
(6,742)
5,707
11,610
29,847
(20,957)
8,890
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
Note
$'000
$'000
$'000
$'000
11. Investments accounted for using
the equity method
Shares in associates
Shares in joint ventures
Total investments accounted for using the equity method
(A)(i)
(B)(i)
26,632
20,036
46,668
14,764
30,926
45,690
-
-
-
-
-
-
(A) INTERESTS IN ASSOCIATES
Name of Company
Principal Activity
Australian Associated Press Pty Ltd
News agency business and
information service
Place of
Incorporation
Australia
Ownership interest
28 June 2009
29 June 2008
47.0%
47.0%
Autobase Limited
E-commerce: online vehicle dealer
New Zealand
25.4%
25.4%
automotive website
Digital Radio Broadcasting Melbourne
Digital audio broadcasting
Australia
18.0%
18.0%
Pty Ltd*
Digital Radio Broadcasting Perth
Digital audio broadcasting
Australia
33.4%
33.4%
Pty Ltd*
Digital Radio Broadcasting Brisbane
Digital audio broadcasting
Australia
25.0%
25.0%
Pty Ltd*
Digital Radio Broadcasting Sydney
Digital audio broadcasting
Australia
11.3%
9.0%
Pty Ltd*
Earth Hour Limited
Environmental promotion
Executive Publishing Network Pty Ltd** Magazine publishing
Guardian Print Limited
Printing facility
Australia
Australia
New Zealand
Homebush Transmitters Pty Ltd
Rental of a transmission facility
Australia
Newspaper House Limited
Property ownership
New Zealand
New Zealand Press Association Ltd
News agency business and financial
New Zealand
information service
33.3%
30.0%
25.0%
50.0%
45.5%
49.2%
33.3%
30.0%
25.0%
50.0%
45.5%
49.2%
NGA.net Pty Ltd
Provider of e-recruitment software
Australia
30.0%
30.0%
to corporations
Online Marketing Group Pty Limited***
E-commerce: Online marketing
Perth FM Facilities Pty Ltd
Rental of a transmission facility
Times Newspapers Limited
Newspaper publishing
Australia
Australia
New Zealand
48.0%
33.3%
49.9%
-
33.3%
49.9%
*
Investments in Digital Radio Broadcasting companies acquired on 28 April 2008.
** This company was deregistered on 22 July 2009.
*** Investment was acquired on 22 October 2008.
61
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(i) Carrying amount of investment in associates
Balance at the beginning of the financial year
Investments in associates acquired during the year
Adjustment for foreign exchange revaluation
Share of associates' net (loss)/profit after income tax expense
Dividends received/receivable from associates
Investments in associates disposed during the year
Balance at end of the financial year
(ii) Share of associates' profits
(Loss)/profit before income tax expense
Income tax benefit/(expense)
Net (loss)/profit after income tax expense
(iii) Share of associates' assets and liabilities
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
(B) INTERESTS IN JOINT VENTURES
Consolidated
Consolidated
28 June 2009
29 June 2008
$'000
$'000
14,764
12,641
19
(405)
(387)
-
13,545
100
(868)
2,427
(340)
(100)
26,632
14,764
(450)
45
(405)
2,607
(180)
2,427
13,969
23,633
37,602
9,894
4,176
14,070
10,434
21,436
31,870
5,739
3,104
8,843
Name of Company
Advantate Pty Ltd
Principal Activity
Place of
Incorporation
Ownership interest
28 June 2009
29 June 2008
E-commerce: Online Marketing
Australia
50.0%
50.0%
-
-
50.0%
50.0%
50.0%
-
50.0%
50.0%
50.0%
50.0%
49.0%
49.0%
-
50.0%
50.0%
50.0%
50.0%
50.0%
Columbia Press Pty Ltd
Newspaper publishing and printing
Australia
Endemol Southern Star (NZ) Pty Ltd*
Television program production
New Zealand
Endemol Southern Star Pty Ltd*
Television program production
Australia
Fermax Distribution Company Pty Ltd** Letterbox distribution of newspapers
Australia
Gilgandra Newspapers Pty Ltd
Newspaper publishing and printing
Australia
Gippsland Regional Partnership
Newspaper publishing and printing
Australia
Hi-5 Operations Pty Ltd*
Television program production
Australia
The Columbia Group Pty Ltd
Newspaper publishing and printing
Australia
Torch Publishing Company Pty Ltd
Newspaper publishing and printing
Australia
*
Investment in joint venture was disposed of as part of the sale of the Southern Star Group on 6 April 2009.
**
Investment was acquired on 2 July 2008.
62
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(i) Carrying amount of investment in joint ventures
Balance at the beginning of the financial year
Share of joint ventures' net profit after income tax expense
Interests in joint venture acquired during the year
Dividends received/receivable from joint venture
Investment in joint venture disposed during the year
Balance at end of the financial year
(ii) Share of joint ventures' profits
Revenues
Expenses
Profit before income tax expense
Income tax expense
Net profit after income tax expense
(iii) Share of joint ventures' assets and liabilities
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
(C) SHARE OF NET PROFITS OF ASSOCIATES AND JOINT VENTURES
Profit before income tax expense
Income tax expense
Net profit after income tax expense
Consolidated
Consolidated
28 June 2009
29 June 2008
$'000
$'000
30,926
2,455
1,150
(3,023)
(11,472)
20,933
6,308
12,053
(8,368)
-
20,036
30,926
27,845
(24,477)
31,999
(23,991)
3,368
(913)
2,455
8,008
(1,700)
6,308
4,151
18,720
22,871
2,491
465
2,956
17,636
10,840
28,476
9,559
1,154
10,713
2,918
(868)
2,050
10,615
(1,880)
8,735
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
12. Available for sale investments
Listed equity securities - at fair value
Total available for sale investments
2,157
2,157
3,547
3,547
-
-
-
-
Available for sale investments consist of investments in ordinary shares and have no fixed maturity date. During the financial year,
an impairment charge of $2.2 million (2008: $1.4 million) was recognised in the income statement in respect of several investments
due to a significant decline in the share price of the investments during the financial year.
63
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
13. Held to maturity investments
Bonds
Total held to maturity investments
13,216
13,216
14,686
14,686
-
-
-
-
The annuity bonds issued by Paperbonds Limited, which were acquired on 8 March 2006 and are to be held to maturity in
September 2015, have a face value of $20.0 million. They are indexed to the consumer price index (CPI).
14. Intangible assets
Mastheads and tradenames
Software
Customer relationships
Radio licences
Goodwill
Total intangible assets
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
3,353,633
3,715,455
-
-
61,726
12,380
62,250
14,298
132,217
2,328,591
146,245
2,554,392
7,948
14,044
-
-
-
-
-
-
5,888,547
6,492,640
7,948
14,044
64
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
RECONCILIATIONS
Reconciliations of the carrying amount of each class of intangible at the beginning and end of the current financial year are set out below:
Radio
Customer
Mastheads &
licences
relationships
tradenames
Software
Goodwill
Note
$'000
$'000
$'000
$'000
$'000
Total
$'000
(i) Consolidated
At 1 July 2007
Cost
Accumulated amortisation and impairment
Net carrying amount
17,000
-
17,000
17,303
(892)
3,795,649
(6,666)
163,421
(110,285)
2,255,513
-
6,248,886
(117,843)
16,411
3,788,983
53,136
2,255,513
6,131,043
Period ended 29 June 2008
Balance at beginning of the financial year
17,000
16,411
3,788,983
53,136
2,255,513
6,131,043
Additions
Disposals
Acquisition of business combinations
Amortisation charge
Exchange differences
3(B)
At 29 June 2008, net of accumulated amortisation
and impairment
At 29 June 2008
-
(6,369)
135,614
-
-
-
-
(200)
(1,913)
-
27,035
28,864
-
39,885
-
(140,448)
(106)
1,438
(19,385)
(1,697)
7,937
-
63,836
(6,475)
372,472
549,209
-
(81,530)
(21,298)
(223,675)
146,245
14,298
3,715,455
62,250
2,554,392
6,492,640
Cost
Accumulated amortisation and impairment
146,245
-
17,103
(2,805)
3,722,121
(6,666)
188,748
(126,498)
2,554,392
-
6,628,609
(135,969)
Net carrying amount
146,245
14,298
3,715,455
62,250
2,554,392
6,492,640
Period ended 28 June 2009
Balance at beginning of the financial year
146,245
14,298
3,715,455
62,250
2,554,392
6,492,640
Additions
Disposals
Acquisition of business combinations
Amortisation charge
Impairment
Exchange differences
27
-
10,406
-
-
-
662
-
1,723
3(B)
-
(1,918)
-
(27,307)
(24,461)
-
-
-
(381,270)
17,063
-
85
(138,045)
6,530
26,345
-
27,034
(4,298)
(93,692)
(97,990)
4,651
(594)
-
16,186
(29,225)
(543,776)
23,678
At 28 June 2009, net of accumulated amortisation
and impairment
132,217
12,380
3,353,633
61,726
2,328,591
5,888,547
At 28 June 2009
Cost
Accumulated amortisation and impairment
156,678
(24,461)
17,103
(4,723)
3,732,273
(378,640)
211,432
(149,706)
2,435,308
(106,717)
6,552,794
(664,247)
Net carrying amount
132,217
12,380
3,353,633
61,726
2,328,591
5,888,547
(ii) Company
At 1 July 2007
Cost
Accumulated amortisation and impairment
Net carrying amount
-
-
-
-
-
-
-
-
-
56,466
(35,049)
21,417
-
-
-
56,466
(35,049)
21,417
65
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Radio
Customer
Mastheads &
licences
relationships
tradenames
Software
Goodwill
Note
$'000
$'000
$'000
$'000
$'000
Period ended 29 June 2008
Balance at beginning of the financial year
Additions
Disposals
Amortisation charge
Intercompany transfers
3(B)
At 29 June 2008, net of accumulated amortisation
and impairment
At 29 June 2008
Cost
Accumulated amortisation and impairment
Net carrying amount
Period ended 28 June 2009
Balance at beginning of the financial year
Additions
Disposals
Amortisation charge
Intercompany transfers
3(B)
At 28 June 2009, net of accumulated amortisation
and impairment
At 28 June 2009
Cost
Accumulated amortisation and impairment
Net carrying amount
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
21,417
1,833
(35)
(2,290)
(6,881)
14,044
53,392
(39,348)
14,044
14,044
576
(4)
(4,659)
(2,009)
7,948
53,776
(45,828)
7,948
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Total
$'000
21,417
1,833
(35)
(2,290)
(6,881)
-
14,044
53,392
(39,348)
14,044
14,044
576
(4)
(4,659)
(2,009)
-
7,948
53,776
(45,828)
7,948
(iii) Impairment of cash generating units (CGU) including goodwill and indefinite life assets
Goodwill is allocated to CGU groups which represent the economic entity's main operational groups within geographic regions.
The recoverable amount of each CGU which includes goodwill or indefinite life intangibles has been reviewed.
The recoverable amount of each CGU is determined based on value-in-use calculations using a five year cashflow projection and a
terminal value. This method resulted in a higher recoverable amount than the fair value less costs to sell method. These calculations
use cash flow projections based on financial budgets approved by the Directors for the 2010 financial year, after an adjustment for
central overheads. Cash flows beyond the 2010 period are extrapolated using the estimated growth rates stated at (v) below. The
growth rates do not exceed the long-term average historical growth rate for the businesses in which the CGU operates.
66
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(iv) Allocation of goodwill and non-amortising intangibles to CGUs
For the financial year ended 28 June 2009, the consolidated entity allocated goodwill and non-amortising intangibles to the following CGU
Groups:
Allocation of goodwill to CGU Groups
New South Wales Metropolitan and Community Publications
Victorian Metropolitan and Community Publications
Regional Publications
Business Publications
Agricultural Publications
New Zealand Publications
Australian Digital
New Zealand Digital
Fairfax Radio Networks and Southern Star Group *
Fairfax Printing
Australian Printing and Publishing
Total goodwill
Allocation of non-amortising intangibles to CGU Groups
New South Wales Metropolitan and Community Publications
Victorian Metropolitan and Community Publications
Regional Publications
Business Publications
Agricultural Publications
New Zealand Publications
Australian Digital
New Zealand Digital
Fairfax Radio Networks and Southern Star Group *
Total indefinite life intangibles
Total goodwill and indefinite life intangibles
* Southern Star Group was disposed of on the 6 April 2009.
No goodwill or indefinite life intangibles are allocated to a CGU in the Company.
Consolidated
Consolidated
28 June 2009
29 June 2008
$'000
$'000
14,485
54,854
11,795
54,623
231,139
230,338
2,128
20,521
-
70,911
576,093
178,937
577,910
601,613
16,216
39,863
2,824
66,969
568,299
363,230
577,910
622,325
2,328,591
2,554,392
434,082
443,711
650,779
436,906
1,082,339
1,175,697
162,523
362,608
833,753
8,450
26,167
132,217
167,050
371,480
879,181
8,450
25,912
146,245
3,485,850
3,861,700
5,814,441
6,416,092
67
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(v) Key assumptions used for value-in-use calculations
The key assumptions on which management has based its cashflow projections when determining the value-in-use calculations
of the CGUs are as follows:
•
•
•
•
•
•
no significant increase in budgeted gross margin or growth rate from the 28 June 2009 financial year for fiscal 2010. This is based
on past performance, anticipated market conditions and expected efficiency improvements.
growth rates of 3% for digital transaction CGUs, between 5% to 12.5% for publication CGUs and between 10% to
12.5% for combined online/publication CGUs for years 1 to 5.
the weighted average growth rates used are consistent with forecasts included in industry reports.
the budgeted exchange rate prevailing at balance date is used when converting foreign cashflows on foreign mastheads. The
exchange rate of 1.30 has been applied to New Zealand mastheads.
the post-tax discount rate applied to the cash flow projections was 9.8% (2008: 10.5%).
a terminal value of 2.75% has been used (2008: 3%) for cashflows from year 6 onwards.
(vi) Impact of possible change in key assumptions
If the discount rate applied to the cash flow projections was increased to 10%, an aggregated impairment of $55.2 million would result
across three CGUs. If a 10.5% discount rate was applied an aggregated impairment of $403.7 million would result across various CGUs.
Management does not consider that there are any other reasonably possible changes in any of the key assumptions which would cause
the carrying amount of any of the CGU Groups to exceed its recoverable amount.
15. Property, plant and equipment
Freehold land and buildings
At cost
Provision for depreciation
Total freehold land and buildings
Leasehold buildings
At cost
Provision for depreciation
Total leasehold buildings
Plant and equipment
At cost
Provision for depreciation
Total plant and equipment
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
272,176
(25,895)
266,515
(22,228)
246,281
244,287
-
-
-
-
-
-
84,811
(20,560)
80,897
(18,325)
64,251
62,572
2,193
(414)
1,779
256
(116)
140
1,173,383
(710,076)
1,163,748
(679,664)
39,078
(29,248)
37,740
(26,268)
463,307
484,084
9,830
11,472
Capital works in progress - at cost
89,880
84,238
898
5,227
Total property, plant and equipment
863,719
875,181
12,507
16,839
68
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
RECONCILIATIONS
Reconciliations of the carrying amount of each class of property, plant and equipment during the financial year are set out below:
Capital works
in progress
Freehold land
Leasehold
Plant and
& buildings
buildings
equipment
Note
$'000
$'000
$'000
$'000
Total
$'000
(i) Consolidated
At 1 July 2007
Cost
Accumulated depreciation and impairment
39,111
-
253,719
(17,491)
80,887
(15,793)
1,127,646
(608,035)
1,501,363
(641,319)
Net carrying amount
39,111
236,228
65,094
519,611
860,044
Period ended 29 June 2008
Balance at beginning of financial year
Additions/capitalisations
Disposals
Acquisition of controlled entities
Depreciation charge
Assets classified as held for sale
Transfers to other asset categories
Exchange differences
At 29 June 2008, net of accumulated
depreciation and impairment
At 29 June 2008
Cost
Accumulated depreciation and impairment
3(B)
9
39,111
46,624
-
25
-
-
-
(1,522)
236,228
65,094
519,611
860,044
1,683
(6,699)
25,329
(4,860)
(1,096)
-
(6,298)
816
(89)
1,616
(2,303)
(1,126)
(1,082)
(354)
37,089
86,212
(11,035)
(17,823)
23,512
50,482
(79,834)
(86,997)
-
1,082
(6,341)
(2,222)
-
(14,515)
84,238
244,287
62,572
484,084
875,181
84,238
-
266,515
(22,228)
80,897
(18,325)
1,163,748
(679,664)
1,595,398
(720,217)
Net carrying amount
84,238
244,287
62,572
484,084
875,181
Period ended 28 June 2009
Balance at beginning of financial year
Additions/capitalisations
Disposals
Acquisition of controlled entities
Depreciation charge
Assets classified as held for sale
Transfers to other asset categories
Impairment
Exchange differences
At 28 June 2009, net of accumulated
depreciation and impairment
3(B)
9
84,238
6,194
(402)
-
-
-
-
-
(150)
244,287
10,440
(478)
2,703
(5,199)
(5,527)
(235)
(511)
801
62,572
6,248
(1,732)
442
484,084
81,572
(2,449)
1,823
875,181
104,454
(5,061)
4,968
(2,905)
(80,227)
(88,331)
-
(392)
-
18
-
627
(22,566)
443
(5,527)
-
(23,077)
1,112
89,880
246,281
64,251
463,307
863,719
Following a review of recoverable amount based on a value in use assessment, an impairment charge of $22.6m has been recorded
against printing press assets at one of the Group's Australian production facilities during the period.
