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GannettR e p o R t 2 0 1 2
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Today, information and content is in demand 24/7.
People want what they want, when they want it
– and its transforming the media business.
Fairfax Media meets that demand like no-one else. Our
audience reach across digital, print and radio – and our
commitment to quality – makes us second to none.
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R
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
1
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ChAiRmAn’s
RepoRt
It has been an interesting and
challenging year for your company.
I am pleased to report that we have
made very good progress with our
strategic initiatives to reduce our cost
base significantly and to transform
our business to take advantage of the
digital developments that allow us to
compete more and more effectively
in real time and multiple media.
In June we announced the acceleration of our Fairfax of the Future program and further major changes to the company
and the way we do business. Your Board and management recognise our company’s very considerable strengths in
areas like our journalism and digital businesses – but also acknowledge the changes sweeping through the media
sector around the world which require continuing flexibility and adaptability.
We are determining our company’s future by making important decisions that will see us focusing on the areas of the
business that have good potential for long-term results for shareholders.
I would like to recognise the hard work and enormous skill of the people in your company. Our metro business made
EBITDA of $102.5 million even in some of the worst advertising markets in a very long time along with worldwide
structural changes in the newspaper industry.
Our regional media business is showing great resilience in its financial performance through the economic cycle.
At the same time we have grown a digital-only business across news, classifieds and transactions that this year
generated a quarter of a billion dollars of revenue for the first time, and is growing strongly.
Our radio business has new management that is vigorously engaged in growing the business.
Our balanced portfolio of businesses and our strategy aims to ensure that Fairfax Media remains one of the leading
media voices in our markets and has a long and strong future.
I would like to take you through some of the big changes we are making.
•
The Sydney Morning Herald and The Age will be moving to the much more user-friendly compact format in the
new year. This format is the same as The Australian Financial Review. While the size is changing, there will be no
change to our commitment to high-quality independent journalism. Many of you will know that a number of quality
mastheads around the world have already moved to a compact format – The Times, The Independent and the
Boston Herald to name a few.
• This new format is facilitating another of our major changes: the closing of our Chullora and Tullamarine print plants
by the middle of 2014. This move alone will see us make cost savings of $44 million annually because we will be
more efficiently utilising our network of smaller, more flexible modern plants.
• We are also making changes in our metro newsrooms to meet the changing needs of readers and advertisers.
These changes achieve more nimble multimedia newsrooms with integration across print, digital and mobile
platforms and better utilisation of our skills across our mastheads here and in New Zealand.
• Fairfax Media has one of the largest digital news audiences in Australia. We are increasingly able to monetise
that strength. From the first quarter of 2013 we are introducing digital subscriptions to our Metro mastheads. We
are doing this very thoughtfully and will be introducing a “metered” model with a base level of free access. The
Australian Financial Review last year introduced its acclaimed iPad app which won the PANPA national app of the
year award for 2012.
Unfortunately cost saving imperatives meant we needed to announce redundancies. Including those already announced
in Fairfax of the Future and the changes outlined here, 1900 people will be leaving the company over the next three
years. Every job matters and your Board and management wish these redundancies were avoidable. They are not.
2
$2,732.4m REvEnUE FRoM
oPERATIonS
$2,310.9m
Down 6.2%
from last year
ToTAL
DIvIDEnDS
3.0 cENTs
fULLy fRANkED
UnDERLyIng
nET PRoFIT
AFTER TAX
$205.4m
Down 25%
from last year
STATUToRy
nET LoSS
AFTER TAX
$2,732.4m
These changes to the company are allowing us to achieve
the $170 million in annual savings that we have previously
announced in two years, not three. With the introduction of
additional cost saving initiatives that we have now identified,
the target for cost savings has been revised up. We will achieve
annual cost savings of $235 million by June 2015.
So we are working smarter and making sure the cost base of
the business better suits the global media environment, an
environment that is requiring all media companies, including
Fairfax Media, to review the value of their assets.
At our annual results in August we announced our decision to
write-down the carrying value of our mastheads by more than
$2 billion. This is a non-cash decision and does not affect the
company on a day-to-day basis.
Your Board has a statutory obligation to assess the carrying value
of our intangible assets – mastheads, goodwill and customer
relationships – based on the three-year outlook for each of our
businesses. We, like the rest of the world, saw the three-year
outlook worsen considerably over the course of the second half of
the year as the cyclical downturn became more pronounced, and
our confidence in a sustained improvement in market conditions
in the near future reduced. I have no doubt we have made the
right decision at the right time.
Your company is focused on the future and we are clear about
what we have to do. We are making significant progress,
achieving changes in the midst of unparalleled structural change
and a prolonged cyclical downturn.
While we are focused on ensuring the stability and ongoing
profitability of our print business, we know that our digital
businesses are going to become increasingly more significant
in terms of the overall revenue mix.
Our news websites, digital transaction websites and apps are
amongst the most successful in Australia and while the pace of
change is breath-taking for many, we are at the front of the pack
and the take-up amongst our more than nine million and growing
audiences (according to Roy Morgan research) is very gratifying.
As ways of digital interaction increase – so do our opportunities to
derive value for our shareholders. We believe we have very good
reason to be confident about this fast growing part of our business.
In closing, I would like to acknowledge the significant contribution
of my fellow Board members. Each and every one of them has
skills and experience that have been of immense benefit to the
company in this challenging environment.
First I would like to acknowledge the very important contribution
made by Bob Savage who retired from the Board at the end
of June this year. Bob’s deep skills in the IT industry, retail and
the finance industry were much appreciated during his time
on the Board.
At the 2012 Annual General Meeting we will have four serving
Directors standing for election or re-election. These are Michael
Anderson, Sam Morgan, James Millar and Jack Cowin. Michael
Anderson is a recognised leader in radio. Sam Morgan is a highly
successful digital entrepreneur and the founder of TradeMe and
has provided enormous insight into our digital thinking. Jack
Cowin was appointed to the Board in July. Jack is well known as a
successful media investor and entrepreneur and we value his years
of media experience. James Millar, also appointed to the Board in
July, brings expert financial and business restructuring skills to the
Board as well as local and international management experience.
The Board also benefits from the contribution of our chief
executive Greg Hywood, one of the most experienced media
executives in the country having had commercial and editorial
experience over a number of decades. These skills, in
combination with the skills of our other Directors, we believe
make up a Board very well suited to address the opportunities
ahead and deliver long-term stakeholder value.
The entire Board is committed to ensuring Fairfax Media is run
in the best interests of all shareholders. We have a strategy.
We are implementing it.
Roger Corbett, AO
Chairman
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
3
ChieF eXeCutiVe
oFFiCeR’s RepoRt
Fairfax Media is being
restructured to ensure its
strong future in a massively
changed media environment.
While we have some way to go,
we are getting runs on the board.
We are fixing our cost base. We are audience focused. We are taking the necessary steps to be a dominant force
in what we expect will be a predominantly digital future.
We are making changes as we trade through this prolonged downturn. I have been in this industry since the 1970s and
I have never seen an advertising environment of the type that we experienced during this year. I also know that cycles
come and go, and inevitably this will pass and our balanced portfolio, cost disciplines and commercial creativity will
position us well for the future.
I would like to take this opportunity to thank each and every Fairfax employee for their commitment and hard work
through this period.
Despite challenging business conditions, in the 2012 financial year Fairfax generated operating EBITDA of $506 million.
We have strong cash flows (cash flow from trading activities was $535 million) and we have a strong balance sheet.
We all want to see a marked improvement and we are committed to delivering it.
We remain committed to print for as long as it remains profitable. We are committed to delivering our journalism in the
manner our audiences demand. That means we will deliver our content across a variety of platforms.
Part of getting the mix right is fine-tuning our print circulation and distribution. Our clients, our advertisers, are moving with us.
Our mastheads are going to remain in print for the foreseeable future thanks to a range of initiatives. Our regional
businesses are particularly resilient, with printed papers spread over 200 mastheads Australia-wide remaining at the heart
of their local communities, supplemented by a range of new and exciting digital initiatives.
Our Fairfax of the Future project involves centralising group functions, variabilising costs, outsourcing where
appropriate, as well as better aligning costs with revenue generating areas.
These changes include:
•
•
•
•
•
rationalising production and print functions across Australia and New Zealand, including the closure of Tullamarine
and Chullora print sites;
restructuring support services including IT and finance;
removing ineffective circulation channels from The Sydney Morning Herald and The Age that offer no value
to advertisers whilst maintaining readership market share;
improving yield on The Sydney Morning Herald and The Age subscriptions; and
reducing variable printing costs through production changes.
In essence, changes we are making will:
•
•
•
•
focus on continued decisive leadership in the development and monetisation of online news platforms;
further grow audiences – already having one of the largest news audiences in Australia;
ensure rigorous cost discipline; and
provide for the development of innovative and profitable products – across print and online – with a focus
on accelerating our online business which is seeing strong revenue growth.
Growth and innovation are what’s driving change at Fairfax.
Some people are not clear as to how our metropolitan print business is performing in the face of structural change. The financial
information shows that this is a profitable business, and we’re committed to maximising that profit for many years to come.
4
UnDERLyIng
EbITDA
$506m
Down 16.7%
from last year
CASh FLow
FRoM TRADIng
nET DEbT
REDUCED by
UnDERLyIng
EPS
$535m
Down 15.2%
from last year
$574m
from last year
(after sPs)
8.7 cENTs
Down 25%
from last year
The advantage The Sydney Morning Herald and The Age have is
that unlike most of their counterparts they have translated a healthy
print audience into a far larger and even healthier digital audience.
Fairfax has not ignored the shift to digital. We had the foresight
to invest in the growth of digital transaction businesses and lay
a solid foundation for a profitable media model.
We have the audiences that advertisers want to reach. We are
one of the key voices in our markets, with significant print, online
and radio assets in Australia and community market segments –
along with several leading digital transactions businesses.
Marketplaces businesses – including RSVP, Domain, Stayz and
Tenderlink – reach more than 4.5 million consumers each month,
producing more than 1.1 million transactions. They’re helped
enormously by their relationship with our digital news mastheads,
creating and reinforcing awareness with our mass audiences and
driving traffic.
Fairfax’s greatest strength is its large-scale audience reach, which
in turn underpins our ability to foster and extend transactional
relationships in profitable ways. Fairfax assets attract a
high-quality audience of more than nine million every week
(according to Roy Morgan research). Of those, 6.8 million people
a month are accessing our content through digital platforms. That’s
no surprise when you consider that 90 per cent of the population
now accesses the internet at least once a month. Some 66 per cent
of all The Sydney Morning Herald and The Age readers now access
the mastheads through digital means – online, tablet or smartphone.
As we look to the future, our goal is to deliver a market-leading
integrated multi-platform business with growing new revenue
streams that are well leveraged to any cyclical upturn. The changes
we are making will unlock real shareholder value that’s embedded
in our business and leverage the ingenuity of our people.
Fairfax has successfully grown a digital-only business across
news, classifieds and transactions that in 2012 generated a
quarter of a billion dollars of revenue for the first time and is
growing strongly. These results give us confidence in the strategy
we have developed for the future. We anticipate that our Metro
digital revenues will be further enhanced by the introduction of
digital subscriptions and continued advertising growth.
Fairfax is focused on our independent news, information and
services being available across all platforms. Our strategy
provides new, highly engaging ways for advertisers to reach
our large-scale audiences.
Fairfax is the biggest publisher of news apps for tablets and
smartphones, with more than 5 million downloaded apps in
the market – across all categories including news, lifestyle and
classified brands. The iPad apps for The Sydney Morning Herald
and The Age have had more than 800,000 downloads so far,
with more than 88,000 highly-engaged readers accessing the
app on an average day.
Why are our digital businesses growing? They are growing
because Fairfax has built one of the largest and most engaged
audience of any news business in Australia. We are actively
building our revenue by accessing this digital audience – around
the clock, which is our “Follow the Sun” audience engagement
model. We are making solid progress on understanding our
audiences and strengthening our relationship with them, as well
as creating ties to new audiences.
This model isn’t just changing the way we sell or build
products, it is changing the way we do journalism. Fairfax
recently conducted a major review focused on the future of
our Metropolitan newsrooms – and we’re adopting a new way of
working so that we can deliver our quality independent journalism
to growing audiences across all platforms.
The new “digital first” approach we’re introducing supports the
delivery of journalism to our multi-platforms. It revolves around
our audiences and it will help ensure the delivery of quality,
independent journalism – day or night – however and wherever
our audiences want to consume it. The model will enable our
staff to work smart; it introduces more flexibility; more sharing;
and more transparency around editorial processes. It will also
encourage greater creativity and collaboration. Editorial quality
remains paramount.
While we still have a lot of work to do, Fairfax is more progressed
than any other media company in Australia – and most others
in the world – in terms of transitioning into a truly modern
world-leading, multi-platform media business.
In closing, none of us underestimates the enormity of the changes
we are making. Fairfax has a strategy and is delivering on it to
ensure we remain a leading independent media company.
Gregory Hywood
Chief Executive Officer and Managing Director
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
5
sustAinAbility And
CoRpoRAte soCiAl
Responsibility
RepoRt
Fairfax, together with media companies
around the world, faces enormous
change. There is also ongoing public
debate about media regulation and the
importance of independent, balanced
and accountable journalism – part of
the bedrock of democratic society.
Just before the end of last financial year, Fairfax announced changes to its business designed to support a sustainable
cost base and to move along the journey from print to digital publishing. It is making the changes needed to secure its
financial sustainability.
Fairfax’s digital audiences are growing strongly. They are growing well beyond our expectations. In its 181 year history,
Fairfax’s audience reach has never been greater. Our newspapers’ websites and tablet applications are winning
awards and proving to audiences that Fairfax is committed to independent journalism, distributed through innovative,
entertaining and engaging channels. Our radio, regional, agricultural and community businesses are continuing to
grow and form deep connections with their local communities.
Printed newspapers and magazines remain important platforms within our mix of media assets and will continue to be
as long as they enjoy reader and advertising support. Indeed, print circulation in regional and community areas is strong.
However, for certain parts of the business, particularly the metro newspapers, Fairfax needs to increase efficiencies and
cut costs in line with structural challenges to revenue. We can, and will, do this while maintaining Fairfax’s high quality
independent journalism.
We are on a three year journey towards re-shaping the business to adapt to these challenges.
Fairfax’s long term financial sustainability cannot be separated from its corporate social responsibilities. Our
stakeholders have an expectation that we will continue to operate the business in a way that consolidates and
builds on our important intangible assets.
Fairfax has commenced a process of stakeholder engagement to help determine what matters most to them in terms
of our sustainability performance and corporate social responsibilities. This process has included engagement with our
people, our shareholders, financial analysts and our audiences. The feedback we have received has helped to formulate
the content in this report. We will aim to continue to improve our stakeholder engagement over the next reporting year.
In last year’s sustainability report, Fairfax identified four areas of focus for Fairfax’s corporate social responsibilities
and we are pleased to report below on our performance in each of these categories:
• editorial integrity
• environment
• our people and culture
• community
6
Editorial intEgrity
Fairfax is proud of its quality independent
journalism. We will continue to maintain
our uncompromising approach to media
ethics and integrity.
We believe that freedom of speech and a robust and independent media are fundamentally important to a strong democracy. The media
should be able to act without fear or favour in carrying out its duty to inform the public and to hold Governments, business and individuals
to account. Media is often referred to as the “fourth estate” of democracy – the others being Government, the public service and the
judiciary. We take this role seriously and believe it serves our commercial interests, as well as serving a public good.
Fairfax’s longstanding commitment to independent public interest journalism is evident in its award-winning content, produced 24 hours
a day, seven days a week, across multiple platforms, including newspapers, magazines, websites, social media, mobile and tablet apps
and radio.
Editorial CulturE, SyStEmS & ProCESSES
In the past year, there has been a lot of public debate about media ethics and regulation in Australia and elsewhere. In Australia,
this included the Independent Inquiry into Media and Media Regulation. Overseas, we have witnessed similar government inquiries.
The integrity of our journalists is more than a moral or regulatory issue. The goodwill in our brands make up some of our biggest assets.
It is fundamentally important to us that we get the story right and for the public to trust that our journalists are conducting themselves in
accordance with proper ethical and legal standards. We have a strong commercial imperative, as well as a public duty, to have a culture,
systems and processes which uphold these standards.
As part of Fairfax’s submission to the Media Inquiry (available at www.dbcde.gov.au) we included a description of our editorial processes
and systems. This demonstrates the checks and balances incorporated into our editorial day to day work practices which support
Fairfax’s commitment to balanced, independent and accurate journalism. We will continue to review our performance in this area.
Editorial integrity is firmly embedded within Fairfax’s workplace culture. As a daily reminder on The Sydney Morning Herald editorial floor,
an excerpt from The Sydney Morning Herald’s creed from 1831 is displayed (pictured above). It states:
“Our editorial management shall be conducted upon principles of candour, honesty
and honour. We have no wish to mislead; no interests to gratify by unsparing abuse,
or indiscriminate approbation.”
In addition to its regulatory obligations, Fairfax has adopted a range of voluntary codes and ethics standards. Every journalist within the
group is expected to uphold these standards and is held to account if compliance is not demonstrated. The Fairfax Code of Conduct
applies to every person within the Fairfax group – journalists and non journalists.
rEadErS’ Editor & Community EngagEmEnt
In 2011 Fairfax created its first Readers’ Editor for The Sydney Morning Herald and The Sun Herald. The role of the Readers’ Editor is
to champion readers’ interests and editorial accountability and engage with a critical stakeholder group - our audiences. In the past year,
the Readers’ Editor published more than 30 columns, each originating from readers’ ideas, complaints or concerns. The Readers’ Editor
has also responded to hundreds of emails, phone calls, tweets and letters, totalling over 10,000 separate communications. This is a key
indicator on audience engagement and importantly, the feedback helps us to meet audience expectations on editorial content, standards
and ethics.
Shortly, the Sydney Morning Herald Readers’ Editor role will be merged with a range of other community focused responsibilities and will
be re-named the Community Editor. This recognises the very important nexus between community issues, audience engagement and our
editorial agenda.
Fairfax plays a vital part in bringing together community representatives and the general public to discuss important and topical matters and
in doing so, makes an important contribution to the political debate.
In July 2012, in response to concerns about increasing violence in
Sydney’s suburb of Kings Cross and the death of a teenage boy, Fairfax
Events convened a meeting of political, academic and community
representatives to discuss the issues. The Herald, Safer Sydney
Community Forum was organised and took place at a packed Sydney
Town Hall. A number of political commitments were made towards
reducing violence in the area and the various stakeholder groups
agreed to re-convene within 6 months to report back on progress.
Image caption: Town Hall, Sydney. Panel included from left: Doug Grand, Chief Executive of Kings Cross Licensing, Paul Nicolaou, Chief Executive of the
NSW AHA, George Souris, NSW Government Minister, Malcolm Turnbull, Federal MP, SMH’s Matthew Moore, Clover Moore, Lord Mayor of Sydney, Mark
Murdoch, Assistant Commissioner Police, and Dr Don Weatherburn, NSW Bureau Crime Statistics.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
7
SuStainability and CorporatE SoCial rESponSibility rEport
cONTiNUED
diStinCtivE ContEnt & innovativE dElivEry
We continue to connect with our audiences through innovative content delivery and at the same time
illuminating important community, economic, environmental and social issues. We see this as a key
community contribution and part of corporate citizenship.
Some important editorial initiatives this year include Fairfax’s commissioning of the Herald – Lateral
Economics Wellbeing Index. The initiative adjusts GDP to take into account the changes in value of the
nation’s stock of physical, environmental and human capital. It also adjusts for changes in health, inequality
and job satisfaction to provide a better measure of national wellbeing than traditional economic measures.
Historically, numerous indices and other tools have measured economic and financial performance. The
Wellbeing Index represents an important step towards measuring the value of the less tangible elements
underpinning healthy societies, economies and communities.
Another example is the WikiCurve, launched in May 2012. Developed in partnership with Futureye, the
WikiCurve explores the community’s views on an issue by looking at how past events impact on current thinking.
Individuals log their views on the WikiCurve and those collective views are then used to map private and
public acceptance and thinking of topical and controversial community concerns. Depending on the issue, this
information can then be used to help inform government policy or shape organisational approach to particular
issues. The first WikiCurve initiative related to drug law reform.
Our editorial coverage this year included a series of articles, focusing on important social themes, including
the Sydney Morning Herald’s Healthy Habits Childhood Obesity series, The Age’s The Drugs Dilemma or the
Australian Financial Review’s special report on Corporate Philanthropy.
EnvironmEnt
The media has a unique opportunity to influence
others to take positive action towards reducing
energy consumption, as well as the ability to
responsibly manage its own carbon footprint.
Media companies make an important contribution to environmental sustainability by educating and
informing the community on environmental issues and debate. Fairfax’s large audiences and diverse
range of multi-media communication platforms do this effectively.
Through our network of transactional websites, we encourage consumers to consider environmental
impacts in their purchasing decisions by providing access to comparative data - for example, Drive’s
Green Motoring Guide and Trade Me’s Fuel Efficiency Guide.
Fairfax also uses its business resources and networks to recognise sustainable business activity.
For example, Fairfax launched the Sustainable 60 Awards in 2009 in New Zealand, together with PwC.
These awards acknowledge sustainable business excellence in a range of categories and are well
recognised within the New Zealand business, government and non-profit communities. We support
a range of similar programs in Australia, for example, the Tomorrow Today program in Newcastle.
8
EnErgy audit & EmiSSionS targEt
In last year’s sustainability report, we made three commitments towards environmental
sustainability, each of which was completed in the past year:
•
•
•
conduct an energy audit across the group;
set an emissions reduction target for the group; and
complete the Carbon Disclosure Project (CDP) report.
The group-wide energy audit allowed us to better understand our energy consumption, set baseline
emissions and identify energy abatement opportunities.
Fairfax has committed to reducing its carbon emissions between 20-25% by 2020 from 2011 levels.
REDUCE
CARbon
EMISSIonS
20-25%
against 2011
levels by 2020
We are aiming to achieve this target through office and print facility consolidation, recycling and waste minimisation programs, energy
reduction through the use of efficient lighting and service equipment and changes to information technology infrastructure and usage.
In a period where energy costs are increasing, these environmental initiatives also reflect Fairfax’s focus on continuous business
efficiency and opportunities for cost saving.
In the past year we have improved our sustainability and environmental reporting, including Fairfax’s National Greenhouse & Energy
Reporting Scheme report, the Carbon Disclosure Project report, internal reporting and this annual Sustainability Report. The increased
transparency regarding our environmental performance and strategy will assist us to track, measure and improve our performance and
better inform our stakeholders.
EnvironmEntal imPaCtS of nEwSPaPEr Printing
Fairfax recently announced a proposal to close two of its large metropolitan print facilities and consolidate printing more efficiently into
our other plants. Print products remain an important distribution platform within Fairfax’s mix of media assets and we will continue to
publish printed newspapers for as long as there is ongoing demand. In this context, we are also mindful of the environmental impacts
associated with print publishing and will continue our efforts to minimise those impacts.
Currently, printing comprises over 60% of Fairfax’s total group carbon emissions. The closure of the large and underutilised printing
plants at Chullora in Sydney and Tullamarine in Melbourne will have significant efficiency advantages and save costs, energy and
other resources.
Each of our print facilities, and the print industry as a whole, has taken a pro-active approach to waste minimisation, recycling and other
initiatives that reduce energy and water consumption. Each print facility monitors and sets weekly targets for the reduction of newsprint
and ink-related waste. We have incentives in place to encourage our people to meet and exceed these targets. In the 2012 reporting
year, Fairfax’s printing plants reduced printed waste by 12.27% over the previous year. This reduction was a combination of reduced
print volumes and improved efficiencies in 12 of its 20 print sites.
We have introduced environmental compliance auditing across our printing operations to ensure all sites comply or exceed
environmental legislative requirements. Sites are audited to ISO 14001, with the results and follow up reported to the Fairfax Board.
As a group, the print industry invests in educating the public about recycling and newsprint recovery programs. These initiatives are
funded and supported by the Publishers National Environmental Bureau (PNEB). The PNEB’s achievements in increasing newsprint
recycling is outstanding.
•
2010 newspaper recovery rate of 78% – but expected to achieve close to 80% in 2011*
• Since 1990, newspaper landfill has been reduced by almost 40%, whereas national landfill volumes
have increased over the same period. Newspaper landfill now represents 0.65% of total landfill volume.
* The final PNEB figures for 2011 newsprint recovery rates were not available as at the date of this report.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
9
SuStainability and CorporatE SoCial rESponSibility rEport
cONTiNUED
pEoplE & CulturE
A diverse, innovative and engaged workforce is
important in enhancing the quality and creativity
which underpins our brands and businesses.
Over the past year, Fairfax has launched initiatives to drive performance and engagement. We are an organisation that thrives on
creative minds and technological innovators. This creates a workplace where people are passionate and proud of the work they do.
Right now, our industry faces economic challenges that are both structural and cyclical. This has an impact on the company and our
people. The structural changes affecting the media sector, compounded by difficult domestic trading conditions, led to Fairfax’s February
announcement that we will be restructuring our business over the next three years. In June we announced that over that period we are
anticipating a reduction to our workforce of approximately 1900 positions, through a combination of natural attrition and redundancies.
These changes impact all parts of Fairfax’s business.
Restructuring and redundancies are hard. This applies for those people leaving the business and also for those who stay. But, the
process is essential to securing Fairfax’s financial sustainability. We are doing all we can to treat people fairly, consult appropriately
and deliver back-up employee assistance, training and outplacement services.
EngagEmEnt
Fairfax values the feedback it receives from its people.
Employee engagement measures the degree to which employees are committed to the company, share its values and feel aligned with
its strategy.
Maintaining and improving employee engagement is fundamental to our ability to attract and retain talented people and ultimately deliver
on our business strategy. We take this process seriously and have increased our resources in the past 12 months to support these
objectives. There are a range of channels for our people to offer feedback, including annual surveys, pulse surveys, intranet feedback
portals and annual reviews. Last year, Fairfax conducted its first group-wide engagement survey. The decision to conduct a group-wide
survey was a first step towards benchmarking engagement and setting clear improvement objectives. These improvement objectives
are outlined below.
The survey was launched in two phases:
Australia – May 2011 – 66% response rate
New Zealand and USA – November 2011 – 82% response rate.
SurvEy – aCCountability for ChangE
Following the release of the survey results, we conducted structured results de-briefings and action planning sessions across every
business unit. Managers prepared action plans for improvement and report regularly about progress to the CEO and the People and
Culture Committee of the Fairfax Board.
Improvement targets for overall alignment and engagement scores were included in the short term incentive plans for all managers
reporting to the CEO. The results of the 2012 survey will determine if these performance targets have been met. Specific questions were
included in the 2012 engagement survey about sustainability and how Fairfax’s corporate citizenship record impacts people’s choices
about where they work.
10
to deliver growth to shareholders
a strong commercial focus
We will balance everything we do with
SurvEy – liStEning to our PEoPlE
outstanding products and services
to provide our audiences and customers with
Fairfax listened to the feedback given in the 2011 survey and has taken the following action in response.
