LEADING
THE
CHANGE
ANNUAL REPORT 2013
FAIRFAX MEDIA ANNUAL REPORT 2013 1
FAIRFAX MEDIA ANNUAL REPORT 2013 1
Fairfax Media. Independent. Always.
Every moment of the day we are delivering quality independent journalism
and content. While we are proud to be more than 180 years old, we are even
prouder to be the media company leading the change, rapidly adapting
to new ways of working, new ways of keeping people informed. Our multi-
platform media business – spanning print, online and radio – ensures our
audiences have the information they want, when they want it.
We’re focused on building, and profitably monetising, our large-scale
and highly engaged news media audiences in Australia and New Zealand.
We connect advertisers to our audiences in creative and highly effective ways.
Working together, and with an unwavering focus on our journalism and
content, Fairfax is implementing its strategy, simplifying operations, reducing
costs, aggressively pursuing new revenue opportunities and improving how
we engage with customers and audiences.
We’re lean, agile and clear-sighted about our future.
Fairfax is ready for today – and more prepared than ever for tomorrow.
Fairfax’s 2013 Annual Report features
a selection of images from The Sydney
Morning Herald Photos1440 exhibitions
held in 2012 and 2013.
There are 1440 minutes in a day. In these
minutes photographers capture a moment.
These moments make up a day. The exhibition
features published and unpublished work by
The Sydney Morning Herald’s photographers.
Photos1440 is supported by Canon Australia
and held annually alongside the World Press
Photo exhibition.
Dawn at Bondi Beach.
Photo: DAllAs KIlP onEn
THE SYDNEY MORNING HERALDPHOTOS1440
2
Announced the rescaling
and upgrading of North
Richmond print site
NOVEMBER
PAnPA AwARDs wIns
The Examiner, The Border Mail,
The Land, The Sunday Age,
The Australian Financial Review
iPad app, The Courier (Ballarat)
iPhone app, stuff.co.nz, The Press
JULY
Gmail
enterprise
solution
introduced
FAIRFAX jouRnAlIsts wIn
At 57th wAlKlEy AwARDs
• Walkley Journalism Leadership Award –
The Border Mail
• The Nikon Walkley Press Photographer
of the Year – Justin McManus, The Age
DECEMBER
Sale of Trade Me
investment
Sale of US
agricultural titles
the sun-herald
City2surf event
attracts
85,000
Essential Mums
parenting site
launches in
New Zealand
REAl-tIME woRKIng In
syDnEy AnD MElBouRnE
IntRoDuCED
OCTOBER
OVER 4 YEARS
DonAtIon
oF FAIRFAX’s
glAss PlAtE
PhotogRAPhs
to the National
Library of Australia
2012augustSEPTEMBER2013$32m SAVINGS 2
FAIRFAX MEDIA ANNUAL REPORT 2013 3
FEBRUARY
Daily life turns one with
a monthly audience of
UNIQUE USERS
Ultimate Footy launch
BRw REDEsIgn, wEBsItE
AnD APP lAunCh
JANUARY
nEw BRAnD
CAMPAIgns FoR
thE syDnEy
MoRnIng hERAlD
AnD thE AgE
sMARt
InvEstoR
RElAunCh
‘A syDnEy
MoRnIng’ AnD
‘youR BusInEss
DAy’ start
broadcasting on 2UE
live from The Sydney
Morning Herald
newsroom
The Sydney Morning Herald
and The Age introduce
digital subscriptions for
overseas readers
Consolidated Commercial
Real Estate brand launched
APRIL
Announced the
upgrading of
Ballarat print site
Simplified
organisational
structure
introduced
FInAnCIAl REvIEw
unvEIls nEw looK
70,000
people pound the
pavements for the Auckland
Round the Bays fun run
The Age and The Sydney Morning
Herald go compact on weekdays
MARCH
Contact centre partnering with
TeleTech commences
FAIRFAX MEDIA nZ wIns MultIPlE
CAtEgoRIEs At CAnon MEDIA AwARDs
• Best Website award – stuff.co.nz
• Best Innovation in Multimedia Storytelling
award – Zone Life in The Press
• Weekly Newspaper of the Year award –
Dominion Post
FInAnCIAl REvIEw sunDAy
PRogRAM DEButs
VIEWERS
MAY
909,000june286,000 4
ChAIRMAn’s REPoRt
FAIRFAX MEDIA ANNUAL REPORT 2013 5
FAIRFAX MEDIA ANNUAL REPORT 2013 5
CHAIRMAN’s REPORT
Significant milestones were
achieved during the year
that contributed to our
objective of simplifying our
business and reducing the
costs of our business.
Important milestones for Fairfax Media’s future were achieved
during the 2013 financial year, a year in which structural changes
in the media industry continued to unfold. Responding to these
changes has been, and will continue to be, our greatest priority.
Our challenge is to develop strategies that position our Company to
continually adapt to a world where the direction of change is clear,
but the end point is not.
In the 2012 Annual Report I set out a number of the elements that would
contribute to our transformation. In 2013, we made substantial progress in
delivering the benefits of the Fairfax of the Future program. Earnings before
interest, tax, depreciation and amortisation (EBITDA) will benefit from the
$311 million of annualised cost savings that we are on track to deliver by
2015, including the additional cost savings announced in June. We continue
to work on further cost reduction and revenue opportunities.
While the 2013 result reflected continued cyclical weakness and structural
change in the advertising sector, it also incorporated the first material
contribution from the implementation of these initiatives. Without Fairfax
of the Future, the EBITDA recorded by our businesses of $366 million
would have been $118 million lower.
Total Group revenue declined 8.2 per cent to $2,033.8 million from the
prior year and the Company reported a net loss after tax of $16.4 million.
The result included a gain of $303 million on the sale of Trade Me and
US Agricultural businesses in the first half, and a non-cash impairment
charge of $444.6 million predominantly from the Regional, Printing and
Agricultural operations in the second half. This charge was necessary
as our Regional and Agricultural business experienced weaker trading
conditions during the year due to subdued mining-exposed markets,
poor mining employment trends, and a downturn in national advertising.
However, it is important to stress that there has been no deterioration in
our mastheads’ local reach, which underpins the resilience of this business.
Our mastheads remain highly valued by our audiences and advertisers
in the communities we serve.
Following the write-down, the Company has net assets in excess
of $1.8 billion.
4
FAIRFAX MEDIA ANNUAL REPORT 2013 5
FAIRFAX MEDIA ANNUAL REPORT 2013 5
STATuToRy neT loSS
AFTeR TAx
$16.4m
undeRlyinG neT
PRoFiT AFTeR TAx
$128m
A Manly ferry approaches Circular Quay. PHOTO: BEN RUSHTON
Significant milestones were achieved during the year that contributed
to our objective of simplifying our business and reducing the costs of
our business. Projects successfully executed included:
• Publication of weekday editions of The Age and The Sydney Morning
Herald in a compact format from March 2013. The convenience of the
new format has been welcomed by many of our readers and positions
us for the planned closure of the Chullora and Tullamarine printing plants,
scheduled for June 2014. We continue to expect annual cost savings of
$44 million from the consolidation of our printing activity as we more
efficiently utilise our network of smaller, more flexible, printing plants.
• Achieving significant cost reductions through the outsourcing of contact
centres, and reducing the real-estate footprint of our main Sydney and
Melbourne offices.
• Establishing the Australian Publishing Media division, which consolidates
our core publishing activities – spanning metropolitan, regional and
community titles – resulting in lower costs and timely content delivery
to our audiences across the day.
• Establishing our digital transaction businesses, which include Stayz
and RSVP, as freestanding units that have the support, resources and
autonomy needed to deliver on their potential.
• Establishing Domain on a standalone basis, providing investors with
transparency around the financial performance of the high-growth digital
elements of the business.
• Introducing digital subscriptions for smh.com.au and theage.com.au with
a metered model that allows a base level of free access.
At our Investor Day held in June we shared insights into a number of our
divisions with investors. We also announced a product review. In early 2013,
we published 431 publications and 337 websites, had seven radio stations
and almost 100 apps. One element of a Board-led review of the Company’s
products and strategy is to thoroughly review each of our products and
the contribution made to our overall business. This is one area of a strategy
review which has also involved the development of plans for the pursuit of
significant new revenue opportunities. The Chief Executive Officer’s Report
THE SYDNEY MORNING HERALDPHOTOS1440 6
ChAIRMAn’s REPoRt
FAIRFAX MEDIA ANNUAL REPORT 2013 7
ToTAl diVidendS
2¢FULLY FRANKED
neT deBT ReduCed By
$760m
TO $154m
AT JUNE 30
contains information in relation to a range of new business initiatives that
sit adjacent to our existing activities. I look forward to reporting on our
progress in developing these businesses in the future.
While we have been busy transforming the operations of our business,
your Board has been mindful of the importance of maintaining balance
sheet strength and flexibility through this period of industry change.
Fairfax finished the 2013 year with net debt of $154 million, a reduction
of $760 million over the 12 month period. Significant contributors to the
strengthened balance sheet include the sale of the Company’s remaining
interest in Trade Me and our United States agricultural publishing
business, which delivered combined sale proceeds of $682.3 million net
of transaction fees.
A further important project undertaken by the Board during the year was
a comprehensive review of remuneration arrangements. The Remuneration
Report contains detail of the outcomes of this review, which includes
implementation of a remuneration plan that reflects the evolution of our
business, and is appropriate for the current period of transformation and
consolidation.
As we reflect on this year of change, the importance of maintaining our
core editorial values of independence and integrity is foremost in protecting
our mastheads and providing us a unique position in the media space in
Australia and New Zealand. These editorial values are fundamental to the
way we do business, and ensure our continued relevance to our audiences.
In closing, I would like to acknowledge the significant contribution of
my fellow Board members – and the contribution of our chief executive
Greg Hywood, who has done an outstanding job in leading our Company
through these challenging times. He has relentlessly and tenaciously
pursued a strategy to secure the future of our Company using to effect
his many years’ experience, editorial knowledge and standing in the
media industry.
Your Board is committed to ensuring Fairfax Media is run in the best
interests of all shareholders and that we carry our legacy with pride into
a bright future.
Roger Corbett, AO
Chairman
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FAIRFAX MEDIA ANNUAL REPORT 2013 7
FAIRFAX MEDIA ANNUAL REPORT 2013 7
T H E S Y D N E Y M O R N I N G H E R A L D
PHOTOS1440
Thousands of budgerigars in Central Australia. PHoTo: Glenn CAMPBell
8
ChIEF EXECutIvE oFFICER’s REPoRt
FAIRFAX MEDIA ANNUAL REPORT 2013 9
CHIEF ExECUTIVE OFFICER’s REPORT
Fairfax Media has established a reputation as the undisputed leader
in innovation and change in the traditional media sector in Australia
and New Zealand. We have delivered some of the most significant
structural and operational changes in our Company’s long history.
We committed to you we would transform our business and we are
meeting or surpassing all critical milestones as we implement our strategy.
This includes developing our leading multi-media, cross-platform business
so it operates within a simple yet effective organisational structure.
We are confident our strategy will deliver the best outcomes for our
shareholders, customers and our audiences.
The changes will ensure Fairfax is a lean and agile company. We are
making all the necessary decisions to prepare for what we know will be
a predominantly digital future.
The trading environment has been challenging. Group revenue declined
by 8.2 per cent in the financial year. Achieving an operating earnings
before interest, tax, depreciation and amortisation (EBITDA) of $366 million
was a challenge. Cost savings under our Fairfax of the Future program
made a substantial contribution to operating profits. Excluding businesses
divested during the year, underlying EBITDA was $315.7 million. Cash flow
from trading activities was $377 million.