69
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Capital works
in progress
Freehold land
Leasehold
Plant and
& buildings
buildings
equipment
Note
$'000
$'000
$'000
$'000
Total
$'000
At 28 June 2009
Cost
Accumulated depreciation and impairment
89,880
-
272,176
(25,895)
84,811
(20,560)
1,173,383
(710,076)
1,620,250
(756,531)
Net carrying amount
89,880
246,281
64,251
463,307
863,719
5,332
-
5,332
5,332
(105)
-
-
-
5,227
5,227
-
5,227
5,227
(4,329)
-
-
-
898
898
-
898
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
582
(144)
438
438
-
-
(257)
(41)
44,959
(27,566)
50,873
(27,710)
17,393
23,163
17,393
3,217
(7)
(1,948)
(7,183)
23,163
3,112
(7)
(2,205)
(7,224)
140
11,472
16,839
256
(116)
140
37,740
(26,268)
43,223
(26,384)
11,472
16,839
140
2,591
(634)
(137)
(181)
11,472
1,571
(197)
(493)
(2,523)
16,839
(167)
(831)
(630)
(2,704)
1,779
9,830
12,507
2,193
(414)
1,779
39,078
(29,248)
42,169
(29,662)
9,830
12,507
3(B)
3(B)
(ii) Company
At 1 July 2007
Cost
Accumulated depreciation and impairment
Net carrying amount
Period ended 29 June 2008
Balance at beginning of financial year
Additions/capitalisations
Disposals
Intercompany transfers
Depreciation charge
At 29 June 2008, net of accumulated
depreciation and impairment
At 29 June 2008
Cost
Accumulated depreciation and impairment
Net carrying amount
Period ended 28 June 2009
Balance at beginning of financial year
Additions/capitalisations
Disposals
Intercompany transfers
Depreciation charge
At 28 June 2009, net of accumulated
depreciation and impairment
At 28 June 2009
Cost
Accumulated depreciation and impairment
Net carrying amount
70
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
16. Derivative financial instruments
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
Current assets
Forward contracts - cash flow hedges
Total current derivative assets
Non-current assets
Interest rate swap - cash flow hedge
Cross currency swap - cash flow hedge
Cross currency swap - fair value hedge
Cross currency swap - net investment hedge
Forward contracts - cash flow hedges
Total non-current derivative assets
Current liabilities
Cross currency swap - cash flow hedge
Share swap - fair value to profit and loss
Forward contracts - cash flow hedges
Total current derivative liabilities
Non-current liabilities
Interest rate swap - cash flow hedge
Cross currency swap - fair value hedge
Cross currency swap - cash flow hedge
Cross currency swap - fair value to profit and loss
Forward contracts - cash flow hedges
173
173
3,519
3,519
-
95,303
38,677
18,762
-
152,742
26,007
486
264
20,277
17,583
107
21,437
13
59,417
-
719
287
26,757
1,006
29,605
17,628
497
-
-
-
92,751
8,757
19,737
6
Total non-current derivative liabilities
47,730
121,251
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
The Group uses derivative financial instruments to reduce the exposure to fluctuations in interest rates and foreign currency rates.
The Group formally designates hedging instruments to an underlying exposure and details the risk management objectives and strategies
for undertaking hedge transactions. The Group assesses at inception and on a semi-annual basis thereafter, as to whether the derivative
financial instruments used in the hedging transactions are effective at offsetting the risks they are designed to hedge. Due to the high
effectiveness between the hedging instrument and underlying exposure being hedged, value changes in the derivatives are generally
offset by changes in the fair value or cash flows of the underlying exposure. Any derivatives not formally designated as part of a
hedging relationship are fair valued with any changes in fair value recognised in the income statement.
The derivatives entered into are over-the-counter instruments within liquid markets.
(A) HEDGING ACTIVITIES
(i) Cash flow hedges - interest rate and cross currency swaps
At 28 June 2009, the Group held interest rate swaps and cross currency swaps designated as hedges of future contracted
interest payments on the EUR denominated Eurobonds. The combined swaps are being used to hedge a combination of future
movements in interest rates and foreign currency exchange rates.
71
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
At 28 June 2009, the notional principal amounts and period of expiry of the swaps are as follows:
Pay fixed, receive floating - AUD$550m
15 June 2012
Maturity date
Interest rate
2009
2008
7.60%
7.60%
The swaps designated to cash flow hedges cover approximately 98% of the Eurobond principal outstanding, with the remaining 2% of
the Eurobond hedges designated as fair value hedges. The contracts require settlement on interest receivable annually and interest
payable each 90 days. These dates coincide with the interest payable dates on the underlying Eurobond.
At 28 June 2009, the Group held cross currency swaps designated as hedges of future contracted interest payments on the
USD denominated senior notes issued in July 2007. The cross currency swaps are being used to hedge a combination of future
movements in interest rates and foreign currency exchange rates.
At 28 June 2009, the notional principal amounts and period of expiry of the swaps for each counterparty are as follows:
Pay fixed, receive floating - AUD$59.5m
Pay fixed, receive floating - AUD$59.5m
Maturity date
10 July 2017
10 July 2017
Interest rate
2009
7.52%
7.46%
2008
7.52%
7.46%
The contracts require settlement on interest receivable semi annually and interest payable each 90 days. These dates coincide with
the interest payable dates on the underlying Senior Notes.
At 28 June 2009, the Group held a cross currency swap designated as hedging the future contracted interest payments on the
NZD denominated Redeemable Preference Shares (RPS) issued in May 2005. The cross currency swap is being used to hedge a
combination of future movements in interest rates and foreign currency exchange rates.
At 28 June 2009, the notional principal amount and period of expiry of the swap are as follows:
Pay fixed, receive floating - AUD$173.6m
Maturity date
15 June 2010
Interest rate
2009
4.95%
2008
4.95%
The contract requires settlement on interest receivable and interest payable each 90 days. These dates coincide with the interest
payable dates on the underlying RPS.
At 28 June 2009, the Group held an interest rate swap designated as hedging the future contracted interest payments on
AUD denominated bank borrowings. The interest rate swap is being used to hedge future movements in interest rates.
At 28 June 2009, the notional principal amount and period of expiry of the swap are as follows:
Pay fixed, receive floating - AUD$125m
12 October 2015
Maturity date
Interest rate
2009
6.52%
2008
-
The contract requires settlement on interest receivable and interest payable each 90 days. These dates coincide with the interest
payable dates on the underlying AUD denominated bank borrowings.
At 28 June 2009, the above hedges were assessed to be highly effective with a combined unrealised loss in fair value of $6.4 million
(2008: $19.3 million gain) recognised in equity for the period. During the period an unrealised loss of $2.0 million (2008: $0.2 million
unrealised gain) was recognised in the income statement attributable to the ineffective portion of the cash flow hedges.
During the year an unrealised loss of $1.9 million was transferred from equity to the income statement (2008: $1.3 million unrealised
gain).
72
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(ii) Cash flow hedges - foreign exchange contracts
At 28 June 2009, the Group held a number of forward exchange contracts to hedge future foreign capital purchase commitments
across the Australian and New Zealand business. The contracts are timed to mature as payments are scheduled to be made to suppliers.
The cash flows are expected to occur over the next twelve months. At 28 June 2009, the details of the outstanding contracts are:
Buy CHF/Sell AUD - Maturity 0 - 12 months
Buy USD/Sell AUD - Maturity 0 - 12 months
Buy EUR/Sell AUD - Maturity 0 - 12 months
Buy EUR/Sell NZD - Maturity 0 - 12 months
Buy EUR/Sell NZD - Maturity 13 - 24 months
Buy GBP/Sell NZD - Maturity 0 - 12 months
Buy AUD/Sell NZD - Maturity 0 -12 months
Buy CHF/Sell NZD - Maturity 0 - 12 months
Buy CHF/Sell NZD - Maturity 13 - 24 months
Buy AUD/Sell GBP - Maturity 0 -12 months
2009 *
$'000
-
367
2,634
5,111
-
-
-
939
-
-
Weighted average
2008 * exchange rate
$'000
2,688
2,226
2,657
5,231
2,375
258
113,505
2,723
509
428
2009
-
0.9038
0.5238
0.4647
-
-
-
0.7322
-
-
2008
0.9245
0.9220
0.6208
0.4882
0.4647
0.3532
1.2285
0.7562
0.7216
0.4266
* The amounts disclosed represent currency bought measured at the contracted rate.
The foreign currency contracts are considered to be fully effective hedges as they are matched exactly against the highly probable
foreign capital purchases with any gain or loss on the contracts taken directly to equity. When the contract is delivered, the Group
will adjust the initial measurement of any component recognised on the balance sheet by the related amount deferred in equity.
At 28 June 2009, the hedges were assessed to be highly effective with a loss of $2.7 million (2008: $2.8 million gain) recognised in
equity for the period. The amount removed from equity and included in the initial measurement of capital purchases during the period to
28 June 2009 was a $1.0 million gain (2008: $1.2 million loss), resulting in a decrease to the capital asset base. The amount removed
from equity and included in expenses from operations for the period was $2.1 million of losses (2008: nil)
(iii) Fair value hedges
At 28 June 2009, the Group held cross currency swap agreements designated to changes in the underlying value of USD denominated
senior notes (refer to Note 21). The terms of certain cross currency swap agreements exchange USD obligations into AUD
obligations and other agreements exchange USD obligations into NZD obligations. The latter are also designated to hedge value
changes in the Group’s New Zealand controlled entities (excluding Trade Me Limited), as discussed in Note (iv) below.
At 28 June 2009, the Group also held cross currency swap agreements partly designated to changes in the underlying value of the
EUR denominated Eurobond (refer to Note 21). The terms of the cross currency swap exchange EUR obligations into AUD obligations.
This swap has been 98% designated to a cash flow hedge, as discussed in (i) above.
At 28 June 2009, the cross currency swap agreements had a combined value of $10.9 million (2008: $92.6 million).
The cross currency swaps are designated based on matched terms to the debt and also have the same maturity profile as the USD
denominated senior notes and the EUR denominated Eurobonds.
73
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
The terms of these cross currency swaps are as follows:
Pay floating AUD receive fixed USD - USD $50m
Pay floating AUD receive fixed USD - USD $125m
Pay floating AUD receive floating USD - USD $25m
Pay floating NZD receive fixed USD - USD $40m
Pay floating NZD receive fixed USD - USD $90m
Pay floating NZD receive fixed USD - USD $50m
Pay floating AUD receive fixed EUR - EUR $4m
Maturity date
15 January 2011
10 July 2014
10 July 2014
15 January 2019
15 January 2016
15 January 2014
15 June 2012
For the Group, the remeasurement of the hedged items resulted in a loss before tax of $101.5 million (2008: $15.7 million gain) and the
changes in the fair value of the hedging instruments resulted in a gain before tax of $103.6 million (2008: $15.5 million loss) resulting in a
net gain before tax of $2.1 million (2008: $0.3 million gain) recorded in finance costs.
(iv) Net investment hedges
The NZD/USD cross currency swap agreements have also been designated to hedge the net investment in New Zealand
controlled entities acquired as part of the acquisition of Independent News Limited in June 2003.
At 28 June 2009, the hedges were assessed to be highly effective with an unrealised loss of $0.6 million (2008: $24.3 million gain)
recognised in equity. During the current financial period there was an unrealised loss of $1.8 million (2008: $0.2 million) recognised in the
income statement attributable to the ineffective portion of the net investment hedges.
74
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
17. Pension assets and liabilities
SUPERANNUATION PLAN
The Group contributes to defined contribution and defined benefit plans, which provide benefits to employees and their dependants
on retirement, disability or death. All defined benefit plans are closed to new members.
The superannuation arrangements in Australia are managed in a sub-plan of the Mercer Super Trust, called FairfaxMedia Super. The
Trustee of the Trust is Mercer Investment Nominees Limited. The superannuation arrangements in New Zealand are managed by
AoN Consulting New Zealand Limited in three funds - Fairfax NZ Retirement Fund, Fairfax New Zealand Superannuation Fund and
Fairfax NZ Senior Executive Superannuation Scheme. All New Zealand funds have defined contribution plans and the Fairfax
NZ Retirement Fund has a defined benefit section.
The defined contribution plans receive fixed contributions from employees and from Group companies and the Group’s legally
enforceable obligation is limited to these contributions. The defined benefit plans receive employee contributions plus Group company
contributions at rates recommended by the plans’ actuaries.
The NZ Retirement Fund includes investments in respect of members of the NZ defined benefit plan and investments in respect of
the NZ defined contribution plan.
The following sets out details in respect of the defined benefit plans only and in the case of the Fairfax NZ Retirement Fund, excludes
$44.0 million (2008: $56.6 million) of defined contribution assets and entitlements.
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
(A) BALANCE SHEET
The amounts recognised in the balance sheet are determined as follows:
Present value of the defined benefit obligation
Fair value of defined benefit plan assets
Net pension (liabilities) / assets
(20,560)
17,875
(24,254)
29,796
(2,685)
5,542
-
-
-
-
-
-
75
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(B) RECONCILIATION OF THE PRESENT VALUE OF DEFINED BENEFIT OBLIGATION
Balance at the beginning of the financial year
24,254
20,048
Current service cost
Interest cost
Contributions by employees
Actuarial (gains) and losses
Benefits paid
Taxes, premiums and expenses paid
Exchange differences on foreign plans
Curtailments
Settlements
Transfers in
928
1,408
68
(173)
(66)
(147)
4
209
(5,925)
-
3,255
3,763
3,717
(2,955)
(9,097)
(708)
(64)
-
-
6,295
Balance at the end of the financial year defined benefit obligations
20,560
24,254
(C) RECONCILIATION OF THE FAIR VALUE OF PLAN ASSETS
Balance at the beginning of the financial year
Expected return on plan assets
Actuarial gains and (losses)
Contributions by Group companies and employees
Benefits paid
Taxes, premiums & expenses paid
Exchange differences on foreign plans
Settlements
Transfers in
29,796
2,012
(7,425)
(381)
(66)
(147)
11
(5,925)
-
33,429
5,602
(8,958)
3,828
(9,097)
(708)
(595)
-
6,295
Balance at the end of the financial year defined benefit assets
17,875
29,796
(D) AMOUNTS RECOGNISED IN INCOME STATEMENT
The amounts recognised in the income statement are as follows:
Current service cost
Interest cost
Curtailments
Expected return on plan assets
Total included in employee benefits expense
Actual return on plan assets
928
1,408
209
(2,012)
533
3,255
3,763
-
(5,602)
1,416
(4,862)
(3,274)
76
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(E) CATEGORIES OF PLAN ASSETS
The major categories of plan assets as a percentage of the fair value of the total defined benefit plan assets are as follows:
Cash
Australian equities
Overseas equities
Fixed interest securities
Property
Other
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
%
%
7
22
33
24
7
7
6
20
34
24
7
9
%
-
-
-
-
-
-
%
-
-
-
-
-
-
(F) PRINCIPAL ACTUARIAL ASSUMPTIONS
The principal actuarial assumptions used (expressed as weighted averages) were as follows:
Discount rate
Expected return on plan assets
Future salary increases
Consolidated
Consolidated
Company
Company
2009
%
4.7
6.3
4.0
2008
%
5.2
6.5
4.0
2009
%
-
-
-
2008
%
-
-
-
The expected rate of return on assets has been determined by weighting the expected long term return for each class by the target
allocation of assets to each asset class. This resulted in a 6.3% p.a. rate of return, net of tax and expenses (2008: 6.5% p.a).
(G) EMPLOYER CONTRIBUTIONS
Employer contributions to the defined benefit section of the plans are based on recommendations by the plans’ actuaries. Actuarial
assessments are made at three yearly intervals and the last actuarial assessment of Fairfax Super was carried out as at 1 July 2008
by Mercer Human Resource Consulting Pty Ltd. The last actuarial assessments of Fairfax NZ Retirement Fund and Fairfax NZ Senior
Executive Superannuation Scheme were carried out as at 1 April 2008 by AoN Consulting New Zealand Limited. Fairfax
New Zealand Superannuation Fund is a defined contribution fund and does not require an actuarial assessment.
The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully funded by the time they
become payable. To achieve this objective, the actuary has adopted a method of funding benefits known as the aggregate funding
method. This funding method seeks to have benefits funded by means of a total contribution which is expected to be a constant
percentage of members’ salaries over their working lifetimes.
Total employer contributions expected to be paid by Group companies for the 2010 financial year are nil (parent entity: $nil).