We need to work together across the company
toPiC
ConCErn
aCtion takEn
deliver on our commitments
We are highly accountable and
Group strategic
direction
More transparency
and detail
Investment in
People
More training,
development
and leadership
opportunities
quickly to our audiences, customers and each other
• Senior management forums coordinated across the Group
We value transparency. We listen and respond
• More structured communication from CEO
• All managers schedule regular team briefings
constantly challenging the status quo
To achieve this we need to be innovative,
of our audiences and customers
• New leadership program introduced
we make are based on the needs
The way we work and decisions
• More effective training programs offered
•
Improved talent management program
• Review of reward and recognition programs
CULTURE
our customers and audiences
in our dealings with each other,
We are responsible and honest
Integrity
or organisation
or favour to any individual
to operate without fear
We have the freedom
Independence
VALUES
•
Launched a Group-wide mentoring program
Communication
More consistent
and regular
communication
from management
• A new intranet launched in 2012 for Metro Media and Corporate teams
(to be progressively rolled out across the Group)
• Business units communicating more frequently through newsletters and updates
•
Increased engagement about business change (eg metro editorial review
process consulted with more than 300 journalists)
OUR CULTURE AND VALUES STORY
fairfax mEdia’S CulturE & valuES
In the 2011 engagement survey, we asked targeted questions about what type of
organisation our people wanted Fairfax to be. These results were used to develop
and create Fairfax’s first Culture & Values Story.
Fairfax’s Culture & Values Story is represented in the graphic to the right. It was
launched to staff by the CEO in June, together with a video message explaining
its context and importance towards building the future sustainability of Fairfax’s
business. The Culture & Values Story is not just a set of words on a piece of
paper. It is about defining the ways in which we do things and finding practical
ways to uphold our values.
To support the launch of the Culture & Values Story, Fairfax will be providing
its people with tools and materials to enhance our workplace culture.
divErSity
We recognise the value of diversity and workplace inclusion. This goes
beyond gender issues and includes other differences such as race,
religion and ethnicity.
Fairfax recently released its first set of Gender Diversity Guidelines in accordance with its ASX
corporate governance obligations. We have implemented practical measures to improve the
representation of females at the senior management level – including training, leadership &
development courses, mentoring and flexible work arrangements. More information about Fairfax’s
approach to diversity is included in the Corporate Governance section of this Annual Report.
Some diversity figures from the past 12 months
• 12 Management Development courses delivered to 211 senior managers – 38% female participation
• 4 leadership courses delivered to 71 people – 52% female participation
• In our regional businesses, there were 2,769 training places available for sales,
editorial, coaching and general management skills – 64% female participation
• New mentoring program for Metro Media included 59% female mentees
and 44% female mentors
• Approximately 12% of Fairfax’s total workforce work part-time
LEADERShIP
CoURSES
DELIvERED
71employees
52% female
MEnToRIng
PRogRAM
59%
female
mentees
44%
female
mentors
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
11
SuStainability and CorporatE SoCial rESponSibility rEport
cONTiNUED
hEalth, SafEty & wEll-bEing
The health, safety and well-being of our people is more than a legal and
moral obligation. It is a core business value. We also know there is a direct
correlation with the engagement, retention and performance of our people.
Fairfax offers its people various programs aimed at maintaining a safe and healthy workplace.
Employees using a Fairfax subsidised gym facility
Free participation in community
fun runs or swim events
Free flu vaccination
Free access to independent external employee
assistance and counselling services for all Fairfax
employees and their immediate families.
Introduction of an independent external ‘whistleblower’
hotline, available to all employees, to report concerns
about ethics and harassment.
908
855
1,310
USE oF FAIRFAX
SUbSIDISED
gyM FACILITIES
908
employees
in Australia
FREE FLU
vACCInATIon
1,310
employees
in Australia
In designing its newer workplaces, Fairfax has been mindful of creating workspaces that promote employee well-being, sustainability,
transparency and access to public transport. In the past year, Fairfax’s Media House office building in Melbourne won a range of
awards including the Property Council of Australia’s Development of the Year, Best Office Development and Best Workplace Project.
During the next reporting year, there will be further changes to Fairfax’s workspaces, which will deliver both environmental and
economic benefits to the business.
workPlaCE SafEty
Fairfax’s workplace safety record for the past 12 months
has improved. We believe this improvement is directly
linked to business initiatives designed for this purpose.
We allocated additional resources to the health & safety
teams over the past year.
Fairfax’s safety audit team reviews site safety performance
on a regular cycle, depending on intrinsic risk and past
performance of sites. In the past financial year, over 90
separate safety audits have been conducted.
In addition to these audits, 18 sites received specialist
in-house safety training with over 400 people attending.
This training was on top of the formal external training
that is undertaken at all sites in areas such as first aid,
fire safety/evacuation and safety committee training.
loSt timE injuriES and loSt
timE injury frEquEnCy ratE
100
s
I
T
L
f
o
.
o
N
80
60
40
20
0
2008/2009
2009/2010
2010/2011
2011/2012
LTIS
LTIFR
5
4
3
2
1
0
R
F
T
L
I
thE fairfax foundation
The Fairfax Foundation was established in 1959 by the Fairfax family with a donation of
£100,000. The Foundation operates separately to the business and exists solely for the benefit of
current and former Fairfax employees and their dependants to help alleviate hardship or distress.
In the past financial year, the Foundation has provided financial grants, loans and other benefits
to the value of $596,637.
FAIRFAX
FoUnDATIon
PRovIDED
$596,637
in employee
assistance this year
12
Community
Fairfax is a vital member of the hundreds of communities
in which it operates. We are committed to being a
socially responsible organisation that supports and
engages with those communities. We do this through
a combination of funding, resources, volunteering,
sponsorships, editorial coverage and promoting
charitable activities.
We recognise the shared value in building community connections. The success and prosperity of the communities in which we
operate has a direct link to the economic sustainability of our business.
Fairfax enables business units to make autonomous decisions about how they engage and support their respective communities,
whilst encouraging each unit to find opportunities to leverage their existing expertise and resources.
indigEnouS jobS auStralia
Fairfax operates the MyCareer jobs website. Integrated with the MyCareer platform is the
Indigenous Jobs Australia (IJA) jobs board at www.ija.com.au. Fairfax established IJA in 2009
in partnership with the Australian Indigenous Chamber of Commerce. The IJA site advertises
dedicated jobs for indigenous Australians at heavily subsidised rates. IJA is engaged within
indigenous communities, especially in schools and remote areas to promote the jobs board and
support indigenous Australians in securing employment.
•
•
3000+ visitors every week
350 corporate advertisers
•
•
1500+ returning visitors every week
750-1000 roles advertised every week
InDIgEnoUS
jobS AUSTRALIA
1,000
jobs advertised
per week
litEraCy ProgramS
Fairfax also leverages its editorial and publishing resources to
support a variety of literacy and education focussed programs.
We know that improving literacy and education standards provides
an important key to solving some of Australia’s greatest social and
community challenges. Of course, we also have a special interest
in nurturing future readers and writers.
Fairfax is a corporate sponsor of the Australian Literacy and
Numeracy Foundation, which is dedicated to lifting literacy and
numeracy standards in remote and marginalised communities.
We are the media partner for the NSW Premier’s Reading
Challenge, a school based reading program, attracting 220,000
participants last year. We also provide free newspapers and/or
digital subscriptions to over 250 schools in socio-economically
disadvantaged areas and conduct a number of school
writing competitions, designed to improve literacy and written
communications (there were 2000 participants last year in
New South Wales).
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
13
SuStainability and CorporatE SoCial rESponSibility rEport
cONTiNUED
ConnectPink
ConnectPink, launched by our regional division in June 2012,
is a website designed to connect women living in rural, regional
and remote parts of Australia. The site enables its members to
chat, shop, swap items, share experiences and read stories about
other inspiring women. In partnership with the McGrath Foundation
ConnectPink raises money through the site to help provide breast
care nurses in regional, rural and remote parts of Australia.
Image caption: Allan Browne (Fairfax Regional CEO and publisher)
with Glenn McGrath and Governor General Quentin Bryce at the launch
of ConnectPink on 15 June 2012.
fairfax EvEntS
Fairfax either sponsors or organises several running, cycling and swimming events across
Australia. These are important public events, bringing people together in a context that
promotes healthy living, community spirit and philanthropy.
We have seen an enormous increase in race participants using these events to raise money
for charities. Fairfax uses its resources to encourage philanthropic associations with each
of its races and appoints official charity partners and charity ambassadors to the events.
In the next reporting year, we will continue our efforts to further embed the philanthropic
connection with each of our sporting events.
In the past financial year, Fairfax has organised 8 events across Australia:
•
•
•
137,691 race participants
855 Fairfax participants
$7,856,969 raised for charity
fairfax workPlaCE giving Program
– ‘morE than wordS’
Fairfax’s Australian Metro and Regional businesses participate in a workplace giving program,
More Than Words, which commenced in 2005. People are able to donate part of their pre-tax salary
to a range of nominated charities. Through the program $662,000 has been donated since 2005.
FAIRFAX EvEnT
PARTICIPAnTS
RAISED
$7.86m
FAIRFAX
EMPLoyEE RACE
PARTICIPAnTS
855
woRkPLACE
gIvIng
PRogRAM
$662,000
Donated
since 2005
14
annual
General
MeeTinG
The annual general
meeting will be held at:
10.30am on Wednesday
24 October 2012
Park Hyatt
1 Parliament Square
Melbourne VIC
FairFax media limited
aCN 008 663 161
Table of conTenTs
Board of Directors
Directors' Report
Remuneration Report
Corporate Governance
Management Discussion and Analysis Report
Annual Financial Report
Independent Auditor's Report
Shareholder Information
Five Year Performance Summary
Directory
16
18
23
34
42
45
124
126
127
128
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
15
board of direcTors
rOGer COrBett, aO
NON-EXECUTIVE CHAIRMAN,
APPOINTED TO THE BOARD 4 FEBRUARY 2003
Mr Corbett was elected Chairman of the Board in October 2009. He 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. In 1999, Mr Corbett was appointed Chief Executive Officer
of Woolworths Limited. He retired from that position in 2006. Mr Corbett is a Director of the Reserve Bank of Australia, a Director of
Wal-Mart Stores, Chairman of PrimeAg Australia Limited and Chairman of Mayne Pharma Group Limited. He is also Chairman of the
Salvation Army Advisory Board (Australian Eastern Territory), a member of the Dean’s Advisory Group of the Faculty of Medicine at the
University of Sydney and Member of the Advisory Council of the Australian School of Business.
GreGOrY HYWOOd
EXECUTIVE DIRECTOR,
APPOINTED TO THE BOARD (NON-EXECUTIVE) EFFECTIVE 4 OCTOBER 2010
APPOINTED AS CEO AND MANAGING DIRECTOR 7 FEBRUARY 2011
Mr Hywood has enjoyed a long career in the media and government. A Walkley Award winning journalist, he held a number of senior
management positions at Fairfax including Publisher and Editor-in-Chief of each of The Australian Financial Review, The Sydney
Morning Herald/Sun-Herald and The Age. He also held the position of Group Publisher Fairfax magazines. He was Executive Director
Policy and Cabinet in the Victorian Premier’s Department between 2004 and 2006, and from 2006 to 2010 was Chief Executive of
Tourism Victoria. Mr Hywood is a Director of The Victorian Major Events Company and of Trade Me Group Limited (NZ).
miCHael aNderSON
NON-EXECUTIVE DIRECTOR,
APPOINTED TO THE BOARD 2 SEPTEMBER 2010
Mr Anderson has had a long career in the radio industry including as Chief Executive of Austereo Limited from 2003 until January
2010. Prior to becoming Chief Executive he was Chief Operating Officer and from 1997 till early 2003 he was Executive Director of
Sales and Marketing. He began his career in sales at Austereo in 1990. During his time as Chief Executive he focussed the company
on building strong station brands and adapting the business to the changing media market including building and maintaining market
leadership and developing new strategic directions, focussing on target audiences and adapting to increased competition. He launched
a nationwide digital network and Australia’s first digital radio station. He has been a leader in adapting radio to the digital era.
JaCK COWiN
NON-EXECUTIVE DIRECTOR,
APPOINTED TO THE BOARD 19 JULY 2012
Mr Cowin is the Founder and Executive Chairman of Competitive Foods Australia Pty Ltd. The company was founded in 1969.
Competitive Foods owns and operates over 350 fast food restaurants in Australia, it also operates several food manufacturing plants
for the supermarket and food service industries exporting to 29 countries. Mr Cowin is a Director of Network Ten Holdings Ltd, Director
of BridgeClimb and Chandler Macleod Group Ltd, and is on the Board of Directors of Sydney Olympic Park Authority.
SaNdra mCPHee
NON-EXECUTIVE DIRECTOR,
APPOINTED TO THE BOARD 26 FEBRUARY 2010
Ms McPhee is a Director of AGL Energy Limited, Kathmandu Holdings Limited, Westfield Retail Trust and Tourism Australia. Her
previous directorships include Australia Post, Coles Group Limited and Perpetual Limited. Prior to becoming a Non-Executive Director,
Ms McPhee held senior executive positions in a range of consumer oriented industries including retail, tourism and aviation, most
recently with Qantas Airways Limited.
JameS millar, am
NON-EXECUTIVE DIRECTOR,
APPOINTED TO THE BOARD 1 JULY 2012
Mr Millar is an experienced Corporate Executive, Advisor and Director of a number of companies and organisations including Mirvac
Ltd, Jetset Travelworld Ltd and Fantastic Holdings Ltd. He is the former Chief Executive Officer and Oceania Area Managing Partner
of Ernst & Young and was a member of the Ernst & Young Global Board. His career prior to the leadership roles at Ernst & Young
was as a corporate reconstruction professional. Mr Millar is a director, trustee or member of a number of not-for-profit and charitable
organisations. He has qualifications in business and accounting and is a Fellow of both the Institute of Chartered Accountants and
the Australian Institute of Company Directors.
16
Board of directors
Sam mOrGaN
NON-EXECUTIVE DIRECTOR,
APPOINTED TO THE BOARD 26 FEBRUARY 2010
Mr Morgan is the founder and former CEO of New Zealand’s largest online transaction site Trade Me, which was purchased by Fairfax
Media in 2006. He is the Chairman of software company Visfleet and a Director of online business Xero. Mr Morgan was previously a
Director of Sonar6.
liNda NiCHOllS, aO
NON-EXECUTIVE DIRECTOR,
APPOINTED TO THE BOARD 26 FEBRUARY 2010
Ms Nicholls is a Corporate Advisor and Director of a number of leading Australian companies and organisations. She is Chair of KDR
(Yarra Trams) and a Director of Sigma Pharmaceutical Group, the Walter and Eliza Hall Institute of Biomedical Science and Low Carbon
Australia Pty Limited. She is also on the Harvard Business School Alumni Board. She is a former Chair of Australia Post, former Chair of
Healthscope Limited and former Director of St. George Bank Limited. Prior to becoming a professional Director, Ms Nicholls held senior
executive positions in the banking and finance industry.
Peter YOUNG, am
NON-EXECUTIVE DIRECTOR,
APPOINTED TO THE BOARD 16 SEPTEMBER 2005
Over the last 30 years, Mr Young has been an investment banking Executive in Australia, New Zealand and the U.S.A. He is a member
of the Royal Bank of Scotland’s Advisory Council in Australia. 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 Ratch-Australia
Corporation Limited, of Queensland Investment Corporation and of NSW Cultural Management Limited. He is also Non-Executive
Director of PrimeAg Australia Limited. He is involved in a number of community, environmental and artistic activities.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
17
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 24 June 2012 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.
rOGer COrBett, aO
Non-Executive Chairman
GreGOrY HYWOOd
Chief Executive Officer and Managing Director
NiCHOlaS FairFax
Non-Executive Director
Resigned 29 November 2011
SaNdra mCPHee
Non-Executive Director
Sam mOrGaN
Non-Executive Director
liNda NiCHOllS, aO
Non-Executive Director
rOBert SaVaGe, am
Non-Executive Director
Resigned 30 June 2012
Peter YOUNG, am
Non-Executive Director
miCHael aNderSON
Non-Executive Director
JameS millar, am
Non-Executive Director
Appointed 1 July 2012
JaCK COWiN
Non-Executive Director
Appointed 19 July 2012
A profile of each Director holding office
at the date of this report is included on
pages 16 - 17 of this report.
18
directors’ report
COmPaNY SeCretarY
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 expertise in commercial and media and communication law.
Ms Hambly is a Director of Trade Me Limited, Company B Belvoir
Limited and Sydney Story Factory. She 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 Chartered Secretaries Australia.
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 the publishing of news, information and
entertainment, advertising sales in newspaper, magazine and
digital formats, and radio broadcasting.
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 loss attributable to the consolidated entity for the financial
year was $2,732,397,000 (2011 Loss: $390,861,000).
diVideNdS
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:
The Company completed the sale of its regional radio assets
to Grant Broadcasters on 31 October 2011.
On 13 December 2011 the Initial Public Offering (IPO) of Trade
Me Group Limited, a New Zealand subsidiary, was concluded
with 34% of the shares held by external parties. A further 15%
divestment occurred on the 21 June 2012. Trade Me's shares
are listed on both the New Zealand Exchange and the Australian
Stock Exchange and the consolidated entity holds a controlling
interest of 51% at year end.
On 23 December 2011, the Company announced that it had
entered into an agreement to merge Fairfax Community Network
Limited in Victoria with MMP Holdings Pty Ltd. Following the
merger, the Company will hold a 50% interest in MMP Holdings. As
part of acquiring this interest, the Company is required to contribute
$35 million in cash to the shareholders of MMP Holdings.
On the 15 June 2012 the consolidated entity repaid the
€350 million Eurobond notes.
liKelY deVelOPmeNtS aNd exPeCted reSUltS
The consolidated entity’s prospects and strategic direction are
provided in the Management Discussion and Analysis Report on
pages 42 - 44.
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.
An interim fully franked dividend of 2 cents per ordinary share
and debenture was paid on 21 March 2012 in respect of the
year ended 24 June 2012.
eNVirONmeNtal reGUlatiON aNd PerFOrmaNCe
No material non-compliance with environmental regulation has
been identified relating to the 2012 financial year.
Since the end of the financial year, the Board has declared a fully
franked dividend of 1 cent per ordinary share and debenture.
This dividend is payable on 21 September 2012.
reVieW OF OPeratiONS
Revenue for the Group was lower than the prior year at
$2,339 million (2011: $2,477 million). After significant expenses
of $2,937.8 million the Group generated a net loss after tax
of $2,732.4 million (2011: $390.9 million). Earnings per share
decreased to a loss of $1.16 (2011: loss 17.0 cents).
Further information is provided in the Management Discussion
and Analysis Report on pages 42 - 44.
The Company reported to the Department of Climate Change
on the total carbon emissions of the Group generated in the
2011 financial year under the National Greenhouse and Energy
Reporting legislation. The Group’s main source of carbon
emissions overall was from electricity consumption at its larger
sites and total scope 1 and 2 emissions reported was 93,951
tonnes CO2-e.
eVeNtS aFter BalaNCe date
Other than those events disclosed in Note 38, there have not
been any after balance date events.
remUNeratiON rePOrt
A remuneration report is set out on pages 23 - 33 and forms part
of this Directors’ Report.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
19
directors’ report
direCtOrS’ iNtereStS
The relevant interest of each Director in the equity of the Company and related bodies corporate as at the date of this report is:
ordinary shares
R Corbett
G Hywood
M Anderson
J Cowin
NJ Fairfax
S McPhee
J Millar
S Morgan
L Nicholls
R Savage
P Young
TOTAL
opening
Balance
99,206
–
–
–
3,892,481
4,783
–
181,500
5,401
47,899
131,117
4,362,387
acquisition
disposals
closing
Balance
post
year end
acquisitions
post
year end
disposals
–
1,682,834
–
–
–
35,437
–
1,908,848
34,986
–
–
3,662,105
–
–
–
–
–
–
–
–
–
–
–
–
99,206
1,682,834
–
–
3,892,481
40,220
–
2,090,348
40,387
47,899
131,117
8,024,492
–
–
–
–
–
13,156
–
–
12,875
–
–
26,031
–
–
–
–
–
–
–
–
–
–
–
–
post
year end
Balance
99,206
1,682,834
–
–
3,892,481
53,376
–
2,090,348
53,262
47,899
131,117
8,050,523
In the case of retired Directors, the closing balance represents the number of shares at the date the Director retired from the Board.
No Director holds options over shares in the Company.
direCtOrS’ meetiNGS
The following table shows the number of Board and Committee meetings held during the financial year ended 24 June 2012 and the
number attended by each Director or Committee member.
Meetings*
Board Meeting
audit and risk
noMinations
people and
culture#
sustainaBility
and corporate
responsiBility
no.
held
no.
attended
no.
held
no.
attended
no.
held
no.
attended
no.
held
no.
attended
no.
held
no.
attended
16
16
14
9
16
16
16
16
16
15
16
13
9
16
16
14
14
16
5
5
–
2
–
–
5
–
5
4
5
–
2
–
–
5
–
5
1
–
–
1
–
–
–
–
1
1
–
–
1
–
–
–
–
1
5
5
4
–
5
–
–
5
5
4
5
3
–
5
–
–
4
5
3
3
3
2
3
–
–
–
–
2
3
2
2
3
–
–
–
–
R Corbett***
G Hywood**
M Anderson
NJ Fairfax
S McPhee
S Morgan
L Nicholls
R Savage
P Young
* The number of meetings held refers to the number of meetings held while the Director was a member of the Board or Committee.
** Mr Hywood attends the Audit and Risk, People and Culture and Sustainability Committee meetings as an invitee of the Committees.
*** Mr Corbett, Chairman, is an ex officio member of all Board committees.
# Formerly known as Personnel Policy and Remuneration Committee until 26 October 2011.
20
directors’ report
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 Access, Disclosure,
Insurance and Indemnity which provides for indemnity by the
Company 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.
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 31 to the financial statements.
The Board of Directors has received advice from the Audit
and 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 22 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 $238,692
• Overseas $213,515
Other assurance and non-assurance services:
• Australia $377,167
• Overseas $603,008.
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.
Roger Corbett, AO
Chairman
Greg Hywood
Chief Executive Officer and Managing Director
23 August 2012
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
21
audiTor’s independence declaraTion
Auditor’s Independence Declaration to the Directors of Fairfax Media
Limited
In relation to our audit of the financial report of Fairfax Media Limited for the financial year ended 24
June 2012, to the best of my knowledge and belief, there have been no contraventions of the auditor
independence requirements of the Corporations Act 2001 or any applicable code of professional conduct.
Ernst & Young
Douglas Bain
Partner
23 August 2012
Liability limited by a scheme approved
under Professional Standards Legislation
22
reMuneraTion reporT
Dear Shareholder
On the following pages you will find the detail of the 2012 Fairfax Media Remuneration Report.
As shareholders will be acutely aware this has been a challenging year for Fairfax and for media companies around the world and has
resulted in reduced underlying profit for the company and a decline in the share price. In these difficult circumstances the Board has
made 5 key decisions relating to remuneration for directors and management:
1. There will be no increase in directors fees for 2013. Fees are set within the cap for fees approved by shareholders in 2010;
2.
3.
4.
5.
Fixed remuneration for executives earning an annual salary of $150,000 or above have been frozen for 2013 unless the company
has pre-existing contractual commitments including in Enterprise Bargaining Agreements;
For the CEO and his direct reports no discretionary Short Term Incentive (“STI”) bonus payments will be made. The CEO and his
direct reports will receive some STI bonus but only for performance targets relating to the achievement of objectively measured
cost savings over the 2012 year;
From the 2013 financial year onwards the Fairfax Long Term Incentive (“LTI”) Plan will operate using performance right allocations
rather than shares. The main reason to change from shares to rights is to remove the entitlement to the payment of dividends on
unvested LTI shares allocated to employees under the Plan; and
From 2013 allocations of LTI rights, the test for vesting of rights will be at three years after the allocation of the rights but there will
be no fourth year retest if the vesting criteria are not met at the three year test.
The STI targets set by the Board for the CEO and his direct reports for 2012 were heavily weighted toward EBIT, revenue and costs.
Costs were broken out as a key target because of the importance the Board placed on the restructuring of the business for the ongoing
financial health of the company. The Board judged these cost targets as critical. It recognised that achievement of the target cost
savings in isolation was unlikely to result in achievement of target EBIT in 2012 because of the likely impact of one off restructure costs
necessarily incurred to achieve the longer term savings.
The cost targets were all achieved at the maximum level for the year. The annualised cost savings achieved by June 2012 were $56
million. Based on this outcome Mr Hywood earned a bonus of $840,000 (35% of his maximum overall STI opportunity). Given the
difficult trading environment he volunteered that the bonus be cut in half. The Board has accepted this offer. Mr Hywood therefore
receives an STI bonus of $420,000 for 2012.
The Remuneration Report details the above matters and also sets out our commitments to diversity as well as important material on
remuneration strategy, structure and outcomes.
The Board commends the Report to you.
In closing, on behalf of the Board I would like to take the opportunity to thank Robert Savage for his important contribution in chairing
the People and Culture Committee before he retired from the Board in June this year.
Sandra McPhee
Chair, People and Culture Committee
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
23
reMuneration report
1. iNtrOdUCtiON
This report forms part of the Company’s 2012 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. remUNeratiON GOVerNaNCe
In 2012 the committee changed its name from the Personnel Policy and Remuneration Committee to the People and Culture Committee
(“P&CC”). The Board has a formal Charter for the P&CC 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 P&CC are:
• Sandra McPhee (member and Chair from 21 May 2012)
• Robert Savage (Chairman up to 20 May 2012 and member to 30 June 2012)
• Roger Corbett
• Michael Anderson
• Peter Young
The P&CC met five times during the year. The Committee’s primary responsibilities are to:
(a) review and approve Fairfax employee remuneration strategies and frameworks
(b)
(c)
(d)
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
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
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
(f)
review the Group’s framework for compliance with occupational, health, safety and environmental regulation and its performance
against the framework, and
(g)
review and approve measurable objectives for achieving gender diversity and assess annually both the objectives and progress.
The CEO, Group General Counsel and Company Secretary and General Manager Human Resources attend P&CC meetings
as invitees except when their own performance or 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 in setting appropriate remuneration levels and processes. No recommendations were received during
the year by external consultants as defined under the Corporations Act.
3. diVerSitY
Fairfax is committed to creating a workplace that is fair and inclusive. As part our commitment, during the financial year several
initiatives were undertaken:
• A Diversity policy was launched company wide by the CEO.
• Additional resources have been allocated including the recruitment of a member of the Organisation Development team who will
have responsibility for driving diversity initiatives.
• The proportion of women employed by the company, in senior executive positions and on the Board is tracked by the CEO and
Board People and Culture Committee and reported in the Quarterly HR report.
•
Leadership development programs have been reviewed and updated. Courses are now shorter in duration and held at Metropolitan
locations to enable more women with carer responsibilities to attend.
• A mentoring program has been established and implemented across the group. Forty four percent of mentors and fifty nine percent of
mentees are females.
The Company is compliant with the Equal Opportunity for Women in the Workplace Act 1999. The workforce gender demographics were
(as at 24 June 2012):
• Proportion of women on the Board: 25%
• Proportion of women in senior management: 26%
• Proportion of women across the organisation: 52%
24
reMuneration report
The following diversity targets and actions have been developed to further drive gender diversity and raise awareness of diversity across
the company:
•
30% female participation in senior management by 2015;
• Conduct further research to gather robust diversity metrics across the business and in individual business units. This will include
conducting a pay equity audit across Fairfax Media. This information will be used to progress plans to address the identified issues;
• The recruitment process for all senior management appointments to include a senior female on the interview panel and at least one
female candidate in the shortlist.