We are targeting a total of $311 million in annualised cost savings by fiscal
2015 from a cost base in 2011 of $1.8 billion. If fixed production charges are
excluded, the effective addressable cost base is $1.2 billion.
Our simplified organisational structure, announced in April, has allowed us to
streamline middle management, share services and reduce duplication. We
have a strong management team committed to driving collaboration across
the business and the aggressive pursuit of new revenue opportunities.
We are working smarter. The newsrooms of The Sydney Morning Herald
and The Age have been restructured to deliver timely journalism and
content to our audiences across the day. Our main offices in Sydney
and Melbourne have also introduced real-time working practices, saving
$32 million over four years.
We have also changed the way we engage with our customers and
audiences. We have moved to improve our contact centres through the
centralisation and partnering with specialist service provider TeleTech,
which will reduce our costs in this area and result in significant savings.
We know the future is about a mix of both cost discipline and
revenue growth.
The turnaround of our Broadcasting business continues, having achieved
cross-platform benefits in content and sales. Overall ratings and market
share have improved, with 96fm currently the highest rating station in Perth
and 3AW holding its top spot in Melbourne.
Group digital revenue increased to $295 million and now comprises 14 per
cent of total revenue. One new source of digital revenue, introduced just
after the end of the 2013 financial year, is digital subscriptions for The Sydney
Morning Herald and The Age. On 22 August 2013, we told the market
that the two mastheads had 68,000 paid digital subscribers and 98,000
bundled print and digital subscribers, tracking ahead of expectations.
8
‘‘
We are confident our
strategy will deliver the
best outcomes for our
shareholders, customers
and our audiences.
‘‘
Businesses such as Domain continue to go from strength to strength.
Domain grew the number of real estate agents with listings by 21 per cent.
Digital growth was a highlight, with investment in mobile apps paying off in
strong performance. At Fairfax we have exposure to more than $300 million
of real estate-related revenue, and we have the brand, the expertise and the
commitment to build the Domain business.
During the year we announced a new organisational structure, one element
of which is the consolidation of our core publishing activities into the new
Australian Publishing Media division. This division is led by Allen Williams, who
previously ran our New Zealand business and before that held several senior
positions in the Company’s regional operations. The formation of Australian
Publishing Media allows us to reduce duplication through a more ordered
grouping of our businesses and activities, and to drive additional revenue by
leveraging our core business – news, business media, lifestyle and community
media – and extensive portfolio of media assets.
We have also formed a Digital Ventures unit, with a new management
structure that is empowered to deliver the full potential of our digital
transaction businesses such as Stayz and RSVP. These are both market-leading
transactions businesses that generate strong margins.
Parkour group in Parramatta. PHOTO: WOLTER PEETERS
FAIRFAX MEDIA ANNUAL REPORT 2013 9
undeRlyinG
eBiTdA
excluding businesses divested
$315.7m
CASHFloW FRoM
TRAdinG
$377m
THE SYDNEY MORNING HERALDPHOTOS1440 10
ChIEF EXECutIvE oFFICER’s REPoRt
FAIRFAX MEDIA ANNUAL REPORT 2013 11
‘‘
Through a period of great
structural change, Fairfax has
maintained its core vales of
independence and integrity.
‘‘
We have a proven track record of growing smaller digital businesses.
We will continue to look at our digital businesses and new opportunities
in terms of both value and earnings.
We are also pursuing several revenue opportunities where we will take an
existing niche presence that sits within Fairfax, imposing more structure
around our activities, and building a substantial business:
• Events – Fairfax currently generates more than $25 million of revenue
a year from Events across the Group, and real potential exists to expand
these activities. Our Events activities are currently structured as an
adjunct to our other businesses, and have succeeded because we
only organise events that leverage Fairfax’s audiences and capabilities.
Our broad reach provides a real boost to mass participation events such
as fun runs and ocean swims, while The Australian Financial Review
leverages our strong content, editorial positions and brands through
events including the Future Forums and Women of Influence. We also
do well organising events in verticals where we have a leading presence,
such as the connection between Good Food Month and our Good Food
Guides. We see a three to five year opportunity to build a business that
is several times larger than our existing Events activities;
• Content Marketing – there is a significant revenue opportunity
for a separate business arm that produces and supplies content for
third-party customers, including provision of content for third-party
newsletters, websites and apps. Today, around 25 per cent of marketing
budgets in Australia are allocated to content marketing, with spend in
the area growing at around 20 per cent annually. As Fairfax has strong
City2Surf in William Street . PHOTO: STEVE CHRISTO
THE SYDNEY MORNING HERALDPHOTOS1440 10
FAIRFAX MEDIA ANNUAL REPORT 2013 11
undeRlyinG
eBiTdA
for continuing businesses
(excludes Corporate/Other)
5%
RadiO
18%
nEw zEaland
29%
mETRO
48%
REgiOnal
capabilities in content creation and distribution to mass audiences, as
well as digital step-outs such as Essential Baby, we are well-placed to offer
clients real differentiation in their content marketing;
• Small to Medium Enterprise (SME) Digital and Marketing
Services – leveraging our strong local sales relationships with clients,
particularly in regional Australia, we will assist smaller businesses to build
an online marketing presence. Our local websites, Facebook presence
and content will all be utilised as we provide a suite of integrated
marketing services. This is an area where Fairfax already has expertise as
we provide these services to 4,000 SME clients, with plans to expand the
product offering and the client base; and
• Data – audience insights will drive revenue and deliver increased
advertising yields. We are making the investment required – in
terms of both systems and human resources – to deliver advertisers
greater insight into our audience, and more tailored, higher value,
advertising opportunities.
I have recently visited many parts of Fairfax to speak with as many of our
8,400 employees as possible. What struck me was the overwhelming
enthusiasm for what we do.
Through a period of great structural change, Fairfax has maintained its core
values of independence and integrity.
The dimensions of change have put enormous stress on our people.
I would like to thank them for their resilience and positive attitude through
a difficult period. We are resolutely confident that our collective efforts will
deliver a prosperous future.
Our teams are now in place and clear about their responsibilities.
They will drive real change through the business and be held accountable
and appropriately recognised for delivering results in our efforts to reduce
costs and develop new revenue opportunities.
I am pleased with the progress we are making on our journey.
We will continue to implement our strategy with great confidence.
Greg Hywood
Chief Executive Officer & Managing Director
12
sustAInABIlIty AnD CoRPoRAtE soCIAl REsPonsIBIlIty
FAIRFAX MEDIA ANNUAL REPORT 2013 13
sUsTAINABILITY AND
CORPORATE sOCIAL REsPONsIBILITY
Fairfax Media operates within a commercial model. Ensuring the Company’s
financial sustainability is critical to our ability to continue to provide long-term
benefits to the community. Our financial sustainability cannot be separated from
our corporate social responsibility. Sustainability begins with being financially
sustainable and serving shareholders’ interests so as to be able to fulfil our
business objectives and serve our communities.
Fairfax has a long and proud history of serving local communities with high-quality
independent content – across print, digital and radio – in Australia and New Zealand.
Fairfax has deeply engaged audiences. Quality independent journalism is a central part
of Fairfax’s strategy to build, and profitably monetise, its large and highly engaged news
media audience. We have now successfully introduced digital subscriptions for The Sydney
Morning Herald and The Age. This initiative enhances resources and so too our ability to
continue to serve our audiences with quality content.
What we do as a business contributes in a very meaningful way to community and to open
government – the bedrock of an effective functioning democracy. Fairfax facilitates public
debate on important issues, holds leaders and people of power and influence to account,
and informs the communities we serve.
There is a reason the media are called the ‘fourth estate’ – after the parliament, the judiciary
and the bureaucracy. Like us or loathe us, we are an important pillar of a healthy society.
Our job is to ask the questions that often people don’t want asked. We take seriously our
responsibility to the communities we serve. We strive to be as accurate and as fair-minded
in our reporting as possible. At Fairfax, we have set up internal processes to make this
happen and embrace self-regulation for the industry, which we fund extensively.
The business changes being implemented at Fairfax over the past year are all about
ensuring the sustainability of the important work we do amid very real structural and
cyclical challenges in the media industry, both locally and abroad. We are taking steps
to ensure the Company is structured and operated in a sustainable way.
2012 Cole Classic at Manly’s Shelly Beach. PHOTO: PETER RAE
THE SYDNEY MORNING HERALDPHOTOS1440 12
FAIRFAX MEDIA ANNUAL REPORT 2013 13
Fairfax is well into its three-year journey of transformation, meeting or exceeding all key
milestones to date. This puts us in a strong position to continue our important work to
deliver the key areas of corporate social responsibility that we as a media business have
identified as being integral to the privileged role that news publishers have in the community.
The four key areas are:
• editorial integrity;
• environment;
• people and culture; and
• community.
EDItoRIAl IntEgRIty
Fairfax is proud of its quality independent journalism. We will continue to
maintain our uncompromising approach to media ethics and integrity.
Fairfax journalists, producers and editors relentlessly seek out the truth.
Fairfax has a long-standing commitment to delivering balanced and accountable
journalism that is in the public’s interest.
InFluEnCIng ChAngE AnD thE soCIAl AgEnDA
During the past year, Fairfax editorial content in print, radio, online, mobile and video has
brought urgency to several important public debates and meaningful context to the most
pressing issues facing our audiences in Australia, New Zealand and around the world.
Some examples of such journalism are below.
violence in Kings Cross
In July 2012, The Sydney Morning Herald led a march to hold local, state government
and industry bodies accountable when community concern about violence in Sydney’s
CBD reached a climax after an 18-year-old died after a random attack on him. The Sydney
Morning Herald used its digital resources to give the community a voice. The Safer Sydney
campaign came to a head with a community forum held at Sydney’s Town Hall. A panel
including Lord Mayor Clover Moore, federal MP Malcolm Turnbull, NSW Hospitality Minister
George Souris and members of the police and hotel associations answered questions
from the hundreds in attendance and the thousands watching via smh.com.au. The tag
#safersydney trended on Twitter.
suicide Prevention
The Border Mail’s Ashley Argoon produced a series of stories about mental health in
regional Australia that won her the Walkley Young Australian Journalist of the Year as well
as the category award for text-based journalism. The Border Mail’s year-long campaign,
“Ending the Suicide Silence”, led to an announcement that the youth mental health service
Headspace would open an Albury facility in November 2014.
Child Abuse
Joanne McCarthy from The Newcastle Herald was awarded the Graham Perkin Australian
Journalist of the Year for her investigations and reporting of abuse within the Catholic
Church in the Hunter Valley. Her work helped bring about a Royal Commission into
child sex abuse.
Commenting on McCarthy’s work, the judges said she showed “relentless campaigning
spirit on behalf of the victims of sex abuse in the Catholic Church in the community in which
she lives in a series of reports, features and opinion pieces. This kind of story is hard to tell on
a big newspaper and requires guts to pursue on a regional one. She never gave up.”
14
sustAInABIlIty AnD CoRPoRAtE soCIAl REsPonsIBIlIty
FAIRFAX MEDIA ANNUAL REPORT 2013 15
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.
CoMMunIty EDuCAtIon
Fairfax makes an important contribution to environmental sustainability by educating
and informing the community about environmental issues through editorial coverage
of important issues such as climate change and water conservation.
The Sun-Herald was the only newspaper to board the supertrawler Abel Tasman as part
of reporting on the related environmental and political debate. When the Coonabarabran
fires happened, Fairfax sent a reporter and photographer to cover the events. The same
team tracked progress as the community began to rebuild. Over the year, The Sun-Herald
reported on issues at Sydney Water, the Department of Health and NSW Police, and
worked with Taronga Zoo to raise awareness of animal conservation and animal adoption.