(H) NET FINANCIAL POSITION OF PLAN
In accordance with AAS 25 Financial Reporting by Superannuation Plans the plans’ net financial position is determined as the difference
between the present value of the accrued benefits and the net market value of plan assets. This has been determined as a surplus
of $3.4 million at the most recent financial position of the plans, being 1 July 2008 for Australia and 1 April 2008 for New Zealand. As
such, the assets of each of the plans are sufficient to satisfy all benefits that would have vested under the plans in the event of
termination of the plans and voluntary or compulsory termination of employment of each employee.
77
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
The directors, based on the advice of the trustees of the plan, are not aware of any changes in circumstances since the date of
the most recent financial statements of the plans (1 July 2008 for Australia and 1 April 2008 for New Zealand), which would
have a material impact on the overall financial position of the defined benefit plan.
(I) HISTORIC SUMMARY
Defined benefit plan obligation
Plan assets
Surplus/(deficit)
2005
$'000
2006
$'000
2007
$'000
2008
$'000
2009
$'000
(21,836)
28,652
(19,424)
30,100
(20,048)
33,429
(24,254)
29,796
(20,560)
17,875
6,816
10,676
13,381
5,542
(2,685)
Experience adjustments arising on plan liabilities
Experience adjustments arising on plan assets
(1,457)
644
(2,152)
(892)
(2,032)
(1,038)
7,678
(3,132)
7,773
(8,278)
18. Deferred tax assets and liabilities
(A) RECOGNISED DEFERRED TAX ASSETS AND LIABILITIES
Deferred tax assets and liabilities are attributable to the following:
Assets
Liabilities
Net
28 June 2009
29 June 2008
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
$'000
$'000
(i) Consolidated
Property, plant and equipment
10,293
19,018
Inventories
Investments
Intangible assets
Other assets
Provisions
Payables
Other liabilities
Tax losses
Film production and distribution
Other
-
-
6,685
23,831
52,826
10,288
3,255
1,510
-
6,219
-
(345)
5,453
36,774
50,608
7,986
2,739
18
1,532
4,778
24,084
2,788
10,498
44,301
24,187
-
-
53
-
-
10,684
38,220
(13,791)
(19,202)
4,114
6,102
44,300
39,042
-
-
105
-
9,584
7,464
(2,788)
(10,498)
(37,616)
(356)
52,826
10,288
3,202
1,510
-
(4,465)
(4,114)
(6,447)
(38,847)
(2,268)
50,608
7,986
2,634
18
(8,052)
(2,686)
Net deferred tax assets/liabilities
114,907
128,561
116,595
148,931
(1,688)
(20,370)
(ii) Company
Property, plant & equipment
Intangible assets
Other assets
Employee provisions
Accruals
Other
Net deferred tax assets/liabilities
-
6,215
-
2,281
2,061
149
10,706
-
5,178
-
2,426
1,405
191
9,200
2,771
3,630
-
-
-
-
7,096
9,867
-
2
-
-
4,011
7,643
(2,771)
6,215
-
2,281
2,061
(6,947)
839
(3,630)
5,178
(2)
2,426
1,405
(3,820)
1,557
There are no unrecognised deferred tax assets other than unrealised and carried forward realised capital losses for which no deferred
tax asset has been recognised.
78
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(B) MOVEMENT IN TEMPORARY DIFFERENCES DURING THE FINANCIAL YEAR
(i) Consolidated
Property, plant and equipment
Inventories
Investments
Intangible assets
Other assets
Provisions
Payables
Other liabilities
Tax losses
Film production and distribution
Other
(ii) Company
Property, plant and equipment
Intangible assets
Other financial assets
Provisions
Payables
Other
(i) Consolidated
Property, plant and equipment
Inventories
Investments
Intangible assets
Other assets
Provisions
Payables
Other liabilities
Tax losses
Film production and distribution
Other
(ii) Company
Property, plant and equipment
Intangible assets
Other financial assets
Provisions
Payables
Other
Balance
Recognised
Recognised
Recognised
Balances
Balance
29 June 2008
on acquisition
in income
in equity
disposed
28 June 2009
(19,202)
(1,474)
(4,114)
(6,447)
(38,847)
(2,268)
50,608
7,986
2,634
18
(8,052)
(2,686)
-
-
(2,117)
17
1,158
-
-
-
409
41
7,101
1,326
(4,102)
3,348
(527)
1,590
3,022
568
1,492
234
2,739
(20,370)
(1,966)
16,791
(3,630)
5,178
(2)
2,426
1,405
(3,820)
1,557
-
-
-
-
-
-
-
859
1,037
2
(145)
656
3,575
5,984
-
-
-
-
2,379
-
-
-
-
-
(4,559)
(2,180)
-
-
-
-
-
(6,702)
(6,702)
(216)
(13,791)
-
51
-
43
(530)
(720)
-
-
7,409
-
6,037
-
-
-
-
-
-
-
(2,788)
(10,498)
(37,616)
(356)
52,826
10,288
3,202
1,510
-
(4,465)
(1,688)
(2,771)
6,215
-
2,281
2,061
(6,947)
839
Balance
Recognised
Recognised
Recognised
Balances
Balance
1 July 2007
on acquisition
in income
in equity
disposed
29 June 2008
(8,661)
(3,875)
(3,310)
(30,987)
19,985
45,371
7,432
1,303
4,656
-
(4,196)
(13,874)
-
(2,613)
(9,751)
230
3,341
526
117
-
(1,168)
6
3,333
(239)
(524)
1,891
-
-
-
-
(15,797)
(6,686)
1,896
28
1,214
(4,638)
(6,884)
1,504
-
-
-
-
-
-
27,718
(23,186)
(18,216)
(6,686)
(3,939)
4,459
-
1,976
2,232
639
5,367
-
-
-
-
-
-
-
309
719
(2)
450
(827)
(4,459)
(3,810)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(19,202)
(4,114)
(6,447)
(38,847)
(2,268)
50,608
7,986
2,634
18
(8,052)
(2,686)
(20,370)
(3,630)
5,178
(2)
2,426
1,405
(3,820)
1,557
79
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
19. Other financial assets
Shares in controlled entities - at cost
Provision for diminution
Shares in unlisted entities - at cost
Total other financial assets
20. Payables
Trade and other payables *
Interest payable
Income in advance
Total current payables
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
-
-
-
1,175
1,175
-
-
-
122
122
3,138,215
3,143,723
(214,000)
2,924,215
-
-
3,143,723
-
2,924,215
3,143,723
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
211,288
226,917
14,946
15,900
19,376
69,815
26,403
76,725
-
-
-
-
300,479
330,045
14,946
15,900
* Trade payables are non-interest bearing and are generally on 30 day terms
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
Note
$'000
$'000
$'000
$'000
21. Interest bearing liabilities
Current interest bearing liabilities - unsecured
Finance lease liability
Other loans
Redeemable Preference Shares
Bank borrowings
Current interest bearing liabilities - secured
Bank borrowings
Total current interest bearing liabilities
Non-current interest bearing liabilities - unsecured
Bank borrowings
Redeemable Preference Shares
Other loans
Senior notes
Medium term notes
Eurobonds
Other
Finance lease liability
(D)
(D)
(E)
(B)
(B)
(B)
(E)
(C)
(F)
(G)
(D)
(D)
3,334
10,072
147,978
22,173
3,194
8,665
-
-
-
3,957
183,557
15,816
237,706
-
973,109
146,401
638,371
167,481
607,537
51,609
22,004
519,676
199,682
570,249
61,680
25,336
Total non-current interest bearing liabilities
1,724,708
2,496,133
80
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
Note
$'000
$'000
$'000
$'000
Net debt for financial covenant purposes
Cash and cash equivalents
Current interest bearing liabilities
Non-current interest bearing liabilities
Derivative financial instruments (assets) / liabilities *
Net debt for financial covenant purposes
(69,124)
(93,864)
183,557
15,816
1,724,708
(56,793)
2,496,133
98,166
1,782,348
2,516,251
-
-
-
-
-
-
-
-
-
-
* Debt hedging instruments as measured against the undiscounted contractual AUD cross currency swap obligations and therefore
may not equate to the values disclosed in the balance sheet (inclusive of transaction costs)
(A) FINANCING ARRANGEMENTS
The Group net debt for financial covenant purposes, taking into account all debt related derivative financial instruments, was
$1,782 million as at 28 June 2009 (2008: $2,516 million).
The Group has sufficient unused committed facilities at the balance sheet date to finance maturing current interest bearing liabilities.
The Group has a number of financing facilities which are guaranteed by Fairfax Media Limited and are covered by deeds of negative
pledge.
(B) BANK BORROWINGS
Current
A NZ$50 million revolving committed cash advance facility is available to the Group until June 2010. At 28 June 2009,
NZ$27.7 million was drawn down (2008: nil).
Non-current
A $1,200 million syndicated bank facility is available to the Group until periods ranging from April 2011 to April 2013.
At 28 June 2009, $125 million was drawn down (2008: $850 million). The interest rate for the drawings under this facility is the
applicable bank bill rate plus a credit margin.
A $200 million revolving committed cash advance facility is available to the group until September 2010. At 28 June 2009, $115 million
was drawn down (2008: $125 million). The interest rate for this facility is the applicable bank bill rate plus a credit margin.
(C) SENIOR NOTES
The Group issued Senior Notes in the US private placement market with a principal value of US$230 million (A$307.9 million)
in January 2004 with a fixed coupon of between 4.74% p.a. and 5.85% p.a. payable semi-annually in arrears. The interest and principal
on the Senior Notes are payable in US dollars and were swapped into floating rate New Zealand dollars and floating rate Australian
dollars via cross-currency swaps. This issue of Senior Notes comprises maturities ranging from January 2011 to January 2019.
The weighted average maturity of the issue is approximately five and a half years. The applicable cross-currency swap credit margin
includes the cost of hedging all currency risk and future interest and principal repayments on a quarterly basis.
The Group issued further Senior Notes in the US private placement market with a principle value of US$250 million (A$330.4 million) in
July 2007 comprising maturities ranging from July 2014 to July 2017. The weighted average maturity of this issue is approximately
6.2 years. The issued notes include fixed rate coupon notes, paying a weighted average coupon of 6.4% p.a. semi annually in arrears,
and floating rate coupon notes. The interest and principle on the Senior Notes are payable in US dollars and were swapped into fixed
and floating rate Australian dollars via cross-currency swaps. An additional 1.00% p.a. step up margin is payable on the coupons,
effective from 10 July 2009, following a downgrade of the Group's credit rating during the period.
81
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(D) OTHER LOANS AND FINANCE LEASE LIABILITY
The Chullora printing facility in Sydney is partially financed by a finance lease facility and loans with a maturity date of September 2015.
There is a CPI indexed annuity loan with principal and interest outstanding of $41.3 million (2008: $45.5 million) and a finance lease
of $25.3 million (2008: $28.5 million), which was entered into in February 1996. There is also principal and interest outstanding
of $20.4 million (2008: $24.9 million) in the form of a fixed rate loan with an established drawdown and repayment schedule.
(E) REDEEMABLE PREFERENCE SHARES (RPS)
The Group issued Redeemable Preference Shares in New Zealand in May 2005 with a principal value of NZ$186.5 million
(A$147.9 million) currently paying a fixed one year coupon of 3.97% p.a. payable quarterly in arrears. The Redeemable Preference
Shares mature in June 2010. The interest and principal on the Redeemable Preference Shares are payable in New Zealand dollars and
were swapped into fixed rate Australian dollars via a cross-currency swap. The applicable cross-currency swap credit margin
includes the cost of hedging all currency risk and future interest and principal repayments on a quarterly basis.
(F) MEDIUM TERM NOTES (MTNs)
On 27 June 2006, the Group issued $200 million of MTNs with a maturity date of 27 June 2011. The MTNs were issued at
a fixed coupon of 6.865% p.a. In May 2009, the Group repurchased and cancelled $32.3 million of the outstanding MTNs.
(G) EUROBONDS
On 15 June 2007 the Group issued €350 million guaranteed notes with a maturity date of 15 June 2012. The notes pay a fixed
coupon of 5.25% p.a. payable annually in arrears. The interest and principal on the notes are payable in Euro and were swapped into
fixed rate Australian dollars via cross-currency swaps. An additional 1.00% p.a. step up margin is payable on the fixed coupon,
effective from 15 June 2009, following a downgrade of the Group's credit rating during the period.
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
101,697
113,793
5,291
6,990
4,927
6,850
4,357
10,590
271
2,228
1,603
37,959
581
3,673
128,692
159,837
13,087
35,435
481
49,003
13,108
31,533
757
45,398
-
-
-
1,911
-
7,202
401
-
-
401
-
-
-
395
-
7,385
703
-
-
703
22. Provisions
Current
Employee benefits
Defamation
Property
Consideration payable under earn out arrangement
Redundancy
Other
Total current provisions
Non-current
Employee benefits
Property
Other
Total non-current provisions
82
395
2,270
(754)
-
-
1,911
-
-
-
-
-
(75)
-
271
757
-
(276)
-
481
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
RECONCILIATION
Reconciliations of the carrying amount of each class of provision, other than employee benefits, during the financial year are set
out below:
Consolidated
Consolidated
Consolidated
Consolidated
Consolidated
Company
Defamation
Property
Earn out
Redundancy
Other
Redundancy
2009
$'000
2009
$'000
2009
$'000
2009
$'000
2009
$'000
2009
$'000
Current
Balance at beginning of the financial year
Additional provision
Utilised
Disposal of controlled entities
Exchange differences
2,228
9,937
1,603
7,189
37,959
4,919
581
81,513
3,673
-
(7,241)
(1,942)
(38,006)
(71,504)
(3,327)
-
3
-
-
-
(515)
-
-
Balance at end of the financial year
4,927
6,850
4,357
10,590
Non-current
Balance at beginning of the financial year
Additional provision
Utilised
Exchange differences
Balance at end of the financial year
NATURE AND TIMING OF PROVISIONS
(i) Employee benefits
-
-
-
-
-
31,533
4,874
(976)
4
35,435
-
-
-
-
-
-
-
-
-
-
Provisions for employee benefits include liabilities for annual leave and long service leave and are measured at the amounts expected
to be paid when the liabilities are settled, refer to Note 1(T)(i).
(ii) Defamation
From time to time, entities in the Group are sued for defamation and similar matters in the ordinary course of business. The defamation
provision maintained is with respect to various insignificant matters across the Group. At the date of this report there were no legal
actions against the consolidated entity that have not been adequately provided for or that are expected to have a material impact
on the Group.
(iii) Property
The provision for property costs is in respect of make good provisions, deferred lease incentives and onerous lease provisions.
The make good provisions and deferred lease incentives are amortised over the shorter of the term of the lease or the useful life of
the assets, being up to 20 years. Onerous lease provisions have been made on various group properties as a result of expected
relocations in the coming year.
(iv) Earn out
The provision for earn out relates to amounts in relation to recent acquisitions which are payable contingent on the achievement
of specified financial performance criteria by the entity acquired.
(v) Redundancy
The provision is in respect of amounts payable in connection with redundancy and includes termination benefits, on-costs and
outplacement services.
(vi) Other
Other provisions includes various other costs relating to the business.
83
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
Note
$'000
$'000
$'000
$'000
23. Contributed equity
Ordinary Shares
2,351,955,725 ordinary shares fully paid
(A)
4,667,990
4,039,131
4,667,990
4,039,131
(2008: 1,513,544,248)
Unvested Employee Incentive Shares
8,411,794 unvested employee incentive shares
(B)
(33,031)
(13,885)
(33,031)
(13,885)
(2008: 3,384,916)
Stapled Preference Shares (SPS)
3,000,000 stapled preference shares (2008: 3,000,000)
(C)
293,163
293,163
299,278
299,278
Debentures
281 debentures fully paid (2008: 281)
Total contributed equity
* Amount is less than $1000
(D)
*
*
*
*
4,928,122
4,318,409
4,934,237
4,324,524
RECONCILIATIONS
Reconciliations of each class of contributed equity at the beginning and end of the current financial year are set out below:
Consolidated
(A) ORDINARY SHARES
Balance at beginning of the financial year
28 June 2009
29 June 2008
28 June 2009
29 June 2008
No. of shares
No. of shares
$'000
$'000
1,513,544,248
1,479,640,401
4,039,131
3,891,162
Dividend reinvestment plan issue - 2 October 2008
5,558,472
-
15,731
-
Dividend reinvestment plan issue - 27 September 2007
-
12,820,970
-
56,156
Share issue - 6 April 2009 Retail offer
Share issue - 13 March 2009 Institutional offer
Share issue - 7 August 2007 Adjustment to Rural Press
acquisition share issue
Share issue - 27 September 2007 Merrill Lynch final
dividend underwriting
Share issue costs
164,479,456
668,373,549
-
-
-
-
-
900
123,360
501,280
-
-
-
5
21,081,977
-
-
(11,512)
91,808
-
Balance at end of the financial year
2,351,955,725
1,513,544,248
4,667,990
4,039,131
84
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(B) UNVESTED EMPLOYEE INCENTIVE SHARES
Balance at beginning of the financial year
Share acquisition - 27 March 2009
Share acquisition - 26 August 2008
Share acquisition - 22 February 2008
Share acquisition - 25 February 2008
Tax expense recognised directly in equity
28 June 2009
29 June 2008
28 June 2009
29 June 2008
No. of shares
No. of shares
$'000
$'000
3,384,916
1,126,794
3,900,084
-
-
-
-
-
-
1,700,000
1,684,916
-
(13,885)
(845)
(11,599)
-
-
(6,702)
-
-
-
(6,969)
(6,916)
-
Balance at end of the financial year
8,411,794
3,384,916
(33,031)
(13,885)
(C) STAPLED PREFERENCE SHARES (SPS)
Balance at beginning of the financial year
Balance at end of the financial year
3,000,000
3,000,000
3,000,000
3,000,000
293,163
293,163
293,163
293,163
(D) DEBENTURES
Balance at beginning of the financial year
Balance at end of the financial year
Total contributed equity
* Amount is less than $1000
281
281
281
281
*
*
*
*
4,928,122
4,318,409
TERMS AND CONDITIONS OF CONTRIBUTED EQUITY
(A) Ordinary Shares
Ordinary shares entitle the holder to receive dividends as declared and, in the event of winding up the Company, to participate in the
proceeds from the sale of all surplus assets in proportion to the number of and amounts paid up on shares held. Ordinary shares entitle
their holder to one vote, either in person, or by proxy, at a meeting of the Company.