4. remUNeratiON OF NON-exeCUtiVe direCtOrS
Under the Fairfax Constitution, the aggregate remuneration of Non-Executive Directors is set by resolution of shareholders.
The aggregate was last reviewed by shareholders at the 2010 Annual General Meeting and set at $2,100,000 per annum. Within
this limit, the Board annually reviews Directors’ remuneration with advice from the P&CC. The Board also considers survey data
on Directors’ fees paid by comparable companies, and any independent expert advice commissioned.
In light of the current performance of the company and present economic climate the Board resolved that there would be no increase in
Directors’ fees this year nor would the Board seek shareholder approval for an increase in the cap on aggregate Directors’ fees this year.
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 and Risk Committee
Members of Audit and Risk Committee
Chair of People and Culture Committee
Members of People and Culture Committee
Chair of the Nominations Committee
Members of Nominations Committee
Chair of the Sustainability and Corporate Responsibility Committee
Members of Sustainability and Corporate Responsibility Committee
$
364,000
130,000
44,000
33,000
33,000
22,000
30,000
20,000
33,000
22,000
*
The Chairman of the Board does not receive committee fees for membership of either of the People and Culture Committee or the
Nominations Committee.
The fees above do not include statutory superannuation payments.
4.1 RetiReMent benefitS fOR nOn-exeCutive DiReCtORS
The Company makes superannuation contributions on behalf of Non-Executive Directors in accordance with statutory requirements.
Other than superannuation, Non-Executive Directors are not entitled to any retirement benefits.
5. remUNeratiON OF tHe CHieF exeCUtiVe OFFiCer
Mr Gregory Hywood
The remuneration details for the CEO are set out in section 6.6 and 6.9 of this report.
The key terms of Mr Hywood’s remuneration arrangements with the Company includes a Fixed Remuneration of $1.6 million per
year. This is unchanged from last year. The Fixed Remuneration represents the total fixed cost to Fairfax including base salary,
superannuation and other benefits. This will remain unchanged for next year. As well as Fixed Remuneration Mr Hywood is eligible for a
performance bonus and participation in the Long-Term Equity-Based Incentive Scheme (LTI).
Mr Hywood is eligible for a performance bonus of up to 150% of Fixed Remuneration depending on achievement of defined performance
criteria set at the beginning of each financial year. The performance targets are recommended by the P&CC and approved by the Board
each year. Fifty five percent of the Performance Bonus is determined by achievement of financial targets for the Group. The remaining
incentive is based on other Key Performance Indicators (KPI) set by the Board each year depending on the operational and strategic goals
of the Group. These KPIs may also include specific financial and strategic targets. A component of this incentive was (in the past) deferred
in to shares (purchased on market by the Executive Share Plan Trust (“Trust”)). Further details of the plan are outlined in section 6.1.
For the 2012 financial year, Mr Hywood will receive a Performance Bonus of $420,000. The elements of his performance plan are
outlined in the table below. The Board resolved to pay the CEO only those elements relating to cost reduction targets. As part of the
Fairfax of the Future transformation program a run rate of $56 million of savings were achieved by June 2012. Key actions taken during
the year included:
• Rationalisation of production and print functions across Australia and New Zealand
• Restructure of support services including HR and IT
• Reduced unprofitable circulation channels for SMH, The Age and selected printed classified products
•
Improved yield on SMH and The Age subscriptions
• Reduced variable printing costs through production changes
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
25
reMuneration report
Based on this outcome, Mr Hywood was entitled to a bonus of $840,000, or 35% of his maximum incentive opportunity. Given the
difficult trading environment, Mr Hywood volunteered to forgo 50% of his earned bonus ($420,000) which equates to 17.5% of his
maximum STI opportunity. The Board accepted Mr Hywood’s offer. The bonus will be paid in cash.
coMponent
Weighting Measures
payMent at
“target”
payMent at
“MaxiMuM” outcoMe
Corporate and
Operational
75%
Strategic
25%
• EBIT
• Cost
• Revenue
• Employee engagement &
safety performance
• KPIs relating to Transform
the Metro business
• KPIs relating to Improve
Operating Performance
and Re-shape the
business
$900,000
$1,800,000 Only payments relating to achieved
Cost reduction targets were paid.
$300,000
$600,000 Discretion was exercised to pay no
bonus on this measure although
target was achieved. No payment
made for this measure.
total
100%
$1,200,000
$2,400,000
$420,000
Under the LTI Mr Hywood has been entitled to an allocation of shares (purchased on market by the Trust) to the equivalent of fifty
percent of his Fixed Remuneration as an allocation of Fairfax shares each year. In the 2012 financial year Mr Hywood was granted
943,063 shares. These shares vest on the terms set out in section 6.2. Subject to shareholder approval, under section 6.3, Mr Hywood
will be entitled to an allocation of performance rights from the 2013 financial year onwards.
6. remUNeratiON OF OtHer 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 the market so as to attract and retain key people. The
P&CC 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 comprises a mix of fixed and performance-based components:
•
•
a fixed remuneration package, and
performance incentives.
The Fixed Remuneration component includes cash, superannuation and any benefits employees choose to salary sacrifice, for
example, motor vehicle and parking. It represents the total fixed cost to the Company including fringe benefits tax payable.
Payment of performance-based incentives is determined by the annual financial performance of the Company, as well as specific
strategic and operational objectives set at the beginning of the year relevant to the executive. The CEO conducts performance reviews
with his direct reports each year, and presents the outcomes and proposed incentive payments to the P&CC. The P&CC reviews and
approves the remuneration packages and bonus payments to the CEO’s direct reports. On the recommendations of the CEO, the P&CC
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 year ended 24 June 2012.
6.1 PeRfORMAnCe-bASeD SHORt-teRM inCentiveS (“bOnuS PAyMentS”) fOR SeniOR exeCutiveS
Annual bonus payments for senior executives place an emphasis on the achievement of annual financial performance criteria for the
Group as well as specific strategic and operational criteria. For key senior executives other than the CEO, the bonus criteria were set by
the P&CC. The bonus opportunity consists of three components:
• Corporate Level – drives corporate financial results (EBIT) and encourages senior management to work together for the overall
benefit of the group
• Business Unit Level – drives business unit financial and other operational metrics to encourage team behaviour (e.g. EBIT, cost
reductions, audience, market position and revenue)
• Strategic Level – indicators of future group, business unit and personal success (delivery against milestones and personal
development) to drive the delivery of the Corporate strategy.
26
reMuneration report
Each senior executive has a target bonus opportunity depending on the accountabilities of the role and impact on Company or business
unit performance. There are two levels of performance:
•
“on-target” performance – where the target bonus will be earned (e.g. for EBIT the “on-target” performance is typically achievement
of budget or prior year) or
•
“maximum” performance – where performance is such that the maximum level of incentive will be earned.
The bonus arrangement allows for a cash payment and a component deferred into shares (Deferred Component). Any amounts
earned from the Strategic component and 50% of any amounts earned above “on-target” performance for Corporate and Business Unit
performance are deferred into shares.
For most executives reporting directly to the CEO, the on-target bonus opportunity is 45% of the executive’s fixed remuneration package
and the maximum incentive opportunity is 90% of the fixed remuneration package.
For all senior executives reporting directly to the CEO, 50% of the bonus is based on corporate measures, 25% is based on business
unit financial and operational performance and 25% is based on other strategic key performance indicators (KPIs).
At the end of the financial year, actual performance is assessed against the measures set at the beginning of the year. The number of
shares for the Deferred Component for each senior executive depends on their role and responsibilities, and on actual performance.
Shares purchased for the Deferred Component are valued at face value based on the Volume Weighted Opening Price over the 10 days
immediately after the financial year’s results are announced to the market in August. Shares are purchased on market by the trustee
of the Executive Share Plan and allocated to the senior executive.
The shares for the Deferred Component are required to be held in the Trust for two years and the senior executive receives dividends
on the shares during this period.
At the end of the two year period, the ownership of the shares is transferred to the senior executive. If the senior executive resigns
or is terminated with cause prior to the end of the two year period, they forfeit the shares.
The balance of the bonus is paid to the senior executive as cash.
The Deferred Component of the incentive plan was introduced for the 2012 performance year. Prior to this, any bonus payments were
paid to the executives as cash.
6.2 LOnG teRM equity-bASeD inCentive SCHeMe (Lti)
Senior executives whose roles and skills are critical to the strategy of the Group are eligible to participate in the Company’s
equity-based LTI.
The LTI plan which has operated, up to and including, the 2012 financial year commenced operation from the 2008 financial year. It
aims to reward executives for creating growth in shareholder value. For Allocations up to the 2012 financial year, participants in the LTI
receive an allocation of Company shares (Allocation). The number of Company shares to which a participant is entitled depends on the
participant’s role and responsibilities.
Shares for the Allocations were purchased on market by the trustee of the Executive Share Plan. The shares are allocated to the
employee and held by the trustee in trust until the Allocation vests or is forfeited. Executives receive any dividends paid on the shares
while they are in the Trust.
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 as described in the table below:
tsr perforMance
Under 50th percentile
50th percentile
50th to 75th percentile
Above 75th percentile
% of allocation that vests
Nil
50% of Allocation
Straight line pro rata
100%
The other 50% 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
Less than 7% CAGR
7% CAGR
7% to 10% CAGR
10% CAGR or above
% of allocation that vests
Nil
25%
Straight line pro rata
100%
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
27
reMuneration report
OtHeR teRMS Of tHe Lti
On termination of an executive’s employment, vesting of rights depend on the circumstances of the termination. If an executive resigns,
unvested allocations will generally be forfeited. Although the Board has discretion to allow vesting, generally the Board will not exercise
this discretion unless there are special circumstances. On termination for 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.
In the circumstances of an offer to acquire the Company, the Board has a discretion regarding vesting.
StAtuS AnD key DAteS – unveSteD Lti SCHeMe
grant date
perforMance testing WindoW
expiry date
(if hurdle not Met)* perforMance status
18 January 2008
1 July 2007 – 30 June 2010
30 June 2011
26 August 2008
1 July 2008 – 30 June 2011
30 June 2012
23 June 2010
1 July 2009 – 30 June 2012
30 June 2013
17 November 2010 1 July 2010 – 30 June 2013
13 September 2011 1 July 2011 – 30 June 2014
30 June 2014
30 June 2015
Performance hurdles were not achieved.
Shares for this Allocation have been forfeited
and returned to the Trust.
Performance hurdles were not achieved.
Shares for this Allocation have been forfeited
and returned to the Trust.
Performance hurdles have not yet been exceeded.
Performance hurdle is now in the retesting period.
Performance testing window not yet commenced.
Performance testing window not yet commenced.
* Retest of conditions performed in the fourth year, if performance hurdle is not met in the initial performance testing window.
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)
$m
$m
Cents
Cents
%
ifrs
2012
2,328
212.0
8.7
3.0
(40.5)
ifrs
2011
2,466
285.0
11.6
3.0
(23.9)
ifrs
2010
2,482
290.7
11.8
2.5
11.3
ifrs
2009
2,600
241.3
12.4
2.0
(52.1)
ifrs
2008
2,909
395.9
23.4
20.0
(34.7)
* TSR comprises share price appreciation and dividends, gross of franking credits, reinvested in the shares.
Source: Bloomberg.
6.3 PeRfORMAnCe RiGHtS PLAn (PRP)
Following a review of the instrument used in the Long-Term Equity-Based Incentive Scheme with the advice of PwC, the Board decided
that future allocations will be in the form of performance rights. The terms and conditions of the scheme are the same as outlined in 6.2
including performance hurdles and termination conditions. However instead of allocating shares purchased on market, allocations are in
the form of performance rights. These rights allow that the executives acquire shares at a future point in time subject to achievement of the
vesting criteria. No dividends will be payable over the vesting period. The vesting period will remain at three years. There will no longer be a
fourth year re-test of the performance hurdles. If the performance rights vest the Executive will acquire them for nil consideration.
6.4 RetiReMent benefitS fOR exeCutiveS
Except for a very small number of long serving executives who are members of a defined-benefit superannuation plan, retirement benefits
are delivered through contribution accumulation superannuation plans. The defined-benefit funds (which are closed to new entrants)
provide defined lump sum benefits based on years of service, retirement age and the executive’s remuneration at the time of retirement.
6.5 exeCutive SeRviCe AGReeMentS
The terms of employment of the CEO are set out in section 5 and below.
The remuneration and other terms of employment for the key management personnel are set out in written agreements. These
service agreements are unlimited in term but may be terminated 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 agreement sets out the Fixed Remuneration,
performance-related bonus opportunities, termination rights and obligations and eligibility to participate in the LTI.
Executive salaries are reviewed annually. Key non-financial terms in the executive service agreements are set out below. Remuneration
details are set out in sections 6.8 and 6.9.
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
28
reMuneration report
(c)
(d)
is charged with any criminal offence which, in the reasonable opinion of the Company, may embarrass or bring the Fairfax Group
into disrepute, or
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, the payment is calculated on the basis of fixed
remuneration excluding bonuses and non-cash incentives.
naMe of
executive
Greg Hywood
coMpany
terMination
notice period
12 months
eMployee
terMination
notice period
6 months
Brian Cassell
12 months
4 months
Gail Hambly(1)
18 months
3 months
Andrew Lam-Po-Tang(2)
Christopher Maher
24 weeks
3 months
24 weeks
3 months
Michelle Williams
12 months
4 months
(1) Participant in the Fairfax defined benefit superannuation scheme.
(2) Maximum term contract for a 3 year period.
post-eMployMent restraint
12 month no solicitation of employees or clients
6 months no work for a competitor of the Fairfax Group
12 month no solicitation of employees or clients
6 months no work for a competitor of the Fairfax Group
12 month no solicitation of employees or clients
6 months no work for a competitor of the Fairfax Group
12 month no solicitation of employees or clients
6 month no solicitation of employees or clients
4 months no work for a competitor of the Fairfax Group
12 month no solicitation of employees or clients
4 months no work for a competitor of the Fairfax Group
6.6 ACtuAL ReMuneRAtiOn Of DiReCtORS
The following table outlines the actual payments made to Directors during the performance year.
Base salary &
terMination
non-executive
directors fees
cash
Bonus superannuation
total
excluding
shares
value of
shares
vested
total
including
shares
R Corbett
G Hywood(3)
JB Fairfax(2)
NJ Fairfax(2)
B McCarthy(4)
S McPhee
M Anderson(1) 2012
2011
2012
2011
2011
2012
2011
2012
2011
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
total remuneration:
2012
Directors
2011
R Savage(5)
S Morgan
L Nicholls
P Young
279,942
–
–
–
–
–
–
1,551,846
1,178,570
3,084,323
–
–
–
–
–
–
–
–
–
–
119,296
120,636
397,000
378,559
55,681
90,000
193,867
–
24,897
–
175,156
153,633
130,000
164,513
174,000
165,672
163,000
155,267
212,678
202,027
–
–
–
–
–
–
–
420,000
290,000
57,952
–
–
–
–
–
–
–
–
–
–
35,931
10,857
35,730
34,070
4,620
8,100
17,448
48,077
32,687
25,000
15,764
13,827
11,700
14,806
15,660
14,910
14,670
13,974
10,763
18,182
1,831,788
4,262,893
1,461,130
1,614,752
420,000
347,952
196,395
200,381
435,169
131,493
432,730
412,629
60,301
98,100
211,315
2,019,923
1,526,154
3,167,275
190,920
167,460
141,700
179,319
189,660
180,582
177,670
169,241
223,441
220,209
3,909,313
6,425,978
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
435,169
131,493
432,730
412,629
60,301
98,100
211,315
2,019,923
1,526,154
3,167,275
190,920
167,460
141,700
179,319
189,660
180,582
177,670
169,241
223,441
220,209
3,909,313
6,425,978
1) M Anderson took a leave of absence from the Board and acted as Executive Chairman of Fairfax Radio from 27 October 2011 to 1 March 2012.
2) NJ Fairfax resigned from the Board effective 29 November 2011 and JB Fairfax retired on 11 November 2010.
3) G Hywood was previously a Non-Executive Director of Fairfax, was appointed in an acting capacity to CEO role on 7 December 2010.
On 7 February 2011 was appointed to the role of CEO and Managing Director on an ongoing basis.
4) B McCarthy ceased to be employed by Fairfax on 6 December 2010.
5) R Savage retired from the Board effective 30 June 2012.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
29
reMuneration report
6.7 key MAnAGeMent PeRSOnneL
The following are the key management personnel for the financial year in addition to the Non-Executive Directors listed above.
kMp
Greg Hywood
Brian Cassell
Gail Hambly
Andrew Lam-Po-Tang*
Christopher Maher*
Michelle Williams*
title
Chief Executive Officer
Chief Financial Officer
Group General Counsel and Company Secretary
Chief Information and Technology Officer
Director of Strategy and Corporate Development
General Manager Human Resources
* Included in the definition of KMP for the first time in the 2012 financial year.
Due to a Group restructure and centralisation of corporate functions each of Andrew Lam-Po-Tang, Christopher Maher and Michelle
Williams have become key management personnel in 2012.
6.8 ACtuAL ReMuneRAtiOn Of tHe exeCutiveS WHO ARe key MAnAGeMent PeRSOnneL
The following table outlines the actual payments made to executives during the performance year.
Base
salary
cash
Bonus
super-
annuation
total
excluding
shares
value of
shares
vested
G Hywood – Chief
Executive Officer(1)
B Cassell – Chief
Financial Officer
G Hambly – Group
General Counsel and
Company Secretary
A Lam-Po-Tang –
Chief Information and
Technology Officer(2)
C Maher – Director of
Strategy and Corporate
Development
M Williams – General
Manager Human
Resources
TOTAL
2012
2011
2012
2011
2012
2011
1,551,846
1,203,467
726,847
717,045
542,189
502,872
420,000
290,000
225,000
118,919
190,000
162,855
48,077
32,687
48,077
50,000
69,235
61,805
2,019,923
1,526,154
999,924
885,964
801,424
727,532
2012
217,361
150,000
19,562
386,923
2012
337,174
110,000
28,916
476,090
2012
306,761
95,000
26,316
428,077
2012
2011
3,682,178
1,190,000
240,183
5,112,361
2,423,384
571,774
144,492
3,139,650
–
–
–
–
–
–
–
–
–
–
–
perforMance
related
total
21%
19%
23%
13%
24%
22%
39%
23%
22%
total
including
shares
2,019,923
1,526,154
999,924
885,964
801,424
727,532
367,361
476,090
428,077
5,112,361
3,139,650
1) G Hywood was previously a Non-Executive Director of Fairfax, was appointed in an acting capacity to CEO role on 7 December 2010.
On 7 February 2011 was appointed to the role of CEO and Managing Director on an ongoing basis.
2) A Lam-Po-Tang commenced with the Company on 2 February 2012.
All executives are employees of the Company and the Group.
30
reMuneration report
6.9 ReMuneRAtiOn Of DiReCtORS AnD key MAnAGeMent PeRSOnneL AS DefineD unDeR tHe Corporations aCt 2001
AnD ReGuLAtiOnS (ACCOuntinG tReAtMent)
DiReCtORS
This table sets out remuneration which includes post employment and share based long-term incentive benefits granted during the
financial year.
M Anderson(1)
R Corbett
JB Fairfax(2)
NJ Fairfax(2)
G Hywood(3)
B McCarthy(4)
S McPhee
S Morgan
L Nicholls
R Savage(5)
P Young
Base salary &
terMination
399,238
120,636
397,000
378,559
55,681
90,000
193,867
1,551,846
1,203,467
3,084,323
175,156
153,633
130,000
164,513
174,000
165,672
163,000
155,267
212,678
202,027
2012
2011
2012
2011
2011
2012
2011
2012
2011
2011
2012
2011
2012
2011
2012
2011
2012
2011
2012
2011
cash
Bonus
–
–
–
–
–
–
–
420,000
290,000
57,952
–
–
–
–
–
–
–
–
–
–
superannuation
long
service
leave
total
excluding
shares
value of
shares(6)
total
including
shares
35,931
10,857
35,730
34,070
4,620
8,100
17,448
48,077
32,687
25,000
15,764
13,827
11,700
14,806
15,660
14,910
14,670
13,974
10,763
18,182
–
–
–
–
–
–
–
5,084
–
–
–
–
–
–
–
–
–
–
–
–
5,084
–
435,169
131,493
432,730
412,629
60,301
98,100
211,315
2,025,007
1,526,154
3,167,275
190,920
167,460
141,700
179,319
189,660
180,582
177,670
169,241
223,441
220,209
–
–
–
–
–
–
–
333,548
–
(597,556)
–
–
–
–
–
–
–
–
–
–
435,169
131,493
432,730
412,629
60,301
98,100
211,315
2,358,555
1,526,154
2,569,719
190,920
167,460
141,700
179,319
189,660
180,582
177,670
169,241
223,441
220,209
3,914,397
6,425,978
333,548
(597,556)
4,247,945
5,828,422
total remuneration:
Directors
2012
2011
3,292,918
5,877,645
420,000
347,952
196,395
200,381
1) M Anderson took a leave of absence from the Board and acted as Executive Chairman of Fairfax Radio from 27 October 2011 to 1 March 2012.
2) NJ Fairfax resigned from the Board effective 29 November 2011 and JB Fairfax retired on 11 November 2010.
3) G Hywood was previously a Non-Executive Director of Fairfax, was appointed in an acting capacity to CEO role on 7 December 2010.
On 7 February 2011 was appointed to the role of CEO and Managing Director on an ongoing basis.
4) B McCarthy ceased to be employed by Fairfax on 6 December 2010.
5) R Savage retired from the Board effective 30 June 2012.
6) Amount includes the amortised cost of the fair value of rights to shares issued but not yet vested. Credits relate to the reversal of the prior
years amortised cost following forfeiture due to departure. No Deferred Component of the annual bonus was paid.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
31
reMuneration report
exeCutiveS
This table sets out remuneration which includes post employment and share based long-term incentive benefits granted during the
financial year.
G Hywood – Chief Executive Officer(1)
B Cassell – Chief Financial Officer
G Hambly – Group General
Counsel and Company Secretary
A Lam-Po-Tang – Chief Information
and Technology Officer(2)
C Maher – Director of Strategy
and Corporate Development
M Williams – General Manager
Human Resources
tOtAL
Base salary
cash
Bonus
super-
annuation
2012
2011
2012
2011
2012
2011
1,551,846
1,203,467
726,847
717,045
542,189
502,872
420,000
290,000
225,000
118,919
190,000
162,855
48,077
32,687
48,077
50,000
69,235
61,805
long
service
leave
expense
5,084
–
24,167
26,799
29,486
13,122
total
excluding
shares
2,025,007
1,526,154
1,024,091
912,763
830,910
740,654
value of
shares(3)
333,548
–
138,989
176,441
107,360
141,194
total
including
shares
2,358,555
1,526,154
1,163,079
1,089,204
938,270
881,848
2012
217,361
150,000
19,562
–
386,923
–
386,923
2012
337,174
110,000
28,916
10,910
487,000
47,483
534,483
2012
2012
2011
306,768
95,000
3,682,178 1,190,000
571,774
2,423,384
26,316
240,183
144,492
18,520
88,167
39,921
446,597
5,200,528
3,179,571
38,063
665,443
317,635
484,659
5,865,969
3,497,206
1) G Hywood was previously a Non-Executive Director of Fairfax, was appointed in an acting capacity to CEO role on 7 December 2010.
On 7 February 2011 was appointed to the role of CEO and Managing Director on an ongoing basis.
2) A Lam-Po-Tang commenced with the Company on 2 February 2012.
3) Amount includes the amortised cost of the fair value of rights to shares issued but not yet vested. Credits relate to the reversal of the prior
years amortised cost following forfeiture due to departure. No Deferred Component of the annual bonus was paid.
All executives are employees of the Company and the Group.
32
reMuneration report
Shares granted to executives who are key Management Personnel during the performance year
perforMance
nuMBer of
condition(1)
shares granted(2)
fair value
per shares(3)
MaxiMuM value
of grant(4)
G Hywood – Chief Executive Officer
B Cassell – Chief Financial Officer
G Hambly – Group General
Counsel and Company Secretary
A Lam-Po-Tang – Chief Information
and Technology Officer
C Maher – Director of Strategy
and Corporate Development
M Williams – General Manager
Human Resources
TSR
EPS
TSR
EPS
TSR
EPS
TSR
EPS
TSR
EPS
TSR
EPS
471,531
471,531
137,038
137,038
110,515
110,515
–
–
64,540
64,540
46,858
46,858
$0.57
$0.80
$0.57
$0.80
$0.57
$0.80
$0.57
$0.80
$0.57
$0.80
$0.57
$0.80
$268,773
$377,225
$645,998
$78,112
$109,630
$187,742
$62,994
$88,412
$151,406
–
–
–
$36,788
$51,632
$88,420
$26,709
$37,486
$64,195
The maximum value of unvested shares in the LTI plans for FY2009, FY2010, and FY2011 is $1,923,043. The minimum total value of all
unvested shares for all plan years is nil.
(1) LTI shares are subject to performance hurdles that are outlined in section 6.2. Rights to LTI shares lapse where the applicable
performance conditions are not satisfied on testing. As the LTI share rights only vest on satisfaction of performance conditions which are
to be tested in future fiscal periods, fiscal 2011 LTI shares have not yet been forfeited or vested.
(2) The grants made to Executives constituted their full LTI entitlement for fiscal 2012 and were made on 13 September 2011 subject to the
terms summarised in section 6.2.
(3) Fair value per LTI share was calculated by independent consultants PwC as at the grant date of 13 September 2011.
(4) The maximum value of the grant has been estimated based on the fair value per instrument. The minimum total value of the grant is nil
(this assumes none of the applicable performance conditions are met). The maximum value has been calculated to be nil for Executives
who have departed during the period.
6.10 OPtiOnS
During the year ended 24 June 2012:
•
•
•
•
no options were granted to Directors or key management personnel (2011: nil)
no options held by Directors or key management personnel vested (2011: nil)
no options held by Directors or key management personnel lapsed (2011: nil), and
no options held by Directors or key management personnel were exercised (2011: nil).
6.11 LOAnS tO DiReCtORS AnD key MAnAGeMent PeRSOnneL
During the year ended 24 June 2012, there were no loans to Directors or to key management personnel (2011: nil).
6.12 HeDGinG RiSk On SeCuRitieS fORMinG PARt Of ReMuneRAtiOn
The rules of the Fairfax Employee Share Plans prohibit employees from creating any encumbrance on unvested share rights. Under
the Board approved Fairfax Securities Trading Policy, the Directors and certain senior employees 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.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
33
corporaTe GoVernance
The Company’s compliance with the ASX Corporate
Governance Council’s Corporate Governance Principles
and Recommendations, (“ASX Recommendations”)
is set out in the following table.
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
Disclose the process for evaluating the performance of senior executives
Provide the information indicated in the Guide to reporting on Principle 1
1.2
1.3
Principle 2: Structure the board to add value
2.1
2.2
2.3
A majority of the Board should be independent Directors
The chair should be an independent Director
The roles of chair and Chief Executive Officer should not be exercised by the
same individual
The Board should establish a nomination committee
Disclose the process for evaluating the performance of the Board, its committees
and individual Directors
Provide the information indicated in Guide to reporting on Principle 2
2.4
2.5
2.6
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
3.3
3.4
3.5
Establish a policy concerning diversity and disclose the policy or a summary of
that policy
Disclose the measurable objectives for achieving gender diversity set by the Board in
accordance with the diversity policy and progress towards achieving them
Disclose the proportion of women employees in the whole organisation, women in
senior executive positions and women on the Board
Provide the information indicated in the Guide to reporting on Principle 3
Principle 4: Safeguard integrity in financial reporting
4.1
4.2
The Board should establish an audit committee
Structure the audit committee so that it:
• consists of only Non-Executive Directors
• consists of a majority of independent Directors
•
• has at least three members.