The same masthead also raised awareness of organ donation by following six recipients for
12 months and telling their stories.
In Canberra, politicians and decision-makers have found The Canberra Times’ ‘Send Them
Home Safe’ campaign on workplace safety impossible to ignore. The campaign began in
November 2012 with a page-one exclusive revealing the extent to which the ACT WorkSafe
inspectorate’s funding, staff and capacity had been downgraded over recent years, and
had possibly contributed to the ACT losing four workers to shocking construction accidents
in the space of a year, and recording the nation’s worst serious injury rate.
The Canberra Times’ campaign raised public awareness of the issues and helped to
prompt the ACT government to take action and accept all 28 recommendations arising
from its independent inquiry into construction industry safety standards.
Consistent with its strong editorial stance on sustainability and water conservation,
The Age worked with RMIT to showcase environmental awareness initiatives.
EnERgy AuDIt & EMIssIons tARgEt
Energy efficiency is a cost saving measure and a key part of our carbon footprint reduction.
Fairfax is on target to meet its emissions reduction commitments 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 its technology
infrastructure and usage.
In 2011, Fairfax made a commitment to reduce its carbon emissions by 20 to 25 per cent
by 2020. Under the NGER Act 2007, Fairfax reported to the Clean Energy Regulator
that, from 2011 to 2012, it had already achieved a 9.6 per cent decline of its Scope 1 and
Scope 2 Greenhouse Gas (GHG) emissions.
The Company is achieving its overall target through a number of key projects, which include:
• Replacement of high-energy-use lighting at 10 of its regional printing sites with low-
energy CFL and LED lighting. The project attracted 33 per cent Government funding
under the Clean Energy Investment Program. We will replace more than 1,070 light
fittings and reduce our carbon emissions from high-energy lighting by about 67 per cent
at those sites.
• Consolidation of printing assets, including the closure of the large-scale Tullamarine
and Chullora print sites by mid-2014 and moving printing to smaller, more energy-
efficient regional sites which will contribute to a reduction in our carbon emissions.
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FAIRFAX MEDIA ANNUAL REPORT 2013 15
• Review of property assets and office accommodation. This has seen a reduction in floor
space requirements at our main offices in Sydney and Melbourne. Fairfax-utilised floor
space will be reduced by two floors at One Darling Island in Sydney and three floors
at Media House in Melbourne. The review is also looking into effective utilisation of all
properties within the Fairfax Group across both Australia and New Zealand, which will
further reduce the Company’s energy requirements and carbon emissions.
In addition to these projects, our ongoing commitment to recycling and waste
management minimisation programs continues.
EnvIRonMEntAl IMPACts oF nEwsPAPER PRIntIng
The print industry continues to invest in a program to educate the public about recycling
and newsprint recovery programs, with support from industry group The Newspaper Works.
Along with the Commonwealth and leading newsprint supplier, Norske Skog, our industry
is also a co-signatory to the National Environmental Sustainability Agreement.
Fairfax continues to promote sustainable technologies and materials such as inks with
a vegetable oil base. All of the newsprint used by Fairfax comes from sustainable plantations.
In the calendar year 2012, the Australian market recycled 78 per cent of its newsprint,
a result that mirrored its achievement in 2011.
FAIRFAX PRIntIng AnD thE EnvIRonMEnt
Fairfax is a member of the Publishers National Environment Bureau (PNEB), part of an
association of Australia’s leading newspaper and magazine publishers known as The
Newspaper Works that has been working since 1990 to promote the sustainable recovery
of old newspapers and magazines. Since The Newspaper Works was established, disposal
of newsprint in landfill has decreased by 40 per cent at a time when landfill volumes
increased significantly. Just 0.65 per cent of landfill volume now constitutes newsprint.
Australia has been widely recognised as having one of the highest newspaper recycling
rates in the world. Fairfax, in conjunction with the PNEB, has been working continuously
to promote the sustainable recovery of old newspapers and magazines. Together, we
have been able to help lift Australia’s newspaper recycling rate from 28 per cent in 1990
to a recycling rate of almost 78 per cent in 2012.
Fairfax is focused on reducing waste while reusing recycled materials in the printing
process. We are continuing to explore and implement creative and effective ideas to
reduce our carbon footprint and consumption of water.
optimising our printing operations
The move to compact-size of The Age and The Sydney Morning Herald weekday editions,
with the weekend editions to go compact in 2014, enables the closure of two of our large print
facilities. We will consolidate printing more efficiently into our network of 14 printing sites.
Fairfax will move printing of its two major Australian metropolitan mastheads, The Age
and The Sydney Morning Herald, to Ballarat in Victoria and North Richmond in NSW
respectively, in 2014. This will boost productivity in these regional Australian towns.
Fairfax print facilities continue to proactively manage waste minimisation, recycling, water
management and energy efficiency. Each print facility monitors and sets weekly targets for
the reduction of newsprint and ink-related waste. Sites are benchmarked against each other
and the wider industry to ensure that best practice processes and efficiencies are in place.
In the 2013 reporting year, Fairfax’s printing plants reduced printed waste by 17.74 per cent
over the previous year. That reduction was achieved through a combination of reduced
print volumes and improved efficiencies at all print sites.
16
sustAInABIlIty AnD CoRPoRAtE soCIAl REsPonsIBIlIty
FAIRFAX MEDIA ANNUAL REPORT 2013 17
Environmental benefits of real-time working
Following the implementation of real-time working at our main Sydney and Melbourne
offices, we have significantly reduced our real-estate footprint by optimising the use of space
to better align with desk usage and adopting more contemporary working practices.
The move to real-time working has produced environmental returns in the form of
recycling stationery, work stations and computer technology. As the Sydney and
Melbourne offices have adopted real-time working, several charities have benefited from
donations of surplus equipment as well as some cash raised by staff. For example, the NSW
Department of Education and Grace Removals assisted with the distribution of 300 under-
desk pedestal units that were donated to schools in the community that were in need.
PEoPlE AnD CultuRE
A diverse, innovative and engaged workforce is important in enhancing the
quality and creativity which underpins our brands and businesses.
Fairfax is in the middle of a significant transformation and understands its business has
a predominantly digital future. The transformation involves a three-year restructuring program
that will see the workforce reduced to about 8,000 and the adoption of new business
practices and behaviours. We are on track to deliver total annualised cost savings of $311 million
by 2015. In addition, there are several new revenue streams that are actively being pursued.
Despite headcount reductions, we’ve implemented smarter processes, and overall
efficiency and output has increased in many business areas. A new digital-facing
way of working and greater sharing of content within our Australian metropolitan
newsrooms has seen a reduction in staff numbers of about 22 per cent within the editorial
departments. Smaller teams of producers are now working across print, online and the
tablet app, replacing traditionally fractured sub-editing roles and removing production
silos. Reporters are filing digital-first stories throughout the day, increasing original content
by 25 per cent on these platforms. Common publishing systems across all metropolitan
publishing platforms allow news lists and all content across digital and print to be shared
seamlessly, resulting in increased efficiency.
Some more key figures about our people:
• 730 employees in Australia use Fairfax-subsidised gym facilities.
• 2106 employees in Australia and New Zealand took up the offer of a free flu vaccination.
• 827 employees participated in the Fairfax-managed fun runs and swim events offered
free of charge to staff.
• Established in 1959, the Fairfax Foundation operates separately from the business for the
purpose of helping current and former Fairfax employees and their dependents. During
the past financial year, the Foundation has provided financial grants, loans and other
benefits to the value of $359,251.
• Fairfax continued to offer independent external assistance and counselling services to
all Fairfax employees and their immediate families, as well as an independent external
“whistleblower” hotline for staff to report concerns about ethics and harassment.
16
to deliver growth to shareholders
a strong commercial focus
We will balance everything we do with
outstanding products and services
to provide our audiences and customers with
We need to work together across the company
deliver on our commitments
We are highly accountable and
quickly to our audiences, customers and each other
We value transparency. We listen and respond
of our audiences and customers
we make are based on the needs
The way we work and decisions
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
constantly challenging the status quo
To achieve this we need to be innovative,
FAIRFAX MEDIA ANNUAL REPORT 2013 17
OUR CULTURE AND VALUES STORY
EngAgEMEnt
Maintaining and improving staff engagement is important to our ability to attract and
retain talented people and to deliver on our business strategy. We obtain staff feedback
via annual comprehensive staff surveys, interim pulse surveys, our company intranet, and
annual performance reviews. We benchmark staff engagement levels and set clear goals
for improvement.
Our annual company-wide alignment and engagement staff survey, held during July
and August 2012, received a response rate of 63 per cent.
Compared with last year, the survey revealed improved understanding by staff and better
communication by senior management of the Company’s strategic direction. Focus groups
across the business identified “investment in people” as a key area of focus for the year to
further improve results. Initiatives to address this focus area included the introduction of reward
and recognition programs, improved communication around learning and development
programs, and the implementation of a new performance management framework.
CultuRE & vAluEs
Following the launch of Fairfax’s Culture and Values program in 2012, several initiatives have
been underway to embed our values. Initiatives include integrating company values into
our performance management system, which brings a focus on both our business and
behavioural goals. Recognition awards have also been established to commend employees
for outstanding achievement, behaviours and contributions to the Company in line with
Fairfax’s Culture and Values.
Our values and cultural drivers are also embedded within our internal projects. For example,
many of our internal programs such as the Fairfax Mentoring Program and our Leadership
Development programs emphasise teaching, role-modelling and demonstrating Fairfax’s
Culture and Values. In 2013, about 475 employees participated in leadership programs
across the business, while 572 employees participated in Fairfax’s mentoring programs.
REAl-tIME woRKIng
Real-time working is a set of physical, behavioural and technological strategies that enable
more flexible and efficient work practices by individuals and teams. It recognises a wide
spectrum of work styles and acknowledges that, on any given day, people will have
different activities that require varying levels of concentration or collaboration.
Real-time working is supported by appropriate tools such as wireless and cloud IT solutions.
Real-time working has provided Fairfax with a workplace that is much more flexible and
adaptive to the needs of our people.
woRKPlACE sAFEty
Fairfax has continued to improve its workplace safety record during the past 12 months.
The number of Lost Time Injuries has decreased, and the Company’s commitment to injury
management and return to work processes has improved. This is reflected in reductions
in Workers Compensation premiums since 2009.
Lost Time Injury frequency rates have increased slightly during the past 12 months as
a result of reduced employment hours attributed to staff reductions.
The Company has also introduced a new internal safety auditing process that aligns with
the Australian and New Zealand National 4801 Safety Standards. The audits will be in
addition to operational site audits and will assist the organisation to achieve best practice
in Work Health and Safety and compliance.
lost tIME InjuRIEs & lost
tIME InjuRy FREQuEnCy RAtE
100
NO. OF LTIs
LTIFR
5
80
60
40
20
0
08/09 09/10 10/11 11/12 12/13
LTIs LTIFR
4
3
2
1
0
18
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FAIRFAX MEDIA ANNUAL REPORT 2013 19
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.
Fairfax’s management and sponsorship of events such as City2Surf (Sydney), City2Sea
(Melbourne) and City2South (Brisbane) have continued to raise important funds for their
charity partners. Participants in the many Fairfax events run throughout the past 12 months
have raised more than $6 million for the various charities associated with each event.
These community events are an important way that the Company builds and maintains
key partnerships with charities, clubs and associations.
In July 2013, The Sun-Herald City2Surf celebrated reaching $20 million in charitable
funds raised since its inception, making it one of the most successful initiatives of its
kind in Australia.