Rights Issue
On 3 April 2009, the Company completed a 3 for 5 accelerated non-renounceable pro-rata entitlement offer, raising a total of
$624.6 million. The Company used the proceeds of the entitlement offer to pay down a substantial part of a syndicated bank facility
maturing in 2011 and 2012.
Dividend Reinvestment Plan
Fairfax Media Limited introduced a Dividend Reinvestment Plan (DRP) to eligible shareholders during the financial year ended
30 June 2004.
Under the terms of the DRP eligible shareholders are able to elect to reinvest their dividends in additional Fairfax shares, free of any
brokerage or other transaction costs. Shares are issued and/or transferred to DRP participants at a predetermined price, less any
discount that the directors may elect to apply from time to time. During the financial year ended 28 June 2009, 5,558,472 ordinary shares
(2008: 12,820,970 ordinary shares) were issued under the terms of the DRP.
(B) Unvested Employee Incentive Shares
Shares in Fairfax Media Limited are held by the Executive Employee Share Plan Trust for the purpose of issuing shares under
the Long Term Incentive Plan. Holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled
to one vote per share at shareholder meetings.
85
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(C) Stapled Preference Shares (SPS)
The SPS (FXJPB), which was issued on 23 March 2006 for a face value of $100 per share, is a stapled security comprising a fully paid
SPS Preference Share issued by the Company, Fairfax Media Limited and a fully paid unsecured note issued by Fairfax Group Finance
New Zealand Limited, a wholly owned entity of the Company. Holders of the SPS are not entitled to vote.
Distribution payments are at the discretion of directors however distributions, in the form of interest on the notes, are expected to be paid
semi-annually in arrears each April and October, and rank in preference to ordinary shareholders and equally with preference
shareholders. The distribution rate is calculated as the sum of the six month bank bill swap rate and the margin, which is determined
by the issuers or adjusted to the step-up margin (2.25%). Distributions are non-cumulative. Total distribution payments in the year to SPS
was $25,005,709 (2008: $25,618,128).
The SPS are perpetual however Fairfax has the right to repurchase the SPS for cash or convert the SPS into a variable number of
ordinary shares from April 2011 or earlier in certain circumstances (an assignment event). In the event an assignment event occurs,
the SPS are ‘unstapled’ and the unsecured notes assigned to a wholly owned Fairfax subsidiary. The SPS holders would continue to
hold a listed SPS preference share issued by the Company and discretionary dividends on the preference shares, which may be franked.
The two securities may not be traded separately prior to an assignment event and an assignment event does not itself give the Company
the right to repurchase or convert the SPS. Holders are never entitled to both interest on the unsecured notes and dividends on the
SPS preference shares at the same time.
(D) Debentures
Debenture holders terms and conditions are disclosed in Note 1(U).
86
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
24. Reserves
Asset revaluation reserve, net of tax
Foreign currency translation reserve, net of tax
Cashflow hedge reserve, net of tax
Net investment hedge reserve, net of tax
Share-based payment reserve, net of tax
Total reserves
(A) Asset revaluation reserve
Balance at beginning of the financial year
Revaluation of available for sale investments
Impairment losses transferred to net profit
Tax effect of net loss on available for sale investment
Balance at end of the financial year
(B) Foreign currency translation reserve
Balance at beginning of the financial year
Transfer to loss on disposal
Net exchange differences on currency translation, net of tax
Balance at end of the financial year
(C) Cashflow hedge reserve
Balance at beginning of the financial year
Effective portion of changes in value of cashflow hedges
Tax effect of net changes on cashflow hedges
Balance at end of the financial year
(D) Net investment hedge reserve
Balance at beginning of the financial year
Effective portion of changes in value of net investment hedges
Tax effect on net investment hedges
Balance at end of the financial year
(E) Share-based payment reserve
Balance at beginning of the financial year
Share-based payment expense
Transfer to Share Trust to fund acquisition of shares
Balance at end of the financial year
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
Note
$'000
$'000
$'000
$'000
(A)
(B)
(C)
(D)
(E)
32
(801)
(173,662)
(201,881)
7,286
(1,024)
3,987
15,307
(438)
1,750
(163,381)
(186,063)
-
-
-
-
3,987
3,987
-
-
-
-
1,750
1,750
(801)
(1,358)
2,191
-
32
-
(2,183)
1,382
-
(801)
(201,881)
48,984
1,192
27,027
-
(250,865)
(173,662)
(201,881)
15,307
(11,495)
3,474
(6,739)
31,079
(9,033)
7,286
15,307
(438)
(836)
250
(24,719)
34,654
(10,373)
(1,024)
(438)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,750
2,237
-
3,987
(1,943)
4,429
(736)
1,750
1,750
2,237
-
3,987
(1,943)
4,429
(736)
1,750
87
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
NATURE AND PURPOSE OF RESERVES
(A) Asset revaluation reserve
The asset revaluation reserve is used to record increments and decrements on the revaluation of non-current assets. From 1 July 2004,
changes in the fair value of investments classified as available for sale investments are recognised in the asset revaluation reserve,
as described in Note 1(M).
(B) Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising on translation of foreign controlled entities and
associated funding of foreign controlled entities, as described in Note 1(F).
(C) Cashflow hedge reserve
The hedging reserve is used to record the portion of gains and losses on a hedging instrument in a cash flow hedge that is determined
to be an effective hedge, as described in Note 1(N). Refer to further disclosures at Note 16.
(D) Net investment hedge reserve
The net investment hedge reserve is used to record gains and losses on a hedging instruments in a fair value hedge, as described in
Note 1(F). Refer to further disclosures at Note 16.
(E) Share-based payment reserve
The share-based payments reserve is used to recognise the fair value of shares issued but not vested and transfers to fund the
acquisition of Share Trust shares, as described in Note 1(T)(ii).
25. Retained profits
Balance at beginning of the financial year
Net (loss)/profit for the financial year
Actuarial (loss)/gain on defined benefit plans, net of tax
Tax benefits recognised directly in equity
Reclassification of tax benefits to equity
Total available for appropriation
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
Note
$'000
$'000
$'000
$'000
821,987
(380,050)
748,164
386,878
490,535
(245,175)
730,731
59,186
(5,093)
(4,315)
7,502
-
8,427
7,833
-
-
-
-
-
-
444,346
1,146,987
245,360
789,917
Dividends paid
6
(206,742)
(325,000)
(181,736)
(299,382)
Balance at end of the financial year
237,604
821,987
63,624
490,535
88
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
26. Minority interest
Interest in:
Contributed equity
Reserves
Retained profits
Balance at end of the financial year
RECONCILIATION
Balance at beginning of the financial year
Acquisition of controlled entities
Disposal of controlled entities
Acquisition of minority interest balances in previously controlled entities
Share of (loss)/profit for the period
Distribution to minority interest
Exchange differences
Balance at end of the financial year
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
1,783
7,679
(17)
9,445
4,898
8,585
(2,482)
11,001
11,001
234
(287)
-
(1,038)
(461)
(4)
12,922
1,587
-
(3,636)
612
(570)
86
9,445
11,001
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Consolidated
Consolidated
28 June 2009
29 June 2008
¢ per share
¢ per share
27. Earnings per share
Basic (loss) / earnings per share
After significant and non-recurring items less SPS dividend (net of tax) *
(21.6)
22.9
Diluted (loss) / earnings per share
After significant and non-recurring items (net of tax) *
Earnings reconciliation - basic
Net (loss) / profit attributable to members of the Company
Less Dividends on SPS (net of tax)
Basic (loss) / earnings after significant and non-recurring items less SPS dividend
(21.6)
22.5
Consolidated
Consolidated
28 June 2009
29 June 2008
$'000
$'000
(380,050)
386,878
(15,683)
(17,164)
(395,733)
369,714
Earnings reconciliation - diluted
Net (loss) / profit attributable to members of the Company
(380,050)
386,878
89
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Weighted average number of ordinary shares used in calculating basic EPS
SPS
Weighted average number of ordinary shares used in calculating diluted
EPS
Consolidated
Consolidated
28 June 2009
29 June 2008
Number
Number
'000
'000
1,832,788
247,889
1,616,910
99,208
2,080,677
1,716,118
* The 2008 basic and dilutive earnings per share has been adjusted to reflect the bonus element inherent in the 3 for 5 rights issue
completed on the 3 April 2009 where the Company raised a total of $624.6 million. Refer to Note 23(A).
28. Commitments
OPERATING LEASE COMMITMENTS - GROUP AS LESSEE
The Group has entered into commercial leases on office and warehouse premises, motor vehicles and office equipment.
Future minimum rentals payable under non-cancellable operating leases as at the period end are as follows:
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
Within one year
Later than one year and not later than five years
Later than five years
Total operating lease commitments
Note
$'000
$'000
44,019
132,345
332,860
49,682
140,014
326,224
509,224
515,920
$'000
147
74
-
221
$'000
The leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases are renegotiated.
These non-cancellable leases have remaining terms of between five and twenty years. All property leases include a clause to enable
upward revision of rental charge on an annual basis according to prevailing market conditions.
FINANCE LEASE COMMITMENTS - GROUP AS LESSEE
The Group has a finance lease for plant and machinery with a carrying amount of $32.5m (2008: $33.7m). The lease has an average
lease term of six years (2008: seven years) and a weighted average interest rate of 13.4% (2008: 13.4%).
Future minimum lease payments under the finance lease together with the present value of the net minimum lease payments
are as follows:
Within one year
Later than one year and not later than five years
Later than five years
Minimum lease payments
Less future finance charges
Total finance lease liability
Classified as:
Current interest bearing liabilities
Non-current interest bearing liabilities
Total finance lease liability
90
5,076
20,304
6,345
31,725
(6,387)
5,076
20,303
11,420
36,799
(8,269)
25,338
28,530
3,334
22,004
25,338
3,194
25,336
28,530
21(D)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
CONTINGENT RENTALS UNDER FINANCE LEASE
A component of the finance lease payments are contingent on movements in the consumer price index. At balance date, the contingent
rent payable over the remaining lease term of 6 years is $25.5 million (2008: $27.6 million).
CAPITAL COMMITMENTS
At 28 June 2009, the Group has commitments principally relating to the purchase of property, plant and equipment. Commitments
contracted for at reporting date but not recognised as liabilities are as follows:
Within one year
Later than one year and not later than five years
Later than five years
Total capital commitments
29. Contingencies
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$'000
$'000
$'000
$'000
12,645
-
-
12,645
28,999
18,545
-
47,544
-
-
-
-
-
-
-
-
EARN OUT AGREEMENT - INVESTSMART FINANCIAL SERVICES PTY LTD AND GO EAST FURNITURE COMPANY
PTY LTD
The consolidated entity has an earn out agreement which represents a contingent liability at 28 June 2009 relating to the
acquisition of InvestSMART Financial Services Pty Ltd and Go East Furniture Company Pty Ltd.
Additional cash consideration of up to $38.0 million will be payable by the consolidated entity if the above business achieves
specified financial performance criteria.
The amount of the earn out is based on the earnings before interest, tax, depreciation and amortisation (EBITDA) of the acquired
business. The earn out target covers the 12 month period up to 30 September 2010.
A liability for the earn out has not been recognised at 28 June 2009 as the amount of the earn out is subject to a variety of
factors including market behaviour, competition, trading volumes and activity and cannot be reliably determined at this stage.
When the earn out is probable and can be reliably measured, the liability will be accounted for as an additional acquisition cost
and added to the carrying amount of the investment as goodwill.
EARN OUT AGREEMENT - THE WEATHER COMPANY PTY LTD
A provision of $3.8 million for the earn out agreement relating to this acquisition has been recognised as at 28 June 2009.
This provision has been recognised as it is considered probable that the earn out targets will be achieved. The provision has been
accounted for as an additional acquisition cost and added to the carrying amount of the investment in The Weather Company Pty Ltd
as goodwill.
EARN OUT AGREEMENT - RED ROCK SOFTWARE LTD
A provision of $0.6 million for the earn out agreement relating to this acquisition has been recognised as at 28 June 2009.
This provision has been recognised as it is considered probable that the earn out target will be achieved. The provision has been
accounted for as an additional acquisition cost and added to the carrying amount of the investment in Red Rock Software Ltd
as goodwill.
91
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
GUARANTEES
Under the terms of ASIC Class Order 98/1418 (as amended), the Company and certain controlled entities (refer Note 30), have
guaranteed any deficiency of funds if any entity to the class order is wound-up. No such deficiency exists at balance date.
DEFAMATION
From time to time, entities in the Group are sued for defamation and similar matters in the ordinary course of business.
At the date of this report, there were no legal actions against the consolidated entity, other than those recognised at Note 22, that are
expected to result in a material impact.
30. Controlled entities
The following entities were controlled as at the end of the financial year:
Fairfax Media Limited
CONTROLLED ENTITIES
5AU Broadcasters Proprietary Limited
ACN 074 162 888 Pty Ltd
ACN 083 365 799 Pty Ltd
ACN 101 806 302 Pty Ltd
Agricultural Publishers Pty Limited
Associated Newspapers Ltd
Australian Property Monitors Pty Limited
Border Mail Printing Pty Ltd
Bridge Printing Office Pty Limited
Bundaberg Broadcasters Pty Ltd
Bundaberg Narrowcasters Pty Ltd
Canweb Printing Pty Limited (in Liq)
Carpentaria Newspapers Pty Ltd
Central Districts Field Days Limited
Commerce Australia Pty Ltd
Communication Associates Limited
Constellar Press & Printing Pty Limited (in Liq)
Country Publishers Pty Ltd
CountryCars.com.au Pty Ltd
Creative House Publications Pty Ltd
Cudgegong Newspapers Pty Ltd
David Syme & Co Pty Limited
Debt Retrieval Agency Limited
Digital Radio Australia Pty Limited
Esperance Holdings Pty Ltd
Examiner Properties Pty Ltd
F@rming Online Pty Ltd
Fairfax Business Media (South Asia) Pte Limited
Fairfax Business Media Pte Limited
Fairfax Business Media Sdn. Bhd.