The audit committee should have a formal charter
Provide the information indicated in Guide to reporting on Principle 4
is chaired by an independent chair, who is not chair of the Board, and
4.3
4.4
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
Provide the information indicated in Guide to reporting on Principle 5
5.2
34
coMpliance
pages
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
35
23 - 33
26, 35
37
37
37
36
36
16 - 17, 20,
36 - 37
37
24 - 25
24 - 25
24 - 25
24, 37
38
36
✔
38
✔ 16 - 17, 20, 38
✔
✔
39
39
corporate governance
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
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
Board should require management to design and implement the risk management and
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
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
Provide the information indicated in Guide to reporting on Principle 7
Principle 8: Remunerate fairly and responsibly
8.1
8.2
The Board should establish a remuneration committee
The remuneration committee should be structured so that it consists of a majority
of independent directors, is chaired by an independent director and has at least
three members
Clearly distinguish the structure of Non-Executive Directors’ remuneration from that
of executive Directors and senior executives
Provide the information indicated in Guide to reporting on Principle 8
6.2
7.2
7.3
7.4
8.3
8.4
coMpliance
pages
✔
✔
✔
✔
✔
✔
✔
✔
✔
✔
39
39
40
40
40
40
23 - 33
23 - 33
23 - 33
23 - 33
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.fairfaxmedia.com.au, contains summaries of the Fairfax Board Charter, Nomination
Committee Charter, Code of Conduct, Sustainability and Corporate Responsibility Committee Charter, 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 People and Culture
Committee Charter and the Diversity Policy are 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 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 the issue 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.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
35
corporate governance
Membership of the Board and its committees at the date of this report is set out below:
coMMittee MeMBership
director
R Corbett
G Hywood
M Anderson
J Cowin
S McPhee
S Morgan
L Nicholls
J Millar
P Young
MeMBership type
audit and risk
noMinations
Independent Chair
CEO/Managing Director
Independent
Independent
Independent
Independent
Independent
Independent
Independent
Member
–
–
–
–
–
Chair
–
Member
Chair
–
–
–
–
–
–
–
Member
people
and culture
sustainaBility
and corporate
responsiBility
Member
–
Member
–
Chair
–
–
–
Member
Member
–
Chair
–
Member
–
–
–
–
The qualifications and other details of each member of the Board are set out on pages 16 - 17 of this report.
Except for the Chief Executive Officer, all Directors (including the Chair) are considered by the Board to be independent,
Non-Executive Directors.
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 as required. The Committee is comprised of
Non-Executive independent Directors. 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
members’ performance is reviewed regularly and to recommend changes from time to time to ensure the Board has an appropriate mix
of skills and experience.
The Committee uses the following principles to recommend candidates and provide advice and other recommendations to the Board:
•
•
a majority of the 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
•
•
•
•
identifying and recommending individuals qualified to be Board members, taking into account such factors as it deems appropriate
identifying Board members qualified 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 by the Chairman.
36
corporate governance
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, potential material relationship with the Company or circumstance relevant to his/her independence.
Directors have determined that all Directors except the Chief Executive Officer 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
•
•
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.
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; disclosing 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.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
37
corporate governance
aUdit aNd riSK COmmittee
The Audit and Risk 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 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 for Board approval and oversees key finance and treasury functions
formulates and oversees 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
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 20. The Chair of
the Committee may, at the Company’s expense, obtain external advice, or obtain assistance and information from officers of the Group,
or engage other support as reasonably required from time to time.
CHarter OF aUdit iNdePeNdeNCe
The Board has also adopted a Charter of Audit Independence. 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 the rotation of the lead audit partner and the independent review partner for the Company at least every five
years. The 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. The auditor must also confirm that neither it nor its
partners has any financial or material business interests in the Company outside of the supply of professional services.
38
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.
ASX and press releases of a material nature must be approved by a Disclosure Officer.
The Disclosure Officers, in conjunction with the Chair of the Board are 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.fairfaxmedia.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.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
39
corporate governance
riSK maNaGemeNt aNd iNteGritY OF FiNaNCial rePOrtiNG
The Board oversees the risk management and internal compliance and control system.
The system seeks to provide a consistent approach to identifying, assessing, and reporting risks, whether they are 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, internal audit 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
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
under the direction of the Audit and Risk Committee, Internal Audit conducts a program of internal process control reviews over
key areas, based on their importance to the Company, and provides 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 and 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 Manager 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 and Risk Committee in the absence of management. Internal Audit reports its results to each meeting of the Audit and Risk
Committee and the Internal Audit Manager attends the meetings.
The Board has received written assurances from the Chief Executive and the Chief Financial Officer that in their opinion:
(a)
(b)
the financial statements and associated notes comply in all material respects with the accounting standards as required by the
Corporations Act 2001
the financial statements and associated notes give a true and fair view, in all material respects, of the financial position as at the
end of the financial year 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 the end of the financial year, 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 People and Culture Committee , its Charter, the Company’s remuneration policies for Non-Executive
Directors and the remuneration of the CEO and senior executives is set out in the Remuneration Report beginning on page 23.
40
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 blackout periods when no trading is to be undertaken and a process for authorisation of trading at other
times. Designated People means the Directors, CEO, Company Secretary, those 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 black-out periods Designated People will not be authorised to trade. Outside of the trading black-out periods, Directors
must obtain approval from the Chair (or the chairman of the Audit and Risk Committee for approvals for the Chair to trade). Other
Designated People must obtain approval from the Company Secretary who will consult with the Chair.
Each Director must notify the Company Secretary of any change in the Director’s interest in Fairfax 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.
SUStaiNaBilitY aNd COrPOrate reSPONSiBilitY COmmittee
In 2011, the Board established a Sustainability and Corporate Responsibility Committee and adopted a supporting Charter.
The primary purpose of the Committee is to advise and assist the Board in setting an overall direction for the Company’s commitment
to building a long term future, which includes operating its business responsibly, ethically and sustainably (financially and otherwise).
To fulfil this purpose, the Committee’s role includes:
1.
2.
3.
4.
5.
6.
7.
8.
9.
providing strategic leadership to the Board and management in overseeing the development and implementation of a sustainability
and corporate social responsibility (CSR) strategy and related policies
fostering a workplace culture which values sustainable and socially responsible business practices
identifying and monitoring current and emerging CSR trends, risks and opportunities and ensuring that the Board is kept up to
date with market and investor expectations on CSR activities
considering and endorsing proposals by management to enhance the Group’s CSR profile, reputation and activities
ensuring the Board, employees, the investment community and other stakeholders are kept properly informed of the Group’s
CSR initiatives and performance
overseeing the Group’s compliance with corporate governance and legal requirements in relation to CSR issues and
related reporting
monitoring that executives are remunerated having regard to performance metrics that recognise both tangible and intangible
value creation
dealing with such matters as the Committee deems necessary to carry out the functions set out above including interaction with
other Board Committees where appropriate, and
reviewing the adequacy of this Charter in light of emerging CSR trends and obligations and making recommendations to the
Board for approval.
The Committee’s membership and Chair are determined by the Board from time to time and must consist of at least three Directors,
no more than one member may be an executive Director. Other Directors are entitled to attend the Committee meetings. The members
of the Sustainability and Corporate Responsibility Committee, and details of their attendance at Committee meetings, are set out on
page 20. In order to carry out the Committee’s duties, the Chair of the Committee is authorised (at the Company’s expense) to engage
external advice, obtain assistance and information from officers of the Group and engage such other support as is reasonably required
from time to time.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
41
ManaGeMenT discussion and analYsis reporT
tradiNG OVerVieW
Trading during the 2012 financial year continued to be impacted by subdued levels of consumer confidence and both structural and
cyclical challenges. Overall revenue of $2.3 billion was down 6 per cent on the prior year. Weakness in the Company's key Australian
advertising markets saw advertising revenue decline 5 per cent in the first half and 7 per cent in the second half.
The performance of print publishing businesses, particularly the Company's main metropolitan titles, reflected moves by various
advertisers to cut advertising spend in response to difficult trading conditions. Retail, financial services, government, motoring and
employment advertising categories accounted for much of the revenue deterioration. The Company's digital revenue streams continued
to grow, up 20 per cent in 2012, as advertisers allocated more of their advertising spend to digital.
These revenue conditions resulted in underlying earnings before interest, tax, depreciation and amortisation (EBITDA) of $506 million,
down 17% on the prior year. Accordingly, the annual asset impairment assessment conducted each year in accordance with Accounting
Standards produced a $2.8 billion non-cash intangible asset impairment charge. This together with other restructuring and redundancy
costs resulted in a net reported loss after tax of $2.7 billion. The asset impairment outcome is the result of a further write down of the
carrying values of mastheads, goodwill and other intangible assets to reflect current trading levels and future expectations. The charge
does not impact the underlying earnings position of the Company or borrowing arrangements.
Excluding this significant charge, the underlying net profit from trading after tax of $212 million was down by 26% on the prior year. See
page 44 for a reconciliation to reported net profit after tax.
In February, the Company announced a three-year Fairfax of the Future program to fundamentally restructure the business through a
series of strategic operational changes that will reshape the Company and reset its cost base. A $21 million EBITDA benefit was realised
during the year as a result of this program's 2012 initiatives and will provide a full year benefit of $56 million in 2013.
The Fairfax of the Future program has three key objectives:
• Positioning the Metro Media business to address further structural decline in print advertising and accelerate its readiness to move
to a digital-only model if it makes commercial sense to do so in the future;
• Reducing group-wide costs and corporate overhead in line with the revised business structure; and
• Strengthening the Fairfax Media balance sheet during a period when restructuring costs will be incurred.
As part of these changes, the Company announced in June that two of 15 print facilities, Chullora and Tullamarine, would close in 2014.
The Chullora and Tullamarine plants were built at a time when almost all of Metro Media’s content, including large weekend classified
sections, were delivered via printed daily newspapers. The rising popularity of digital delivery alternatives has seen a reduction in print
volumes and caused surplus capacity in these plants which have significant overheads. The Chullora and Tullamarine printing work will
be channelled to other parts of Fairfax print network to ensure optimal use of our facilities.
Total savings from the Fairfax of the Future program are expected to be $235 million on an annualised basis by June 2015. The one-off
costs associated with achieving these cost savings are projected to be approximately $248 million on a net basis after allowing for
proceeds from sale of the print sites. Of these one off costs, restructure and redundancy costs of $140 million were accounted for in
fiscal 2012.
FiNaNCial POSitiON
Fairfax Media continues to generate strong free cash flows with net cash inflow from trading activities of $496 million. The Company
reduced its net debt by $574 million after $57 million of capital expenditure on software, plant and equipment and acquisition
expenditure; $83 million in dividend payments; $228 million income tax and net interest obligations; and surplus cash flow plus proceeds
from the Trade Me divestment.
Following the successful IPO of Trade Me in December 2011, Fairfax executed a fully underwritten share placement for the sale of a
further 15% of Trade Me in June 2012 to reduce its holding from 66% to 51%. This transaction provided Fairfax with $422 million of
proceeds net of transaction costs.
The sell down of Fairfax’s Trade Me interest strengthened Fairfax’s balance sheet and was prudent in the context of the current trading
and announced restructuring activities. Repayment of the $557 million Eurobond facility was effected during June 2012 from cash
reserves and other undrawn facilities.
42
ManageMent discussion and analysis report
Since June 2008, the company has reduced its net debt position substantially.
net Debt SiGnifiCAntLy ReDuCeD
SPS redeemed April 2011
Net debt
A$billion
3.0
2.5
2.0
1.5
1.0
0.5
0.0
FY2008
FY2009
FY2010
FY2011
FY2012
Net debt was well within all covenant limits at year end. Total net debt of $914 million includes $99 million of net debt within Trade Me.
The Company's debt repayments in fiscal 2013 are minimal and maturing facilities will remain undrawn.
The following table shows the maturity of existing funding facilities the company has in place.
fACiLitieS MAtuRinG in 2013 ARe unDRAWn
Undrawn
Drawn
A$million
900
800
700
600
500
400
300
200
100
0
FY2013
FY2014
FY2015
FY2016
FY2017
FY2018
FY2019
Following balance date, directors have declared a dividend of 1 cent per ordinary share, fully franked. Combined with the interim
dividend of 2 cents, this brings the total dividend paid to 3 cents for the year and represents a dividend payout ratio of 35%. The
Dividend Reinvestment Plan was not in operation for the payment of these dividends.
The Board continually assesses the level of the dividend payout ratio in light of trading conditions, restructuring costs and capital requirements.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
43
ManageMent discussion and analysis report
reCONCiliatiON OF StatUtOrY tO UNderlYiNG PerFOrmaNCe
Total revenue
Associate profits
Expenses
Operating ebitDA
Net (loss)/profit attributable
to members of the Company
SPS dividend (net of tax)
Net (loss)/profit after tax
and SPS dividend
(Loss)/earnings per share
as reported
significant iteMs
underlying trading
perforMance
24 June 2012
$’000
26 June 2011
$’000
24 June 2012
$’000
26 June 2011
$’000
24 June 2012
$’000
26 June 2011
$’000
2,328,066
1,746
4,888,418
2,465,541
3,362
2,549,588
(2,558,606)
(80,685)
–
–
–
–
3,064,628
(3,064,628)
688,129
(688,129)
2,328,066
1,746
1,823,790
506,022
(2,732,397)
(390,861)
(3,064,628)
(674,674)
205,424
–
10,034
–
–
–
2,465,541
3,362
1,861,459
607,444
283,813
10,034
(2,732,397)
(400,895)
(2,937,821)
(674,674)
205,424
273,779
(116.2)
(17.0)
8.7
11.6
Refer to Note 4 of the Financial Statements for further breakdown of the significant items reported during the year.
reCONCiliatiON OF tradiNG tO OPeratiNG CaSH FlOW
Cash flow from trading activities
Interest received
Finance costs and income tax paid
Net cash flow from operating activities
24 June 2012
$’000
26 June 2011
$’000
495,997
9,986
(238,334)
267,649
624,280
9,856
(202,711)
431,425
44
FairFax media limited
aCN 008 663 161
annual financial
reporT
Consolidated Income Statement
Consolidated Statement of Comprehensive Income
Consolidated Balance Sheet
Consolidated Cash Flow Statement
Consolidated Statement of Changes in Equity
notes to the financial Statements
Investments accounted for using the equity method
Inventories
Intangible assets
Income tax expense
Interest bearing liabilities
01 Summary of significant accounting policies
02 Revenues
03 Expenses
04 Significant items
05
06 Dividends paid and proposed
07 Receivables
08
09 Assets and liabilities held for sale
10 Other financial assets
11
12 Available for sale investments
13
14 Property, plant and equipment
15 Derivative financial instruments
16 Deferred tax assets and liabilities
17 Payables
18
19 Provisions
20 Pension assets and liabilities
21 Contributed equity
22 Reserves
23 Retained profits
24 Earnings per share
25 Commitments
26 Contingencies
27 Controlled entities
28 Acquisition and disposal of controlled entities
29 Business combinations
30 Employee benefits
31 Remuneration of auditors
32 Director and executive disclosures
33 Related party transactions
34 Notes to the cash flow statement
35 Financial and capital risk management
36 Segment reporting
37 Parent entity information
38 Events subsequent to balance sheet date
Directors’ Declaration
Independent Auditor's Report
Shareholder Information
Five Year Performance Summary
Directory
46
47
48
49
50
52
65
66
67
68
69
70
71
71
72
73
74
75
79
81
84
85
86
88
89
92
94
96
96
97
98
98
103
104
105
106
107
109
110
111
119
122
122
123
124
126
127
128
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
4545
consolidaTed incoMe sTaTeMenT
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
Revenue from operations
Other revenue and income
Total revenue and income
Share of net profits of associates and joint ventures
Expenses from operations excluding impairment, depreciation,
amortisation and finance costs
Depreciation and amortisation
Impairment of intangibles, investments and property, plant and equipment
Finance costs
net loss from operations before income tax expense
Income tax benefit/(expense)
note
2(A)
2(B)
11(C)
3(A)
3(B)
3(C)
5
24 June 2012
$’000
26 June 2011
$’000
2,310,919
28,269
2,339,188
1,746
(2,023,358)
(107,503)
(2,865,060)
(122,857)
(2,777,844)
52,041
2,463,413
13,095
2,476,508
3,362
(1,894,537)
(114,351)
(655,051)
(119,009)
(303,078)
(86,589)
net loss from operations after income tax expense
(2,725,803)
(389,667)
Net (loss)/profit is attributable to:
Non-controlling interest
Owners of the parent
earnings per share (cents per share)
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
6,594
(2,732,397)
1,194
(390,861)
(2,725,803)
(389,667)
24
24
(116.2)
(116.2)
(17.0)
(17.0)
The above Consolidated Income Statement should be read in conjunction with the accompanying Notes.
46
consolidaTed sTaTeMenT
of coMpreHensiVe incoMe
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
Net loss from operations after income tax expense
Other comprehensive income
Changes in fair value of available for sale financial assets
Actuarial (loss)/gain on defined benefit plans
Changes in fair value of cash flow hedges
Changes in value of net investment hedges
Exchange differences on translation of foreign operations
Income tax on items of other comprehensive income
Other comprehensive income for the period, net of tax
total comprehensive income for the period
total comprehensive income is attributable to:
Non-controlling interest
Owners of the parent
note
24 June 2012
$’000
26 June 2011
$’000
(2,725,803)
(389,667)
(675)
(3,732)
(11,869)
(3,568)
14,352
5,662
(1,606)
1,385
(13,894)
13,148
(92,043)
(787)
170
(93,797)
(2,725,633)
(483,464)
5
6,594
(2,732,227)
1,194
(484,658)
(2,725,633)
(483,464)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying Notes.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
47
consolidaTed balance sHeeT
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES AS AT 24 JUNE 2012
CuRRent ASSetS
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative assets
Assets held for sale
Income tax receivable
Other financial assets
total current assets
nOn-CuRRent ASSetS
Receivables
Investments accounted for using the equity method
Available for sale investments
Intangible assets
Property, plant and equipment
Derivative assets
Deferred tax assets
Pension assets
Other financial assets
total non-current assets
total assets
CuRRent LiAbiLitieS
Payables
Interest bearing liabilities
Derivative liabilities
Liabilities directly associated with held for sale assets
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
Non-controlling interest
tOtAL equity
note
24 June 2012
$’000
26 June 2011
$’000
34(B)
7
8
15
9(A)
10
7
11
12
13
14
15
16(A)
20(A)
10
17
18
15
9(B)
19
18
15
16(A)
19
20(A)
358,364
334,466
36,622
123
25,674
2,592
3,914
207,137
371,742
38,967
–
4,975
–
3,686
761,755
626,507
2,479
30,811
1,991
2,502,045
547,004
27,040
122,530
149
10,768
2,268
33,322
2,633
5,260,108
722,346
27,839
10,512
260
14,833
3,244,817
6,074,121
4,006,572
6,700,628
282,637
6,439
–
4,956
193,887
10,680
279,669
666,785
80,200
–
140,810
46,477
498,599
1,213,941
1,200,934
95,628
15,225
149,305
3,933
271
865,247
106,534
21,815
50,396
3,595
392
1,465,296
1,047,979
1,963,895
2,261,920
2,042,677
4,438,708
21
22
23
4,646,248
(45,520)
(2,805,566)
1,795,162
247,515
4,646,248
(226,294)
11,764
4,431,718
6,990
2,042,677
4,438,708
The above Consolidated Balance Sheet should be read in conjunction with the accompanying Notes.
48
consolidaTed casH floW sTaTeMenT
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Redundancy payments
Interest received
Dividends and distributions received
Finance costs paid
Net income taxes paid
Net cash inflow from operating activities
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
Loans advanced to other parties
Loans repaid by other parties
Repayment of convertible notes
Net cash outflow from investing activities
Cash flows from financing activities
Payment for repurchase of Stapled Preference Shares
Payment for purchase of non-controlling interests in subsidiaries
Payment for shares acquired by employee share trust
Proceeds from disposal of non-controlling interest in subsidiary (net of transaction costs)*
Proceeds from borrowings and other financial liabilities
Repayment of borrowings and other financial liabilities
Payment of facility fees
Dividends and distributions paid to shareholders including SPS**
Dividends paid to non-controlling interests in subsidiaries
Net cash outflow from financing activities
net 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
34(B)
note
24 June 2012
$’000
26 June 2011
$’000
2,564,435
(2,029,532)
(42,511)
9,986
3,605
(127,633)
(110,701)
267,649
2,721,399
(2,090,813)
(8,971)
9,856
2,665
(120,761)
(81,950)
431,425
34(A)
(13,232)
(1,443)
(42,788)
3,315
18,237
–
4,750
–
(31,161)
–
(92)
–
421,885
321,270
(756,933)
–
(82,318)
(491)
(96,679)
139,809
207,137
11,418
358,364
(11,998)
(15,807)
(57,461)
3,897
1,820
(20,820)
2,311
100
(97,958)
(300,000)
(7,865)
(4,666)
–
281,591
(120,335)
(2,870)
(85,511)
(1,070)
(240,726)
92,741
117,872
(3,476)
207,137
* The proceeds relate to the sale of 34% of Trade Me Group Limited on 13 December 2011 and the further 15% divestment on 21 June 2012.
This entity is still controlled by the Group.
** Total cash dividends for the prior year totalled $85.5 million; this included $17.3 million made to stapled preference shareholders (SPS).
Total SPS distributions during the prior period were $19.8 million, $2.5 million of which was classified in finance costs paid. This is
consistent with the reclassification of the SPS from equity to debt during the previous period, prior to being repurchased on 29 April 2011.
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying Notes.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
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FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
51
noTes To THe financial sTaTeMenTs
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
01
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 the consolidated entity consisting
of Fairfax Media Limited and its controlled entities.
The financial report is for the period 27 June 2011 to 24 June 2012 (2011: the period 28 June 2010 to 26 June 2011). Reference in this
report to ‘a year’ is to the period ended 24 June 2012 or 26 June 2011 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 authoritative pronouncements of the Australian Accounting
Standards Board. The financial report also complies with International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board.
The Group has prepared the financial statements in compliance with amendments to the Corporations Acts 2001 in June 2010
which removed the requirement for the Group to lodge parent entity financial statements. Parent entity financial statements have
been replaced by the specific parent entity disclosures in Note 37.
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.
(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 acquisition 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.
Non-controlling interests in the earnings and equity of controlled entities are shown separately in the income statement, statement of
comprehensive income, statement of changes in equity 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.
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.
52
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(C) aCCOUNtiNG FOr aCQUiSitiONS
Business combinations are accounted for using the acquisition method. The consideration transferred in a business combination
is measured at fair value, which is calculated as the sum of the acquisition-date fair values of the assets transferred by the acquirer,
the liabilities incurred by the acquirer to former owners of the acquiree and the equity issued by the acquirer, the amount of any
non-controlling interest in the acquiree. For each business combination, the acquirer measures the non-controlling interest in the
acquiree either at fair value or at the proportionate share of the acquiree’s identifiable net assets. Acquisition-related costs are
expensed as incurred and included in other expenses.
When the Group acquires a business, it assesses the financial assets and liabilities assumed for appropriate classification and
designation in accordance with the contractual terms, economic conditions, the Group’s operating or accounting policies and other
pertinent conditions as at the acquisition date. This includes the separation of embedded derivatives in host contracts of the acquiree.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity interest in
the acquiree is remeasured to fair value at the acquisition date through profit or loss.
Any contingent consideration to be transferred by the acquirer is recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration which is deemed to be an asset or liability is recognised in accordance
with AASB 139 either in profit or loss or as a change to other comprehensive income. If the contingent consideration is classified
as equity, it will not be remeasured until it is finally settled within equity.
(d) imPairmeNt OF aSSetS
The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any indication exists, or
when annual impairment testing for an asset is required, the Group estimates the asset's recoverable amount. An asset's or cash
generating units' (CGU) recoverable amount is the higher of it's fair value less costs to sell and value in use and is determined for
an individual asset or group of assets. When the carrying amount of an asset or CGU exceeds its recoverable amount, the asset is
considered impaired and is written down to its recoverable amount.
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.
For assets excluding goodwill, an assessment is made at each reporting date whether there is any indication that previously recognised
impairment losses may no longer exist or may have decreased. If such indication exists, the Group estimates the asset's or CGU’s
recoverable amount. A previously recognised impairment loss is reversed only if there has been a change in the assumptions used
to determine the asset's recoverable amount since the last impairment loss was recognised. The reversal is limited so that the carrying
amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the income statement
until the asset is carried at a revalued amount, in which case the reversal is treated as a revaluation increase.
(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 a cash generating unit for
the purposes of impairment testing (refer Note 1(D)). Goodwill is not amortised. Instead, goodwill is tested for impairment annually,
and at each reporting period if events or changes in circumstances indicate that it might be impaired, and is carried at cost less
accumulated impairment losses. Impairment is determined for goodwill by assessing the recoverable amount of each CGU (or group
of CGUs) to which the goodwill relates. Impairment losses relating to goodwill cannot be reversed in future periods.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
(ii) Other intangible assets
Mastheads and tradenames
The majority of mastheads and tradenames have been assessed to have indefinite useful lives. Accordingly, they are not amortised,
instead they are tested for impairment annually, and at each reporting period where 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 the majority of
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.
There is a small number of tradenames that have been assessed to have a definite useful life and are amortised using a straight-line
method over twenty years.
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.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
53
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
Websites
Internal and external costs directly incurred in the development of websites are capitalised and amortised using a straight-line
method over two to four years. Capitalised website 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 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.
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 when 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. Revenue from advertising, circulation, subscription, radio broadcasting and printing is recognised
when control of the right to be compensated has been obtained and the stage of completion of the contract can be reliably
measured. For newspapers, magazines and other publications the right to be compensated is on the publication date. Revenue from
the provision of online advertising on websites is recognised in the period the advertisements are placed or the impression occurs.
Amounts disclosed as revenue are net of commissions, rebates, discounts, returns, trade allowances, duties and taxes paid.
Dividends are recognised as revenue when the right to receive payment is established. This applies even if they are paid out of
pre-acquisition profits. However, the investment may need to be tested for impairment as a consequence. Refer to Note 1(D).
Interest is recognised as it accrues, taking into account the effective yield on the financial asset.
54
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(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.
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.
Deferred tax assets and deferred tax liabilities are offset only if a legally enforceable right exists to set off current tax assets against
current tax liabilities and the deferred tax assets and liabilities relate to the same taxable group and the same taxation authority.
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.
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.
Taxation of financial arrangements (TOFA)
Legislation is in place which changes the tax treatment of financial arrangements including the tax treatment of hedging
transactions. The Group has assessed the potential impact of these changes on the Group’s tax position. No impact has been
recognised and no adjustments have been made to the deferred tax and income tax balances at 24 June 2012 (2011: Nil).
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
55
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(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.
(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.
56
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(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 and other financial assets 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.
(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.
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:
• Fair value hedges: hedges of the fair value of recognised assets or liabilities or a firm commitment;
• Cash flow hedges: hedges of highly probable forecast transactions; or
• Net investment hedges: hedges of the net investment in a foreign operation.