Race Director, Rebecca Wilmer, said: “The City2Surf and its associated sister events have
become incredibly important fundraising drives for hundreds of charities across the
country. For some, they are the biggest initiatives of the year. The events give them the
opportunity to raise much-needed funds and awareness for their cause.
“Through initiatives like the City2Surf Gold Charity program, there is now the opportunity
for participants to apply even more of a focus on fundraising, and each year we’re seeing
this continue to grow.”
The Sun-Herald City2Surf is an integral part of the community, and the world’s biggest run
with 85,000 participants last year. The Sun-Herald also hosts the SurfSwim and Run4Fun.
In supporting and promoting active lifestyles of all kinds, Fairfax through its masthead
The Sydney Morning Herald, is also proud to be part of Australia’s longest-running and
largest ocean swim – the Cole Classic. The carnival, held in conjunction with Manly Life
Saving Club, continues to grow in popularity and this year attracted more than 3,800
swimmers. Families are encouraged to take part in The Sydney Morning Herald Sun Run
which is held on the day before the swim. Together, these two events raised $224,511 for
more than 700 charities.
In New Zealand, Round the Bays, which started in 1972 with 1,200 participants, is co-
owned by Fairfax Media and the Auckland Joggers Club. The 8.4km run, which follows the
contours of Auckland’s Waitemata harbour, has grown to more than 70,000 participants
each year. It is one of the world’s largest fun runs and New Zealand’s largest mass
participation sporting event.
Each year, several charities receive donations of about NZD$120,000 from the race.
In the past decade, about NZD$1.5 million has gone to a range of charitable causes
supporting the health, well-being and development of Auckland’s children via
Round the Bays.
ChARItABlE ContRIButIons
There are many heroic organisations that perform vital roles of protection and support
in our communities, and which have raised needed funds for hundreds of special groups
and projects. We are proud to have helped many hundreds of organisations during the
past 12 months.
18
FAIRFAX MEDIA ANNUAL REPORT 2013 19
Fairfax contributed in excess of $6 million in cash and kind to a range of charitable and
community causes during the year. These contributions help Fairfax form connections
in communities in which its mastheads, radio stations and brands operate in.
For example, the Fairfax Radio Network (FRN) supports communities its radio stations
broadcast to. FRN does so by becoming involved in a range of community-based activities,
sponsorships, community service announcements and through the participation by our
staff in community events.
FRN stations also assisted hundreds of non-profit organisations by providing community
service announcement airtime.
In addition, FRN’s national content distribution company, Fairfax Radio Syndication, supplied
commercial distribution and campaign monitoring for a number of charities free of charge.
In New Zealand, Fairfax sponsors several nation-wide causes as well as running its own
successful charities. Each year, via the Ports of Auckland Round the Bays, it donates about
NZD$110,000 to a range of charities involved in the well-being and education of children.
The Fairfax First Books program puts four picture books a year into the hands of every
child at more than 80 kindergartens across New Zealand to foster a love of reading and
build early literacy skills.
In 2012, Fairfax’s New Zealand division launched Creative Spirit (creativespirit.org.nz), an
employment program designed to boost employment of people with disabilities, starting
with businesses in the creative communication space. And Fairfax has started in its own
Auckland office by employing two administration staff who job-share 30 hours a week
and who, since joining the Company in March 2012, have become valued team members.
Since Fairfax launched Creative Spirit, several advertising and media agencies have signed
on and are employing people with disabilities as part of the program.
Fairfax workplace giving Program – More than words
Fairfax’s Australian businesses participate in a workplace giving program, More Than
Words, which started in 2005. The program encourages and enables employees to donate
part of their pre-tax salary to a range of nominated charities. Through the program, more
than $739,000 has been donated since 2005.
literacy programs
One area in which Fairfax believes its news outlets are particularly well-placed to make
a difference is literacy. Last year, over the course of 24 weeks, The Sunday Age and The
Sun-Herald campaigned strongly on the importance of reading by challenging students
around Victoria and NSW to read 12 books in six months. The challenge, known as The
Premier’s Reading Challenge, is a team effort at home, in school and through the masthead.
The Fairfax First Books program is improving early childhood literacy in New Zealand.
Boots For Kids
Young people feature prominently in Fairfax’s scope of charitable support. A recent initiative
started with a casual conversation between The Age football writer Michael Gleeson and
former Collingwood and All-Australian player Leon Davis about indigenous children who
had never owned a pair of footy boots but loved the game passionately. Known as Boots
for Kids, the program encourages families in Victoria to donate their children’s used footy
boots for use in remote indigenous communities in the Northern Territory and Western
Australia where kids play barefoot.
20
sustAInABIlIty AnD CoRPoRAtE soCIAl REsPonsIBIlIty
DIvERsIty
Diversity in employment is a crucial issue these days. Diversity of gender, ethnicity and
able-bodiedness creates diversity of thought. That diversity of thought is exactly what
companies like ours need especially in times of transformation.
Even though the newspaper industry has historically demonstrated a bias in favour of
men in senior roles, our organisation employs many women in senior editorial and general
management positions. There is still room for more diversity. Fairfax wants to encourage
even more women to take on leadership roles within the Company while still ensuring that
promotion is based on merit rather than quotas.
Last year, The Australian Financial Review partnered with Westpac to run the inaugural
100 Women of Influence Awards, which was launched with a keynote address by then
Prime Minister Julia Gillard. The program identified Australia’s 100 Women of Influence
during a 10-week editorial campaign across 10 categories.
In 2013, the 100 Women of Influence further cemented its standing as an awards program
of note, culminating in a gala event and awards ceremony in October in Sydney.
Fairfax in New Zealand and Westpac New Zealand have also entered into an exciting
partnership that aims to recognise women who have demonstrated outstanding
achievements and used their influence to make a positive impact on New Zealand society.
The NZ Women of Influence awards is an annual program that identifies the 60 most
inspiring women of New Zealand across a broad range of categories: management &
business; local & regional; entrepreneur; community service & social enterprise; innovation
& science; and emerging leader. The emerging leader category is run through Fairfax’s
Stuff.co.nz brand.
The NZ Women of Influence program was launched on June 26 this year. Nominations
ran until August 25, with winners to be announced and celebrated on October 23.
By recognising women in a broad range of roles, we hope to not only celebrate their
successes and contribution to New Zealand and Australia but also to encourage other
women to make a difference.
Following the external programs in Australia and New Zealand, Fairfax Women of Influence
has recently been rolled out internally at Fairfax to recognise and celebrate the successes
of our female staff. Through the program, female staff will have the chance to learn from
some of the external program finalists and winners through workshops, seminars, and
leadership programs. The Fairfax Women of Influence awards recognise our female
employees in six categories: young leader; community leadership; public agenda setting;
leadership; innovation; and change champion.
Our involvement in Women of Influence is an important step towards encouraging greater
acceptance of the importance of diversity in employment.
TABLE OF CONTENT s
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
FAIRFAX MEDIA LIMITED 2013
ACN 008 663 161
21
Board of Directors.............................................................................................................................22
Directors’ Report................................................................................................................................ 24
Auditor’s Independence Declaration ........................................................................ 28
Remuneration Report ................................................................................................................. 29
Remuneration Report (Audited) .......................................................................................31
Corporate Governance.............................................................................................................. 45
Management Discussion and Analysis Report ............................................. 54
Consolidated Income Statement ................................................................................... 56
Consolidated Statement of Comprehensive Income ............................57
Consolidated Balance Sheet................................................................................................ 58
Consolidated Cash Flow Statement ........................................................................... 59
Consolidated Statement of Changes in Equity ............................................ 60
Notes to the Financial Statements
1. Summary of significant accounting policies ................................... 62
2. Revenues ....................................................................................................................................72
3. Expenses .....................................................................................................................................73
4. Significant items .................................................................................................................74
5. Discontinued operations .........................................................................................75
6.
Income tax expense ..................................................................................................... 76
7. Dividends paid and proposed .........................................................................77
8. Receivables ..............................................................................................................................78
9.
Inventories ............................................................................................................................... 79
10. Assets and liabilities held for sale ................................................................. 79
11. Other financial assets ................................................................................................. 80
Investments accounted for using the equity method ....... 80
12.
13. Available for sale investments.......................................................................... 82
14.
Intangible assets ............................................................................................................... 82
15. Property, plant and equipment ....................................................................... 85
16. Derivative financial instruments .....................................................................87
17. Deferred tax assets and liabilities .................................................................89
18. Payables ..................................................................................................................................... 90
19.
Interest bearing liabilities ......................................................................................... 91
20. Provisions .................................................................................................................................. 92
21. Pension assets and liabilities ..............................................................................94
22. Contributed equity .........................................................................................................96
23. Reserves ..................................................................................................................................... 97
24. Retained profits ..................................................................................................................99
25. Earnings per share .........................................................................................................99
26. Commitments ..................................................................................................................100
27. Contingencies ....................................................................................................................101
28. Controlled entities .........................................................................................................101
29. Acquisition and disposal of controlled entities..........................106
30. Business combinations .......................................................................................... 107
31. Employee benefits.......................................................................................................108
32. Remuneration of auditors ..................................................................................109
33. Director and executive disclosures..........................................................110
34. Related party transactions .................................................................................112
35. Notes to the cash flow statement ...............................................................113
36. Financial and capital risk management ...............................................114
37. Segment reporting .......................................................................................................121
38. Parent entity information .....................................................................................124
39. Events subsequent to reporting date ...................................................124
Directors’ Declaration ................................................................................................................125
Independent Auditor’s Report ....................................................................................... 126
Shareholder Information ...................................................................................................... 128
Directory .................................................................................................................................................. 129
22
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; a member of the
Advisory Council of the Australian School of Business; Chairman of the University of New South Wales Centre for Healthy Brain
Ageing Advisory Board and a member of the Australian Indigenous Chamber of Commerce Advisory Board.
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.
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. During his time as Chief Executive he focused 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, focusing 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 and is a Director of Oztam Pty
Limited and Ooh Media.
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 Limited. 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, Director of BridgeClimb and Chandler Macleod Pty Limited, and is on the Board of Directors for
Sydney Olympic Park.
BOARD OF DIRECTORs
FAIRFAX MEDIA LIMITED 2013
23
SANDRA MCPHEE, AM
non-exeCuTiVe diReCToR,
APPoinTed To THe BoARd 26 FeBRuARy 2010
Ms McPhee is a Director of AGL Energy Limited, Westfield Retail Trust, Kathmandu Holdings Limited 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. 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 currently a Director of Jetset Travelworld Limited, Mirvac Limited and Fantastic Holdings Limited, as well as 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.
SAM MORGAN
non-exeCuTiVe diReCToR,
APPoinTed To THe BoARd 26 FeBRuARy 2010
Mr Morgan is the founder, former CEO and now a Director of Trade Me Limited, New Zealand’s largest online transaction site.
He is the Chairman of software company Visfleet and a Director of listed online business Xero Limited. 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 Medical Research
and Low Carbon Australia Pty Limited. 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, Mrs 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 USA. He is
currently the Chairman of Barclays Australia and New Zealand. He was a member of the Royal Bank of Scotland’s Advisory
Council in Australia. He also 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 also currently the Chairman of Queensland
Investment Corporation, and a Director of PrimeAg Australia and the Sydney Theatre Company, as well as a member of the
Queensland Art Gallery Board of Trustees. He is involved in a number of community, environmental and artistic activities.
24
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 30 June 2013 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
SANDRA MCPHEE, AM
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 22 – 23 of this report.
DIRECTORs’ REPORT
FAIRFAX MEDIA LIMITED 2013
25
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 Chair of CopyCo Pty
Limited and 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 $16,432,000 (2012 Loss: $2,732,397,000).