Fairfax Business Publications (Hong Kong) Ltd (in Liq)
Fairfax Community Network Limited
92
Notes
(a)
Country of
Incorporation
Australia
Ownership interest
2009
%
2008
%
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Singapore
Singapore
Malaysia
Hong Kong
Australia
100
100
100
100
100
100
100
100
100
100
100
100
100
100
75
100
100
100
100
60
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
75
100
100
100
100
60
100
100
100
100
100
100
100
100
100
100
100
100
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
CONTROLLED ENTITIES
Fairfax Community Newspapers Pty Limited
Fairfax Corporation Pty Limited
Fairfax Digital Australia & New Zealand Pty Ltd
Fairfax Digital Limited
Fairfax EEC Limited (in Liq)
Fairfax Group Finance New Zealand Limited
Fairfax Media (UK) Limited
Fairfax Media Group Finance Pty Limited
Fairfax Media Management Pty Limited
Fairfax Media Publications Pty Limited
Fairfax New Zealand Finance Limited
Fairfax New Zealand Holdings Limited
Fairfax New Zealand Limited
Fairfax News Network Pty Limited
Fairfax Print Holdings Pty Limited
Fairfax Printers Pty Limited
Fairfax Radio Network Pty Limited
Fairfax Radio Syndication Pty Limited
Fairfax Regional Printers Pty Limited
Fantasports Australia Pty Ltd
Farm Progress Companies, Inc
Farm Progress Holding Co, Inc
Farm Progress Insurance Services, Inc
Financial Essentials Pty Ltd
Go East Furniture Company Pty Ltd
Golden Mail Pty Limited
Harris and Company Pty Limited
Harris Enterprises Pty Ltd
Harris Print Pty Ltd
Harris Publications Pty Ltd
Hunter Distribution Network Pty Ltd
Illawarra Newspaper Holdings Pty Ltd
Indiana Prairie Farmer Insurance Services, Inc
InvestSMART Financial Services Pty Ltd
InvestSMART Limited
J&R Graphics Pty Limited (in Liq)
John Fairfax & Sons Ltd
John Fairfax (US) Limited
John Fairfax Limited
Lanson Investments Pty Ltd
Large Publications Pty Ltd (in Liq)
Leeton Newspapers Pty Ltd
Lime Digital Pty Limited
Macleay Valley Happynings Pty Ltd (in Liq)
Mayas Pty Ltd
Mayas Unit Trust
Media Investments Pty Ltd
Melbourne Community Newspapers Pty Ltd
Notes
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
Country of
Incorporation
Australia
Australia
Australia
Australia
United Kingdom
New Zealand
United Kingdom
Australia
Australia
Australia
Australia
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
United States
United States
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
Australia
New Zealand
Australia
Australia
United States
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Ownership interest
2009
%
2008
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
66
100
100
100
100
100
100
100
100
100
100
100
100
100
100
79
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
66
100
100
100
100
100
100
100
100
100
100
100
100
100
100
79
100
100
100
100
100
100
100
93
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
CONTROLLED ENTITIES
Merredin Advertiser Pty Ltd
Metropolis Media Pty Ltd (in Liq)
Micosh Pty Ltd
Miller Publishing Co, Inc
Milton Ulladulla Publishing Co. Pty Ltd
Mistcue Pty Limited
Mountain Press Pty Ltd
NE Investments Pty Ltd (in Liq)
Newcastle Newspapers Pty Ltd
North Australian News Pty Ltd
Northern Newspapers Pty Ltd
NZ Rural Press Limited
Old Friends Limited
Online Services International Limited
Online Travel Limited
OSF Australia Pty Limited
Oxford Scientific Films Limited
Personal Investment Direct Access Pty Limited
Port Lincoln Times Pty Ltd
Port Stephens Publishers Pty Ltd
Port Stephens Publishers Trust
Pro-Ag Pty Ltd (in Liq)
Queensland Community Newspapers Pty Limited
Radio 1278 Melbourne Pty Limited
Radio 2UE Sydney Pty Ltd
Radio 3AW Melbourne Pty Limited
Radio 4BC Brisbane Pty Limited
Radio 4BH Brisbane Pty Limited
Radio 6PR Perth Pty Limited
Radio 96FM Perth Pty Limited
Red Rock Software Limited
Regional Printers Pty Limited
Regional Publishers (Tasmania) Pty Ltd
Regional Publishers (Victoria) Pty Limited
Regional Publishers (Western Victoria) Pty Limited
Regional Publishers Pty Ltd
Riverina Newspapers (Griffith) Pty Ltd
RP Interactive Pty Ltd
RPL Technology Pty Limited (in Liq)
RSVP.com.au Pty Limited
Rural Press (North Queensland) Pty Limited
Rural Press (USA) Limited
Rural Press Ltd
Rural Press Printing (Victoria) Pty Limited
Rural Press Printing Pty Limited
Rural Press Queensland Pty Ltd
Rural Press Regional Media (WA) Pty Limited
Rural Press Share Plan Pty Limited
94
Notes
(a)
(a)
(a)
(a)
(b)
(c)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(d)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
Country of
Incorporation
Australia
Australia
Australia
United States
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
New Zealand
New Zealand
Australia
United Kingdom
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
Australia
Australia
Australia
Australia
Australia
Australia
Ownership interest
2009
%
2008
%
100
100
100
100
60
65
88
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
60
65
88
100
100
100
100
100
100
100
-
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
-
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
CONTROLLED ENTITIES
Rural Press USA Inc
Rural Publishers Pty Limited
Southern Weekly Partnership
S.A. Regional Media Pty Limited
Satellite Interactive Marketing Pty Limited
Satellite Music Australia Pty Limited
Snowy Mountains Publications Pty Ltd (in Liq)
Stayz Limited
Stayz Pty Limited
Stock Journal Publishers Pty Ltd
Suzannenic Pty Limited
The Advocate Newspaper Proprietary Limited
The Age Company Ltd
The Age Print Company Pty Ltd
The Barossa News Pty Limited
The Border Morning Mail Limited
The Border News Partnership
The Examiner Newspaper Pty Ltd
The Federal Capital Press of Australia Pty Limited
The Independent News Pty Ltd
The Murrumbidgee Irrigator Pty Ltd
The Printing Press Pty Limited
The Queanbeyan Age Proprietary Limited (in Liq)
TheVine.com.au Pty Ltd
The Wagga Daily Advertiser Pty Ltd
The Warrnambool Standard Pty Ltd
The Weather Company Pty Limited
Tofua Holdings Pty Ltd (in Liq)
Trade Me Limited
Tricom Group Pty Ltd
Vianet Trustee Limited
West Australian Rural Media Pty Ltd
Western Australian Primary Industry Press Pty Ltd
Western Magazine Pty Ltd
Western Magazine Settlement Trust
Whyalla News Properties Pty Ltd
Winbourne Pty Limited
Notes
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(e)
(a)
(a)
(a)
(a)
Country of
Incorporation
United States
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Ownership interest
2009
%
2008
%
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
63
100
100
100
100
100
100
70
100
100
75
100
100
100
100
100
100
75
75
100
100
100
100
51
100
100
100
100
100
100
100
100
100
100
100
100
100
63
100
100
100
100
100
100
70
100
100
75
100
100
100
-
100
100
75
75
100
100
(a)
The Company and the controlled entities incorporated within Australia are party to Class Order 98/1418 (as amended) issued by
the Australian Securities & Investment Commission. These entities have entered into a Deed of Cross Guarantee dated June
2007 (as varied from time to time) under which each entity guarantees the debts of the others. These companies represent a ‘Closed
Group’ for the purposes of the Class Order and there are no other members of the ‘Extended Closed Group’. Under the Class Order,
these entities have been relieved from the requirements of the Corporations Act 2001 with regard to the preparation, audit and
publication of accounts.
(b)
Incorporated on 11 May 2009.
(c)
(d)
(e)
Incorporated on 16 January 2009.
Acquired on 31 March 2009.
Acquired on 11 May 2009.
95
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
DEED OF CROSS GUARANTEE
Fairfax Media Limited and certain wholly-owned entities (the “Closed Group”) identified at (a) above are parties to a Deed of Cross
Guarantee under ASIC Class Order 98/1418 (as amended). Pursuant to the requirements of that Class Order, a summarised
consolidated income statement for the period ended 28 June 2009 and consolidated balance sheet as at 28 June 2009, comprising
the members of the Closed Group after eliminating all transactions between members are set out below:
2009
$'000
2008
$'000
24,592
289,321
35,466
46
5,527
35,978
40,634
413,447
38,395
3,314
1,096
11,610
390,930
508,496
576,037
517,084
44,947
2,157
13,216
43,926
3,547
14,686
4,003,600
4,829,520
706,638
130,392
531
780,222
59,403
4,858
91,929
107,080
1,144,266
-
1,277,473
8,890
6,713,713
7,646,689
7,104,643
8,155,185
221,662
269,023
12,259
26,757
114,073
1,274
15,816
919
111,630
2,018
376,025
399,406
(A) BALANCE SHEET
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative assets
Assets held for sale
Other current assets
Total current assets
Non-current assets
Receivables
Investments accounted for using the equity method
Available for sale investments
Held to maturity investments
Intangible assets
Property, plant and equipment
Derivative assets
Pension asset
Deferred tax assets
Other financial assets
Other non-current assets
Total non-current assets
Total assets
Current liabilities
Payables
Interest bearing liabilities
Derivative liabilities
Provisions
Current tax liabilities
Total current liabilities
96
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Non-current liabilities
Interest bearing liabilities
Derivative liabilities
Deferred tax liabilities
Provisions
Pension liabilities
Other
Total non-current liabilities
Total liabilities
Net assets
Equity
Contributed equity
Reserves
Retained profits
Total equity
(B) INCOME STATEMENT
Total revenue
Share of net (losses)/profits of associates and joint ventures
Expenses before finance costs
Finance costs
Net (loss)/profit from operations before income tax expense
Income tax expense
Net (loss)/profit from operations after income tax expense
2009
$'000
2008
$'000
1,427,075
2,352,638
47,729
84,663
47,040
2,685
-
149,295
116,042
44,052
-
2,881
1,609,192
2,664,908
1,985,217
3,064,314
5,119,426
5,090,871
4,928,122
4,318,409
(61,544)
252,848
137,334
635,128
5,119,426
5,090,871
1,968,112
2,322,237
(76)
8,478
(2,185,766)
(54,317)
(1,874,469)
(104,699)
(272,047)
(22,494)
351,547
(95,254)
(294,541)
256,293
97
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
31. Acquisition and disposal of controlled entities
(A) ACQUISITIONS
The consolidated entity gained control over the following entities or publishing assets during the year:
Entity or business acquired
Connect 4
Waiheke Marketplace
D-Scene
Katherine Times
New Zealand Lifestyle Block
Infego Communications Limited
Red Rock Software Limited
Vianet International Limited
Principal activity
Financial information services
Newspaper publishing
Newspaper publishing
Newspaper publishing
Magazine publishing
Magazine publishing
Online holiday accommodation advertising 31 March 2009
Online tourism solution provider
11 May 2009
Date of
Acquisition
Ownership
Interest
31 July 2008
28 August 2008
15 September 2008
21 October 2008
24 October 2008
14 November 2008
(i)
(ii)
(iii)
(iv)
(v)
(vi)
100%
(vii)
(i)
The business assets of Connect 4 were acquired, including the Connect 4 trademark and the www.connect4.com.au
domain name.
(ii)
The publishing assets of Waiheke Marketplace were acquired, including the Waiheke Marketplace and Property Lifestyle
masthead.
(iii)
(iv)
(v)
(vi)
The publishing assets of D-Scene were acquired, including the D-Scene masthead.
The publishing assets of Katherine Times were acquired, including the Katherine Times masthead.
The publishing assets of New Zealand Lifestyle Block were acquired, including the New Zealand Lifestyle Block masthead.
The publishing assets of Infego Communications Limited were acquired, including the Unlimited, Actv8, Exec.Ed. and
Start Up Mastheads.
(vii)
The business assets of Vianet International Limited were acquired, including a 100% share of Vianet Trustee Limited.
For additional information refer to Note 32(B).
(B) DISPOSALS
The consolidated entity disposed of its interests in the following entities or publishing assets during the year:
Entity or business disposed
Principal activity
Date of
Disposal
Carnival Film & Television Limited
Television production
19 September 2008
Southern Star Group Limited and its controlled entities
Television production and distribution
6 April 2009
Real Estate Publications Australasia Pty Limited
Magazine publishing
Homes Pictorial Publications Unit Trust
Magazine publishing
22 April 2009
22 April 2009
Ownership
Interest
75%
100%
55%
55%
98
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
32. Business combinations
(A) SOUTHERN CROSS BROADCASTING
On 9 November 2007 certain assets and liabilities of Southern Cross Broadcasting were acquired.
At 29 June 2008, the purchase price allocation for this business combination was based on provisional information. During the financial
year ended 28 June 2009, the purchase price allocation was finalised. The impact of this was a decrease to goodwill of
$13.8 million. The fair value of the identifiable assets and liabilities of Southern Cross Broadcasting as at the date of acquisition were:
Recognised
on acquisition
$'000
Acquiree's
carrying amounts
$'000
Value of net assets acquired
Cash and cash equivalents
Receivables
Inventories
Investments accounted for using the equity method
Property, plant and equipment
Intangible assets
Assets available for sale
Other current assets
Current tax assets
Deferred income tax asset
Total assets
Payables
Interest bearing liabilities
Provisions
Other non current liabilities
Current tax liability
Deferred tax liability
Total liabilities
Value of identifiable net assets
Outside equity interest in net assets
Goodwill arising on acquisition
Total identifiable net assets and goodwill
Consideration
Purchase consideration - cash
Costs directly attributable to the acquisition
Total consideration
Net cash outflow on acquisition
Net cash acquired with subsidiary
Cash paid
Net cash outflow
17,784
72,230
963
5,605
34,278
162,906
3,324
17,896
3,012
11,602
329,600
77,832
347
10,932
1,177
2,434
16,318
109,040
220,560
(257)
316,480
536,783
532,374
4,409
536,783
17,784
(536,783)
(518,999)
(B) OTHER ACQUISITIONS DURING THE PERIOD
Other acquisitions, none of which were individually significant to the consolidated entity, are listed in Note 31(A).
17,784
72,815
963
5,505
30,145
148,269
3,324
17,896
3,012
25,973
325,686
77,817
347
10,932
1,177
-
7,582
97,855
227,831
-
-
227,831
99
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
The purchase allocation of these acquisitions has not been finalised and provisional accounting has been applied. The assets and
liabilities acquired were:
Recognised
on acquisition
$'000
Acquiree's
carrying amounts
$'000
257
357
403
2,080
3,097
1,027
14
118
1,159
1,938
-
1,938
257
347
403
2,080
3,087
1,027
14
118
1,159
1,928
4,514
6,442
5,800
600
42
6,442
257
(5,842)
(5,585)
Value of net assets acquired
Cash and cash receivables
Receivables
Property, plant and equipment
Intangible assets
Total assets
Payables
Current tax liabilities
Provisions
Total liabilities
Value of identifiable net assets
Goodwill arising on acquisition
Total identifiable net assets and goodwill
Consideration
Purchase consideration - cash
Contingent consideration
Costs directly attributable to the acquisition
Total consideration
Net cash outflow on acquisition
Net cash acquired with subsidiary
Cash paid
Net cash outflow
100
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
33. Employee benefits
(A) NUMBER OF EMPLOYEES
As at 28 June 2009 the consolidated entity employed 8,979 full time employees (2008: 9,800) and 1,828 part-time and casual employees
(2008: 2,106). This includes 2,254 (2008: 2,353) full-time employees and 363 (2008: 488) part-time and casual employees in
New Zealand.
(B) EMPLOYEE SHARE PLANS
The Company had three employee share plans during the period. All three plans have been suspended pending review of the revised
tax treatment on employee share plans announced by the Federal Government in May 2009. Prior to suspension, the terms of each plan
were as set out below:
1. Fairfax Exempt Employee Share Plan
This plan is open to all permanent full-time and part-time Australian employees with more than twelve months service with the
consolidated entity in Australia. Under this Plan, participants may salary sacrifice up to $1,000 of pre tax salary per annum for purchase
of issued Fairfax shares at the market price on the open market of the ASX. The shares are purchased by an independent trustee
company on predetermined dates.
2. Fairfax Deferred Employee Share Plan
This plan is open to all permanent full-time and part-time Australian employees with more than twelve months service with the
consolidated entity in Australia. Under this Plan, participants may salary sacrifice a minimum of $3,000 and up to a maximum of 25%
of salary per annum for purchase of issued Fairfax shares at the market price on the open market of the ASX. The shares are
purchased by an independent trustee company on pre-fixed dates.
3. Long Term Incentive Scheme
2006 - 2007 Equity-based incentive schemes (EBIS)
Under the 2006-2007 EBIS, which applied for bonuses earned in the 2006 and 2007 financial years, one third of the annual bonus
earned by senior executives reporting to the CEO was deferred. The deferred amount was remitted to the trustee of the Employee
Share Plan to purchases shares on market and allocates the shares inside the Plan to the relevant executive. Each executive’s
allocated shares vest three years after the allocation date subject to ongoing employment requirements.
2008 and ongoing equity-based incentive scheme
The long term incentive plan is available to certain permanent full-time and part-time employees of the consolidated entity.
Under this plan, the cash value of a percentage of an eligible employee’s annual total fixed remuneration will be in the form of
rights to Fairfax shares, which are beneficially held in a trust. The shares will vest if the eligible employee remains in employment
three calendar years from the date the rights are allocated and certain performance hurdles are satisfied. If the allocation does not
vest at the end of year three, a re-test of the performance hurdles occurs in the fourth year. There are currently no cash
settlement alternatives. Dividends on the allocated shares during the vesting period are paid directly to the eligible employee and the
Company does not have any recourse to dividends paid.