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 within finance costs. 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
within finance costs. 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.
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.
net investment hedge
Hedges of a net investment in a foreign operation are accounted for in a similar way to cash flow hedges. Gains or losses on the
hedging instrument relating to the effective portion of the hedge are recognised directly in equity while any gains or losses relating
to the ineffective portion are recognised in profit or loss. On disposal of the foreign operation, the cumulative value of such gains or
losses recognised directly in equity is transferred to the income statement based on the amount calculated during the direct method
of consolidation.
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.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
57
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(O) PrOPertY, PlaNt aNd eQUiPmeNt
Property, plant and equipment is recorded at cost less accumulated depreciation and any accumulated impairment losses. 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
Other production equipment
Other equipment
Computer equipment
up to 60 years
up to 10 years
up to 15 years
up to 20 years
up to 6 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.
(P) 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.
(Q) 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.
(r) 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.
58
notes to the financial stateMents
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(S) 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.
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 30).
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(T)).
(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.
(t) CONtriBUted eQUitY
Ordinary shares are classified as equity. Stapled preference shares were classified as equity (refer to Note 21(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 reacquires its own equity instruments, e.g. under the Long Term Incentive Plan, those instruments are deducted
from equity.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
59
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
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.
(U) 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.
(V) SeGmeNt rePOrtiNG
An operating segment is a component of an entity that engages in business activities from which it may earn revenues and incur
expenses (including revenue and expense relating to transactions with other components of the same entity), whose operating results
are regularly reviewed by the entity’s chief operating decision maker to make decisions about resources to be allocated to the segment
and assess its performance and for which discrete financial information is available. Management will also consider other factors in
determining operating segments such as the existence of a line manager and the level of segment information presented to the
Board of Directors.
Operating segments have been identified based on the information provided to the chief operating decision makers, being the Board
of Directors, Chief Executive Officer and Chief Financial Officer, and are disclosed in Note 36.
The group aggregates two or more operating segments when they have similar economic characteristics, and the segments are
similar in each of the following respects:
• Nature of the products and services;
• Nature of the production processes;
• Type or class of customer for the products and services;
• Methods used to distribute the products or provide the services; and if applicable
• Nature of the regulatory environment.
Operating segments that meet the quantitative criteria as prescribed by AASB 8 are reported separately. However, an operating
segment that does not meet the quantitative criteria is still reported separately where information about the segment would be useful
to users of the financial statements.
Information about other business activities and operating segments that are below the quantitative criteria are combined and
disclosed in a separate category for “Other segments”.
(W) SiGNiFiCaNt aCCOUNtiNG eStimateS aNd JUdGemeNtS
The carrying amounts of certain assets and liabilities are 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 or at each reporting period where there is an indication of impairment, whether goodwill and intangible assets
with indefinite useful lives are impaired. This requires an estimation of the recoverable amount of the cash generating units (CGU), using
a value in use discounted cash flow methodology, 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, along with a sensitivity analysis, are detailed in Note 13.
60
notes to the financial stateMents
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(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 Monte Carlo model, using the
assumptions detailed in Note 30.
(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 20.
(v) Redundancy provision
A provision for redundancy has been disclosed in Note 19 as a result of the Group having a constructive obligation and a detailed
formal plan for restructuring.
(x) 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.
(Y) NeW aCCOUNtiNG StaNdardS aNd UiG iNterPretatiONS
Certain new accounting standards and interpretations have been published that are not mandatory for 24 June 2012 reporting
periods. The Group’s assessment of the impact of these new standards and interpretations is set out below:
RefeRenCe
titLe
SuMMARy
AASB 2011-9
Amendments to Australian
Accounting Standards
– Presentation of Other
Comprehensive Income
[AASB 1, 5, 7, 101, 112,
120, 121, 132, 133, 134,
1039 & 1049]
This standard requires entities to group items
presented in other comprehensive income on
the basis of whether they might be reclassified
subsequently to profit or loss and those that
will not.
APPLiCAtiOn
DAte Of
StAnDARD*
1 July 2012
iMPACt On GROuP
finAnCiAL RePORt
No major impact on
the Group.
APPLiCAtiOn
DAte fOR
GROuP*
25 June 2012
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
61
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
APPLiCAtiOn
DAte Of
StAnDARD*
1 January
2013**
iMPACt On GROuP
finAnCiAL RePORt
The Group has not
yet determined the
extent of the impact
of the amendments.
APPLiCAtiOn
DAte fOR
GROuP*
1 July 2013
1 January
2013
1 July 2013
The Group has not
yet determined the
extent of the impact
of the amendments.
RefeRenCe
titLe
SuMMARy
AASB 9 includes requirements for the
classification and measurement of financial
assets. It was further amended by AASB
2010-7 to reflect amendments to the
accounting for financial liabilities.
These requirements improve and simplify the
approach for classification and measurement
of financial assets compared with the
requirements of AASB 139.
The main changes are described below.
(a) Financial assets that are debt instruments
will be classified based on (1) the objective
of the entity’s business model for managing
the financial assets; (2) the characteristics
of the contractual cashflows.
(b) Allows an irrevocable election on initial
recognition to present gains and losses on
investments in equity instruments that are
not held for trading in other comprehensive
income. Dividends in respect of these
investments that are a return on investment
can be recognised in profit or loss and
there is no impairment or recycling on
disposal of the instrument.
(c) Financial assets can be designated and
measured at fair value through profit
or loss at initial recognition if doing so
eliminates or significantly reduces a
measurement or recognition inconsistency
that would arise from measuring assets
or liabilities, or recognising the gains and
losses on them, on different bases.
(d) Where the fair value option is used for
financial liabilities the change in fair value
is to be accounted for as follows:
– The change attributable to changes in credit
risk are presented in other comprehensive
income (OCI)
– The remaining change is presented in profit
or loss.
Consequential amendments were also made
to other standards as a result of AASB 9,
introduced by AASB 2009-11 and superseded
by AASB 2010-7 and 2010-10.
AASB 10 establishes a new control model that
applies to all entities. It replaces parts of AASB
127 Consolidated and Separate Financial
Statements dealing with the accounting for
consolidated financial statements and UIG-112
Consolidation – Special Purpose Entities.
The new control model broadens the
situations when an entity is considered to
be controlled by another entity and includes
new guidance for applying the model to
specific situations, including when acting as
a manager may give control, the impact of
potential voting rights and when holding less
than a majority voting rights may give control.
This is likely to lead to more entities being
consolidated into the group.
Consequential amendments were also made
to other standards via AASB 2011-7.
AASB 9
Financial Instruments
AASB 10
Consolidated Financial
Statements
62
notes to the financial stateMents
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
APPLiCAtiOn
DAte Of
StAnDARD*
1 January
2013
iMPACt On GROuP
finAnCiAL RePORt
The Group has not
yet determined the
extent of the impact
of the amendments.
APPLiCAtiOn
DAte fOR
GROuP*
1 July 2013
1 January
2013
1 July 2013
The Group has not
yet determined the
extent of the impact
of the amendments.
1 January
2013
1 July 2013
The Group has not
yet determined the
extent of the impact
of the amendments.
RefeRenCe
titLe
SuMMARy
AASB 11
Joint Arrangements
AASB 12
Disclosure of Interests in
Other Entities
AASB 13
Fair Value Measurement
AASB 11 replaces AASB 131 Interests in
Joint Ventures and UIG-113 Jointly-controlled
Entities – Non-monetary Contributions by
Ventures. AASB 11 uses the principle of
control in AASB 10 to define joint control,
and therefore the determination of whether
joint control exists may change. In addition
it removes the option to account for jointly
controlled entities (JCEs) using proportionate
consolidation. Instead, accounting for a joint
arrangement is dependent on the nature of
the rights and obligations arising from the
arrangement. Joint operations that give the
venturers a right to the underlying assets
and obligations themselves is accounted
for by recognising the share of those assets
and obligations. Joint ventures that give
the venturers a right to the net assets is
accounted for using the equity method. This
may result in a change in the accounting for
the joint arrangements held by the group.
Consequential amendments were also made
to other standards via AASB 2011-7 and
amendments to AASB 128.
AASB 12 includes all disclosures relating
to an entity’s interests in subsidiaries, joint
arrangements, associates and structured
entities. New disclosures have been
introduced about the judgements made by
management to determine whether control
exists, and to require summarised information
about joint arrangements, associates and
structured entities and subsidiaries with non-
controlling interests.
AASB 13 establishes a single source of
guidance for determining the fair value of
assets and liabilities. AASB 13 does not
change when an entity is required to use
fair value, but rather, provides guidance on
how to determine fair value when fair value
is required or permitted. Application of this
definition may result in different fair values
being determined for the relevant assets.
AASB 13 also expands the disclosure
requirements for all assets or liabilities carried
at fair value. This includes information about
the assumptions made and the qualitative
impact of those assumptions on the fair
value determined.
Consequential amendments were also made
to other standards via AASB 2011-12.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
63
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
APPLiCAtiOn
DAte Of
StAnDARD*
1 January
2013
iMPACt On GROuP
finAnCiAL RePORt
The Group has not
yet determined the
extent of the impact
of the amendments.
APPLiCAtiOn
DAte fOR
GROuP*
1 July 2013
1 January
2013
1 July 2013
The Group has not
yet determined the
extent of the impact
of the amendments.
RefeRenCe
titLe
SuMMARy
AASB 119
Employee Benefits
Annual Improvements to
IFRSs 2009–2011 Cycle
Annual
Improvements
2009–2011
Cycle***
The main change introduced by this standard
is to revise the accounting for defined
benefit plans. The amendment removes
the options for accounting for the liability,
and requires that the liabilities arising from
such plans is recognized in full with actuarial
gains and losses being recognized in other
comprehensive income. It also revised
the method of calculating the return on
plan assets.
The revised standard changes the definition of
short-term employee benefits. The distinction
between short-term and other long-term
employee benefits is now based on whether
the benefits are expected to be settled wholly
within 12 months after the reporting date.
Consequential amendments were also made
to other standards via AASB 2011-10.
This standard sets out amendments to
International Financial Reporting Standards
(IFRSs) and the related bases for conclusions
and guidance made during the International
Accounting Standards Board’s Annual
Improvements process. These amendments
have not yet been adopted by the AASB.
The following items are addressed by this
standard:
IFRS 1 First-time Adoption of International
Financial Reporting Standards
• Repeated application of IFRS 1
• Borrowing costs
IAS 1 Presentation of Financial Statements
• Clarification of the requirements for
comparative information
IAS 16 Property, Plant and Equipment
• Classification of servicing equipment
IAS 32 Financial Instruments: Presentation
• Tax effect of distribution to holders of equity
instruments
IAS 34 Interim Financial Reporting
• Interim financial reporting and segment
information for total assets and liabilities
* Designates the beginning of the applicable annual reporting period unless otherwise stated.
** AASB ED 215 Mandatory effective date of IFRS 9 proposes to defer the mandatory effective date of AASB 9 to annual periods beginning
on or after 1 January 2015, with early application permitted. At the time of preparation, finalisation of ED 215 is still pending by the AASB.
However, the IASB has deferred the mandatory effective date of IFRS 9 to annual periods beginning on or after 1 January 2015, with early
application permitted.
*** These IFRS amendments have not yet been adopted by the AASB. In order to claim compliance with IFRS, these amendments should be
noted in the financial statements.
64
notes to the financial stateMents
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
02 revenues
(a) reVeNUe FrOm OPeratiONS
Total revenue from sale of goods
Total revenue from services
total revenue from operations
(B) OtHer reVeNUe aNd iNCOme
Interest income
Dividend revenue
Foreign exchange gains
Gains on sale of property, plant and equipment
Gain on revaluation of investment in associate
Gain on derivative at fair value through profit and loss
Other
total other revenue and income
total revenue and income
24 June 2012
$’000
26 June 2011
$’000
453,931
1,856,988
487,787
1,975,626
2,310,919
2,463,413
11,122
142
8,767
135
2,541
3,900
1,662
28,269
10,967
92
–
1,251
–
–
785
13,095
2,339,188
2,476,508
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
65
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
03
expenses
(a) exPeNSeS BeFOre imPairmeNt, dePreCiatiON,
amOrtiSatiON aNd FiNaNCe COStS
Staff costs excluding staff redundancy costs
Redundancy costs
Newsprint and paper
Distribution costs
Production costs
Promotion and advertising costs
Rent and outgoings
Repairs and maintenance
Communication costs
Maintenance and other computer costs
Fringe benefits tax, travel and entertainment
Other
24 June 2012
$’000
26 June 2011
$’000
857,950
199,547
209,988
138,320
183,368
111,565
60,717
29,844
22,469
26,597
26,213
156,780
862,561
36,752
243,942
137,933
188,058
119,327
58,255
29,459
22,167
26,777
25,138
144,168
Total expenses before impairment, depreciation, amortisation and finance costs
2,023,358
1,894,537
(B) dePreCiatiON aNd amOrtiSatiON
Depreciation of freehold property
Depreciation of plant and equipment
Amortisation of leasehold buildings
Amortisation of tradenames
Amortisation of software
Amortisation of customer relationships
total depreciation and amortisation
(C) FiNaNCe COStS
External corporations/persons
Finance lease
Hedge ineffectiveness
Total finance costs
(d) detailed exPeNSe diSClOSUreS
Operating lease rental expense
Defined contribution fund expense
Share-based payment expense
Net foreign exchange loss
5,109
67,432
4,287
28
28,268
2,379
5,094
74,828
3,677
13
27,842
2,897
107,503
114,351
121,622
3,896
(2,661)
122,857
41,213
57,689
1,068
–
121,057
4,647
(6,695)
119,009
39,019
57,885
2,675
631
66
notes to the financial stateMents
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
04
significant iteMs
The loss after tax from operations includes the following items where disclosure is relevant in explaining the financial performance of the
consolidated entity.
impairment of intangibles, property, plant and equipment, and investments – Comprising:
Impairment of mastheads, goodwill, customer relationships and software
Impairment of property, plant and equipment, and investments
Income tax benefit
impairment of intangibles, property, plant and equipment, and investments, net of tax
Restructuring and redundancy – Comprising:
Restructuring and redundancy charges
Income tax benefit
Restructuring and redundancy, net of tax
note
24 June 2012
$'000
26 June 2011
$'000
(A)
(B)
(C)
(2,758,061)
(106,120)
66,689
(2,797,492)
(649,869)
(4,038)
3,188
(650,719)
(200,447)
60,118
(140,329)
(34,222)
10,267
(23,955)
Net significant items after income tax expense
(2,937,821)
(674,674)
(A) The value in use calculations performed as part of the annual impairment test has resulted in an impairment charge of $2,758 million
(2011: $650 million). The impairment is a consequence of:
the deterioration of the Group’s results in the second half of the 2012 financial year;
the lower than budgeted year to date results in financial year 2013;
the increasing pace of structural change in the publishing industry; and
higher discount rates across the industry.
•
•
•
•
Refer to Note 13 for the method and assumptions used in the value in use calculations.
(B) As part of the Fairfax of the Future restructuring program, the company has announced it will close the Chullora and Tullamarine
print operations by June 2014. As a result, an impairment charge has been recognised where the carrying amount of the print assets
was in excess of recoverable amount.
(C) Restructuring and redundancy charges associated with the Fairfax of the Future program have been recognised in the current
period. Refer to Note 1(W)(v).
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
67
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
05
incoMe tax expense
CONSOlidated iNCOme StatemeNt
Income tax expense is reconciled to prima facie income tax payable as follows:
Net loss before income tax expense
Prima facie income tax at 30% (2011: 30%)
Tax effect of differences:
Overseas tax rate and accounting differentials
Share of net profits of associates and joint ventures
Capital gains not taxable
Non assessable dividends
Over provision in respect of current tax in prior financial years
Under provision in respect of deferred tax in prior financial years
Temporary differences not recognised on intangible and other asset write-offs
Non-deductible items
Impact of tax consolidation
Other
Income tax (benefit)/expense
Current income tax expense
Deferred income tax (benefit)/expense
Over provision in respect of current tax in prior financial years
Income tax (benefit)/expense in the income statement
CONSOlidated StatemeNt OF COmPreHeNSiVe iNCOme
Deferred tax related to items charged or credited directly to other comprehensive income
during the year:
Unrealised (loss)/gain on available for sale financial assets
Net gain/(loss) on actuarial gains and losses
Net gain on revaluation of cash flow hedges
Net gain/(loss) on hedge of net investment
Net gain/(loss) on exchange differences on translation of foreign operations
income tax on items of other comprehensive income
24 June 2012
$’000
26 June 2011
$’000
(2,777,844)
(303,078)
(833,353)
(90,923)
4,289
(442)
(552)
(11)
3,420
(5,475)
780,269
2,861
(2,612)
(435)
(52,041)
61,003
(116,464)
3,420
(52,041)
(14,502)
(363)
–
(11)
6,120
(8,828)
192,983
2,434
–
(321)
86,589
69,578
10,891
6,120
86,589
24 June 2012
$’000
26 June 2011
$’000
(90)
1,117
3,561
1,070
4
5,662
279
(418)
4,168
(3,944)
(872)
(787)
68
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
06 dividends paid and proposed
(a) OrdiNarY SHareS
Interim 2012 dividend: 100% franked 2.0 cents
– paid 21 March 2012
(2011: 100% franked dividend 1.5 cents
– paid 21 March 2011)
Final 2011 dividend: 100% franked 1.5 cents
– paid 27 September 2011
(2010: 100% franked dividend 1.4 cents
– paid 23 September 2010)
total dividends paid – ordinary shares
(B) StaPled PreFereNCe SHareS (SPS)
SPS dividend:
2011: $3.2334 per share – paid 29 April 2011*
2011: $3.2515 per share – paid 1 November 2010
total dividends paid – SPS
total dividends paid
consolidated
24 June 2012
$’000
consolidated
26 June 2011
$’000
coMpany
24 June 2012
$’000
coMpany
26 June 2011
$’000
47,039
35,279
47,039
35,279
35,279
82,318
32,927
68,206
35,279
82,318
32,927
68,206
–
–
–
82,318
7,355
9,950
17,305
85,511
–
–
–
–
–
–
82,318
68,206
*
The final SPS distribution totalled $9.9 million, $2.5 million of which was classified as finance costs. This is consistent with the
reclassification of the SPS from equity to debt during the previous period, prior to being repurchased on 29 April 2011.
(C) diVideNdS PrOPOSed aNd NOt reCOGNiSed aS a liaBilitY
Since balance date the directors have declared a dividend of 1 cent per fully paid ordinary share fully franked at the corporate tax rate of
30%. The aggregate amount of the dividend to be paid on 21 September 2012 out of profits but not recognised as a liability at the end of
the year is expected to be $23.5 million.
(d) FraNKed diVideNdS
Franking account balance as at balance date at 30% (2011: 30%)
Reduction in franking credits that will arise from the receipt of income tax receivable balances
as at the end of the financial year
Franking credits that will arise from the payment of income tax payable balances
as at the end of the financial year
Total franking credits available for subsequent financial years based on a tax rate of 30%
73,404
coMpany
2012
$’000
coMpany
2011
$’000
74,182
30,936
(778)
–
–
39,532
70,468
On a tax-paid basis, the Company’s franking account balance is approximately $74.2 million (2011: $30.9 million). The impact on the
franking account of the dividend declared by the directors since balance date will be a reduction in the franking account of approximately
$10.1 million.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
69
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
07 receivaBles
Current
Trade debtors*
Provision for doubtful debts
Loans and deposits
Prepayments
Other
total current receivables
non-current
Loans and deposits
Other
total non-current receivables
24 June 2012
$'000
26 June 2011
$'000
316,940
(10,059)
306,881
52
12,763
14,770
351,406
(10,061)
341,345
111
14,742
15,544
334,466
371,742
1,539
940
2,479
1,876
392
2,268
* Trade debtors are non-interest bearing and are generally on 7 to 45 day terms.
iMPAiReD tRADe DebtORS
As at 24 June 2012, trade debtors of the Group with a nominal value of $10.1 million (2011: $10.1 million) were impaired and provided
for. No individual amount within the provision for doubtful debts is material. Refer to Note 35(C) for the factors considered in determining
whether trade debtors are impaired.
As at 24 June 2012, an analysis of trade debtors that are not considered impaired is as follows:
Not past due
Past due 0 – 30 days
Past due 31 – 60 days
Past 60 days
2012
$'000
224,013
64,103
11,633
7,132
2011
$'000
243,145
63,865
17,533
16,802
306,881
341,345
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.
Movements in the provision for doubtful debts are as follows:
Balance at the beginning of the financial year
Additional provisions
Acquisition of controlled entities
Disposal of controlled entities
Utilised
Exchange differences
Balance at the end of the financial year
2012
$'000
10,061
3,576
5
(318)
(3,290)
25
10,059
2011
$'000
9,627
3,318
–
–
(2,791)
(93)
10,061
70
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
08
inventories
Raw materials and stores – at net realisable value
Finished goods – at cost
Work in progress – at cost
total inventories
24 June 2012
$'000
26 June 2011
$'000
31,815
4,242
565
36,622
34,412
3,844
711
38,967
During the year, newsprint and paper expense (excluding cartage) of $208.6 million (2011: $242.4 million) was recognised.
09 assets and liaBilities held for sale
(a) aSSetS Held FOr Sale
Freehold land and buildings
Plant and equipment
Fairfax Community Network Limited disposal group
Intangible assets
Other assets
total assets held for sale
(B) liaBilitieS direCtlY aSSOCiated WitH Held FOr Sale aSSetS
Fairfax Community Network Limited disposal group
Provisions
Other liabilities
total liabilities directly associated with held for sale assets
24 June 2012
$'000
26 June 2011
$'000
8,949
514
15,262
949
25,674
3,918
1,038
4,956
4,468
507
–
–
4,975
–
–
–
freehold land and buildings, plant and equipment
Assets held for sale comprise properties, plant and equipment in Australia and New Zealand that are being actively marketed and for
which the sale is highly probable. During the current year, two of these properties were sold.
Prior to being transferred to held for sale, the properties, plant and equipment were remeasured at the lower of carrying amount and fair
value less costs to sell. In the prior year, a $1.4 million impairment charge was recognised in the income statement against the assets.
fairfax Community network Limited disposal group
On 23 December 2011, an agreement for the sale of Fairfax Community Network Limited was signed with the sale being completed
subsequent to the reporting date. As a result, the assets and liabilities of this company have been transferred to held for sale.
On remeasure of the disposal group at the lower of carrying amount and fair value less cost to sell, an impairment of $20.0 million was
recorded against mastheads.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
71
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
10 other financial assets
Current
Loan receivable
Total current other financial assets
non-current
Shares in unlisted entities – at fair value
Loan receivable
Total non-current other financial assets
24 June 2012
$'000
26 June 2011
$'000
3,914
3,914
3,686
3,686
67
10,701
10,768
73
14,760
14,833
The loan receivable has quarterly repayments, consisting of both interest and principal, and matures on 30 September 2015.
72
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
11
investMents accounted for using the equity Method
Shares in associates
Shares in joint ventures
total investments accounted for using the equity method
(a) iNtereStS iN aSSOCiateS
naMe of coMpany
principal activity
Australian Associated Press Pty Ltd
Autobase Limited*
News agency business and
information service
E-commerce: online vehicle dealer
automotive website
Digital Radio Broadcasting Melbourne Pty Ltd Digital audio broadcasting
Digital audio broadcasting
Digital Radio Broadcasting Perth Pty Ltd
Digital Radio Broadcasting Brisbane Pty Ltd Digital audio broadcasting
Digital audio broadcasting
Digital Radio Broadcasting Sydney Pty Ltd
Environmental promotion
Earth Hour Limited
Rental of a transmission facility
Homebush Transmitters Pty Ltd
Property ownership
Newspaper House Limited
News agency business and financial
New Zealand Press Association Ltd
information service
Provider of e-recruitment software
to corporations
Rental of a transmission facility
Newspaper publishing
Provider of EDI software
Provider of EDI software
Perth FM Facilities Pty Ltd
Times Newspapers Limited
Xchange IT Software Pty Ltd
Xchange IT Newsagents Pty Ltd
NGA.net Pty Ltd
note
(A)(i)
(B)(i)
24 June 2012
$'000
26 June 2011
$'000
12,671
18,140
30,811
14,449
18,873
33,322
place of
incorporation
oWnership interest
24 June 2012 26 June 2011
Australia
47.0%
47.0%
New Zealand
–
25.4%
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
18.0%
33.4%
25.0%
11.3%
33.3%
50.0%
45.5%
49.2%
18.0%
33.4%
25.0%
11.3%
33.3%
50.0%
45.5%
49.2%
Australia
24.6%
28.0%
Australia
New Zealand
Australia
Australia
33.3%
49.9%
33.3%
25.0%
33.3%
49.9%
33.3%
25.0%
*
The business assets of Autobase Limited were acquired by the Group on 30 April 2012 (refer Note 28(A)). This entity was then placed into
liquidation on 1 May 2012.
(i) Carrying amount of investment in associates
Balance at the beginning of the financial year
Share of associates' net (loss)/profit after income tax expense
Dividends received/receivable from associates
Investments in associates disposed during the year
Impairment of investment in associate
Exchange differences
Balance at end of the financial year
(ii) Share of associates' profits
Revenue
(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
24 June 2012
$'000
26 June 2011
$'000
14,449
(565)
(393)
(518)
(292)
(10)
12,671
14,102
770
(373)
–
–
(50)
14,449
45,425
39,541
(593)
28
(565)
15,136
24,158
39,294
11,057
4,315
15,372
930
(160)
770
15,641
23,464
39,105
10,622
3,216
13,838
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
73
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(B) iNtereStS iN JOiNt VeNtUreS
naMe of coMpany
principal activity
place of
incorporation
oWnership interest
24 June 2012 26 June 2011
Organisation of canine industry exhibitions Australia
Dog Lovers Show Pty Limited*
Organisation of agricultural events
Farm Progress/VX LLC**
Letterbox distribution of newspapers
Fermax Distribution Company Pty Ltd
Gilgandra Newspapers Pty Ltd
Newspaper publishing and printing
Gippsland Regional Publications Partnership Newspaper publishing and printing
Newspaper publishing and printing
Torch Publishing Company Pty Ltd
USA
Australia
Australia
Australia
Australia
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
–
–
50.0%
50.0%
50.0%
50.0%
* Company was incorporated and investment was acquired on 12 June 2012.
** Investment was acquired on 27 September 2011.
(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 transferred to a controlled entity
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
12 availaBle for sale investMents
Listed equity securities – at fair value
total available for sale investments
24 June 2012
$'000
26 June 2011
$'000
18,873
2,311
26
(3,070)
–
18,140
11,274
(8,812)
2,462
(151)
2,311
4,107
16,990
21,097
1,198
339
1,537
1,869
(123)
1,746
29,483
2,592
–
(2,200)
(11,002)
18,873
12,377
(9,600)
2,777
(185)
2,592
4,935
17,584
22,519
1,553
424
1,977
3,707
(345)
3,362
24 June 2012
$'000
26 June 2011
$'000
1,991
1,991
2,633
2,633
Available for sale investments consist of investments in ordinary shares at fair value and have no fixed maturity date.