DIVIDENDS
An interim fully franked dividend of 1 cent per ordinary share
and debenture was paid on 20 March 2013 in respect of the
year ended 30 June 2013.
Since the end of the financial year, the Board has declared
a fully franked dividend of 1.0 cent per ordinary share and
debenture in respect of the year ended 30 June 2013. This
dividend is payable on 17 September 2013.
REVIEW OF OPERATIONS
Revenue for the Group was lower than the prior year at
$2,045 million (2012: $2,225 million). After significant expenses
of $144.5 million the Group generated a net loss after tax
of $16.4 million (2012: $2,732.4 million). Earnings per share
increased to a loss of 0.7 cents (2012: loss $1.16).
Further information is provided in the Management
Discussion and Analysis Report on pages 54 – 55.
SIGNIFICANT CHANGES IN THE STATE OF AFFAIRS
Significant changes in the state of affairs of the consolidated
entity during the financial year were as follows:
On 23 December 2011, the Company announced that it had
entered into an agreement to merge Fairfax Community
Network Ltd in Victoria with Metro Media Publishing Pty Ltd.
The merger was completed on 13 July 2012 and resulted
in the Company holding a 50.01 per cent interest in MMP
Holdings Pty Ltd.
The Company disposed of its US Agricultural Media business
for US$79.9 million on 14 November 2012.
On 21 December 2012, the Company disposed of its
remaining 51 per cent interest in Trade Me Group Ltd for
A$605.5 million net of transaction fees.
LIKELY DEVELOPMENTS AND EXPECTED RESULTS
The consolidated entity’s prospects and strategic direction are
discussed in the Management Discussion and Analysis Report
on pages 54 – 55 of this report.
Further information about likely developments in the
operations of the consolidated entity and the expected results
of those operations in future financial years has not been
included in this report because disclosure of the information
would be likely to result in unreasonable prejudice to the
consolidated entity.
ENVIRONMENTAL REGULATION AND PERFORMANCE
No material non-compliance with environmental regulation
has been identified relating to the 2013 financial year.
The Company reported to the Department of Climate Change
on the total carbon emissions of the Group generated in
the 2012 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
84,976 (2012: 93,951) tonnes CO2-e.
EVENTS AFTER REPORTING DATE
The Group undertook a tender offer to repurchase some of
its outstanding Senior Notes in July 2013. Acceptances under
the tender totalled US$224 million of the outstanding total of
US$430 million. The repurchased notes comprised US$25
million of floating rate notes and US$199 million of fixed rate
notes. Approximately A$270 million of funds were used to
repurchase the Senior Notes through the exercise of US$224
million of existing cross currency swaps. The early redemption
of the Senior Notes will result in a $4.6 million gain net of tax
recorded in the income statement in the 2014 financial year.
26
DIRECTORs’ REPORT
In July 2013, the Group entered into a new loan facility for NZ$40 million. The loan facility is available to the Group
until July 2015.
On 13 August, the Group entered into an agreement to sell InvestSMART to Australasian Wealth Investments Limited (AWI) for
cash consideration of $7 million. The completion of the transaction is dependent on a capital raising process by AWI.
REMUNERATION REPORT
A remuneration report is set out on pages 29 – 44 and forms part of this 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:
ACQUISITION
DISPOSALS
CLOSING
BALANCE
POST YEAR END
ACQUISITIONS
POST YEAR END
DISPOSALS
POST YEAR END
BALANCE
ORDINARY SHARES
R Corbett
G Hywood*
M Anderson
J Cowin
S McPhee
J Millar
S Morgan*
L Nicholls
R Savage
P Young
ToTAl
OPENING
BALANCE
99,206
1,682,834
–
–
40,220
–
2,090,348
40,387
47,899
131,117
–
200,000
–
3,000,000
70,673
100,000
–
67,371
–
–
4,132,011
3,438,044
–
–
–
–
–
–
–
–
–
–
–
99,206
1,882,834
–
3,000,000
110,893
100,000
2,090,348
107,758
47,899
131,117
7,570,055
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
99,206
1,882,834
–
3,000,000
110,893
100,000
2,090,348
107,758
47,899
131,117
7,570,055
* Balance includes Trade Me shares which was a related body corporate until 21 December 2012.
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 30 June 2013
and the number attended by each Director or Committee member.
BOARD MEETING
AUDIT AND RISK
NOMINATIONS
PEOPLE AND CULTURE
SUSTAINABILITY
AND CORPORATE
RESPONSIBILITY
MEETINGS*
R Corbett**
G Hywood***
M Anderson
J Cowin
S McPhee
J Millar
S Morgan
L Nicholls
R Savage
P Young
NO.
HELD
NO.
ATTENDED
NO.
HELD
NO.
ATTENDED
NO.
HELD
NO.
ATTENDED
NO.
HELD
NO.
ATTENDED
NO.
HELD
NO.
ATTENDED
16
16
16
14
16
15
16
16
–
16
16
16
15
13
16
15
13
15
–
14
4
4
–
–
–
2
–
4
–
4
4
4
–
–
–
2
–
4
–
4
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
6
6
3
6
–
–
–
–
3
6
6
6
3
6
–
–
–
–
3
3
3
3
–
3
–
2
–
–
–
3
3
3
–
3
–
1
–
–
–
* The number of meetings held refers to the number of meetings held while the Director was a member of the Board or Committee.
** Mr Corbett, Chairman, is an ex officio member of all Board committees.
*** Mr Hywood attends the Audit and Risk, People and Culture and Sustainability and Corporate Responsibility Committee meetings as an
invitee of the Committees.
FAIRFAX MEDIA LIMITED 2013
27
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.
NO OFFICERS ARE FORMER AUDITORS
No officer of the consolidated entity has been a partner of
an audit firm or a Director of an audit company that is the
auditor of the Company and the consolidated entity for the
financial year.
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 32 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 28
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 $243,809
• Overseas $98,020
Other assurance and non-assurance services:
• Australia $225,449.
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
22 August 2013
28
AUDITOR’s INDEPENDENCE DECLARATION
Ernst & Young
680 George Street
Sydney NSW 2000 Australia
GPO Box 2646 Sydney NSW 2001
Tel: +61 2 9248 5555
Fax: +61 2 9248 5959
ey.com/au
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 30
June 2013, 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
22 August 2013
A member firm of Ernst & Young Global Limited
Liability limited by a scheme approved under Professional Standards Legislation
REMUNERATION REPORT
FAIRFAX MEDIA LIMITED 2013
29
Dear Shareholder
On behalf of the Board, I am pleased to present Fairfax Media’s 2013 Remuneration Report.
OUR REACTION TO CHANGES IN OUR MARKET
Fairfax Media has not stood still in another challenging year for the media business. We have confronted the fundamental
changes in the media market and developed a strategy that we believe will deliver a lean and agile Fairfax Media in a highly
competitive market. We are implementing our transformation strategy.
Through this transition, Fairfax Media has moved its organisational focus from print to digital and has profitable cash positive
newspapers. The 2013 financial year has been a time of real progress on the critical milestones to achieving the business
transformation we have previously announced. We have:
• consolidated our core Australian publishing businesses into a single unit, Australian Publishing Media, which is removing
duplication from our business and driving revenue;
•
launched the compact editions of the weekday Sydney Morning Herald and The Age, so as to enable printing plant
rationalisation;
• established Domain as a standalone operation recognising the significance of the real estate sector and Domain’s strong
position in this sector;
•
•
formed the Digital Ventures unit to maximise the full potential of our digital transaction businesses such as Stayz and RSVP
and to grow new digital opportunities;
reduced our cost structure significantly; reflected in the $251 million in savings we have previously announced, plus an
additional $60 million in savings including the restructure of Australian Publishing Media;
• begun a comprehensive product review to do those things that we do well and profitably and not do those things that are
not efficient or that are not part of our core business; and
• begun new revenue generation initiatives across our business including a focus on leveraging our mastheads and powerful
brands in the growing business of events.
We have advised the market that traditional print advertising revenue continues to decline. The transition from a traditional print
media company to a cross-platform business is not instantaneous.
We are confident that we are on a path that will lead us to maximise the opportunities available to a company with our brands,
reputation and people. We believe this will generate competitive returns for our shareholders over the medium to long term.
But we acknowledge that short term returns to shareholders have suffered through this transition.
This development has been reflected in 2013 remuneration and in a comprehensive review of incentive arrangements for
2014 and beyond.
REMUNERATION IN THE 2013 FINANCIAL YEAR
In the 2013 financial year, a year of challenges and of change:
•
•
the majority of senior executive salaries were frozen as were fees paid to Non-Executive Directors. The Chairman also fulfilled
his commitment made at the last AGM and agreed to a reduction in his fees from $432,730 per annum to $396,760;
there will be no annual bonuses paid to senior executives for 2013, unless there was a pre existing contractual payment
commitment; and
•
the long term incentives, granted previously and tested at the end of the performance period this year, did not vest.
This report provides details of our remuneration practices and the incentive plans in place in the 2013 financial year. We also
want to share with you what we plan to do for the 2014 financial year and beyond.
REMUNERATION 2014 AND BEYOND
The Board has gone back to the drawing board to design a ‘fit for purpose’ remuneration plan that is better reflective of the
journey we are asking our shareholders to go on with us in this period of consolidation and transformation followed by the
emergence of a new Fairfax Media. The plan recognises that:
30
REMUNERATION REPORT
•
the transformation journey we are on is not a short one, meaning that while we are positioning ourselves for the future,
it may take a little while for the transformation to be reflected in significantly improved shareholder returns;
• we now have a smaller, highly dedicated and skilled team of the best people to lead Fairfax on this journey; and
• as our business evolves, our current remuneration structure has become less relevant for the Fairfax of tomorrow.
In the 2014 financial year, as the Board and management continues the hard work required to deliver on our strategy and
to transform your company:
•
the vast majority of our senior executives will not receive any increase in fixed remuneration;
• our most senior executives have volunteered to sacrifice 10% of their fixed remuneration to purchase Company shares.
The shares will be restricted for two years. Further details of this are set out in the Remuneration Report;
• Non-Executive Directors have agreed to a reduction of 10% in their base fees from 1 July 2013;
• our existing short term and long term incentive plans will be replaced with a single transformation incentive scheme.
The new scheme will comprise two components for our most senior executives in the 2014 financial year, a proportion of long
term options and a smaller proportion of deferred performance shares granted at the end of the year for achieving milestones
in the year as follows:
•
in order to align the majority of the incentive with growth in shareholder returns, options will be granted following our 2013
AGM with an exercise price set at that time. These options will only vest if the absolute total shareholder return growth
performance condition is satisfied. This condition will be tested between July 2016 and June 2017. Performance conditions
are set out in the following Remuneration Report;
• a smaller percentage of incentive opportunity will be in the form of deferred performance shares. These shares will be
granted for achieving annual milestones in the transformation strategy. These milestones will be set at the start of each year
by the Board in line with the strategic plan. These milestones are set to reflect specific accountabilities for our management
including variously revenue, earnings, market share and cost reduction targets at Group and/or business level. The specific
targets are currently being finalised for 2014 and we will report on achievements against these targets and the associated
outcomes in our 2014 Remuneration Report; and
•
in order to align the value of these rewards with our longer term prospects, half of the shares granted following testing of
performance in 2014 will be deferred for 12 months (i.e. until 2015) and the other half for two years (i.e. until 2016). The shares
will be forfeited if the executive resigns or is terminated for poor performance during the deferral period.
The Board is confident that this new remuneration structure better aligns executive rewards with our shareholders and
provides an appropriate incentive to deliver our strategy.
We hope shareholders will see that the Board has not stood idle in the face of the dramatic change in the media industry.