101
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
34. Remuneration of auditors
During the financial year the following amounts were paid or payable for services provided by the auditor of the Company and its
related parties:
Audit services
Ernst & Young Australia
Audit and review of financial reports
Affiliates of Ernst & Young Australia
Audit and review of financial reports
Total audit services
Other assurance services
Ernst & Young Australia
Regulatory and contractually required audits
Other
Affiliates of Ernst & Young Australia
Regulatory and contractually required audits
Other
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
$
$
$
$
1,466,000
1,788,000
1,466,000
1,788,000
319,000
360,000
319,000
360,000
1,785,000
2,148,000
1,785,000
2,148,000
272,840
119,233
296,000
136,975
-
59,905
-
8,240
268,946
13,546
321,869
29,723
-
-
-
-
Total other assurance services
674,565
784,567
59,905
8,240
Total remuneration for assurance services
2,459,565
2,932,567
1,844,905
2,156,240
Non assurance services
Ernst & Young Australia
Other services
Affiliates of Ernst & Young Australia
Other services
Total non assurance services
Total remuneration of auditors
582
11,732
582
10,765
11,413
-
11,347
23,145
582
-
-
-
2,470,912
2,955,712
1,845,487
2,156,240
102
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
35. Director and executive disclosures
(A) EQUITY INSTRUMENT DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL
(i) Shareholdings
Directors
RJ Walker
RC Corbett
D Evans
JB Fairfax
N Fairfax
JM King
DE Kirk**
B McCarthy
R Savage
P Young
Key management personnel
G Hambly
J Matthews
J Withers**
S Narayan**
B Cassell*
Total
Balance
Net change
Balance Post year-end Post year-end
Post year-end
29 June 2008
Other
28 June 2009
acquisitions
disposals
balance
1,035,251
972,948
2,008,199
40,091
52,448
59,115
109,934
99,206
162,382
216,482,782
18,943,999
235,426,781
2,412,351
1,480,130
3,892,481
46,068
21,135
67,203
371,280
(371,280)
-
1,463,027
201,016
1,664,043
19,996
25,183
27,903
106,564
47,899
131,747
133,772
-
3,296
57,888
775,847
44,809
46,667
-
94,042
285,167
178,581
46,667
3,296
151,930
1,061,014
222,919,280
22,022,149
244,941,429
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
2,008,199
99,206
162,382
235,426,781
3,892,481
67,203
-
1,664,043
47,899
131,747
178,581
46,667
3,296
-
1,061,014
244,789,499
* B Cassell replaced S Narayan as Chief Financial Officer in May 2009.
** In the case of retired directors, the closing balance represents the number of shares at the date the director retired from the Board.
For KMP, the closing balance represents the number of shares at the date of resignation.
103
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Directors
RJ Walker
MD Burrows **
RC Corbett
D Evans
JB Fairfax
N Fairfax
JM King
DE Kirk
R Savage
P Young
Key management personnel
B McCarthy
G Hambly
J Matthews
J Withers
S Narayan
Total
Balance
Net change
Balance Post year-end Post year-end
Post year-end
1 July 2007
Other
29 June 2008
acquisitions
disposals
balance
1,014,300
20,951
1,035,251
28,297
45,712
29,540
13,801
8,943
10,551
38,647
54,655
40,091
52,448
216,501,147
(18,365)
216,482,782
1,210,113
1,202,238
2,412,351
47,252
324,405
-
12,367
(1,184)
46,875
19,996
12,816
46,068
371,280
19,996
25,183
1,484,934
(21,907)
1,463,027
115,569
18,203
133,772
-
3,296
22,981
-
-
34,907
-
3,296
57,888
-
3,989
3,547
3,103
3,989
3,325
-
3,324
-
-
-
-
-
-
220,825,417
1,372,671
222,198,088
49,574
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,063,548
54,655
44,080
55,995
216,485,885
2,416,340
49,393
371,280
23,320
25,183
1,463,027
133,772
-
3,296
57,888
222,247,662
** In the case of retired directors, the closing balance represents the number of shares at the date the director retired from the Board.
Stapled Preference Shares (SPS)
SPS held, acquired or disposed of in the financial year ended 28 June 2009 by directors or key management personnel have
been disclosed in the table above.
(B) RIGHTS OVER SHARE HOLDINGS OF DIRECTORS AND KEY MANAGEMENT PERSONNEL
Details of shares provided as remuneration is in section 5.2 of the remuneration report.
Opening Balance
Granted as
Net change Closing Balance
29 June 2008
remuneration
Other ***
28 June 2009
739,511
292,299
857,489
(1,403,326)
402,180
-
193,674
694,479
139,512
107,648
-
256,848
87,983
110,969
126,101
-
(36,409)
-
-
269,016
121,057
(486,340)
-
214,072
233,749
-
39,524
209,040
1,623,801
1,886,812
(1,926,075)
1,584,538
Directors
DE Kirk**
B McCarthy
Key management personnel
G Hambly
J Matthews
J Withers**
S Narayan**
B Cassell*
Total
104
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Directors
DE Kirk
Key management personnel
B McCarthy
G Hambly
J Matthews
J Withers
S Narayan
Total
Opening Balance
Granted as
Net change Closing Balance
1 July 2007
remuneration
Other ***
29 June 2008
116,297
623,214
-
292,299
109,438
15,999
-
120,613
80,651
91,649
-
195,518
-
-
(50,577)
-
(59,283)
739,511
292,299
139,512
107,648
-
256,848
362,347
1,283,331
(109,860)
1,535,818
* B Cassell replaced S Narayan as Chief Financial Officer in May 2009.
** The closing balance represents the number of shares at the date of departure following resignation. For KMP, closing balance represents
number of shares at the date of resignation.
*** Net change movements include forfeitures.
(C) LOANS TO KEY MANAGEMENT PERSONNEL
(i) Aggregates for key management personnel
There were no loans issued to directors of Fairfax Media Limited or to other key management personnel of the Group,
including their personally related parties, during the financial period ended 28 June 2009 (2008: nil).
(ii) Individuals with loans above $100,000 during the financial year
There are no outstanding loans above $100,000 for the financial years ended 28 June 2009 and 29 June 2008.
(D) OTHER TRANSACTIONS WITH KEY MANAGEMENT PERSONNEL
A number of directors of Fairfax Media Limited also hold directorships with other corporations which provide and receive
goods or services to and from the Fairfax Group in the ordinary course of business on normal terms and conditions. None of
these directors derive any direct personal benefit from the transactions between the Fairfax Group and these corporations.
Transactions were entered into during the financial year with the directors of Fairfax Media Limited and its controlled entities
or with director-related entities, which:
• occurred within a normal employee, customer or supplier relationship on terms and conditions no more favourable than
those which it is reasonable to expect would have been adopted if dealing with the director or director-related entity
at arm’s length in the same circumstances;
• do not have the potential to adversely affect decisions about the allocation of scarce resources or discharge the
responsibility of the directors; or
• are minor or domestic in nature.
During the year as part of the 3 for 5 rights issue, Fairfax Media Limited entered into an arms length transaction with ABN
Amro Group (now owned by the Royal Bank of Scotland) resulting in fees paid to ABN of $5.8 million. Peter Young was
a senior advisor of ABN Amro during this period.
During the prior year Fairfax Media Limited entered into arms length transactions with Lazard LLC resulting in fees paid to
Lazard for the 2008 year of $3.3 million. Mr Mark Burrows, who resigned as Fairfax Group Deputy Chairman on
31 January 2008, was Managing Director of Lazard LLC and Chairman of Lazard Australia at that date.
105
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
36. Related party transactions
(A) ULTIMATE PARENT
Fairfax Media Limited is the ultimate parent company.
(B) CONTROLLED ENTITIES
Interests in controlled entities are set out in Note 30.
(C) KEY MANAGEMENT PERSONNEL
Disclosures relating to key management personnel are set out in Note 35.
(D) TRANSACTIONS WITH RELATED PARTIES
The following transactions occurred with related parties on normal market terms and conditions:
Consolidated
28 June 2009
29 June 2008
Company
28 June 2009
29 June 2008
Sales to
Purchases
Amount owed
Amount owed
related
from related
by related
to related
parties
$'000
parties
$'000
parties
$'000
4,986
4,573
17,876
13,736
2,606
322
parties
$'000
458
239
-
-
-
20
-
-
-
-
Fairfax Media Limited has undertaken transactions with its controlled entities during the year including the issue and receipt of loans
and management fees. On consolidation, all such transactions have been eliminated in full.
106
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
37. Notes to the cash flow statements
Consolidated
Consolidated
Company
Company
28 June 2009
29 June 2008
28 June 2009
29 June 2008
Note
$'000
$'000
$'000
$'000
(A) RECONCILIATION OF NET (LOSS)/PROFIT AFTER INCOME TAX
EXPENSE TO NET CASH INFLOW FROM OPERATING ACTIVITIES
Net (loss)/profit for the financial year
Non-cash items
Depreciation and amortisation
3(B)
Impairment of property, plant and equipment, intangibles and investments
Amortisation of borrowing costs
Share of profits of associates and joint ventures
not received as dividends or distributions
Straight-line rent adjustment
Net loss/(gain) on disposal of property, plant and equipment
Net loss on disposal of investments
Net gain on disposal of other assets
Fair value adjustment to derivatives
Gain on repurchase of medium term notes
Net foreign currency loss/(gain)
Share based payment expense
Non-cash superannuation expense
Changes in operating assets and liabilities,
net of effects from acquisitions
Decrease/(increase) in trade receivables
Decrease/(increase) in other receivables
Decrease in inventories
Decrease in other assets
(Decrease)/increase in payables
Increase/(decrease) in provisions
(Decrease)/increase in tax balances
(381,088)
387,490
(245,175)
59,186
117,556
569,091
3,917
108,295
1,382
3,508
7,363
214,000
-
-
-
6
-
-
-
-
-
5,533
9,514
-
-
-
-
42
-
-
-
-
-
2,237
-
4,429
-
(14)
2,446
-
-
(978)
(485)
(17,272)
785
1,279
-
-
1,264
1,259
(53,391)
(27)
5,080
(2,430)
(1,400)
(1,115)
-
(5,410)
4,429
1,461
377
(18,455)
3,785
6,286
(40,900)
(34,023)
1,913
1,325
1,658
264
5,224
-
(1,071)
(5,167)
3,173
2,237
982
84,261
16,396
1,643
2,307
(3,073)
5,451
(40,189)
Net cash inflow/(outflow) from operating activities
384,897
420,246
(32,339)
24,367
(B) RECONCILIATION OF CASH AND CASH EQUIVALENTS
Reconciliation of cash at end of the financial year (as shown in the Statement of Cash Flows) to the related items in the financial
statements is as follows:
Cash on hand and at bank
Total cash at end of the financial year
69,124
69,124
93,864
93,864
1,680
1,680
680
680
(C) NON-CASH INVESTING AND FINANCING ACTIVITIES
Dividends satisfied by the issue of shares under the dividend reinvestment plan are shown in Note 23(A).
107
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
38. Financial and capital risk management
Financial risk management
The Group's principal financial instruments, other than derivatives, comprise cash, short term deposits, bills of exchange, bank loans
and capital markets issues. The main purpose of these financial instruments is to manage liquidity and to raise finance for the Group's
operations. The Group has various other financial instruments, such as trade and other receivables and trade and other payables,
which arise directly from its operations.
The Group uses derivatives in accordance with Board approved policies to reduce the Group's exposure to fluctuations in interest
rates and foreign exchange rates. These derivatives create an obligation or right that effectively transfers one or more of the risks
associated with an underlying financial instrument, asset or obligation. Derivative instruments that the Group uses to hedge risks such
as interest rate and foreign currency movements include:
•
•
•
•
•
cross currency swaps;
interest rate swaps;
forward foreign currency contracts;
forward rate agreements; and
interest rate option contracts.
The Group's risk management activities for interest rate and foreign exchange exposures are carried out centrally by Fairfax Media
Group Treasury department. The Group Treasury department operates under policies as approved by the Board. The Group Treasury
department operates in co-operation with the Group's operating units so as to maximise the benefits associated with centralised
management of Group risk factors.
Capital risk management
The Group manages its capital to ensure that entities in the Group will be able to continue as going concerns while maximising the
return to shareholders through the optimisation of net debt and total equity balances.
The capital structure of Group entities is monitored using net debt to EBITDA (earnings before interest, tax, depreciation and
amortisation) ratio. The ratio is calculated as net debt divided by underlying EBITDA. Net debt is calculated as total interest bearing
liabilities less cash and cash equivalents. Where interest bearing liabilities are denominated in a currency other than the Australian dollar
functional currency, and the liability is hedged into an Australian dollar obligation, the liability is measured for financial covenant purposes
as the hedged Australian dollar amount.
In order to maintain or adjust the capital structure, the Group may adjust the amount of dividends paid to shareholders, return equity
to shareholders, issue new shares or sell assets to reduce debt. The Group continuously reviews the capital structure to ensure:
•
•
•
sufficient finance for the business is maintained at a reasonable cost;
sufficient funds are available for the business to implement its capital expenditure and business acquisition strategies;
distributions to shareholders are maintained at a payout ratio of approximately 20% of net profit; and
• where excess funds arise with respect to the funds required to enact the Group's business strategies, consideration is given to
possible returns of equity to shareholders.
The Group's financial strategy is to maintain the net debt to underlying EBITDA ratio around 3.0 times (2008: 3.0 to 3.5 times) and
maintain an investment grade credit rating. In May 2009, the Group's S&P credit rating was reduced from BBB- to BB+. Notwithstanding
this restatement, the Group's target credit rating remains investment grade.
108
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
The net debt to EBITDA ratio for the Group at 28 June 2009 and 29 June 2008 is as follows:
Net debt for financial covenant purposes
EBITDA *
Net debt to EBITDA ratio
Note
21
Consolidated
Consolidated
2009
$'000
2008
$'000
1,782,348
610,226
2,516,251
840,573
2.9
3.0
* For the purposes of the debt to EBITDA ratio, underlying EBITDA is adjusted for specific items of a non-recurring nature and excludes
any unrealised profit or (loss) arising from mark to market revaluations of financial instruments. In respect of the first 12 month
period after the acquisition of any acquired business, EBITDA will include acquired EBITDA in respect of the acquired business for
any period not covered in the consolidated EBITDA of the Group.
Risk factors
The key financial risk factors that arise from the Group's activities, including the Group's policies for managing these risks are
outlined below.
Market risk is the risk that the fair value or future cash flows of the Group's financial instruments will fluctuate because of changes
in market prices. The market risk factors to which the Group is exposed to are discussed in further detail below.
(A) INTEREST RATE RISK
Interest rate risk refers to the risks that the value of a financial instrument or future cash flows associated with the instrument will
fluctuate due to movements in market interest rates.
Interest rate risk arises from interest bearing financial assets and liabilities that the Group utilises. Non-derivative interest bearing assets
are predominantly short term liquid assets. Long term debt issued at fixed rates exposes the Group to fair value interest rate risk.
The Group's borrowings which have a variable interest rate attached give rise to cash flow interest rate risk.
The Group's risk management policy for interest rate risk seeks to reduce the effects of interest rate movements on its asset and
liability portfolio through management of the exposures.
The Group maintains a mix of foreign and local currency fixed rate and variable rate debt, as well as a mix of long term debt versus
short term debt. The Group primarily enters into interest rate swap, interest rate option and cross currency swap agreements to manage
these risks. The Group designates which of its financial assets and financial liabilities are exposed to a fair value or cash flow interest
rate risk, such as financial assets and liabilities with a fixed interest rate or financial assets and financial liabilities with a floating interest
rate that is reset as market rates change.
The Group hedges the currency risk on all foreign currency borrowings by entering into cross currency swaps, which have the
economic effect of converting foreign currency borrowings to local currency borrowings. Over the counter derivative contracts are
carried at fair value, which are estimated using valuation techniques based wherever possible on assumptions supported by observable
market prices or rates prevailing at the balance sheet date. For other financial instruments for which quoted prices in an active market
are available, fair value is determined directly from those quoted market prices.
Refer to Note 16 for further details of the Group's derivative financial instruments and details of hedging activities.
109
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
At balance date, the Group had the following mix of financial assets and financial liabilities exposed to interest rate risks:
Floating
rate
$'000
69,124
-
-
13,216
-
47,873
130,213
Fixed
rate
$'000
-
-
-
-
-
104,869
104,869
Non-
interest
bearing
$'000
Total
$'000
-
69,124
346,946
346,946
2,157
-
1,175
-
350,278
2,157
13,216
1,175
152,742
585,360
-
-
300,479
300,479
301,171
30,976
-
-
25,338
20,389
607,395
607,537
167,481
-
-
147,978
357,485
18,125
1,550,780
55,612
-
-
-
-
-
-
-
-
321,560
638,371
607,537
167,481
25,338
147,978
1,908,265
73,737
375,610
1,606,392
300,479
2,282,481
Consolidated
As at 28 June 2009
Financial assets
Cash and cash equivalents
Trade and other receivables
Available for sale investments
Held to maturity investments
Other financial assets
Derivatives
Total financial assets
Financial liabilities
Payables
Interest bearing liabilities:
Bank borrowings and loans
Senior notes
Eurobonds
Medium term notes
Finance lease liability
Redeemable preference shares (RPS)
Total interest bearing liabilities
Derivatives
Total financial liabilities
110
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Consolidated
As at 29 June 2008
Financial assets
Cash and cash equivalents
Trade and other receivables
Available for sale investments
Held to maturity investments
Other financial assets
Derivatives
Total financial assets
Financial liabilities
Payables
Interest bearing liabilities:
Bank borrowings and loans
Senior notes
Eurobonds
Medium term notes
Finance lease liability
Redeemable preference shares (RPS)
Total interest bearing liabilities
Derivatives
Total financial liabilities
Company
As at 28 June 2009
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial liabilities
Payables
Total financial liabilities
Floating
rate
$'000
93,864
-
-
14,686
-
21,544
130,094
Fixed
rate
$'000
-
-
-
-
-
37,860
37,860
Non-
interest
bearing
$'000
Total
$'000
-
93,864
482,355
482,355
3,547
-
122
-
3,547
14,686
122
59,404
486,024
653,978
-
-
330,045
330,045
1,022,527
26,729
-
-
28,530
24,884
492,947
570,249
199,682
-
-
146,401
1,077,786
94,390
1,434,163
19,737
-
-
-
-
-
-
-
-
1,047,411
519,676
570,249
199,682
28,530
146,401
2,511,949
114,127
1,172,176
1,453,900
330,045
2,956,121
Floating
rate
$'000
1,680
-
1,680
-
-
Fixed
rate
$'000
Non-
interest
bearing
$'000
Total
$'000
-
398,566
-
1,651,577
1,680
2,050,143
398,566
1,651,577
2,051,823
-
-
14,946
14,946
14,946
14,946
111
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
Company
As at 29 June 2008
Financial assets
Cash and cash equivalents
Trade and other receivables
Total financial assets
Financial liabilities
Payables
Total financial liabilities
Sensitivity analysis
Floating
rate
$'000
Fixed
rate
$'000
Non-
interest
bearing
$'000
Total
$'000
680
-
680
-
-
-
398,566
-
1,274,487
680
1,673,053
398,566
1,274,487
1,673,733
-
-
15,900
15,900
15,900
15,900
The table below shows the effect on net profit and equity after income tax if interest rates at balance date had been 30% higher or
lower with all other variables held constant, taking into account all underlying exposures and related hedges. Concurrent movements
in interest rates and parallel shifts in the yield curves are assumed.