74
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
13
intangiBle assets
Radio licences
Customer relationships
Mastheads and tradenames
Software
Goodwill
total intangible assets
reCONCiliatiONS
24 June 2012
$'000
26 June 2011
$'000
121,637
8,474
1,286,843
76,006
1,009,085
132,217
3,453
3,254,396
71,024
1,799,018
2,502,045
5,260,108
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
licences
$'000
custoMer
relationships
$'000
Mastheads &
tradeMarks
$'000
note
softWare
$'000
goodWill
$'000
total
$'000
At 27 June 2010
Cost
Accumulated amortisation and impairment
156,678
(24,461)
19,614
(7,983)
3,745,362
(378,729)
242,066
(156,085)
2,453,036
(106,717)
6,616,756
(673,975)
net carrying amount
132,217
11,631
3,366,633
85,981
2,346,319
5,942,781
Period ended 26 June 2011
Balance at beginning of the financial year
Additions
Capitalisations from works in progress
Disposals
Acquisition through business combinations
Amortisation charge
Impairment
Exchange differences
At 26 June 2011, net of accumulated
amortisation and impairment
14
3(B)
132,217
–
–
–
–
–
–
–
11,631
–
–
–
1,353
(2,897)
(6,588)
(46)
3,366,633
13
–
–
20,846
(13)
(80,915)
(52,168)
85,981
1,732
11,275
(179)
1,381
(27,842)
–
(1,324)
2,346,319
–
–
(2,128)
48,387
–
(562,366)
(31,194)
5,942,781
1,745
11,275
(2,307)
71,967
(30,752)
(649,869)
(84,732)
132,217
3,453
3,254,396
71,024
1,799,018
5,260,108
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
75
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
radio
licences
$'000
custoMer
relationships
$'000
Mastheads &
tradeMarks
$'000
note
softWare
$'000
goodWill
$'000
total
$'000
At 26 June 2011
Cost
Accumulated amortisation and impairment
156,678
(24,461)
8,008
(4,555)
3,714,053
(459,657)
253,229
(182,205)
2,468,101
(669,083)
6,600,069
(1,339,961)
net carrying amount
132,217
3,453
3,254,396
71,024
1,799,018
5,260,108
Period ended 24 June 2012
Balance at beginning of the financial year
Additions
Capitalisations from works in progress
Reallocation from purchase price
accounting *
Disposals
Assets classified as held for sale
Acquisition through business combinations
Amortisation charge
Impairment
Exchange differences
At 24 June 2012, net of accumulated
amortisation and impairment
14
3(B)
At 24 June 2012
Cost
Accumulated amortisation and impairment
132,217
–
–
–
(10,580)
–
–
–
–
–
3,453
–
–
3,254,396
1,443
–
71,024
17,011
7,843
1,799,018
46
–
5,260,108
18,500
7,843
7,384
–
–
–
(2,379)
–
–
(15,211)
2,895
(28)
– (1,963,624)
6,972
16
2,899
(134)
(40)
5,675
(28,268)
(251)
247
(8,263)
(2,000)
(11)
6,518
–
(794,295)
8,072
2,020
(12,714)
(15,262)
15,088
(30,675)
(2,758,170)
15,307
121,637
8,474
1,286,843
76,006
1,009,085
2,502,045
143,700
(22,063)
15,417
(6,943)
3,692,719
(2,405,876)
269,976
(193,970)
2,455,250
(1,446,165)
6,577,062
(4,075,017)
net carrying amount
121,637
8,474
1,286,843
76,006
1,009,085
2,502,045
*
Reallocation from purchase price accounting relates to the identification of customer relationships ($7.4 million), software ($2.9 million)
and the recording of a deferred tax liability ($2.0 million) relating to these assets. The current year amortisation charge for these assets
includes $0.4 million relating to the 2011 financial year as part of the reallocation from goodwill to amortising intangibles.
76
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(i) Impairment of cash generating units (CGU) including goodwill and indefinite life assets
A CGU is the grouping of assets at the lowest level for which there are separately identifiable cash flows. CGU Groups are an aggregation
of CGUs which have similar characteristics. The recoverable amount of each CGU which includes goodwill or indefinite life intangibles
has been tested.
The value in use calculations prepared by the company use discounted cash flow methodology. Key components of the calculation and
the basis for each component are set out below:
Year 1 cash flows
This is based upon the annual budget for 2013, which includes the impact of the Fairfax of the Future program together with
adjustments to account for lower current trading results.
Year 2 and 3 cash flows
These cash flows are forecast using year 1 as a base and a growth or decline factor applied to revenue and expenses in years 2 and 3.
The rate of change takes account of management's best estimate of the likely results in these periods, industry forecasts, historical
actual rates and the impact of the Fairfax of the Future restructure. Revenue declines of between 2.5% and 7.5% have been used in
publishing where management expect the cyclical downturn and structural change to continue. In the digital businesses, revenue growth
of 12% reflecting experience, has been adopted including the introduction of digital subscription models. Expenses have been adjusted
to account for the revenue growth or decline, Fairfax of the Future restructuring and other committed management initiatives.
terminal growth factor
A terminal growth factor that estimates the long term average growth for that CGU is applied to the year 3 cash flows into perpetuity. A
rate of 3.5% (2011: 3.5%) has been used for digital cash flows. Metropolitan publishing and Printing Operations were calculated at no
growth (2011: 3-3.5%) and Australian Regional Media, Broadcasting and New Zealand Media calculated at 2.5% (2011:3-3.5%).
Discount rate
The discount rate is an estimate of the post tax rate that reflects current market assessment of the time value of money and the risks
specific to the CGU. The post-tax discount rates applied to the CGU Groups' cash flow projections were in a range producing a mid
point of 11.5% for Australian and 11.2% for New Zealand Media (2011: Aust and NZ: 10.1%), 12.8% for Australian Online (2011: 12.3%)
and 12.6% for New Zealand Online (2011: 12.8%).
Each of the above factors is subject to significant judgement about future economic conditions and the ongoing structure of the
publishing and digital industries. Specifically, the Directors note that the extent and duration of the current cyclical downturn in
advertising is difficult to predict. The Directors have applied their best estimates to each of these variables but cannot warrant their
outcome. To assess the impact of this significant uncertainty, and the range of possible outcomes, sensitivity analysis is disclosed below.
(ii) impact of possible change in key assumptions
Holding all assumptions constant, if year 1 cash flow forecasts declined by 5%, an additional impairment in aggregate, of $206 million would
arise for all CGU Groups. If year 1 cash flow forecasts increased by 5%, in aggregate, the impairment would be reduced by $190 million.
Holding all assumptions constant, if years 2 and 3 cash flow forecasts declined by 5%, an additional impairment in aggregate, of $265 million
would arise for all CGU Groups. If years 2 and 3 cash flow forecast increased by 5%, in aggregate, the impairment would be reduced by
$241 million.
Holding all assumptions constant, if the discount rate applied to the media cash flow projections was increased by 0.5%, an additional
impairment of $106 million would arise. If the rate was decreased by 0.5%, the impairment would be reduced by $97 million.
Holding all assumptions constant, if terminal growth factors were reduced by a further 1% across all CGU's then a further impairment
of $190 million would arise. If terminal growth factors were increased by 1% across all CGU's then the impairment would be reduced
by $235 million.
(iii) Allocation of goodwill, licences, mastheads and tradenames to CGus
For the financial year ended 24 June 2012, goodwill, licences, mastheads and tradenames were allocated to the CGU Groups below.
The table below also indicates which operating segment each CGU Group belongs to. Operating segments are defined at Note 1(V)
and Note 36 with further disclosure on the results for each operating segment.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
77
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
At 24 June 2012
operating
segMent
goodWill
$'000
licences,
Mastheads
and
tradenaMes
$'000
Allocation to CGu Groups
New South Wales Metropolitan and Community Media
Victorian Metropolitan and Community Media
Business Media
Australian Digital
Australian Regional Media
Agricultural Media
Trade Me
Printing Operations
Broadcasting
New Zealand Media
Metropolitan Media
Metropolitan Media
Metropolitan Media
Metropolitan Media
Fairfax Regional Media
Fairfax Regional Media
Trade Me
Printing Operations
Broadcasting
New Zealand Media
–
–
7,290
217,808
4,518
23,019
573,954
126,311
56,185
–
178,813
137,446
67,097
23,750
483,487
232,747
25,713
–
121,637
137,790
total
$'000
178,813
137,446
74,387
241,558
488,005
255,766
599,667
126,311
177,822
137,790
total goodwill, licences, mastheads and tradenames
1,009,085
1,408,480
2,417,565
At 26 June 2011
Allocation to CGu Groups
New South Wales Metropolitan and Community Media
Victorian Metropolitan and Community Media
Business Media
Australian Online
Australian Regional Media
Agricultural Media
Trade Me
Printing Operations
Broadcasting
New Zealand Media
operating
segMent
goodWill
$'000
licences,
Mastheads
and
tradenaMes
$'000
Metropolitan Media
Metropolitan Media
Metropolitan Media
Metropolitan Media
Fairfax Regional Media
Fairfax Regional Media
Trade Me
Printing Operations
Broadcasting
New Zealand Media
–
–
77,804
233,590
404,420
58,068
559,306
351,713
108,185
5,932
431,936
441,565
162,523
23,525
1,090,221
345,744
25,340
–
132,217
733,542
total
$'000
431,936
441,565
240,327
257,115
1,494,641
403,812
584,646
351,713
240,402
739,474
total goodwill, licences, mastheads and tradenames
1,799,018
3,386,613
5,185,631
78
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
14
property, plant and equipMent
freehold land and buildings
At cost
Accumulated depreciation and impairment
total freehold land and buildings
Leasehold buildings
At cost
Accumulated depreciation and impairment
total leasehold buildings
Plant and equipment
At cost
Accumulated depreciation and impairment
total plant and equipment
Capital works in progress – at cost
total property, plant and equipment
24 June 2012
$'000
26 June 2011
$'000
257,582
(38,220)
267,103
(34,530)
219,362
232,573
103,904
(36,166)
100,101
(25,285)
67,738
74,816
1,083,690
(831,535)
1,112,149
(713,739)
252,155
398,410
7,749
16,547
547,004
722,346
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
$'000
freehold
land and
Buildings
$'000
note
leasehold
Buildings
$'000
plant and
equipMent
$'000
total
$'000
At 27 June 2010
Cost
Accumulated depreciation and impairment
9,003
–
271,799
(31,442)
100,306
(22,205)
1,115,740
(664,580)
1,496,848
(718,227)
net carrying amount
9,003
240,357
78,101
451,160
778,621
Period ended 26 June 2011
Balance at beginning of financial year
Additions/capitalisations
Capitalisation to software
Disposals
Acquisition through business combinations
Depreciation charge
Assets classified as held for sale
Impairment
Exchange differences
At 26 June 2011, net of accumulated
depreciation and impairment
13
3(B)
9
9,003
20,746
(11,275)
(13)
–
–
(507)
(1,252)
(155)
240,357
493
–
(38)
398
(5,094)
(1,005)
–
(2,538)
78,101
781
–
(325)
–
(3,677)
–
–
(64)
451,160
34,901
–
(6,598)
662
(74,828)
150
(3,808)
(3,229)
778,621
56,921
(11,275)
(6,974)
1,060
(83,599)
(1,362)
(5,060)
(5,986)
16,547
232,573
74,816
398,410
722,346
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
79
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
capital
Works in
progress
$'000
freehold
land and
Buildings
$'000
note
leasehold
Buildings
$'000
plant and
equipMent
$'000
total
$'000
At 26 June 2011
Cost
Accumulated depreciation and impairment
16,547
–
267,103
(34,530)
100,101
(25,285)
1,112,149
(713,739)
1,495,900
(773,554)
net carrying amount
16,547
232,573
74,816
398,410
722,346
Period ended 24 June 2012
Balance at beginning of financial year
Additions/capitalisations
Capitalisation to software
Disposals
Acquisition through business combinations
Depreciation charge
Assets classified as held for sale
Impairment
Exchange differences
At 24 June 2012, net of accumulated
depreciation and impairment
At 24 June 2012
Cost
Accumulated depreciation and impairment
13
3(B)
9
16,547
(936)
(7,843)
(38)
–
–
–
–
19
232,573
781
–
(2,654)
–
(5,109)
(6,881)
–
652
74,816
3,274
–
(181)
11
(4,287)
(96)
(6,039)
240
398,410
23,917
–
(2,044)
185
(67,432)
(783)
(100,559)
461
722,346
27,036
(7,843)
(4,917)
196
(76,828)
(7,760)
(106,598)
1,372
7,749
219,362
67,738
252,155
547,004
7,749
–
257,582
(38,220)
103,904
(36,166)
1,083,690
(831,535)
1,452,925
(905,921)
net carrying amount
7,749
219,362
67,738
252,155
547,004
During the current year, an impairment charge of $106.6 million was recorded on property, plant and equipment. This impairment
primarily relates to printing press equipment at the Chullora and Tullamarine sites following the announcement of the expected closure
of these sites in the 2014 financial year.
The useful life of printing press equipment has been reassessed to be no more than ten years. The depreciation rates for the 2013
financial year will be adjusted to reflect this change in useful life.
80
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
15 derivative financial instruMents
Current assets
Forward contracts
total current derivative assets
non-current assets
Cross currency swap – cash flow hedge
Cross currency swap – net investment hedge
Call option derivative
total non-current derivative assets
Current liabilities
Interest rate swap – cash flow hedge
Cross currency swap – cash flow hedge
Cross currency swap – fair value hedge
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
Obligation under put option*
total non-current derivative liabilities
24 June 2012
$'000
26 June 2011
$'000
123
123
2,464
23,976
600
27,040
–
–
–
–
27,243
59,172
1,792
7,421
–
–
–
27,339
500
27,839
6,540
72,800
860
80,200
13,453
74,379
7,481
11,221
95,628
106,534
*
Present value of exercise price of the put option over subsidiary shares. The put and the call option are 50% exercisable in the period
July 2012 – October 2012 and the remaining interest is exercisable in the period July 2013 – September 2013.
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.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
81
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
HedGiNG aCtiVitieS
(i) Cash flow hedges – interest rate and cross currency swaps
On 15 June 2012, the Group settled the Eurobond and the interest rate swaps and cross currency swaps designated as hedges of
the future contracted interest payments on the EUR denominated Eurobonds. The combined swaps were being used to hedge a
combination of future movements in interest rates and foreign currency exchange rates.
At 24 June 2012, 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 24 June 2012, 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
interest rate
Maturity date
10 July 2017
10 July 2017
2012
7.52%
7.46%
2011
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 24 June 2012, 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 24 June 2012, the notional principal amount and period of expiry of the swap is as follows:
Pay fixed, receive floating – AUD$125m
interest rate
Maturity date
12 October 2015
2012
6.52%
2011
6.52%
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 24 June 2012, the above hedges were assessed to be highly effective with a combined unrealised loss in fair value of $8.3 million
(2011: $9.7 million loss) recognised in equity for the period. During the period an unrealised gain of $0.1 million (2011: $0.1 million
unrealised loss) was recognised in the income statement attributable to the ineffective portion of the cash flow hedges.
During the year there was a gain transferred from equity to the income statement of $1.2 million (2011: nil).
(ii) Cash flow hedges – foreign exchange contracts
During the year, forward exchange contracts were used by the Group to hedge future foreign capital and non-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. At 24 June 2012, the Group held forward exchange contracts of $0.1 million (2011: nil).
The foreign currency contracts are considered to be fully effective hedges as they are matched against the highly probable foreign
capital and non-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.
During the current and prior financial period there was no material ineffectiveness recognised in the income statement attributable to
cash flow hedges of foreign exchange contracts.
(iii) fair value hedges
At 24 June 2012, the Group held cross currency swap agreements designated to changes in the underlying value of USD denominated
senior notes (refer to Note 18). 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.
On 15 June 2012, the Group settled the cross currency swap agreements partly designated to changes in the underlying value of the
EUR denominated Eurobond (refer to Note 18). The terms of the cross currency swap exchange EUR obligations into AUD obligations.
This swap has been 99% designated to a cash flow hedge, as discussed in (i) above.
At 24 June 2012, the cross currency swap agreements had a combined derivative liability position of $59.2 million (2011: $75.2 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.
82
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
The terms of these cross currency swaps are as follows:
Pay floating AUD receive fixed USD – USD$125m
Pay floating AUD receive floating USD – USD$25m
Pay floating NZD receive fixed USD – USD$50m
Pay floating NZD receive fixed USD – USD$90m
Pay floating NZD receive fixed USD – USD$40m
Maturity date
10 July 2014
10 July 2014
15 January 2014
15 January 2016
15 January 2019
For the Group, the remeasurement of the hedged items resulted in a loss before tax of $11.0 million (2011: $79.3 million gain) and the
changes in the fair value of the hedging instruments resulted in a gain before tax of $14.6 million (2011: $73.8 million loss) resulting in
a net gain before tax of $3.6 million (2011: $5.5 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 the business assets of Independent News Limited in June 2003.
At 24 June 2012, the hedges were assessed to be highly effective with an unrealised loss of $2.5 million (2011: $9.2 million gain)
recognised in equity. During the current financial period there was an unrealised gain of $0.2 million (2011: $0.1 million loss) recognised
in the income statement attributable to the ineffective portion of the net investment hedges.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
83
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
16 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
24 June 2012
$'000
26 June 2011
$'000
24 June 2012
$'000
26 June 2011
$'000
24 June 2012
$'000
26 June 2011
$'000
Property, plant and equipment
Inventories
Investments
Intangible assets
Other assets
Provisions
Payables
Other liabilities
Other
16,117
–
–
6,278
18,792
100,620
15,004
4,917
2,853
Gross deferred tax assets/liabilities
164,581
4,268
–
–
6,306
16,039
50,001
12,152
4,771
2,913
96,450
22,275
3,121
1,133
13,018
17,487
–
–
393
(151)
36,893
3,155
10,915
38,656
17,728
–
–
241
165
(6,158)
(3,121)
(1,133)
(6,740)
1,305
100,620
15,004
4,524
3,004
(32,625)
(3,155)
(10,915)
(32,350)
(1,689)
50,001
12,152
4,530
2,748
57,276
107,753
107,305
(11,303)
Set-off of deferred tax assets/liabilities
(42,051)
(85,938)
(42,051)
(85,938)
–
–
net deferred tax assets/liabilities
122,530
10,512
15,225
21,815
107,305
(11,303)
(B) mOVemeNt iN temPOrarY diFFereNCeS dUriNG tHe FiNaNCial Year
Property, plant and equipment
Inventories
Investments
Intangible assets
Other assets
Provisions
Payables
Other liabilities
Other
Property, plant and equipment
Inventories
Investments
Intangible assets
Other assets
Provisions
Payables
Other liabilities
Other
Balance
26 June 2011
recognised
on acquisition
recognised
in incoMe
recognised
in equity
Balances
disposed
Balance
24 June 2012
(32,625)
(3,155)
(10,915)
(32,350)
(1,689)
50,001
12,152
4,530
2,748
(11,303)
7
–
–
(2,215)
–
240
9
–
–
(1,959)
26,410
34
9,872
27,825
(567)
50,618
2,865
(6)
(587)
116,464
–
–
(90)
–
3,561
–
–
–
843
4,314
50
–
–
–
–
(239)
(22)
–
–
(211)
(6,158)
(3,121)
(1,133)
(6,740)
1,305
100,620
15,004
4,524
3,004
107,305
Balance
27 June 2010
recognised
on acquisition
recognised
in incoMe
recognised
in equity
Balances
disposed
Balance
26 June 2011
(22,823)
(3,020)
(10,347)
(35,369)
2,958
48,993
9,504
2,448
3,056
(4,600)
–
–
–
(576)
–
47
–
–
–
(529)
(9,802)
(135)
(847)
3,595
(8,906)
961
2,648
2,082
(487)
(10,891)
–
–
279
–
4,259
–
–
–
179
4,717
–
–
–
–
–
–
–
–
–
–
(32,625)
(3,155)
(10,915)
(32,350)
(1,689)
50,001
12,152
4,530
2,748
(11,303)
84
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(C) tax lOSSeS aNd FUtUre dedUCtiBle temPOrarY diFFereNCeS
The Group has realised Australian capital losses for which no deferred tax asset is recognised on the balance sheet of $216.5 million
(2011: $213.4 million) which are available indefinitely for offset against future capital gains subject to continuing to meet relevant
statutory tests.
The Group has deductible temporary differences for which no deferred tax asset is recognised on the balance sheet of $684.7 million
(2011: $299.4 million).
(d) FUtUre aSSeSSaBle temPOrarY diFFereNCeS
At 24 June 2012, there are no material unrecognised future assessable temporary differences associated with the Group's investments
in associates or joint ventures, as the Group has no material liability for additional taxation should unremitted earnings be remitted
(2011: Nil).
17
payaBles
Trade and other payables*
Interest payable
Income in advance
total current payables
* Trade payables are non-interest bearing and are generally on 30 day terms.
24 June 2012
$'000
26 June 2011
$'000
204,233
12,038
66,366
184,229
22,192
73,248
282,637
279,669
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
85
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
18
interest Bearing liaBilities
Current interest bearing liabilities – unsecured
Bank borrowings
Other loans
Medium term notes
Eurobonds
Other
Finance lease liability
total current interest bearing liabilities
non-current interest bearing liabilities – unsecured
Bank borrowings
Other loans
Senior notes
Other
Finance lease liability
total non-current interest bearing liabilities
Net deBt FOr FiNaNCial COVeNaNt PUrPOSeS
Cash and cash equivalents
Current interest bearing liabilities
Non-current interest bearing liabilities
Derivative financial instruments liabilities*
Net debt for financial covenant purposes
note
24 June 2012
$'000
26 June 2011
$'000
(B)
(E)
(F)
(D)
(D)
(B)
(C)
(D)
(D)
–
19,378
–
–
2,308
4,131
6,439
167,700
472,543
3,322
3,842
666,785
718,177
392,060
466,302
6,003
10,452
450,293
8,311
14,583
1,200,934
865,247
(358,364)
6,439
1,200,934
65,089
(207,137)
666,785
865,247
162,706
914,098
1,487,601
*
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 $914
million as at 24 June 2012 (2011: $1,488 million).
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 was available to the Group until 23 December 2011. On 19 December 2011,
this facility was repaid (2011: NZ$25 million).
non-current
A $1,155.6 million syndicated bank facility is available to the Group until periods ranging from April 2013 to April 2015. At 24 June 2012,
$590 million was drawn down (2011: $395 million). The interest rate for drawings under this facility is the applicable bank bill rate plus a
credit margin.
A NZ$200 million revolving cash advance facility is available to Trade Me Group Limited until November 2014. At 24 June 2012, NZ$166
million was drawn down (2011: Nil). The interest rate for drawings under this facility is the applicable bank bill rate plus a credit margin.
86
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(C) SeNiOr NOteS
The Group issued Senior Notes in the US private placement market with a principal value of US$230 million (A$289.8 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 2014 to January 2019. In January 2011
Senior Notes of US$50 million were repaid. The weighted average maturity of the issue is approximately 3.7 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 principal value of US$250 million (A$308.2 million) in
July 2007 comprising maturities ranging from July 2014 to July 2017. The weighted average maturity of this issue is approximately 3.2
years. The issued notes include fixed rate coupon notes, paying a weighted average coupon of 6.90% p.a. semi-annually in arrears, and
floating rate coupon notes. The interest and principal 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.
(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 finance lease of $14.6 million (2011: $18.4 million), which was entered into in February 1996. There is also principal and
interest outstanding of $8.3 million (2011: $11.6 million) in the form of a fixed rate loan with an established repayment schedule.
(e) 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 6.87% p.a. In May 2009, the Group repurchased and cancelled $32.3 million of the outstanding MTNs. The remaining $167.7
million of MTNs were repaid on 27 June 2011.
(F) 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 6.25% p.a. payable annually in arrears (2011: 6.25%). The interest and principal on the notes are payable in Euro and were swapped
into fixed rate Australian dollars via cross-currency swaps.
On 15 June 2012 the Eurobond interest and principal were repaid and all associated swaps were settled.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
87
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
19
provisions
Current
Employee benefits
Defamation
Property
Redundancy
Other
total current provisions
non-current
Employee benefits
Property
Redundancy
Other
total non-current provisions
reCONCiliatiON
24 June 2012
$'000
26 June 2011
$'000
99,385
2,849
576
90,889
188
103,232
6,283
346
30,703
246
193,887
140,810
14,750
37,539
97,016
–
149,305
13,527
36,821
–
48
50,396
Reconciliations of the carrying amount of each class of provision, other than employee benefits, during the financial year are set out below:
At 26 June 2011
Current
Non-current
Total provisions, excluding employee benefits
Period ended 24 June 2012
Balance at beginning of the financial year
Additional provision
Utilised
Transfer to assets held for sale
Exchange differences
Balance at end of the financial year
At 24 June 2012
Current
Non-current
Total provisions, excluding employee benefits
NatUre aNd timiNG OF PrOViSiONS
(i) Employee benefits
defaMation
$'000
property
$'000
redundancy
$'000
other
$'000
6,283
–
6,283
6,283
2,208
(5,643)
–
1
346
36,821
30,703
–
37,167
30,703
37,167
2,397
(1,419)
(50)
20
30,703
199,906
(40,677)
(2,085)
58
2,849
38,115
187,905
2,849
–
2,849
576
37,539
90,889
97,016
38,115
187,905
246
48
294
294
398
(504)
–
–
188
188
–
188
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(S)(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 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.
88
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(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.
(iv) Redundancy
The provision is in respect of amounts payable in connection with redundancy and includes termination benefits, on-costs and
outplacement services.
(v) Other
Other provisions includes various other costs relating to the business.
20
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 Fairfax Media 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 following sets out details in respect of the defined benefit plans only and in the case of the Fairfax NZ Retirement Fund, excludes
$49.8 million (2011: $52.1 million) of defined contribution assets and entitlements.
(a) BalaNCe SHeet
The amounts recognised in the balance sheet are determined as follows:
Pension assets
Pension liabilities
net pension liabilities
Present value of the defined benefit plan obligation
Fair value of defined benefit plan assets
net pension liabilities
(B) reCONCiliatiON OF tHe PreSeNt ValUe OF deFiNed
BeNeFit PlaN OBliGatiON
Balance at the beginning of the financial year
Current service cost
Interest cost
Contributions by employees
Actuarial losses/(gains)
Benefits paid
Taxes, premiums and expenses paid
Exchange differences on foreign plans
Curtailments
Settlements
Balance at the end of the financial year
note
24 June 2012
$'000
26 June 2011
$'000
149
(3,933)
(3,784)
(21,974)
18,190
260
(3,595)
(3,335)
(22,644)
19,309
(3,784)
(3,335)
(B)
(C)
22,644
917
999
234
2,364
(1,585)
(590)
4
(410)
(2,603)
21,974
21,512
952
979
248
(725)
(56)
(243)
(23)
–
–
22,644
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
89
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(C) reCONCiliatiON OF tHe Fair ValUe OF deFiNed BeNeFit
PlaN aSSetS
Balance at the beginning of the financial year
Expected return on plan assets
Actuarial (losses)/gains
Contributions by Group companies and employees
Benefits paid
Taxes, premiums and expenses paid
Exchange differences on foreign plans
Settlements
Balance at the end of the financial year
(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
(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
(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
24 June 2012
$'000
26 June 2011
$'000
19,309
1,257
(1,368)
3,761
(1,585)
(590)
9
(2,603)
18,190
16,712
1,168
660
1,081
(56)
(243)
(13)
–
19,309
24 June 2012
$'000
26 June 2011
$'000
917
999
(410)
(1,257)
249
952
979
–
(1,168)
763
(40)
1,636
24 June 2012
%
26 June 2011
%
6
25
28
19
7
15
2012
%
2.6
7.0
4.0
9
20
33
28
5
5
2011
%
5.2
5.9
4.0
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 7.0% p.a. rate of return, net of tax and expenses (2011: 5.9% p.a.).