Our 2013 financial year remuneration outcomes, notwithstanding a lot of hard work from all of our employees, reflect our
financial performance in the year.
As shareholders will be aware, last year we received a ‘first strike’ under the Corporations Act, as more than 25 per cent of the
votes cast in relation to our Remuneration Report were against the non-binding resolution. Accordingly, this year a ‘second
strike’ would cause us to propose a motion at the AGM to spill your Board.
Our 2014 financial year remuneration structure is designed to support our strategy of building the Fairfax of tomorrow.
Your Board ask that you support our remuneration policies and practices by voting in favour of this Report at our 2013 AGM.
Yours faithfully
Sandra McPhee, AM
Chair – People and Culture Committee
REMUNERATION REPORT (AUDITED)
FAIRFAX MEDIA LIMITED 2013
31
1.
INTRODUCTION
This report forms part of the Company’s 2013 Directors’ Report and sets out the Fairfax Group’s remuneration arrangements for
‘key management personnel’ (KMP) in accordance with the requirements of the Corporations Act 2001 and its regulations. KMP
comprises Directors and members of the senior executive team who have authority and responsibility for planning, directing
and controlling the activities of the Fairfax Group.
At the 2012 Annual General Meeting the Company received a ‘first strike’ under the Corporations Act as more than 25% of
votes cast in relation to the Remuneration Report were cast against the non-binding resolution. Accordingly, at the 2013
Annual General Meeting, a ‘second strike’ will cause the Company to propose a motion at that Annual General Meeting to
spill the Board.
The Board has subsequently changed the executive incentive plans as set out below.
2. REMUNERATION FRAMEWORK AND GOVERNANCE
2.1 ReMuneRATion PRinCiPleS And FRAMeWoRk 2013 And 2014 CHAnGeS
FAIRFAX MEDIA EXECUTIVE REMUNERATION FRAMEWORK
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 have regard to market so as to be
able to attract and retain key people.
The People and Culture Committee (P&CC) assists the Board to achieve the goal that the executive remuneration
framework address the following:
• attract, retain and motivate talented, qualified and experienced people in the context of industry changes over recent
•
years, and the market in which Fairfax is currently operating;
fairly remunerate and reward for achievement of Group strategic milestones, with incentive payments deferred to
promote alignment with shareholder interests;
• align remuneration with achievement of business strategy; and
• be transparent and fair.
The executive remuneration framework comprises a mix of fixed and performance-based components.
Fixed remuneration package
Performance Incentives
•
•
•
•
includes cash, superannuation and any benefits
employees choose to salary sacrifice (eg motor
vehicle and parking)
represents the total fixed cost to the Company
including fringe benefits tax payable
in recognition of Group financial performance
in recent years, most senior executives’ fixed
remuneration has been frozen
for 2014 executive KMP have volunteered to
sacrifice 10% of fixed remuneration into
restricted shares
• short term incentive (STI) payments subject to
annual financial performance of the Company,
as well as specific strategic and operational
objectives relevant to the executive
• on recommendation from the CEO, the P&CC
reviews and approves STI payments and the key
performance indicators for the following year
•
•
financial gateway for FY13 STI was not met, and
therefore no payments made for that year
for FY13 and prior, long term incentive linked to
performance against total shareholder return
and earnings per share conditions over 3 years
• prior years' LTI vesting criteria were tested
following end of FY13 and not met, therefore no
LTI awards for prior years which have reached
the vesting date will vest
•
for 2014 new incentive plan to be implemented
32
REMUNERATION REPORT (AUDITED)
2.2 ReMuneRATion GoVeRnAnCe
The Board’s goal is that Fairfax’s executive remuneration strategy align with Company performance and shareholder interests.
Importantly, the Board is focused on delivering a remuneration framework that attracts and retains the right executive team to
set and deliver upon company strategy, and that remuneration arrangements support achievement of that strategy and growth
in shareholder value.
The P&CC, comprising solely of Non-Executive Independent Directors, assists the Board in discharging its duties. The members
of the P&CC during 2013 were:
• Sandra McPhee (Chair);
• Roger Corbett;
• Michael Anderson;
• Peter Young (member until 6 December 2012); and
• Jack Cowin (member from 6 December 2012).
The CEO, CFO, Group General Counsel/Company Secretary and Group Director Human Resources attend P&CC meetings as
invitees except when their own performance or remuneration arrangements are being discussed.
The Board has a formal Charter for the P&CC which sets out the responsibilities, composition and meeting rules of the Committee.
The Committee’s primary responsibilities include making recommendations in relation to Director and executive remuneration,
that support the remuneration strategy, and the performance conditions that underpin it, to promote the achievement of the
Group’s strategy. Further details of the role and responsibilities of the Committee are set out in its Charter, which is available
on the Fairfax Media website; www.fairfaxmedia.com.au
The P&CC’s key focus during the 2013 financial year was to review the Group’s remuneration arrangements during the year
in the context of the industry changes over recent years, and the market in which Fairfax is currently operating. Further details
of the outcomes of the review are set out in Section 3, below.
The Committee engages independent remuneration consultants to provide advice and information regarding market
relativities as required. During the year jws consulting was engaged by the Committee to assist with the review outlined above.
As part of that engagement jws consulting provided remuneration recommendations in relation to the Group’s incentive plan
arrangements, fixed remuneration and Non-Executive Director fee levels.
As required to be disclosed by the Corporations Act, within the context of the work described above, fees paid to jws
consulting for the remuneration recommendations were $65,000 (excluding GST) and the fees for other advice were $22,000
(excluding GST).
In addition to the above, advice was also provided by PricewaterhouseCoopers on market trends on short term incentive
gateways and clawback provisions. Fees for this work were $13,000 (excluding GST).
jws consulting and PricewaterhouseCoopers have provided confirmation that the recommendations provided were free from
‘undue influence’ by the members of the KMP to whom the recommendations related and, based on these confirmations,
the Board is satisfied that the recommendations were made free from any undue influence.
REMUNERATION REPORT (AUDITED)
FAIRFAX MEDIA LIMITED 2013
33
2.3 ReMuneRATion Mix
The Board considers that a significant proportion of executive remuneration should be ‘at risk’, and linked to Fairfax’s short and
long term strategy and performance. The following diagram shows senior executives’ remuneration mix for the 2013 financial year.
CEO
45%
33%
22%
CFO
54%
24%
22%
OTHER KMP EXECUTIVES
57%
26%
17%
Fixed
STI (on-target)
LTI (max)
0
20
40
60
80
100
3. SUMMARY OF EXECUTIVE REMUNERATION OUTCOMES FOR 2013
The media market and, in particular, the print media business has had another challenging year.
Market conditions remain difficult, and traditional print advertising revenue continues to decline. 2013 saw Fairfax implement a
number of cost saving initiatives and continue to implement its strategy to respond to industry changes, but the transition from
a traditional print media company to a cross-platform business is not instantaneous.
In this year of challenges and change and consistent with the impact on our shareholders:
• senior executive salaries remained frozen unless there was a substantial role change;
• no annual bonuses were paid to senior executives because short term incentives did not meet the required financial gateway,
unless there was a contractual pre-existing obligation; and
•
the long term incentives, granted in prior years and tested at the end of their performance periods this year, did not vest.
The detailed remuneration tables set out in Section 6.3 show full details of KMP remuneration for the 2013 financial year.
Numbers include the expense relating to equity instruments under the LTI, as required by the Accounting Standards
notwithstanding that these amounts were not actually delivered to executives.
The following table has been included voluntarily to provide a better understanding of the amounts actually received by current
KMP (as set out in section 5) for each component of remuneration during the 2013 financial year.
Table 1
NAME
Greg Hywood
David Housego (1)
Gail Hambly
Allen Williams (2)
FIXED
REMUNERATION (3)
1,611,239
491,089
635,830
189,934
BONUS
–
100,000
–
–
LTI
–
–
–
–
TOTAL
1,611,239
591,089
635,830
189,934
1) David Housego commenced with the Company in the role of Chief Financial Officer (CFO) on the 3 December 2012 (with an annual fixed
remuneration of $825,000). As part of his recruitment arrangements Mr Housego was entitled to a one off payment of $100,000 at the
end of the FY13 subject to performance objectives being achieved.
2) Allen Williams commenced as Managing Director Australian Publishing Media on 4 April 2013 (with an annual fixed remuneration of
$775,000). Prior to this Mr Williams was the CEO of Fairfax New Zealand.
3) Fixed remuneration comprises of base pay, superannuation and long service leave.
In addition, over the prior two financial years:
• STI payments have been below on-target performance; and
• no LTI awards vested.
34
REMUNERATION REPORT (AUDITED)
4. EXECUTIVE REMUNERATION CHANGES FOR 2014
The Board, through the P&CC, undertook a comprehensive review of the Group’s remuneration arrangements during the year
in the context of the industry changes and the market in which Fairfax is currently operating. The Board recognises that, at this
pivotal point in the Company’s life cycle, the remuneration and incentive framework needs, more than ever, to be generally
market competitive (to guard against key people leaving the business) and to drive a performance culture, encouraging and
rewarding the achievement of milestones in the transformation strategy.
The review confirmed that the current remuneration arrangements are not appropriate to motivate executives to achieve the
transformation proposed over the coming years, the current performance metrics, in particular, do not support achievement of
the transformational objectives.
The Board, however, is acutely aware of the position of shareholders and the levels of return over recent years. Accordingly, a
key objective of the review was to achieve a remuneration framework that rewards performance, but ensures that such reward
is aligned with shareholder interests.
The key considerations and outcomes from the review in respect of remuneration arrangements for the executive KMP are set
out in the following table:
Table 2: Findings from review
REMUNERATION COMPONENT
KEY CONSIDERATIONS AND FINDINGS FROM REVIEW
OUTCOMES AND FY14 CHANGES
Fixed remuneration
• More than ever, Fairfax needs to attract and
retain high calibre executives to transform
the Company.
• Particularly in the context of the transformation
journey that is ahead and as a result of
previous incentive grants not vesting and the
consequent retention risk, fixed remuneration
plays an even greater role in attracting and
retaining the right people.
incentives
• The current incentive plans are not valued
by executives and are not achieving their
purpose of providing an incentive to achieve
organisational objectives.
• A ‘fit for purpose’ incentive is required to
reward the most senior executives if they
achieve turning around the performance
of the Company.
• Steps in the transformation are designed to
translate into enhancement of shareholder
wealth over time.
• The Board recognises loss of shareholder
wealth over recent years.
• No fixed remuneration increases for FY14
for executive KMP.
• Key management personnel have agreed to
sacrifice 10% of their fixed 2014 remuneration into
shares in Fairfax which are restricted for two years.
At the end of two years, if participants in the salary
sacrifice plan are still employed by the Company
then the Company would provide one additional
“bonus” share for every five shares purchased from
the participants salary sacrifice.
• The salary sacrifice is intended to reduce cash
remuneration payable, while still providing a benefit
to executives aligned with shareholder benefits.
• No further grants will be made under existing short
term and long term incentive plans.
• Replacing the existing plans is a single transformation
incentive scheme to be implemented for FY14
(the Fairfax Transformation Incentive Plan (“FTIP”)).
• The new scheme provides the issue of long term
options that are exercisable only if shareholder
wealth objectives are achieved.
• A smaller proportion of deferred performance
shares will be granted at the end of FY14 if specific
business metrics linked to the transformation of the
Company have been achieved.
• Rewards under the FTIP will be delivered in equity
(i.e. no cash outlay) in order to further incentivise
growth in shareholder wealth.
• Any deferred performance shares earned in initial
years are deferred, so that executives do not
become entitled to access the equity until later
in the transformation process.