A sensitivity of 30% (2008: 10%) has been selected as this is considered reasonable given the current level of both short term and long
term Australian interest rates. A 30% sensitivity would move short term interest rates at 28 June 2009 from around 3.24% to 4.21%
representing a 97 basis point shift (2008: 78 basis point shift).
In 2009, 86% (2008: 92%) of the Group's debt, taking into account all underlying exposures and related hedges was denominated in
Australian Dollars; therefore, only the movement in Australian interest rates is used in this sensitivity analysis.
Based on the sensitivity analysis, if interest rates were 30% higher, net profit would be impacted by the interest expense being higher
on the Group's net floating rate Australian Dollar positions during the year.
Consolidated
If interest rates were 30% higher with all other variables
(6,397)
(12,455)
1,554
(1,761)
held constant - increase/(decrease)
If interest rates were 30% lower with all other variables
6,397
12,455
(1,307)
1,761
held constant - increase/(decrease)
Impact on post-tax profit
Impact on equity
2009
$'000
2008
$'000
2009
$'000
2008
$'000
112
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(B) FOREIGN CURRENCY RISK
Foreign currency risk refers to the risk that the value or the cash flows arising from a financial commitment, or recognised asset or
liability will fluctuate due to changes in foreign currency rates. The Group's foreign currency exchange risk arises primarily from:
•
•
borrowings denominated in foreign currency; and
firm commitments and/or highly probable forecast transactions for receipts and payments settled in foreign currencies and prices
dependent on foreign currencies respectively.
The Group is exposed to foreign exchange risk from various currency exposures, primarily with respect to:
• United States Dollars;
• New Zealand Dollars;
• Euro;
• British Pounds Sterling;
• Swiss Francs;
• Singapore Dollars; and
• Malaysian Ringgit.
Forward foreign exchange contracts are used to hedge the Group's known non-debt related foreign currency risks. These contracts
generally have maturities of less than twelve months after the balance sheet date and consequently the net fair value of the gains and
losses on these contracts will be transferred from the cash flow hedging reserve to the income statement at various dates during this
period when the underlying exposure impacts earnings. The derivative contracts are carried at fair value, being the market value as
quoted in an active market.
The Group's risk management policy for foreign exchange is to only hedge known or highly probable future transactions. The policy
only permits hedging of the Group's underlying foreign exchange exposures.
Benefits or costs arising from currency hedges for revenue and expense transactions that are designated and documented in a hedge
relationship are brought to account in the income statement over the lives of the hedge transactions depending on the effectiveness
testing outcomes and when the underlying exposure impacts earnings. For transactions entered into that hedge specific capital or
borrowing commitments, any cost or benefit resulting from the hedge forms part of the initial asset or liability carrying value.
When entered into, the Group formally designates and documents the financial instrument as a hedge of the underlying exposure, as
well as the risk management objectives and strategies for undertaking the hedge transactions. The Group formally assesses both at
the inception and at least semi-annually thereafter, whether the financial instruments that are used in hedging transactions are effective at
offsetting changes in either the fair value or cash flows of the related underlying exposure. Because of the high degree of effectiveness
between the hedging instrument and the underlying exposure being hedged, fluctuations in the value of the derivative instruments are
generally offset by changes in the fair values or cash flows of the underlying exposures being hedged. Any ineffective portion of a
financial instrument's change in fair value is immediately recognised in the income statement and this is mainly attributable to financial
instruments in a fair value hedge relationship. Derivatives entered into and not documented in a hedge relationship are revalued with
the changes in fair value recognised in the income statement. All of the Group's derivatives are straight forward over-the-counter
instruments with liquid markets.
Refer to Note 16 for further details of the Group's derivative financial instruments and details of hedging activities.
Sensitivity analysis
The tables below show the effect on net profit and equity after income tax as at balance date from a 10% weaker/stronger base
currency movement in exchange rates at that date on a total derivative portfolio with all other variables held constant.
A sensitivity of 10% has been selected as this is considered reasonable given the current level of exchange rates and the volatility
observed both on a historical basis and market expectations for potential future movement. The Group's foreign currency risk from the
Group's long term borrowings denominated in foreign currencies has no significant impact on profit from foreign currency movements
as they are effectively hedged.
113
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(a) AUD / NZD
Comparing the Australian Dollar exchange rate against the New Zealand Dollar, a 10% weaker Australian Dollar would result in an
exchange rate of 1.1244 and a 10% stronger Australian Dollar in an exchange rate of 1.3742 based on the year end rate of 1.2493.
This range is considered reasonable given over the last five years, the Australian Dollar exchange rate against the New Zealand Dollar
has traded in the range of 1.0421 to 1.2692.
Impact on post-tax profit
(hedging reserves) *
Impact on equity
2009
$'000
2008
$'000
2009
$'000
2008
$'000
Consolidated
If the AUD exchange rate was 10% weaker against the NZD with all other
5,457
368
(21,838)
(26,392)
variables held constant - increase/(decrease)
If the AUD exchange rate was 10% stronger against the NZD with all other
(2,460)
81
20,496
21,797
variables held constant - increase/(decrease)
* Hedging reserves includes both the cash flow hedge reserve and net investment hedge reserve
(b) AUD / USD
Comparing the Australian Dollar exchange rate against the United States Dollar, a 10% weaker Australian Dollar would result in an
exchange rate of 0.7261 and a 10% stronger Australian Dollar in an exchange rate of 0.8875 based on the year end rate of 0.8068.
This range is considered reasonable given over the last five years, the Australian Dollar exchange rate against the United States Dollar
has traded in the range of 0.6021 to 0.9788.
Impact on equity
Impact on post-tax profit
(cash flow hedge reserve)
2009
$'000
2008
$'000
2009
$'000
2008
$'000
Consolidated
If the AUD exchange rate was 10% weaker against the USD with all other
(499)
116
2,710
1,836
variables held constant - increase/(decrease)
If the AUD exchange rate was 10% stronger against the USD with all other
322
(95)
(2,224)
(1,509)
variables held constant - increase/(decrease)
(c) AUD / EUR
Comparing the Australian Dollar exchange rate against the Euro, a 10% weaker Australian Dollar would result in an exchange rate
of 0.5164 and a 10% stronger Australian Dollar in an exchange rate of 0.6312 based on the year end rate of 0.5738. This range is
considered reasonable given over the last five years, the Australian Dollar exchange rate against the Euro has traded in the range of
0.4796 to 0.6460.
Consolidated
Impact on equity
Impact on post-tax profit
(cash flow hedge reserve)
2009
$'000
2008
$'000
2009
$'000
2008
$'000
If the AUD exchange rate was 10% weaker against the Euro with all other
-
-
2,304
(787)
variables held constant - increase/(decrease)
If the AUD exchange rate was 10% stronger against the Euro with all other
(2,200)
(53)
(72)
643
variables held constant - increase/(decrease)
114
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(d) NZD / EUR
Comparing the New Zealand Dollar exchange rate against the Euro, a 10% weaker New Zealand Dollar would result in an exchange rate
of 0.4136 and a 10% stronger New Zealand Dollar in an exchange rate of 0.5056 based on the year end rate of 0.4596. This range is
considered reasonable given over the last five years, the New Zealand Dollar exchange rate against the Euro has traded in the range of
0.3911 to 0.6127.
Impact on equity
Impact on post-tax profit
(cash flow hedge reserve)
2009
$'000
2008
$'000
2009
$'000
2008
$'000
-
-
-
-
330
923
(268)
(753)
Consolidated
If the NZD exchange rate was 10% weaker against the Euro with all other
variables held constant - increase/(decrease)
If the NZD exchange rate was 10% stronger against the Euro with all other
variables held constant - increase/(decrease)
*
Amounts disclosed in Australian Dollar terms
The Company is not exposed to any foreign currency risks on borrowings.
(C) CREDIT RISK
Credit risk is the risk that a contracting entity will not complete its obligations under a financial instrument and cause the Group to make
a financial loss. The Group has exposure to credit risk on all financial assets included in the Group's balance sheet. To help manage
this risk, the Group:
•
has a policy for establishing credit limits for the entities it deals with;
• may require collateral where appropriate; and
• manages exposures to individual entities it either transacts with or enters into derivative contracts with (through a system of
credit limits).
The Group is exposed to credit risk on financial instruments and derivatives. For credit purposes, there is only a credit risk where the
contracting entity is liable to pay the Group in the event of a closeout. The Group has policies that limit the amount of credit exposure to
any financial institution. Derivative counterparties and cash transactions are limited to financial institutions that meet minimum credit
rating criteria in accordance with the Group's policy requirements. At 28 June 2009 counterparty credit risk was limited to financial
institutions with credit ratings ranging from A- to AA.
The Group's credit risk is mainly concentrated across a number of customers and financial institutions. The Group does not have any
significant credit risk exposure to a single or group of customers or individual institutions.
Financial assets are considered impaired where there is objective evidence that the Group will not be able to collect all amounts due
according to the original trade and other receivable terms. Factors considered when determining if an impairment exists include ageing
and timing of expected receipts and the credit worthiness of counterparties. A provision for doubtful debts is created for the difference
between the assets carrying value and the present value of estimated future cash flows. The Group's trading terms do not generally
include the requirement for customers to provide collateral as security for financial assets.
Refer to Note 7 for an ageing analysis of trade receivables and the movement in the provision for doubtful debts. All other financial
assets are not impaired and are not past due. Based on the credit history of these classes, it is expected that these amounts will be
received when due.
115
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(D) LIQUIDITY RISK
Liquidity risk is the risk that the Group cannot meet its financial commitments as and when they fall due.
To help reduce this risk the Group:
•
•
•
has a liquidity policy which targets a minimum level of committed facilities and cash relative to EBITDA;
has readily accessible funding arrangements in place; and
staggers maturities of financial instruments.
The contractual maturity of the Group's fixed and floating rate derivatives, other financial assets and other financial liabilities are shown
in the tables below. The amounts represent the future undiscounted principal and interest cash flows and therefore may not equate
to the values disclosed in the balance sheet.
As at 28 June 2009
Financial liabilities*
Payables
Bank borrowings and loans
Notes and bonds
Finance lease liability
Consolidated
Company
(Nominal cash flows)
(Nominal cash flows)
1 year
or less
$'000
1 to 2
years
$'000
2 to 5
years
$'000
More than
5 years
$'000
1 year
or less
$'000
1 to 2
years
$'000
(300,479)
-
-
-
(14,946)
(24,392)
(257,850)
(35,953)
(15,533)
(84,834)
(314,721)
(749,522)
(598,378)
(8,126)
(8,441)
(27,424)
(12,467)
Redeemable Preference Shares (RPS)
(153,223)
-
-
-
Derivatives - inflows*
Cross currency swaps - foreign leg (fixed)**
218,533
127,283
793,481
504,759
Cross currency swaps - foreign leg (variable)**
Forward foreign currency contracts**
Derivatives - outflows*
363
7,743
363
-
1,088
31,349
-
-
Cross currency swaps - AUD leg (fixed)**
(206,303)
(24,110)
(241,933)
(154,622)
Cross currency swaps - AUD leg (variable)**
(23,942)
(94,843)
(392,234)
(185,472)
Cross currency swaps - NZD leg (variable)**
(9,352)
(9,352)
(93,533)
(188,987)
Interest rate swaps ***
(16,846)
(16,846)
(25,284)
(6,328)
Forward foreign currency contracts**
(7,880)
-
-
-
116
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
As at 29 June 2008
Financial liabilities*
Payables
Bank borrowings and loans
Notes and bonds
Finance lease liability
Redeemable Preference Shares (RPS)
Derivatives - inflows*
Consolidated
Company
(Nominal cash flows)
(Nominal cash flows)
1 year
or less
$'000
1 to 2
years
$'000
2 to 5
years
$'000
More than
5 years
$'000
1 year
or less
$'000
1 to 2
years
$'000
(330,045)
-
-
-
(15,900)
(101,272)
(513,356)
(640,431)
(27,178)
(72,787)
(72,787)
(972,424)
(512,577)
(7,847)
(9,210)
(8,144)
(26,397)
(22,023)
(156,630)
-
-
Cross currency swaps - foreign leg (fixed)**
67,392
214,812
764,822
485,651
Cross currency swaps - foreign leg (variable)**
Forward foreign currency contracts**
Derivatives - outflows*
875
139,721
875
-
2,624
26,927
-
-
Cross currency swaps - AUD leg (fixed)**
(32,703)
(205,950)
(256,549)
(154,866)
Cross currency swaps - AUD leg (variable)**
Cross currency swaps - NZD leg (variable)**
Forward foreign currency contracts**
(51,758)
(22,632)
(137,044)
(51,758)
(522,428)
(194,354)
(22,632)
(67,897)
(293,491)
-
-
-
* For floating rate instruments, the amount disclosed is determined by reference to the interest rate at the last repricing date.
** Contractual amounts to be exchanged representing gross cash flows to be exchanged.
*** Net amount for interest rate swaps for which net cash flows are exchanged.
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
117
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(E) FAIR VALUE
The carrying amounts and fair values of financial assets and financial liabilities at balance date are:
Consolidated
Financial assets
Cash and cash equivalents
Receivables
Derivative assets
Available for sale investments
Held to maturity investments
Other financial assets
Financial liabilities
Payables
Interest bearing liabilities
- bank borrowings
- Eurobonds
- senior notes
- medium term notes
- lease liability
- Redeemable Preference Shares (RPS)
Derivative liabilities
Company
Financial assets
Cash and cash equivalents
Receivables
Financial liabilities
Payables
Carrying value
Fair value Carrying value
Fair value
2009
$'000
2009
$'000
2008
$'000
2008
$'000
69,124
346,932
152,915
2,157
13,216
1,175
69,124
346,932
152,915
2,157
13,216
1,175
93,864
93,864
482,355
482,355
62,936
3,547
14,686
122
62,936
3,547
14,686
122
585,519
585,519
657,510
657,510
300,479
300,479
330,045
330,045
321,560
607,537
638,371
167,481
25,338
147,978
74,487
321,558
1,047,411
1,047,411
609,741
640,583
167,700
36,187
149,123
74,487
570,249
519,676
199,682
28,530
146,401
122,257
573,296
522,280
200,000
38,897
148,623
122,257
2,283,231
2,299,858
2,964,251
2,982,809
1,680
2,050,143
1,680
2,050,143
680
1,673,053
680
1,673,053
2,051,823
2,051,823
1,673,733
1,673,733
14,946
14,946
14,946
14,946
15,900
15,900
15,900
15,900
Market values have been used to determine the fair value of listed available for sale investments.
The fair value of the senior notes and lease liabilities have been calculated by discounting the future cash flows by interest rates for
liabilities with similar risk profiles. The discount rates applied range from 2.66% to 13.38% (2008: 5.75% to 13.38%).
The carrying value of all other balances approximate their fair value.
118
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
39. Segment reporting
Business segments
The consolidated entity is organised into three business segments, publishing & printing, digital and broadcasting. The publishing
and printing segment comprises newspaper, magazine and general publishing and printing. Revenues are generated from
circulation sales, printing and the sale of advertising in those publications. The digital segment incorporates the Group's online
news sites and transactional businesses. Broadcasting comprises radio stations and licences and television production.
Geographical segments
The consolidated entity operates predominantly in two geographic segments, Australia and New Zealand.