90
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(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 two yearly intervals for Australia and the last actuarial assessment of Fairfax Media Super was carried out
as at 1 July 2010 by Mercer Human Resource Consulting Pty Ltd. Actuarial assessments are made at three yearly intervals for New
Zealand and the last actuarial assessment of Fairfax NZ Retirement Fund was carried out as at 1 April 2011 by AoN Consulting New
Zealand Limited. Fairfax New Zealand Superannuation Fund and Fairfax NZ Senior Executive Superannuation Scheme are defined
contribution funds and do 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 2013 financial year are $612,000.
(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 deficit of
$1 million at the most recent financial position of the plans, being 1 July 2010 for Australia and 1 April 2011 for New Zealand.
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 2010 for Australia and 1 April 2011 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
Defined benefit plan assets
Surplus/(deficit)
2008
$'000
(24,254)
29,796
2009
$'000
(20,560)
17,875
2010
$'000
(21,512)
16,712
2011
$'000
(22,644)
19,309
5,542
(2,685)
(4,800)
(3,335)
Experience adjustments arising on plan liabilities
Experience adjustments arising on plan assets
7,678
(3,132)
(1,513)
6,283
1,551
(756)
(490)
(585)
2012
$'000
(21,974)
18,190
(3,784)
–
1,184
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
91
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
21 contriButed equity
note
24 June 2012
$'000
26 June 2011
$'000
Ordinary Shares
2,351,955,725 ordinary shares authorised and fully paid (2011: 2,351,955,725)
(A)
4,667,944
4,667,944
unvested employee incentive Shares
11,723,026 unvested employee incentive shares (2011: 11,723,026)
Stapled Preference Shares (SPS)
Nil stapled preference shares (2011: Nil)
Debentures
281 debentures fully paid (2011: 281)
total contributed equity
* Amount is less than $1000
ReCOnCiLiAtiOnS
(B)
(21,696)
(21,696)
(C)
(D)
–
*
–
*
4,646,248
4,646,248
Reconciliations of each class of contributed equity at the beginning and end of the current financial year are set out below:
(a) OrdiNarY SHareS
Balance at beginning of the financial year
note
24 June 2012
nO. Of SHAReS
26 June 2011
no. of shares
24 June 2012
$'000
26 June 2011
$'000
2,351,955,725
2,351,955,725
4,667,944
4,667,944
Balance at end of the financial year
2,351,955,725
2,351,955,725
4,667,944
4,667,944
(B) UNVeSted emPlOYee iNCeNtiVe SHareS
Balance at beginning of the financial year
Share acquisition – 10 December 2010
Tax benefit recognised directly in equity
Balance at end of the financial year
11,723,026
–
–
8,411,794
3,311,232
–
11,723,026
11,723,026
(21,696)
–
–
(21,696)
(C) StaPled PreFereNCe SHareS (SPS)
Balance at beginning of the financial year
Share repurchase – 29 April 2011
Share issue costs transferred to reserves
Balance at end of the financial year
22(G)
(d) deBeNtUreS
Balance at beginning of the financial year
Balance at end of the financial year
–
–
–
–
281
281
3,000,000
(3,000,000)
–
–
281
281
–
–
–
–
*
*
(18,430)
(4,666)
1,400
(21,696)
293,163
(300,000)
6,837
–
*
*
total contributed equity
2,363,678,751
2,363,678,751
4,646,248
4,646,248
* Amount is less than $1000
92
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
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.
(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.
(C) StaPled PreFereNCe SHareS (SPS)
The SPS (FXJPB), which were issued on 23 March 2006 for a face value of $100 per share, was 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 were not entitled to vote.
On 29 April 2011, all of the SPS were repurchased in accordance with their terms of issue for a repurchase amount of $100 per share.
(d) deBeNtUreS
Debenture holders terms and conditions are disclosed in Note 1(T).
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
93
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
22 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
Acquisition reserve
General reserve
total reserves
(a) aSSet reValUatiON reSerVe
Balance at beginning of the financial year
Revaluation of available for sale investments
Tax effect on available for sale investments
Balance at end of the financial year
(B) FOreiGN CUrreNCY traNSlatiON reSerVe
Balance at beginning of the financial year
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
Losses arising during the year on interest rate and cross currency swaps
Gains arising during the year on currency forward contracts
Reclassification adjustments for gains included in the income statement
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
Tax effect on share-based payment expense
Balance at end of the financial year
(F) aCQUiSitiON reSerVe
Balance at beginning of the financial year
Acquisition of non-controlling interest
Disposal of non-controlling interest in subsidiary
Tax effect of disposal of non-controlling interest in subsidiary
Recognition of put option on non-controlling interest
Balance at end of the financial year
94
note
24 June 2012
$'000
26 June 2011
$'000
(A)
(B)
(C)
(D)
(E)
(F)
(G)
(259)
(219,528)
(7,088)
2,669
7,764
177,759
(6,837)
506
(233,884)
1,220
5,167
6,971
563
(6,837)
(45,520)
(226,294)
506
(675)
(90)
(259)
1,833
(1,606)
279
506
(233,884)
14,356
(140,969)
(92,915)
(219,528)
(233,884)
1,220
(10,731)
82
(1,220)
3,561
(7,088)
5,167
(3,568)
1,070
2,669
6,971
1,068
(275)
7,764
563
717
187,321
(10,842)
–
177,759
10,946
(13,894)
–
–
4,168
1,220
(4,037)
13,148
(3,944)
5,167
5,099
2,675
(803)
6,971
–
(4,637)
–
–
5,200
563
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(G) GeNeral reSerVe
Balance at beginning of the financial year
Share issue costs transferred from contributed equity
Balance at end of the financial year
NatUre aNd PUrPOSe OF reSerVeS
(A) Asset revaluation reserve
note
24 June 2012
$'000
26 June 2011
$'000
21
(6,837)
–
(6,837)
–
(6,837)
(6,837)
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).
As at the reporting date, the asset revaluation reserve was in a debit balance. This balance relates to available for sale investments that
have been devalued at reporting date. The devaluation is not considered significant or prolonged so as to require an impairment of the
investment.
(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 15.
(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(N). Refer to further disclosures at Note 15.
(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(S)(ii).
(f) Acquisition reserve
The acquisition reserve is used to record differences between the carrying value of non-controlling interests and the consideration paid/
received, where there has been a transaction involving non-controlling interests that does not result in a loss of control. The reserve is
attributable to the equity of the parent.
The current year movement from the disposal of non-controlling interest in subsidiary relates to the sale of 34% of Trade Me Group
Limited on 13 December 2010 and the further divestment of 15% on 21 June 2012. This entity is still controlled by the Group.
(G) General reserve
The general reserve is used to record Stapled Preference Share (SPS) issue costs that have been transferred from contributed equity.
The SPS were repurchased on 29 April 2011.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
95
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
23 retained profits
Balance at beginning of the financial year
Net loss for the financial year
Actuarial (loss)/gain on defined benefit plans, net of tax
Tax benefits recognised directly in equity
total available for appropriation
Dividends paid
Balance at end of the financial year
24
earnings per share
basic loss per share
After significant items less SPS dividend (net of tax)
Diluted loss per share
After significant items (net of tax)
earnings reconciliation – basic
Net loss attributable to members of the Company
Less Dividends on SPS (net of tax)
Basic loss after significant items less SPS dividend
earnings reconciliation – diluted
Net loss attributable to members of the Company
Weighted average number of ordinary shares used in calculating basic ePS
SPS
Weighted average number of ordinary shares used in calculating diluted ePS
note
24 June 2012
$'000
26 June 2011
$'000
11,764
(2,732,397)
(2,615)
–
481,978
(390,861)
967
5,191
(2,723,248)
97,275
6
(82,318)
(85,511)
(2,805,566)
11,764
24 June 2012
¢ per share
26 June 2011
¢ per share
(116.2)
(17.0)
(116.2)
(17.0)
24 June 2012
$'000
26 June 2011
$'000
(2,732,397)
–
(390,861)
(10,034)
(2,732,397)
(400,895)
(2,732,397)
(390,861)
24 June 2012
nuMBer
'000
26 June 2011
nuMBer
'000
2,351,956
2,351,956
–
166,530
2,351,956
2,518,486
96
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
25 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:
Within one year
Later than one year and not later than five years
Later than five years
total operating lease commitments
24 June 2012
$'000
26 June 2011
$'000
41,805
140,921
311,320
41,850
135,606
271,331
494,046
448,787
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 property, plant and machinery with a carrying amount of $28.9 million (2011: $30.1 million). The lease
has a remaining term of three years (2011: four years) and a weighted average interest rate of 13.3% (2011: 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
note
MiniMuM
payMents
2012
$'000
5,076
11,420
–
16,496
(1,913)
present
value of
payMents
2012
$'000
4,131
10,452
–
14,583
–
MiniMuM
payMents
2011
$'000
5,076
16,496
–
21,572
(3,147)
present
value of
payMents
2011
$'000
3,842
14,583
–
18,425
–
Total finance lease liability
18(D)
14,583
14,583
18,425
18,425
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 rent payable
over the remaining lease term of three years which is subject to such movements amounts to $14.4 million (2011: $18.3 million).
CaPital COmmitmeNtS
At 24 June 2012, 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
JOiNt VeNtUre COmmitmeNtS
24 June 2012
$'000
26 June 2011
$'000
1,322
–
–
1,322
2,506
–
–
2,506
At 24 June 2012, the Group has a commitment contracted for at reporting date but not recognised as a liability in relation to a joint
venture in MMP Holdings Pty Ltd. The commitment includes a purchase price and a working capital adjustment of $41.3 million and the
contribution of the shares in Fairfax Community Network Limited. The assets and liabilities of Fairfax Community Network Limited have
been disclosed as held for sale in Note 9.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
97
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
26 contingencies
GUaraNteeS
Under the terms of ASIC Class Order 98/1418 (as amended), the Company and certain controlled entities (refer Note 27), 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 19, that are expected to
result in a material impact.
27 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 101 806 302 Pty Ltd
Agricultural Publishers Pty Limited
Associated Newspapers Ltd
Aussie Destinations (1) Pty Ltd
Australian Property Monitors Pty Limited
AZXC Pty Ltd
Border Mail Printing Pty Ltd
Bridge Printing Office Pty Limited
Bundaberg Broadcasters Pty Ltd
Bundaberg Narrowcasters Pty Ltd
Carpentaria Newspapers Pty Ltd
Central Districts Field Days Limited
Commerce Australia Pty Ltd
Communication Associates Limited
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
Examiner Properties Pty Ltd
Fairfax Business Media (South Asia) Pte Ltd
Fairfax Business Media Pte Ltd
Fairfax Business Media Sdn. Bhd.
Fairfax Community Network Limited
Fairfax Community Newspapers Pty Limited
Fairfax Corporation Pty Limited
Fairfax Digital Holdings NZ Limited
Fairfax Digital Assets NZ Limited
Fairfax Digital Australia & New Zealand Pty Limited
Fairfax Digital Limited
Fairfax Group Finance New Zealand Limited
Fairfax Media (UK) Limited
98
notes
(a)
country of
incorporation
Australia
oWnership interest
2012
%
2011
%
(c)
(a)
(a)
(a)
(a)
(a)
(a)
(c)
(c)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(d)
(d)
(a)
(a)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Singapore
Singapore
Malaysia
Australia
Australia
Australia
New Zealand
New Zealand
Australia
Australia
New Zealand
United Kingdom
–
100
100
100
100
100
100
100
100
–
–
100
100
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
68
100
68
100
100
100
100
100
100
100
100
100
100
60
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 24 JUNE 2012
Fairfax Media Group Finance Pty Limited
Fairfax Media Management Pty Limited
Fairfax Media Operations Limited
Fairfax Media Operations Pty Limited
Fairfax Media Productions UK Limited
Fairfax Media Publications Pty Limited
Fairfax New Zealand Finance Pty Limited
Fairfax New Zealand Holdings Limited
Fairfax New Zealand Limited
Fairfax News Network Pty Limited
Fairfax OF Limited
Fairfax OSI Limited
Fairfax Print Holdings Pty Limited
Fairfax Printers Pty Limited
Fairfax Radio Network Pty Limited
Fairfax Radio Syndication Pty Limited
Fairfax Regional Media (Tasmania) Pty Limited
Fairfax Regional Printers Pty Limited
Farm Progress Companies, Inc
Farm Progress Holding Co, Inc
Farm Progress Insurance Services, Inc
Financial Essentials Pty Ltd
Find a Babysitter Pty Ltd
Golden Mail Pty Limited
Gunnedah Publishing Co Pty Ltd
Harris and Company Pty Limited
Harris Enterprises Pty Ltd
Harris Print Pty Ltd
Hunter Distribution Network Pty Ltd
Illawarra Newspaper Holdings Pty Ltd
Indiana Prairie Farmer Insurance Services, Inc
Integrated Publication Solutions Pty Limited
Internet Marketing Australia Pty Ltd
Internet Products Sales & Services Pty Ltd
InvestSMART Financial Services Pty Ltd
John Fairfax & Sons Ltd
John Fairfax (US) Limited
John Fairfax Limited
Lanson Investments Pty Ltd
Leeton Newspapers Pty Ltd
Lime Digital Pty Limited
Mackamedia Pty Ltd
Mamiko Co Pty Ltd
Mayas Pty Ltd
Mayas Unit Trust
Media Investments Pty Ltd
Micosh Pty Ltd
Miller Publishing Co, Inc
Milton Ulladulla Publishing Co. Pty Ltd
Mistcue Pty Limited
Mountain Press Pty Ltd
Namoi Media & Marketing Pty Ltd
Newcastle Newspapers Pty Ltd
Newsagents Direct Distribution Pty Ltd
North Australian News Pty Ltd
Northern Newspapers Pty Ltd
notes
country of
incorporation
2012
%
2011
%
oWnership interest
(a)
(a)
(a)
(a)
(h)
(i)
(a)
(a)
(a)
(a)
(a) (g)
(a)
(a)
(a)
(b)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(c)
(b)
(b)
(a)
(a)
(b)
(a)
(a)
(a)
(a)
Australia
Australia
New Zealand
Australia
United Kingdom
Australia
Australia
New Zealand
New Zealand
Australia
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
United States
United States
United States
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
Australia
Australia
Australia
Australia
Australia
United States
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
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
–
100
100
100
100
100
100
100
100
100
100
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
66
–
100
100
100
100
100
100
100
68
68
100
100
100
100
100
100
100
–
–
100
100
100
100
100
100
65
88
–
100
100
100
100
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
99
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
NZ Rural Press Limited
Occupancy Pty Limited
Ollority Pty Ltd
Online Marketing Group Pty Limited
OSF Australia Pty Limited
Personal Investment Direct Access Pty Limited
Port Lincoln Times Pty Ltd
Port Stephens Publishers Pty Ltd
Port Stephens Publishers Trust
Queensland Community Newspapers Pty Ltd
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
Regional Press Australia Pty 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
RSVP.com.au Pty Limited
Rural Press (USA) Inc
Rural Press (USA) Limited
Rural Press Printing (Victoria) Pty Limited
Rural Press Printing Pty Limited
Rural Press Pty Limited
Rural Press Queensland Pty Ltd
Rural Press Regional Media (WA) Pty Limited
Rural Publishers Pty Limited
Southern Weekly Partnership
S.A. Regional Media Pty Limited
Satellite Music Australia Pty Limited
Stayz Limited
Stayz Pty Limited
Stock Journal Publishers Pty Ltd
Suzannenic Pty Limited
The Advocate Newspaper Proprietary Limited
The Age Company Pty Ltd
The Age Print Company Pty Limited
The Barossa News Pty Limited
The Border Morning Mail Pty Limited
The Border News Partnership
The Federal Capital Press of Australia Pty Limited
The Independent News Pty Ltd
The Murrumbidgee Irrigator Pty Ltd
TheVine.com.au Pty Limited
The Wagga Daily Advertiser Pty Ltd
The Warrnambool Standard Pty Ltd
The Weather Company Pty Limited
Trade Me Group Limited
Trade Me Limited
100
notes
country of
incorporation
2012
%
2011
%
oWnership interest
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
United States
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
(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)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(e)
100
95
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
75
100
100
95
95
100
100
100
100
100
100
100
63
100
100
100
70
100
100
75
51
51
100
90
68
68
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
51
100
100
90
90
100
100
100
100
100
100
100
63
100
100
100
70
100
100
75
–
100
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
Tricom Group Pty Ltd
Trade Me Travel Trustees Limited
Weatherzone Japan LLC
West Australian Rural Media Pty Ltd
West Australian Primary Industry Press Pty Ltd
Western Magazine Pty Ltd
Western Magazine Settlement Trust
Whyalla News Properties Pty Ltd
Winbourne Pty Limited
notes
country of
incorporation
Australia
New Zealand
Japan
Australia
Australia
Australia
Australia
Australia
Australia
(f)
(a)
(a)
(a)
(a)
oWnership interest
2012
%
100
100
75
100
100
75
75
100
100
2011
%
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.
Incorporated on 3 November 2011.
Incorporated on 13 October 2011.
Incorporated on 8 July 2011.
(b) Acquired on 1 November 2011.
(c) Disposed on 31 October 2011.
(d)
(e)
(f)
(g) This company was formerly called The Examiner Newspaper Pty Ltd.
(h) This company was formerly called Old Friends Limited.
(i) This company was formerly called Online Services International Limited.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
101
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
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 24 June 2012 and consolidated balance sheet as at 24 June 2012, comprising
the members of the Closed Group after eliminating all transactions between members are set out below:
(a) BalaNCe SHeet
Current assets
Cash and cash equivalents
Trade and other receivables
Inventories
Derivative assets
Assets held for sale
Income tax receivable
Other financial assets
total current assets
non-current assets
Receivables
Investments accounted for using the equity method
Available for sale investments
Intangible assets
Property, plant and equipment
Derivative assets
Deferred tax assets
Other financial assets
total non-current assets
total assets
Current liabilities
Payables
Interest bearing liabilities
Derivative liabilities
Liabilities directly associated with held for sale assets
Provisions
Current tax liabilities
total current liabilities
non-current liabilities
Interest bearing liabilities
Derivative liabilities
Provisions
Pension liabilities
total non-current liabilities
total liabilities
net assets
equity
Contributed equity
Reserves
Retained losses
total equity
102
24 June 2012
$'000
26 June 2011
$'000
56,029
263,250
31,756
123
18,268
14,345
3,914
136,644
296,131
33,642
–
2,342
–
3,686
387,685
472,445
258,134
30,551
1,991
1,637,134
470,352
27,040
119,635
1,042,873
647,574
32,377
2,633
3,768,533
626,056
27,839
8,362
1,052,167
3,587,710
6,165,541
3,975,395
6,637,986
203,475
6,439
–
4,956
180,090
2,595
202,998
647,407
80,200
–
120,964
39,828
397,555
1,091,397
1,070,560
89,607
146,534
3,933
865,295
100,513
47,486
3,595
1,310,634
1,016,889
1,708,189
2,108,286
2,267,206
4,529,700
4,646,248
(53,283)
(2,325,759)
4,646,248
(30,958)
(85,590)
2,267,206
4,529,700
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(B) iNCOme StatemeNt
Total revenue
Share of net profits of associates and joint ventures
Expenses before finance costs
Finance costs
net loss from operations before income tax expense
Income tax benefit/(expense)
net loss from operations after income tax expense
24 June 2012
$'000
26 June 2011
$'000
1,782,584
1,244
(3,956,037)
(66,569)
(2,238,778)
76,738
1,989,258
2,845
(2,256,837)
(39,552)
(304,286)
(64,045)
(2,162,040)
(368,331)
28 acquisition and disposal of controlled entities
(a) aCQUiSitiONS
The Group gained control over the following entities or businesses during the year:
entity or Business acquired
principal activity
Namoi Media & Marketing Pty Ltd
Mackamedia Pty Ltd
Mamiko Co Pty Ltd
Gunnedah Publishing Co Pty Ltd
Autobase Limited
Newspaper publishing
Newspaper publishing
Newspaper publishing
Newspaper publishing
Online vehicle dealer automotive website
date of
acquisition
1 November 2011
1 November 2011
1 November 2011
1 November 2011
30 April 2012
oWnership
interest
100%
100%
100%
100% (i)
(ii)
(i) The business of Gunnedah Publishing Co Pty Ltd was acquired including the Namoi Valley Independent masthead.
(ii) The business of Autobase Limited was acquired including the domain name www.autobase.co.nz.
For additional information refer to Note 29.
(B) diSPOSalS
The Group disposed of its interests in the following businesses during the year:
entity or Business disposed
principal activity
5AU Broadcasters Proprietary Limited
Bundaberg Broadcasters Pty Ltd
Bundaberg Narrowcasters Pty Ltd
Lanson Investments Pty Ltd
Broadcasting
Broadcasting
Broadcasting
Broadcasting
date of disposal
31 October 2011
31 October 2011
31 October 2011
31 October 2011
oWnership
interest
100%
100%
100%
100%
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
103
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
29 Business coMBinations
aCQUiSitiONS dUriNG tHe PeriOd
Acquisitions, none of which were individually significant to the consolidated entity, are listed in Note 28(A).
The fair values of the identifiable assets and liabilities acquired were:
value of net assets acquired
Cash and cash equivalents
Receivables
Inventories
Property, plant and equipment
Investments and other assets
Intangible assets
Deferred tax assets
total assets
Payables
Provisions
Other liabilities
Current tax liabilities
total liabilities
Value of identifiable net assets
Goodwill arising on acquisition
Total identifiable net assets and goodwill attributable to the group
Purchase consideration
Cash paid
Cash received/receivable on liquidation of Autobase Limited
Fair value of equity interest in associate prior to acquisition
total purchase consideration
Net cash outflow on acquisition
Net cash acquired with subsidiary
Cash paid
Cash received/receivable on liquidation of Autobase Limited
Net cash outflow
recognised
on acquisition
$'000
110
274
43
196
1
8,570
112
9,306
66
374
13
10
463
8,843
6,518
15,361
15,312
(3,040)
3,089
15,361
110
(15,312)
3,040
(12,162)
Direct costs of $123,362 were incurred in relation to the above acquisitions. These costs are included in other expenses in the
consolidated income statement.
The consolidated income statement includes sales revenue and net profit for the year ended 24 June 2012 of $2.8 million and
$0.1 million respectively, as a result of acquisitions of business combinations made during the reporting period. Had the acquisitions
occurred at the beginning of the reporting period, the consolidated income statement would have included revenue and profit of
$8.8 million and $1.5 million respectively.
Goodwill of $6.5 million includes synergies expected to be achieved as a result of combining the acquired businesses with the rest of
the Group. The acquired workforces and future growth opportunities are also key factors contributing to the goodwill acquired during the
reporting period.
Included in the business acquisitions made during the reporting period were mastheads, trademarks, software, business and domain names.
104
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
30
eMployee Benefits
(a) NUmBer OF emPlOYeeS
As at 24 June 2012 the consolidated entity employed 8,416 full-time employees (2011: 8,806) and 1,748 part-time and casual
employees (2011: 1,825). This includes 2,094 (2011: 2,117) full-time employees and 310 (2011: 378) part-time and casual employees in
New Zealand.
(B) emPlOYee SHare PlaNS
The Company had three employee share plans during the period. The terms of each plan are set out below:
1. fairfax exempt employee Share Plan
This plan is open to all Australian employees with at least twelve months service with the consolidated entity in Australia, whose
adjusted taxable income is $180,000 per annum or less. Under this Plan, participants may salary sacrifice up to $1,000 of pre tax salary
per annum for the 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 Australian employees with at least twelve months service with the consolidated entity in Australia. Under this
Plan, participants may salary sacrifice a minimum of $1,000 and up to a maximum of $5,000 of salary per annum for the 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. Participants must nominate a 'lock' period of either three, five or seven years during which their
shares must remain in the plan, unless they leave the consolidated entity in Australia.
3. Long term 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 nominally allocated
Fairfax shares, which are beneficially held in a trust. The shares will vest if the eligible employee remains in employment three years
from the date the nominal shares 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.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
105
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
31 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:
24 June 2012
$
26 June 2011
$
1,031,030
1,174,200
266,770
231,750
25,854
27,256
1,323,654
1,433,206
238,692
376,167
276,510
111,182
213,515
603,008
170,030
–
11,818
–
20,703
2,200
1,443,200
580,625
2,766,854
2,013,831
1,000
–
1,000
–
–
–
2,767,854
2,013,831
Audit services
Ernst & Young Australia
Audit and review of financial reports
Affiliates of Ernst & Young Australia
Audit and review of financial reports
Non Ernst & Young Firms
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
Non Ernst & Young Firms
Regulatory and contractually required audits
Other
total other assurance services
total remuneration for assurance services
non assurance services
Ernst & Young Australia
Other services
Affiliates of Ernst & Young Australia
Other services
Non Ernst & Young Firms
Other services
total non assurance services
total remuneration of auditors
106
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
32 director and executive disclosures
(a) eQUitY iNStrUmeNt diSClOSUreS relatiNG tO KeY maNaGemeNt PerSONNel
(i) Shareholdings
Balance
26 June 2011
net
change
other
Balance
24 June 2012
post
year-end
acquisitions
post
year-end
disposals
post
year-end
Balance
2012
Directors
R Corbett
NJ Fairfax*
G Hywood
S McPhee
S Morgan
L Nicholls
R Savage*
P Young
M Anderson
key management personnel
B Cassell
G Hambly
A Lam-Po-Tang
C Maher
M Williams
99,206
3,892,481
–
4,783
181,500
5,401
47,899
131,117
–
1,061,014
177,631
–
641
1,281
–
–
118,343
35,437
1,383,168
34,986
–
–
–
99,206
3,892,481
118,343
40,220
1,564,668
40,387
47,899
131,117
–
–
(72,816)
–
–
–
1,061,014
104,815
–
641
1,281
–
–
–
13,156
–
12,875
–
–
–
–
–
–
–
–
Total
5,602,954
1,499,118
7,102,072
26,031
2011
Directors
R Corbett
JB Fairfax*
NJ Fairfax
B McCarthy*
G Hywood
S McPhee
S Morgan
L Nicholls
R Savage
P Young
M Anderson
Balance
27 June 2010
99,206
235,426,781
3,892,481
1,200,462
–
–
–
–
47,899
131,117
–
net
change
other
–
–
–
–
–
4,783
181,500
5,401
–
–
–
99,206
235,426,781
3,892,481
1,200,462
–
4,783
181,500
5,401
47,899
131,117
–
–
–
–
–
–
7,712
–
7,261
–
–
–
key management personnel
B Cassell
G Hambly
1,061,014
178,581
–
(950)
1,061,014
177,631
–
–
Total
242,037,541
190,734
242,228,275
14,973
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
99,206
3,892,481
118,343
53,376
1,564,668
53,262
47,899
131,117
–
1,061,014
104,815
–
641
1,281
7,128,103
–
–
–
–
–
–
–
–
–
–
–
–
–
–
99,206
235,426,781
3,892,481
1,200,462
–
12,495
181,500
12,662
47,899
131,117
–
1,061,014
177,631
242,243,248
Balance
26 June 2011
post
year-end
acquisitions
post
year-end
disposals
post
year-end
Balance
*
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.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
107
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(B) riGHtS OVer SHare HOldiNGS OF direCtOrS aNd KeY maNaGemeNt PerSONNel
Details of equity-based incentive schemes are included in section 6.2 of the remuneration report.