• Further detail as to how the Transformation
Incentive Plan will operate is set out below.
The Board is confident that this new remuneration structure better aligns executive rewards with our shareholders over the
medium and longer term and provides an appropriate incentive to deliver our strategy.
REMUNERATION REPORT (AUDITED)
FAIRFAX MEDIA LIMITED 2013
35
The new scheme will comprise two components for our most senior executives in the 2014 financial year:
1. a proportion of long term options; and
2. a smaller proportion of deferred performance shares granted at the end of the year for achieving milestones in the year:
•
in order to align the majority of the incentive with growth in shareholder returns, options will be granted following our 2013
AGM with an exercise price set at that time. These options will only vest if the absolute total shareholder return growth
performance condition is satisfied. This condition will be tested between July 2016 and June 2017. Performance conditions
are set out below;
•
•
a smaller percentage of incentive opportunity will be in the form of deferred performance shares. These shares will
be granted for achieving annual milestones in the transformation strategy. These milestones will be set at the start of
each year by the Board in line with the strategic plan. These milestones are set to reflect specific accountabilities for our
management including variously revenue, earnings, market share and cost reduction targets at Group and/or business
level. The specific targets are currently being finalised for 2014 and we will report on achievements against these targets
and the associated outcomes in our 2014 Remuneration Report; and
in order to align the value of these rewards with our longer term prospects, half of the shares granted following testing
of performance in 2014 will be deferred for 12 months (i.e. until 2015) and the other half for two years (i.e. until 2016).
The shares will be forfeited if the executive resigns or is terminated for poor performance during the deferral period.
The following diagram shows how the scheme will operate and the objectives that it aims to achieve.
In order to align the majority of the reward with growth in our share price, options will
be granted following our 2013 AGM with an exercise price set at that time and that
will be subject to an absolute total shareholder return growth performance condition
that must be satisfied before they vest.
This condition will be tested between July 2016 and June 2017
July’13
July’14
July’15
July’16
Jan’17
July’17
70%
Majority of
award delivered
in Options
Vesting subject to achievement of longer term
shareholder wealth objectives
30%
Remainder
delivered in
Performance
Shares, subject to
achievement of
transformational
objectives
If transformational
objectives met,
Performance
shares granted,
subject to deferral
50% become
unrestricted
50% become
unrestricted
In order to align the value of these
rewards with our longer term prospects,
half of the shares granted following testing
of performance in 2014 will be deferred for
12 months and the other half for two years.
The shares will be forfeited if the
executive resigns or is terminated for poor
performance during the derral period.
1ST TEST
2ND TEST
3RD TEST
In order to provide a degree of market competitive remuneration to our key people, deferred performance shares will be granted for
achieving annual milestones in transformation strategy. These milestones will be:
•
•
set at the start of each year by the Board in line with the long range strategy (and any refinement of that strategy)
set in line with specific accountabilities for our management and reflect variously revenue, earnings, market share and cost
reduction targets at Group and/or business level
reported (both targets and the associated outcomes) in our 2014 Remuneration Report
•
• under the new plan the KMP participants have an opportunity to earn up to the equivalent of 200% of their fixed remuneration
in allocations of a combination of options and deferred performance shares.
36
REMUNERATION REPORT (AUDITED)
oPTionS HuRdleS: ABSoluTe TSR
Following consideration of the likely forms by which shareholder wealth may be generated by Fairfax over the next three years
(share price growth, ‘ordinary’ dividends and potentially ‘special’ distributions in the form of dividend or capital returns), the
performance hurdle to apply to the vesting of the options is absolute total shareholder return growth (“Absolute TSR”). Absolute
TSR will measure growth in shareholder wealth over the applicable performance period as it measures both share price growth
as well as dividends to shareholders.
The applicable compound annual growth rates hurdles for the Absolute TSR are set out in the table below.
PERFORMANCE
% EXERCISABLE
ABSOLUTE TSR GROWTH
Threshold
Target
Stretch
25%
50%
100%
15% CAGR
20% CAGR
25% CAGR
The Board has discretion to deem the performance conditions not met if vesting would otherwise only occur as a result
of extraneous factors, for example the effect of sustained speculation regarding a takeover bid for the Company on the
share price, which are not, in the reasonable opinion of the Board, reflective of the quality of the Company’s performance.
HuRdleS FoR deFeRRed PeRFoRMAnCe SHAReS
Proposed metrics aligned with the business transformation strategy during 2014 are designed to drive financial growth for
shareholders over time.
By the end of 2016/17 the Company should effectively be through most of the transformation work. It should have achieved a
smaller and more variable cost base; significant transition to a predominantly digital future for major mastheads; a viable digital
business in regional; established revenue adjacencies; Domain and Radio should be substantially larger businesses; and we
should have optimised our portfolio of digital and transactional businesses. The specific initiatives set as the target for each of
the 2014, 2015 and 2016 years will be different and will have potentially different weighting between the years. The intention is
that the delivery of each of the targets in each year should deliver the overall transition by 2016/17.
Appropriate metrics will be set at the start of each new financial year. This aims to ensure that, as the transition develops, there
will be enough flexibility to respond along the way and moderate, change or introduce new measures that will give confidence
that the plan will operate effectively. All measures will be clearly defined and measurable.
FACiliTy FoR kMP SAlARy SACRiFiCe inTo SHAReS
Executive KMP members have voluntarily agreed to salary sacrifice 10% of their fixed remuneration for the purchase of
Company shares in 2014.
In order to recognise that executives who elect to participate in the salary sacrifice have given up some of their cash
remuneration entitlement to have ‘skin in the game,’ the Company provides a part matching offer.
Pursuant to this offer, at the end of two years, assuming that the participant in the salary sacrifice plan is still employed by Fairfax,
the Company would provide 1 additional ‘bonus’ share for every 5 shares acquired under the salary sacrifice arrangements.
5. KEY MANAGEMENT PERSONNEL (KMP)
During the financial year, the business undertook an organisational restructure which resulted in a number of changes to roles
and responsibilities. This resulted in a change in the people having authority and responsibility for planning, directing and
controlling the organisation.
The key management personnel (KMP) for the financial year are set out in Table 3.
REMUNERATION REPORT (AUDITED)
FAIRFAX MEDIA LIMITED 2013
37
Table 3
NAME
non-executive directors
Roger Corbett
Michael Anderson
Jack Cowin
Sandra McPhee
James Millar
Sam Morgan
Linda Nicholls
Peter Young
executive director
Greg Hywood
other executives
David Housego
Gail Hambly
Allen Williams
Former executives
Brian Cassell
ROLE
Non-Executive Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Executive Officer
Chief Financial Officer (effective from 3 December)
Group General Counsel/Company Secretary
Managing Director, Australian Publishing Media
Chief Financial Officer (until 3 December)
6. REMUNERATION OF EXECUTIVE KMP
6.1 PeRFoRMAnCe-BASed SHoRT-TeRM inCenTiVeS (“BonuS PAyMenTS”) FoR SenioR exeCuTiVeS
As the 2013 incentive gate target was not met, no STI is payable to KMP for the financial year.
The Board reviewed the Group’s STI arrangements during the year and determined to wind up the existing Plan.
The following table sets out how the Group’s STI arrangements operated during the 2013 financial year.
Table 4
DETAIL OF 2013 STI ARRANGEMENTS
What is the STi?
What were the performance
measures and why were
they chosen?
Annual bonus payments for senior executives with 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. Bonus criteria for the CEO were set by the Board.
For the 2013 financial year, an incentive gate applied which required a threshold level of financial performance
to be achieved before any bonuses became payable. The incentive gate was set at the achievement of the
Group’s budgeted EBIT. This was not achieved in 2013 so no STI was paid.
Three components applied in respect of FY13.
LEVEL
Corporate Level (50%)
Business Unit Level (25%)
Strategic Level (25%)
COMPONENT
drives corporate financial results (EBIT) and encourages
senior management to work together for the overall
benefit of the Group
drives business unit financial and other operational metrics
to encourage team behaviour (e.g. EBIT, cost reductions,
audience, market position and revenue)
indicators of future Group, business unit and personal
success (delivery against milestones and personal
development) to drive the delivery of the Corporate strategy.
What could executives earn
under the STi?
Each senior executive had a target opportunity depending on the accountabilities of the role and impact on
Company or business unit performance. There are two levels of performance:
PERFORMANCE LEVEL
OPPORTUNITY
“on-target” performance – e.g. for EBIT the “on-
target” performance is typically achievement of
budget or prior year
“maximum” performance – requires stretching
performance targets to be met.
CEO – 75% of fixed remuneration
Other executive KMP – 45% of fixed remuneration
CEO – 150% of fixed remuneration
Other executive KMP – 90% of fixed remuneration
38
REMUNERATION REPORT (AUDITED)
DETAIL OF 2013 STI ARRANGEMENTS
did the STi provide
for deferral?
How is performance
then assessed?
To what extent were
performance conditions
met during the year?
The STI provided 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 would be deferred into shares. The balance of the
bonus is paid to the senior executive as cash.
Any Deferred Shares awarded are required to be held in the Trust for two years (as the STI has been earned
by the executive, dividends are paid on the shares during this period).
Commencing in the 2013 financial year, the Deferred Component was subject to a claw-back provision. This
means that the Board may exercise its discretion to reduce or cancel shares subject to trading restrictions in
fairness to all parties where a senior executive has engaged in fraud or gross misconduct, or where material
risk or financial-related information has come to light since the grant of the deferred equity and the Board
subsequently considers that the initial grant was not justified.
As the financial gateway was not met for FY13, no Deferred Shares were awarded.
At the end of the financial year, actual performance is assessed against the measures set at the beginning
of the year.
The 2013 incentive gate target was not met and therefore no short term incentives were paid to executives
in respect of the financial year.
In the 2013 financial year, the KMP performance based short-term incentive opportunity and outcomes are set out below:
SuMMARy oF THe STi FoR THe 2013 FinAnCiAl yeAR
Table 5
NAME
Greg Hywood
David Housego (2)
Brian Cassell
Gail Hambly
Allen Williams
MAXIMUM OPPORTUNITY
-PERFORMANCE-BASED
SHORT-TERM INCENTIVES (1)
% OF MAXIMUM
OPPORTUNITY EARNED
% OF MAXIMUM
OPPORTUNITY FORFEITED
150%
90%
90%
90%
90%
0%
23%
0%
0%
0%
100%
77%
100%
100%
100%
1) As a percentage of Fixed Remuneration.
2) As part of his recruitment arrangements Mr Housego was entitled to a one off payment of $100,000 at the end of the FY13 subject
to achievement of performance goals.
6.2 lonG TeRM equiTy-BASed inCenTiVe SCHeMe (lTi)
The 2009 LTI grant was tested at the end of the performance period this year, and did not vest.
The Board reviewed the Group’s LTI arrangements during the year, and determined to wind up the Plan as it currently operates.
The following table sets out how the Group’s LTI arrangements operated during the 2013 financial year.
Table 6
DETAIL OF LTI ARRANGEMENTS
What was the lTi and
who participates?
Senior executives whose roles and skills are critical to the strategy of the Group were eligible to participate in
the Company’s equity-based LTI.
The LTI aims to reward executives for creating growth in shareholder value.
How is the lTi grant
determined?
For 2013, participants in the LTI received an allocation of performance rights (rights) which allow the executive
to acquire shares for no consideration subject to achievement of the performance hurdles. No dividends are
payable to participants on the unvested rights.
The number of rights to which a participant is entitled depends on the participant’s role and responsibilities.
Allocations were set at a fixed percentage of the executive’s Fixed Remuneration at the time they participate in
the LTI scheme. The value of the rights at the time of allocation is determined by an independent external valuer.