(A) PRIMARY REPORTING FORMAT - BUSINESS SEGMENT
(i) Results
28 June 2009
Sales to external customers
Intersegment sales
Total revenue
Intersegment elimination
Other revenue
Total segment revenue
Printing &
Publishing
Digital
Broadcasting
$'000
$'000
$'000
Other
$'000
Consolidated
entity
$'000
2,239,267
187,785
171,821
1,052
2,599,925
-
347
-
-
347
2,239,267
188,132
171,821
1,052
2,600,272
9,597
(347)
9,597
2,239,267
188,132
171,821
10,649
2,609,522
Segment profit/(loss) from operations before income tax expense
Unallocated revenue less unallocated expenses
Net (loss)/profit from operations before income tax expense
Income tax expense
Net (loss)/profit after income tax expense
(133,395)
77,123
(42,636)
(77,647)
(174,861)
(176,555)
(174,861)
(252,508)
(351,416)
(29,672)
(29,672)
(282,180)
(381,088)
29 June 2008
Sales to external customers
Intersegment sales
Total revenue
Intersegment elimination
Other revenue
Total segment revenue
Printing &
Publishing
Digital
Broadcasting
$'000
$'000
$'000
Other
$'000
Consolidated
entity
$'000
2,555,847
169,856
185,528
-
-
-
-
-
2,911,231
-
2,555,847
169,856
185,528
-
2,911,231
22,776
-
22,776
2,555,847
169,856
185,528
22,776
2,934,007
Segment profit/(loss) from operations before income tax expense
Unallocated revenue less unallocated expenses
Net profit from operations before income tax expense
Income tax expense
Net profit after income tax expense
632,346
81,704
33,426
(37,428)
(186,875)
710,048
(186,875)
(224,303)
523,173
(135,683)
(135,683)
(359,986)
387,490
119
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(ii) Assets and liabilities
28 June 2009
Assets
Segment assets
Unallocated assets
Total assets
Liabilities
Segment liabilities
Unallocated liabilities
Total liabilities
Net assets
29 June 2008
Assets
Segment assets
Unallocated assets
Total assets
Liabilities
Segment liabilities
Unallocated liabilities
Total liabilities
Net assets
(iii) Other detailed segment disclosures
Printing &
Publishing
Digital
Broadcasting
$'000
$'000
$'000
Other
$'000
Consolidated
entity
$'000
5,996,018
807,486
347,029
293,774
331,003
37,568
23,871
163,662
7,444,307
150,900
7,595,207
556,104
2,027,313
2,583,417
5,011,790
Printing &
Publishing
Digital
Broadcasting
$'000
$'000
$'000
Other
$'000
Consolidated
entity
$'000
6,562,522
769,799
656,484
175,713
299,797
31,691
94,294
235,649
8,164,518
128,583
8,293,101
661,431
2,666,336
3,327,767
4,965,334
Printing &
Publishing
Digital
Broadcasting
$'000
$'000
$'000
Other
$'000
Consolidated
entity
$'000
28 June 2009
Equity method investments included in segment assets
26,882
12,423
433
6,930
46,668
Acquisition of property, plant and equipment, intangible assets
and other non-current assets
Depreciation and amortisation
Impairment of property, plant and equipment, intangibles
and investments
Other non-cash expenses
29 June 2008
81,508
98,774
21,652
13,909
4,232
3,099
24,096
1,774
131,488
117,556
463,984
154,214
-
9,494
71,589
4,422
33,518
18,564
569,091
186,694
Equity method investments included in segment assets
27,650
977
9,686
7,377
45,690
Acquisition of property, plant and equipment, intangible assets
and other non-current assets
Depreciation and amortisation
Impairment of property, plant and equipment, intangibles
and investments
Other non-cash expenses
120
92,277
91,901
-
80,197
19,281
9,769
-
5,762
1,959
3,965
-
2,204
36,531
2,660
150,048
108,295
1,382
21,102
1,382
109,265
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(B) SECONDARY REPORTING FORMAT - GEOGRAPHICAL SEGMENT
(i) Results
28 June 2009
Segment revenue
Total revenue
Other unallocated revenue
Total segment revenue
Segment profit/(loss) from operations before income tax expense
Unallocated revenue less unallocated expenses
Net (loss)/profit from operations before income tax expense
Income tax expense
Net (loss)/profit after income tax expense
29 June 2008
Segment revenue
Total revenue
Other unallocated revenue
Total segment revenue
Segment profit from operations before income tax expense
Unallocated revenue less unallocated expenses
Net profit from operations before income tax expense
Income tax expense
Net profit after income tax expense
Australia
New Zealand
$'000
$'000
Consolidated
entity
$'000
2,103,386
2,103,386
-
496,539
2,599,925
496,539
-
2,599,925
9,597
2,103,386
496,539
2,609,522
(251,810)
-
70,088
-
(176,555)
(174,861)
(251,810)
70,088
(351,416)
-
-
(29,672)
(251,810)
70,088
(381,088)
Consolidated
Australia
New Zealand
$'000
$'000
entity
$'000
2,322,100
2,322,100
-
586,863
2,908,963
586,863
-
2,908,963
25,044
2,322,100
586,863
2,934,007
498,738
-
211,310
-
710,048
(186,875)
498,738
211,310
523,173
-
-
(135,683)
498,738
211,310
387,490
121
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
(ii) Assets and liabilities
28 June 2009
Assets
Segment assets
Unallocated assets
Total assets
Liabilities
Segment liabilities
Unallocated liabilities
Total liabilities
Net assets
29 June 2008
Assets
Segment assets
Unallocated assets
Total assets
Liabilities
Segment liabilities
Unallocated liabilities
Total liabilities
Net assets
Consolidated
Australia
New Zealand
$'000
$'000
entity
$'000
5,828,863
1,615,444
474,227
81,876
7,444,307
150,900
7,595,207
556,103
2,027,314
2,583,417
5,011,790
Consolidated
Australia
New Zealand
$'000
$'000
entity
$'000
6,489,637
1,674,903
550,518
110,913
8,164,540
128,561
8,293,101
661,431
2,666,336
3,327,767
4,965,334
(iii) Other detailed segment disclosures
Australia
New Zealand
Australia
New Zealand
28 June 2009
28 June 2009
29 June 2008
29 June 2008
$'000
$'000
$'000
$'000
Equity method investments included in segment assets
44,933
1,735
43,926
1,764
Acquisition of property, plant and equipment, intangible assets and other
non-current assets
Depreciation and amortisation
Impairment of property, plant and equipment, intangibles and investments
Other non-cash expenses
96,778
101,762
504,720
165,337
34,710
15,794
64,371
21,357
115,508
94,131
1,382
95,963
34,540
14,164
-
13,302
122
Notes to the Financial Statements
Fairfax Media Limited and Controlled Entities for the period ended 28 June, 2009
40. Events subsequent to balance sheet date
No significant events subsequent to the balance sheet date have occurred.
123
Directors’ Declaration
In accordance with a resolution of the directors of Fairfax Media Limited, we state that:
1.
In the opinion of the directors:
a)
the financial report and the additional disclosures included in the Directors' Report designated as audited, of the
Company and of the consolidated entity are in accordance with the Corporations Act 2001, including:
I.
giving a true and fair view of the Company's and consolidated entity's financial position as at 28 June 2009 and
of their performance for the period ended on that date; and
II.
complying with Accounting Standards and Corporations Regulations 2001; and
b)
there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become
due and payable.
2. This declaration has been made after receiving the declaration required to be made to the directors in accordance with
section 295A of the Corporations Act 2001 for financial period ended 28 June 2009.
3.
In the opinion of the directors, as at the date of this declaration, there are reasonable grounds to believe that the
members of the closed group identified in Note 30 will be able to meet any obligations or liabilities to which they are or
may become subject to, by virtue of the Deed of Cross Guarantee.
On behalf of the Board
Ronald Walker
Chairman
Brian McCarthy
Chief Executive Officer and Director
1 September 2009
124
Independent Auditor’s Report to the Members of
Fairfax Media Limited
125
Independent Auditor’s Report to the Members of
Fairfax Media Limited
126
Shareholder Information
Fairfax Media Limited
TWENTY LARGEST HOLDERS OF SECURITIES AT 28 AUGUST 2009
ORDINARY SHARES (FXJ)
National Nominees Limited
J P Morgan Nominees Australia Limited
HSBC Custody Nominees (Australia) Limited
Marinya Media Pty Ltd
Cogent Nominees Pty Limited
Citicorp Nominees Pty Limited
ANZ Nominees Limited
Australian Reward Investment Alliance
Citicorp Nominees Pty Limited
Tasman Asset Management Ltd
HSBC Custody Nominees (Australia) Limited - GSCO ECA
UBS Nominees Pty Ltd
RBC Dexia Investor Services Australia Nominees Pty Limited
Citicorp Nominees Pty Limited
AMP Life Limited
Citicorp Nominees Pty Limited
J P Morgan Nominees Australia Limited
Argo Investments Limited
Queensland Investment Corporation
Citicorp Nominees Pty Limited
STAPLED PREFERENCE SECURITIES (SPS) (FXJPB)
J P Morgan Nominees Australia Limited
National Nominees Limited
Cogent Nominees Pty Limited
Goldman Sachs JB Were Pty Ltd
ANZ Nominees Limited
Citicorp Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited - A/C 3
Avanteos Investments Limited
RBC Dexia Investor Services Australia Nominees Pty Limited
UBS Nominees Pty Ltd
Questor Financial Services Limited
HSBC Custody Nominees (Australia) Limited
Buttonwood Nominees Pty Ltd
Cogent Nominees Pty Limited
Citicorp Nominees Pty Limited
M F Custodians Ltd
Equity Trustees Limited
Brispot Nominees Pty Ltd
Sandhurst Trustees Ltd
ANZ Trustees Limited
DEBENTURES
National Financial Services Corp.
Number of
securities
439,394,282
313,411,755
238,394,592
227,650,358
84,643,634
76,088,278
45,949,578
41,687,479
28,845,932
28,596,184
25,509,005
24,555,088
24,317,763
23,875,574
21,873,798
20,589,532
16,551,345
15,779,138
15,440,355
14,359,323
1,727,512,993
451,267
313,981
212,076
150,000
145,056
133,095
100,000
79,411
61,458
60,816
52,356
43,705
37,664
33,600
30,279
28,826
25,750
25,640
22,295
20,000
2,027,275
%
18.68%
13.33%
10.14%
9.68%
3.60%
3.24%
1.95%
1.77%
1.23%
1.22%
1.08%
1.04%
1.03%
1.02%
0.93%
0.88%
0.70%
0.67%
0.66%
0.61%
73.46%
15.04%
10.47%
7.07%
5.00%
4.84%
4.44%
3.33%
2.65%
2.05%
2.03%
1.75%
1.46%
1.26%
1.12%
1.01%
0.96%
0.86%
0.85%
0.74%
0.67%
67.60%
281
100
127
Shareholder Information
Fairfax Media Limited
OPTIONS
There were no options exercisable at the end of the financial year.
SUBSTANTIAL SHAREHOLDERS
Substantial shareholders as shown in substantial shareholder notices received by the company as at 28 August 2009 are:
National Australia Bank Limited Group
Marinya Media Pty Ltd
Maple-Brown Abbott Limited
Commonwealth Bank of Australia
Morgan Stanley & Co Incorporated
DISTRIBUTION OF HOLDINGS AT 28 AUGUST 2009
No. of securities
1 - 1,000
1,001 - 5,000
5,001 - 10,000
10,001 - 100,000
100,001 and over
Total number of holders
Number of holders holding less than a marketable parcel
Ordinary Shares
255,189,749
232,512,219
187,655,883
126,111,138
119,717,545
No. of
ordinary
shareholders
11,017
21,639
7,824
7,226
463
48,169
3,489
No. of
SPS
holders
1,293
167
17
18
6
1,501
-
No. of
debenture
holders
1
1
-
-
-
-
-
VOTING RIGHTS
Voting rights of ordinary shareholders are governed by Rules 5.8 and 5.9 of the Company’s Constitution which provide that every
member present personally or by proxy, attorney or representative shall on a show of hands have one vote and on a poll, shall have
one vote for every share held. SPS and debentures do not carry any voting rights.
128
Five Year Performance Summary
Fairfax Media Limited and Controlled Entities
Total revenue
Revenues from operations
(Loss)/earnings before depreciation, interest
and tax (EBITDA)
Depreciation
(Loss)/earnings before interest and tax
Net interest expense
(Loss)/profit before tax
Income tax expense
Net (loss)/profit attributable to members of
the Company
Net profit before significant items
Total equity
Total assets
Total borrowings
Number of shares and debentures
Number of shareholders
Number of PRESSES holders
Number of SPS holders
EBITDA to operating revenue
Basic (loss)/earnings per share
Basic earnings per share before significant items
Operating cash flow per share
Dividend per share
Dividend payout ratio
Interest cover based on EBITDA
before significant items
Gearing
Return on equity
2009
2008
2007
2006
2005
2,609.5
2,599.1
2,934.0
2,900.9
2,178.5
2,111.4
1,909.9
1,907.8
1,880.2
1,873.4
(59.0)
117.6
(176.6)
174.9
(351.4)
29.7
(380.1)
242.4
5,011.8
7,595.2
1,908.3
2,352.0
49,050
-
1,388
(2.3)
(21.6)
12.4
16.4
2.0
-
3.5
38.1
4.8
818.3
108.3
710.0
186.9
523.2
135.7
386.9
395.3
4,965.3
8,293.1
2,511.9
1,513.5
50,184
-
1,010
28.2
22.9
23.4
27.7
20.0
87.3
4.4
50.6
8.0
560.7
111.3
449.4
111.2
338.2
76.6
263.5
267.8
4,961.0
8,000.5
2,347.7
1,479.6
50,843
-
733
26.6
22.7
23.2
24.7
20.0
88.1
5.3
47.3
5.4
493.5
79.8
413.7
97.1
316.6
88.5
227.5
234.3
2,136.8
4,087.1
1,507.9
939.1
40,301
-
564
26.0
24.4
24.5
30.7
19.5
79.9
5.1
70.6
11.0
511.4
80.1
431.3
76.6
354.7
90.8
263.2
237.6
2,168.7
3,592.8
1,048.4
924.5
38,089
5,835
-
27.5
26.6
25.8
37.2
23.5
88.3
6.5
42.2
11.0
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
$m
m
%
cents
cents
cents
cents
%
Times
%
%
129
Directory
Fairfax Media Limited
ANNUAL GENERAL MEETING
The annual general meeting will be held at 10.30am on
Tuesday, 10 November 2009 at the Four Seasons Hotel,
199 George Street, Sydney NSW 2000.
FINANCIAL CALENDAR
For financial year 2008/09
Stapled preference security dividend
Annual general meeting
2 November 2009
10 November 2009
Estimated for financial year end 2009/10
Interim result
Stapled preference security dividend
Preliminary final result
Stapled preference security dividend
Annual general meeting
February 2010
April 2010
August 2010
October 2010
November 2010
COMPANY SECRETARY
Gail Hambly
REGISTERED OFFICE
Level 5,
1 Darling Island Road,
Pyrmont NSW 2009
Ph: +61 2 9282 2833
Fax: +61 2 9282 1633
SHARE REGISTRY
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
Ph: 1300 888 062 (toll free within Australia)
Ph: +61 2 8280 7670
Fax: +61 2 9287 0303
Email: registrars@linkmarketservices.com.au
Website: www.linkmarketservices.com.au
STOCK EXCHANGE LISTING
The Company’s ordinary shares are listed on the Australian
Stock Exchange - “FXJ”. The Stapled Preference Securities
(SPS) are listed on the Australian Stock Exchange - “FXJPB”.
The NZ redeemable preference shares are listed on the New
Zealand Debt Exchange - “FXFFA”.
WEBSITE
Corporate information and the Fairfax annual report can be
found via the Company’s website at www.fxj.com.au. The
Company’s family of websites can be accessed through
www.fairfax.com.au.
IMPORTANT INFORMATION ABOUT THE FAIRFAX ANNUAL
REPORT
A soft copy of the annual report is available at
www.fxj.com.au. To obtain a hard copy of the report, contact
Link Market Services - see contact details under Share
Registry.
CONSOLIDATION OF SHAREHOLDINGS
Shareholders who wish to consolidate their separate
shareholdings into one account should advise the Share
Registry in writing.
DIRECT PAYMENT TO SHAREHOLDERS' ACCOUNTS
The Company pays dividends by direct credit to shareholders'
bank accounts. The Company no longer issues cheques
except in exceptional circumstances. A direct credit form can
be downloaded or obtained from the Share Registry by going
to www.fxj.com.au and clicking on Shareholder Info
Service, or by contacting the Share Registry.
Payments are electronically credited on the dividend date and
confirmed by a mailed payment advice. Shareholders are
advised to notify the Share Registry (although it is not
obligatory) of their tax file number so that dividends can be
paid without tax being withheld.
130
Publications and Websites
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131
Publications and Websites
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132
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Victoria
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FINANCIAL REVIEW GROUP
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Emerald,the Coalfields, Spencer Gulf,
the Claire Valley, Port Lincoln and the
Riverland
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133
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Publications and Websites
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Your Guide
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USA
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Farmonline
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