Directors
G Hywood
key management personnel
B Cassell
G Hambly
A Lam-Po-Tang
C Maher
M Williams
Total
Directors
B McCarthy
G Hywood
key management personnel
B Cassell
G Hambly
Total
opening
Balance
26 June 2011
granted as
reMuneration
net
change
other*
closing
Balance
24 June 2012
–
1,514,491
–
1,514,491
599,889
504,754
–
149,261
120,567
274,077
221,030
–
129,081
93,716
(87,983)
(7,835)
–
(24,635)
(15,177)
785,983
717,949
–
253,707
199,106
1,374,471
2,232,395
(135,630)
3,471,236
opening
Balance
27 June 2010
granted as
reMuneration
net
change
other*
closing
Balance
26 June 2011
950,399
–
–
–
284,792
270,560
315,097
234,194
1,505,751
549,291
–
–
–
–
–
950,399
–
599,889
504,754
2,055,042
* Net change movements include forfeitures.
(C) lOaNS tO KeY maNaGemeNt PerSONNel
(i) Aggregates for key management personnel
There were no loans made 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 24 June 2012 (2011: 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 24 June 2012 and 26 June 2011.
108
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
33 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 27.
(C) 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.
(d) traNSaCtiONS WitH related PartieS
The following transactions occurred with related parties on normal market terms and conditions:
Associates
24 June 2012
26 June 2011
Joint ventures
24 June 2012
26 June 2011
Director-related entities *
24 June 2012
26 June 2011
SALeS tO
ReLAteD
PARtieS
$'000
PuRCHASeS
fROM ReLAteD
PARtieS
$'000
AMOunt OWeD
by ReLAteD
PARtieS
$'000
AMOunt OWeD
tO ReLAteD
PARtieS
$'000
2,690
2,279
9,110
10,224
2,412
2,550
115
61
116
103
1,587
343
2,905
3,772
2,252
4,845
3
214
11
28
–
1
–
7
*
Sales to director-related entities primarily relate to advertising sold to major retailers of which Directors are board members.
Purchases from director-related entities primarily relate to purchases from energy suppliers of which Directors are board members.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
109
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
34 notes to the cash floW stateMent
(a) reCONCiliatiON OF Net lOSS aFter iNCOme tax exPeNSe
tO Net CaSH iNFlOW FrOm OPeratiNG aCtiVitieS
Net loss for the financial year
non-cash items
Depreciation and amortisation
Impairment of property, plant and equipment, intangibles and investments
Amortisation of borrowing costs
Share of losses/(profits) of associates and joint ventures not received as dividends
Straight-line rent adjustment
Net loss on disposal of property, plant and equipment
Net gain on disposal of investments and other assets
Fair value adjustment to derivatives
Net foreign currency (gain)/loss
Share-based payment expense
Non-cash superannuation expense
Gain on revaluation of investment in associate
Other non-operating gains
Changes in operating assets and liabilities, net of effects from acquisitions
Decrease in trade receivables
Decrease/(increase) in other receivables
Decrease/(increase) in inventories
Increase in other assets
Increase in payables
Increase in provisions
(Decrease)/increase in tax balances
note
24 June 2012
$'000
26 June 2011
$'000
(2,725,803)
(389,667)
3(B)
107,503
2,865,060
1,921
1,717
470
401
(1,005)
(6,561)
(9,070)
1,068
(716)
(2,541)
19
33,924
3,121
2,506
(919)
6,897
155,398
(165,741)
114,351
655,051
1,568
(789)
909
1,526
(785)
(6,695)
807
2,675
(70)
–
–
18,725
(2,194)
(1,592)
(1,113)
1,777
32,303
4,638
Net cash inflow from operating activities
267,649
431,425
(B) reCONCiliatiON OF CaSH aNd CaSH eQUiValeNtS
Reconciliation of cash at end of the financial year (as shown in the Statement of
Cash Flow) 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
358,364
207,137
358,364
207,137
110
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
35 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 a going concern 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; and
sufficient funds are available for the business to implement its capital expenditure and business acquisition strategies.
Where excess funds arise with respect to the funds required to enact the Group's business strategies, consideration is given to possible
increased dividends or returns of equity to shareholders.
The Group's financial strategy is to target the net debt to underlying EBITDA ratio at around 2 times. The Group's S&P credit rating is
currently BB+ (negative outlook).
The net debt to EBITDA ratio for the Group at 24 June 2012 and 26 June 2011 is as follows:
Net debt for financial covenant purposes
EBITDA *
Net debt to EBITDA ratio
note
18
2012
$'000
2011
$'000
914,098
506,022
1,487,601
608,837
1.81
2.44
*
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/(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.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
111
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
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 15 for further details of the Group's derivative financial instruments and details of hedging activities.
At balance date, the Group had the following mix of financial assets and financial liabilities exposed to interest rate risks:
fLOAtinG
RAte
$'000
fixeD
RAte
$'000
nOn-inteReSt
beARinG
$'000
358,364
–
–
14,615
23,976
396,955
–
718,177
24,361
–
–
14,583
757,121
60,964
–
–
–
–
–
–
–
8,311
441,941
–
–
–
450,252
27,243
tOtAL
$'000
358,364
323,242
1,991
14,682
27,163
–
323,242
1,991
67
3,187
328,487
725,442
282,637
282,637
–
–
–
–
–
–
7,421
726,488
466,302
–
–
14,583
1,207,373
95,628
818,085
477,495
290,058
1,585,638
As at 24 June 2012
financial assets
Cash and cash equivalents
Trade and other receivables
Available for sale 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
Total interest bearing liabilities
Derivatives
Total financial liabilities
112
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
As at 26 June 2011
financial assets
Cash and cash equivalents
Trade and other receivables
Available for sale 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
Total interest bearing liabilities
Derivatives
Total financial liabilities
Sensitivity analysis
fLOAtinG
RAte
$'000
fixeD
RAte
$'000
nOn-inteReSt
beARinG
$'000
207,137
–
–
18,446
27,339
252,922
–
411,438
23,815
–
–
18,425
453,678
120,668
–
–
–
–
–
–
–
11,633
426,478
472,543
167,700
–
1,078,354
54,845
tOtAL
$'000
207,137
358,876
2,633
18,519
27,839
–
358,876
2,633
73
500
362,082
615,004
279,669
279,669
–
–
–
–
–
–
11,221
423,071
450,293
472,543
167,700
18,425
1,532,032
186,734
574,346
1,133,199
290,890
1,998,435
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% (2011: 30%) 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 24 June 2012 from around 3.53% to 4.59%
representing a 106 basis point shift (2011: 151 basis point shift).
In 2012, 72% (2011: 86%) 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.
If interest rates were 30% higher with all other variables held
constant – increase/(decrease)
If interest rates were 30% lower with all other variables held
constant – increase/(decrease)
(4,352)
(3,725)
2,663
4,888
4,352
3,725
(2,755)
(5,181)
iMpact on post-tax profit
iMpact on equity
2012
$'000
2011
$'000
2012
$'000
2011
$'000
(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; and
• New Zealand Dollars.
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.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
113
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
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 15 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 15% 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 15% 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.
(a) AuD / nZD
Comparing the Australian Dollar exchange rate against the New Zealand Dollar, a 15% weaker Australian Dollar would result in an
exchange rate of 1.0807 and a 15% stronger Australian Dollar in an exchange rate of 1.4621 based on the year end rate of 1.2714. 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 1.0781 to 1.3746.
iMpact on post-tax profit
iMpact on equity
(hedging reserves)*
2012
$'000
2011
$'000
2012
$'000
2011
$'000
If the AUD exchange rate was 15% weaker against the NZD
with all other variables held constant – increase/(decrease)
If the AUD exchange rate was 15% stronger against the NZD
with all other variables held constant – increase/(decrease)
1,092
1,232
(29,424)
(29,147)
(1,932)
(2,086)
21,748
21,543
* 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 15% weaker Australian Dollar would result in an
exchange rate of 0.8548 and a 15% stronger Australian Dollar in an exchange rate of 1.1566 based on the year end rate of 1.0057. 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 0.6120 to 1.1028.
If the AUD exchange rate was 15% weaker against the USD
with all other variables held constant – increase/(decrease)
If the AUD exchange rate was 15% stronger against the USD
with all other variables held constant – increase/(decrease)
iMpact on post-tax profit
2012
$'000
683
(134)
2011
$'000
612
(145)
iMpact on equity
(cash floW hedge reserve)
2012
$'000
2011
$'000
(2,033)
(2,468)
2,939
2,902
114
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(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 24 June 2012 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.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
115
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(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.
Refer to Note 18(B) for details of the Group's unused credit facilities at 24 June 2012.
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 24 June 2012
financial liabilities*
Payables
Bank borrowings and loans
Notes and bonds
Finance lease liability
Derivatives – inflows*
Cross currency swaps – foreign leg (fixed)**
Cross currency swaps – foreign leg (variable)**
Forward foreign currency contracts
Derivatives – outflows*
Cross currency swaps – AUD leg (fixed)**
Cross currency swaps – AUD leg (variable)**
Cross currency swaps – NZD leg (variable)**
Interest rate swaps***
Forward foreign currency contracts
Put option
As at 26 June 2011
financial liabilities*
Payables
Bank borrowings and loans
Notes and bonds
Finance lease liability
Derivatives – inflows*
Cross currency swaps – foreign leg (fixed)**
Cross currency swaps – foreign leg (variable)**
Derivatives – outflows*
Cross currency swaps – AUD leg (fixed)**
Cross currency swaps – AUD leg (variable)**
Cross currency swaps – NZD leg (variable)**
Interest rate swaps***
Put option
1 year
or less
$'000
(282,637)
(44,862)
(27,111)
(11,323)
26,584
527
64,328
(8,911)
(9,000)
(8,128)
(2,825)
(64,428)
(3,711)
1 year
or less
$'000
(279,669)
(34,099)
(708,797)
(10,766)
529,122
462
(224,110)
(382,702)
(9,056)
(366,846)
–
(noMinal cash floWs)
1 to 2
years
$'000
–
(193,485)
(75,478)
(9,491)
75,073
527
–
(8,911)
(9,000)
(71,327)
(2,825)
–
(3,710)
2 to 5
years
$'000
More than
5 years
$'000
–
(603,881)
(275,674)
(12,428)
251,027
24,873
–
(26,734)
(178,712)
(127,294)
(129,238)
–
–
–
–
(142,900)
–
143,006
–
–
(119,221)
–
(54,264)
–
–
–
(noMinal cash floWs)
1 to 2
years
$'000
–
(156,700)
(25,961)
(9,130)
2 to 5
years
$'000
More than
5 years
$'000
–
(296,456)
(334,158)
(21,984)
–
–
(150,920)
–
25,499
462
311,945
24,768
155,704
–
(8,911)
(7,007)
(9,056)
(129,219)
(5,611)
(26,734)
(192,479)
(85,503)
(10,547)
(5,610)
(136,800)
–
(169,970)
–
–
* 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.
116
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(e) Fair ValUe
The carrying amounts and fair values of financial assets and financial liabilities at balance date are:
financial assets
Cash and cash equivalents
Receivables
Derivative assets
Available for sale investments
Other financial assets
financial liabilities
Payables
Interest bearing liabilities:
Bank borrowings
Eurobonds
Senior notes
Medium term notes
Finance lease liability
Derivative liabilities
carrying
value
2012
$'000
358,364
323,242
27,163
1,991
14,682
725,442
fair
value
2012
$'000
358,364
323,242
27,163
1,991
14,682
725,442
carrying
value
2011
$'000
207,137
358,876
27,839
2,633
18,519
615,004
fair
value
2011
$'000
207,137
358,876
27,839
2,633
18,519
615,004
282,637
282,637
279,669
279,669
726,488
–
466,302
–
14,583
95,628
1,585,638
726,488
–
467,348
–
23,840
95,628
1,595,941
423,071
472,543
450,293
167,700
18,425
186,734
1,998,435
423,071
473,331
451,689
167,700
28,887
186,734
2,011,081
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 2.12% to 13.32% (2011: 1.94% to 13.35%).
The carrying value of all other balances approximate their fair value.
The Group uses various methods in estimating the fair value of a financial instrument. The methods comprise:
(a) quoted prices (unadjusted) in active markets for identical assets or liabilities (level 1);
(b) inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (as prices) or
indirectly (derived from prices) (level 2); and
(c) inputs for the asset or liability that are not based on observable market data (unobservable inputs) (level 3).
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
117
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
The fair value of the financial instruments as well as the methods used to estimate the fair value are summarised in the table below:
As at 24 June 2012
financial assets
Derivative assets
Available for sale investments
financial liabilities
Derivative liabilities
As at 26 June 2011
financial assets
Derivative assets
Available for sale investments
financial liabilities
Derivative liabilities
level 1
$'000
–
1,991
1,991
–
–
level 1
$'000
–
2,633
2,633
level 2
$'000
27,163
–
27,163
95,628
95,628
level 2
$'000
27,839
–
27,839
–
–
186,734
186,734
level 3
$'000
–
–
–
–
–
level 3
$'000
–
–
–
–
–
total
$'000
27,163
1,991
29,154
95,628
95,628
total
$'000
27,839
2,633
30,472
186,734
186,734
118
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
36 segMent reporting
(a) deSCriPtiON OF SeGmeNtS
The Group has identified its operating segments based on the internal reports that are reviewed and used by the Board of Directors,
CEO and CFO in assessing performance and in determining the allocation of resources.
In the 2012 financial year, the Group has implemented changes to the structure of the organisation which has resulted in a change in its
reportable segments. The Group is organised into seven reportable segments based on aggregated operating segments determined by
the similarity of products and services provided, economic characteristics and geographical consideration.
The prior year financial information has been restated under the new reportable segments. Refer to Note 1(V) for disclosure on
operating segments.
reportaBle segMent
Fairfax Regional Media
Metropolitan Media
New Zealand Media
Printing Operations
Trade Me
Broadcasting
Other
products and services
Newspaper publishing and online for all Australian regional media and for Australia,
NZ and USA agricultural media.
Metropolitan news, lifestyle and entertainment media across various platforms
including print, online, tablet and mobile. Also includes classifieds for metropolitan and
community publications and transactional businesses.
Newspaper, magazine and general publishing and online for all New Zealand media.
Australian and New Zealand printing operations.
Transactional businesses of Trade Me in New Zealand.
Metropolitan radio networks, regional radio stations and narrowcast licences.
Comprises corporate, Satellite Music Australia and Oxford Scientific Films.
Although the broadcasting segment does not meet the quantitative thresholds required by AASB 8, management has concluded that
disclosure of this segment would be beneficial to users of the financial statements.
(B) reSUltS BY OPeratiNG SeGmeNt
The segment information provided to the Board of Directors, CEO and CFO for the reportable segments for the year ended 24 June
2012 is as follows:
24 June 2012
Fairfax Regional Media
Metropolitan Media
New Zealand Media
Printing Operations
Trade Me
Broadcasting
Other
Consolidated entity
26 June 2011
Fairfax Regional Media
Metropolitan Media
New Zealand Media
Printing Operations
Trade Me
Broadcasting
Other
Consolidated entity
segMent
revenue
$'000
intersegMent
revenue
$'000
573,851
1,132,997
345,562
474,825
114,014
97,164
8,646
(2,223)
(2,402)
(653)
(411,902)
–
(67)
–
revenue
froM
external
custoMers
$'000
571,628
1,130,595
344,909
62,923
114,014
97,097
8,646
underlying
eBit
$'000
152,875
76,766
52,684
18,480
81,987
11,304
4,423
2,747,059
(417,247)
2,329,812
398,519
587,803
1,221,999
361,405
539,332
95,156
111,723
12,041
(2,147)
(1,344)
(901)
(456,164)
–
–
–
585,656
1,220,655
360,504
83,168
95,156
111,723
12,041
168,779
124,253
58,530
41,343
73,407
24,167
2,614
2,929,459
(460,556)
2,468,903
493,093
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
119
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
(C) OtHer SeGmeNt iNFOrmatiON
(i) Segment revenue
Segment revenue reconciles to total revenue and income as follows:
Total segment revenue from external customers
Interest income
Share of net profits of associates and joint ventures
total revenue and income
24 June 2012
$'000
26 June 2011
$'000
2,329,812
11,122
(1,746)
2,468,903
10,967
(3,362)
2,339,188
2,476,508
Revenue from external customers includes the operating segments share of net profits from associates and joint ventures. Intersegment
revenue primarily relates to printing charges from internal print facilities for group publications.
The consolidated entity operates predominantly in two geographic segments, Australia and New Zealand. The amount of its revenue
from external customers in Australia is $1,870.3 million (2011: $2,011.4 million) and the amount of revenue from external customers
in New Zealand is $468.9 million (2011: $465.1 million). Segment revenues are allocated based on the country in which the customer
is located.
(ii) Segment result – ebit
The Board of Directors, CEO and CFO assess the performance of the operating segments based on a measure of underlying EBIT.
This measurement basis excludes the effects of significant items from the operating segments such as restructuring costs and goodwill,
masthead or radio licence impairments when the impairment is the result of an isolated, significant event.
Interest income and expenditure are not allocated to segments, as this type of activity is driven by the centralised treasury function,
which manages the cash position of the Group.
A reconciliation of underlying EBIT to operating loss before income tax is provided as follows:
underlying ebit
Interest income
Finance costs
Impairment of mastheads, goodwill, customer relationships and software
Impairment of property, plant and equipment, and investments
Restructuring and redundancy charges
Reported net loss before tax
24 June 2012
$'000
26 June 2011
$'000
398,519
11,122
(122,857)
(2,758,061)
(106,120)
(200,447)
493,093
10,967
(119,009)
(649,869)
(4,038)
(34,222)
(2,777,844)
(303,078)
Information provided to the Board of Directors, CEO and CFO in respect of assets and liabilities is presented on a group basis
consistent with the consolidated financial statements.
120
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
A summary of significant items by operating segments is provided for the period ended 24 June 2012 and 26 June 2011.
iMpairMent
of Mastheads,
goodWill,
custoMer
relationships
and softWare
$'000
iMpairMent
of property,
plant and
equipMent, and
investMents
$'000
restructuring
and
redundancy
charges
$'000
961,344
912,823
608,351
225,402
–
50,000
141
–-
7,293
10,266
85,633
–
721
2,207
10,625
28,248
70
74,021
–
720
86,763
total
$'000
971,969
948,364
618,687
385,056
–
51,441
89,111
2,758,061
106,120
200,447
3,064,628
iMpairMent
of Mastheads,
goodWill,
custoMer
relationships
and softWare
$'000
iMpairMent
of property,
plant and
equipMent
$'000
restructuring
and
redundancy
charges
$'000
5,196
490,041
77,305
6,588
–
65,000
5,739
649,869
–
–
4,038
–
–
–
–
4,038
1,674
18,983
7,136
3,623
–
–
2,806
34,222
total
$'000
6,870
509,024
88,479
10,211
–
65,000
8,545
688,129
24 June 2012
Fairfax Regional Media
Metropolitan Media
New Zealand Media
Printing Operations
Trade Me
Broadcasting
Other
Consolidated entity
26 June 2011
Fairfax Regional Media
Metropolitan Media
New Zealand Media
Printing Operations
Trade Me
Broadcasting
Other
Consolidated entity
(iii) Segment assets
The total of non-current assets other than financial instruments, deferred tax assets and employment benefit assets (there are no rights
arising under insurance contracts) located in Australia is $2,217.8 million (2011: $5,125.8 million) and the total of these non-current
assets located in New Zealand is $866.5 million (2011: $894.9 million). Segment assets are allocated to countries based on where the
assets are located.
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
121
notes to the financial stateMents
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
37
parent entity inforMation
The following disclosures relate to Fairfax Media Limited as an individual entity, being the ultimate parent entity of the Fairfax Media group.
financial position of parent entity
Current assets
Total assets
Current liabilities
Total liabilities
total equity of parent entity
Contributed equity
General reserve
Acquisition reserve
Share-based payment reserve
Retained losses
total equity
Result of parent entity
Loss for the period
Other comprehensive income
total comprehensive income for the period
24 June 2012
$'000
26 June 2011
$'000
1,764,003
2,061,419
18,323
18,742
1,457,808
4,456,158
17,587
17,877
4,646,248
(722)
(10,672)
7,612
(2,599,789)
4,646,248
(722)
–
6,971
(214,216)
2,042,677
4,438,281
(2,303,255)
–
(183,040)
–
(2,303,255)
(183,040)
Fairfax Media Limited has entered into a Deed of Cross Guarantee with the effect that the Company guarantees debts in respect of its
subsidiaries within the Closed Group. Further details regarding the deed are set out in Note 27.
Operating lease commitments – parent entity as lessee
Fairfax Media Limited has entered into commercial leases on office premises.
Future minimum rentals payable under non-cancellable operating leases as at the period end are as follows:
Within one year
Later than one year and not later than five years
Later than five years
total operating lease commitments
24 June 2012
$'000
26 June 2011
$'000
161
82
–
243
157
243
–
400
38
events suBsequent to Balance sheet date
The Group completed an agreement to merge Fairfax Community Network Limited in Victoria with MMP Holdings Pty Ltd on 13 July 2012.
Following the merger, the Group will hold a 50% interest in MMP Holdings Pty Ltd.
122
direcTors’ declaraTion
FAIRFAX MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 24 JUNE 2012
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 statements and notes of the consolidated entity are in accordance with the Corporations Act 2001, including:
(i)
giving a true and fair view of the consolidated entity's financial position as at 24 June 2012 and of its performance for
the year ended on that date;
(ii) and complying with Australian Accounting Standards and the Corporations Regulations 2001;
(b) the financial statements and notes also comply with International Financial Reporting Standards as disclosed in Note 1;
(c) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due
and payable; and
(d) as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group identified
in Note 27 will be able to meet any obligations or liabilities to which they are or may become subject, by virtue of the Deed
of Cross Guarantee.
2.
This declaration has been made after receiving the declarations required to be made to the Directors from the
Chief Executive Officer and the Chief Financial Officer in accordance with section 295A of the Corporations Act 2001
for the financial year ended 24 June 2012.
On behalf of the Board
Roger Corbett, AO
Chairman
Greg Hywood
Chief Executive Officer and Managing Director
23 August 2012
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
123
independenT audiTor’s reporT
TO THE MEMBERS OF FAIRFAX MEDIA LIMITED
Independent auditor's report to the members Fairfax Media Limited
Report on the financial report
We have audited the accompanying financial report of Fairfax Media Limited, which comprises the
consolidated balance sheet as at 24 June 2012, the consolidated income statement, the consolidated
statement of comprehensive income, the consolidated statement of changes in equity and the
consolidated statement of cash flows for the year then ended, notes comprising a summary of significant
accounting policies and other explanatory information, and the directors' declaration of the consolidated
entity comprising the company and the entities it controlled at the year's end or from time to time during
the financial year.
Directors' responsibility for the financial report
The directors of the company are responsible for the preparation of the financial report that gives a true
and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for
such internal controls as the directors determine are necessary to enable the preparation of the financial
report that is free from material misstatement, whether due to fraud or error. In Note 1, the directors
also state, in accordance with Accounting Standard AASB 101 Presentation of Financial Statements, that
the financial statements comply with International Financial Reporting Standards.
Auditor's responsibility
Our responsibility is to express an opinion on the financial report based on our audit. We conducted our
audit in accordance with Australian Auditing Standards. Those standards require that we comply with
relevant ethical requirements relating to audit engagements and plan and perform the audit to obtain
reasonable assurance about whether the financial report is free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial report. The procedures selected depend on the auditor's judgment, including the assessment
of the risks of material misstatement of the financial report, whether due to fraud or error. In making
those risk assessments, the auditor considers internal controls relevant to the entity's preparation and
fair presentation of the financial report in order to design audit procedures that are appropriate in the
circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's
internal controls. An audit also includes evaluating the appropriateness of accounting policies used and
the reasonableness of accounting estimates made by the directors, as well as evaluating the overall
presentation of the financial report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
Independence
In conducting our audit we have complied with the independence requirements of the Corporations Act
2001(cid:2)(cid:1)(cid:1)(cid:5)(cid:9)(cid:1)(cid:12)(cid:6)(cid:22)(cid:9)(cid:1)(cid:11)(cid:13)(cid:22)(cid:9)(cid:15)(cid:1)(cid:20)(cid:16)(cid:1)(cid:20)(cid:12)(cid:9)(cid:1)(cid:8)(cid:13)(cid:18)(cid:9)(cid:7)(cid:20)(cid:16)(cid:18)(cid:19)(cid:1)(cid:16)(cid:10)(cid:1)(cid:20)(cid:12)(cid:9)(cid:1)(cid:7)(cid:16)(cid:14)(cid:17)(cid:6)(cid:15)(cid:24)(cid:1)(cid:6)(cid:1)(cid:23)(cid:18)(cid:13)(cid:20)(cid:20)(cid:9)(cid:15)(cid:1)(cid:3)(cid:21)(cid:8)(cid:13)(cid:20)(cid:16)(cid:18)(cid:25)(cid:19)(cid:1)(cid:4)(cid:15)(cid:8)(cid:9)(cid:17)(cid:9)(cid:15)(cid:8)(cid:9)(cid:15)(cid:7)e Declaration, a
copy of which is included by reference (cid:13)(cid:15)(cid:1)(cid:20)(cid:12)(cid:9)(cid:1)(cid:8)(cid:13)(cid:18)(cid:9)(cid:7)(cid:20)(cid:16)(cid:18)(cid:19)(cid:25)(cid:1)(cid:18)(cid:9)(cid:17)(cid:16)(cid:18)(cid:20)(cid:2)(cid:1)
124
Liability limited by a scheme approved
under Professional Standards Legislation
independenT audiTor’s reporT
TO THE MEMBERS OF FAIRFAX MEDIA LIMITED
2
Opinion
In our opinion:
a.
the financial report of Fairfax Media Limited is in accordance with the Corporations Act 2001,
including:
i
ii
giving a true and fair view of the consolidated entity's financial position as at 24 June 2012
and of its performance for the year ended on that date; and
complying with Australian Accounting Standards and the Corporations Regulations 2001;
and
b.
the financial report also complies with International Financial Reporting Standards as disclosed in
Note 1.
Report on the remuneration report
We have audited the Remuneration Report included in pages 23 to 33 of the directors' report for the year
ended 24 June 2012. The directors of the company are responsible for the preparation and presentation
of the Remuneration Report in accordance with section 300A of the Corporations Act 2001. Our
responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in
accordance with Australian Auditing Standards.
Opinion
In our opinion, the Remuneration Report of Fairfax Media Limited for the year ended 24 June 2012,
complies with section 300A of the Corporations Act 2001.
Ernst & Young
Douglas Bain
Partner
Sydney
23 August 2012
FAIRFAX MEDIA LIMITED ANNUAL REPORT 2012
125
sHareHolder inforMaTion
FAIRFAX MEDIA LIMITED
tWeNtY larGeSt HOlderS OF SeCUritieS at 31 aUGUSt 2012
ORDinARy SHAReS (fxJ)
National Nominees Limited
JP Morgan Nominees Australia Limited
Timeview Enterprises Pty Ltd
HSBC Custody Nominees (Australia) Limited
Citicorp Nominees Pty Limited
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