In the allocations for the 2008 to 2012 financial years, participants in the LTI received an allocation of
Company shares. The shares were allocated to the executives and held by the trustee in trust until the
performance conditions are met and the allocation vests, or is forfeited. Details of these awards are set out in
the Company’s 2012 remuneration report available at www.fairfaxmedia.com.au
REMUNERATION REPORT (AUDITED)
FAIRFAX MEDIA LIMITED 2013
39
DETAIL OF LTI ARRANGEMENTS
What is the
performance period?
What are the performance
hurdles?
Three years.
For allocations prior to 2013, 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. This re-test was removed in respect of the 2013
allocation.
Two performance hurdles apply to the 2013 allocation, both linked to the Company’s return to shareholders.
Fifty percent of the 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 vest as described in the
table below
TSR PERFORMANCE
Below 50th percentile
50th percentile
50th to 75th percentile
Above 75th percentile
% OF ALLOCATION THAT VESTS
Nil
50% of allocation
Vest on a straight line basis
100%
The other 50% of the allocation will vest if the Company achieves 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%
Vest on a straight line basis
100%
The base case to be used for the EPS performance hurdle test for the 2013 allocation of rights will be the
underlying 2012 financial year EPS of 8.7 cents per share as set out in the Fairfax Media 2012 Annual Report.
Underlying EPS is calculated excluding significant items which are set out in note 4 to the 2012 financial year
audited accounts. In order to be consistent, underlying EPS will also be used at the test date.
What happens in the event
of a change of control?
The Board has discretion regarding vesting.
What happens if the executive
ceases employment?
If an executive resigns, unvested allocations will, in general, be forfeited. 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
STATuS And key dATeS – unVeSTed lTi SCHeMe
Table 7
GRANT DATE
AWARD INSTRUMENT
18 January 2008
Performance Shares
26 August 2008
Performance Shares
23 June 2010
Performance Shares
17 November 2010
Performance Shares
13 September 2011
Performance Shares
PERFORMANCE
TESTING WINDOW
EXPIRY DATE
(IF HURDLE NOT MET)*
AWARD STILL ELIGIBLE FOR VESTING?
1 July 2007 –
30 June 2010
1 July 2008 –
30 June 2011
1 July 2009 –
30 June 2012
1 July 2010 –
30 June 2013
1 July 2011 –
30 June 2014
30 June 2011
30 June 2012
30 June 2013
No.**
No.**
No.**
30 June 2014
In re-testing period.
30 June 2015
Base EPS was FY10 = 11.8c. Retest
minimum target FY14 = 15.5c
Performance testing window not yet
commenced
Base EPS FY11 = 11.6c. Three year test
minimum FY14 = 14.2c. Minimum retest
FY15 = 15.2c
40
REMUNERATION REPORT (AUDITED)
GRANT DATE
AWARD INSTRUMENT
31 October 2012
Performance Rights
PERFORMANCE
TESTING WINDOW
1 July 2012 –
30 June 2015
EXPIRY DATE
(IF HURDLE NOT MET)*
30 June 2016
AWARD STILL ELIGIBLE FOR VESTING?
Performance testing window not yet
commenced.
Base EPS FY12 = 8.7c. Three year test
minimum FY15 = 10.7c. Minimum retest
FY16 = 11.4c.
* Retest of conditions performed in the fourth year in respect of LTI allocations prior to 2013, if performance hurdle is not met in the initial
performance testing window. Performance is re-tested over the 4 year period.
** Shares have been forfeited.
6.3 ReMuneRATion oF key MAnAGeMenT PeRSonnel
This table sets out details of remuneration during the financial year.
Table 8
G Hywood – Chief Executive
Officer
D Housego – Chief Financial
Officer (1)
G Hambly – Group General
Counsel & Company Secretary
A Williams – Managing Director
Australian Publishing Media (2)
B Cassell – Chief Financial
Officer (3)
C Maher – Director of
Strategy and Corporate
Development (4) (5)
A Lam-Po-Tang – Chief
Information Officer and
Director Group Services (4)
M Williams – Group Director
Human Resources (4)
ToTAl
BASE SALARY,
TERMINATION &
OTHER BENEFITS
CASH
BONUS
SUPER-
ANNUATION
LONG SERVICE
LEAVE EXPENSE
TOTAL
EXCLUDING
SHARES/RIGHTS
VALUE OF
SHARES/
RIGHTS (6)
TOTAL
INCLUDING
SHARES/RIGHTS
2013
2012
2013
2013
2012
2013
2013
2012
2012
1,575,000
1,551,846
–
420,000
464,166
100,000
554,210
542,189
184,083
–
190,000
–
274,411
726,847
–
225,000
337,174
110,000
25,000
48,077
26,923
70,790
69,235
2,885
9,615
48,077
28,916
11,239
5,084
1,611,239
2,025,007
371,468
333,548
–
591,089
250,556
1,982,707
2,358,555
841,645
10,830
29,486
2,966
14,654
24,167
10,910
635,830
830,910
189,934
298,680
1,024,091
487,000
82,366
107,360
125,537
(79,828)
138,989
47,483
718,196
938,270
315,471
218,852
1,163,080
534,483
2012
217,361
150,000
19,562
–
386,923
–
386,923
2012
306,768
95,000
26,316
18,520
446,604
38,063
484,667
2013
2012
3,051,870
3,682,185
100,000
1,190,000
135,213
240,183
39,689
88,167
3,326,772
5,200,535
750,099
665,443
4,076,871
5,865,978
1) D Housego commenced with the Company in the role of Chief Financial Officer (CFO) on the 3 December 2012 (with an annual fixed
remuneration of $825,000). As part of his recruitment arrangements Mr Housego was entitled to a one off payment of $100,000 at the
end of FY13 subject to achievement of performance goals.
2) A Williams met the definition of a KMP on his appointment as Managing Director Australian Publishing Media on 4 April 2013 (with an
annual fixed remuneration of $775,000). Prior to this Mr Williams was the CEO of Fairfax New Zealand.
3) B Cassell retired from the position of CFO on 3 December and was no longer deemed to be KMP.
4) Following the structural changes within the group this person no longer met the definition of a KMP since 25 June 2012.
5) C Maher resigned on 12 October 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.
REMUNERATION REPORT (AUDITED)
FAIRFAX MEDIA LIMITED 2013
41
RiGHTS GRAnTed To exeCuTiVeS WHo ARe key MAnAGeMenT PeRSonnel duRinG THe PeRFoRMAnCe yeAR
Table 9
G Hywood – Chief Executive Officer
D Housego – Chief Financial Officer
G Hambly – Group General Counsel
& Company Secretary
A Williams – Managing Director
Australian Publishing Media
PERFORMANCE
CONDITION(1)
NUMBER OF RIGHTS
GRANTED(2)
FAIR VALUE
PER RIGHTS(3)
MAXIMUM VALUE
OF GRANT(4)
TSR
EPS
TSR
EPS
TSR
EPS
TSR
EPS
4,444,444
4,444,444
1,833,333
1,833,333
1,041,667
1,041,667
918,562
918,562
$0.08
$0.35
$0.09
$0.40
$0.09
$0.40
$0.09
$0.40
$355,556
$1,555,555
$1,911,111
$165,000
$733,333
$898,333
$93,750
$416,667
$510,417
$82,670
$367,425
$450,095
The maximum value of unvested shares in the LTI plans for FY10, FY11, and FY12 is $1,971,843. The minimum total value of all unvested shares
for all plan years is nil.
1) LTI rights 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 rights only vest on satisfaction of performance conditions which are to be tested in future
fiscal periods, fiscal 2013 LTI shares have not yet been forfeited or vested.
2) The rights granted to Executives constituted their full LTI entitlement for fiscal 2013 and were made on 17 September 2012 and 24 October
2012 for the CEO 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 17 September 2012 and 24 October 2012.
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.
6.4 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) provides defined lump sum benefits based on years of service, retirement age and the executive’s
remuneration at the time of retirement.
6.5 loAnS To diReCToRS And key MAnAGeMenT PeRSonnel
During the year ended 30 June 2013, there were no loans to Directors or to key management personnel (2012: nil).
6.6 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.
6.7 ClAW-BACk
Currently, the deferred component of the STI is subject to a claw-back provision. This means that the Board may exercise its
discretion to reduce or cancel shares in fairness to all parties where a senior executive has engaged in fraud or gross misconduct,
or where material risk or financial-related information has come to light since the grant of the deferred equity and the Board
subsequently considers that the initial grant was not justified. No deferred shares have been earned under the existing STI.
The Board proposes to incorporate a similar ability to claw back a proportion of incentives under the new plan being
implemented during 2014.
42
REMUNERATION REPORT (AUDITED)
7. EXECUTIVE SERVICE AGREEMENTS
The remuneration and other terms of employment for the executive KMP 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.
Key details of executive service agreements are set out below.
7.1 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.
Also set out in the table below is the notice that the executive is required to give.
Table 10
NAME OF EXECUTIVE
COMPANY TERMINATION
NOTICE PERIOD
EMPLOYEE TERMINATION
NOTICE PERIOD
POST-EMPLOYMENT RESTRAINT
Greg Hywood
12 months
6 months
12 month no solicitation of employees or clients
David Housego
12 months
4 months
12 month no solicitation of employees or clients
6 months no work for a competitor of the Fairfax Group
6 months no work for a competitor of the Fairfax Group
Gail Hambly (1)
18 months
3 months
12 month no solicitation of employees or clients
6 months no work for a competitor of the Fairfax Group
Allen Williams
12 months
6 months
12 month no solicitation of employees or clients
6 months no work for a competitor of the Fairfax Group
(1) Participant in the Fairfax defined benefit superannuation scheme.
7.2 TeRMinATion oF eMPloyMenT WiTHouT noTiCe
The Company may terminate the employment of the executive without notice and without payment in lieu of notice in some
circumstances. Generally this includes if the executive:
a) commits an act of serious misconduct
b) commits a material breach of the executive service agreement
c)
is charged with any criminal offence which, in the reasonable opinion of the Company, may embarrass or bring the Fairfax
Group into disrepute, or
d) unreasonably refuses to carry out his or her duties including complying with reasonable, material and lawful directions
from the Company.
8. 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.
The Board resolved that there would be no increase in Directors’ fees in 2013.
The Board also resolved that fees will no longer be paid for Nominations Committee membership effective 1 January 2013.
The Chairman of the Board agreed to a reduction in his Directors fees from 1 January 2013 by $35,970.
All Directors have also agreed to reduce Directors’ base fees by a further 10% from 1 July 2013.
REMUNERATION REPORT (AUDITED)
FAIRFAX MEDIA LIMITED 2013
43
Board and committee fees payable as at the date of this report are as follows:
Table 11
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
*The Chairman of the Board does not receive committee fees for membership of Committees.
The fees above do not include statutory superannuation payments.
8.1 ReTiReMenT BeneFiTS FoR non-exeCuTiVe diReCToRS
Other than superannuation contributions made on behalf of Non-Executive Directors in accordance with statutory
requirements, Non-Executive Directors are not entitled to any retirement benefits.
8.2 non-exeCuTiVe diReCToRS’ FeeS
The following table outlines fees paid to Non-Executive Directors during the financial year.
Table 12
M Anderson (1)
R Corbett (2)
J Cowin (3)
J Millar (4)
S McPhee
S Morgan
L Nicholls
P Young
directors
BASE SALARY, BONUS
& OTHER BENEFITS
NON-EXECUTIVE
DIRECTORS FEES
SUPERANNUATION
2013
2012
2013
2012
2013
2013
2013
2012
2013
2012
2013
2012
2013
2012
2013
2012
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
180,290
119,296
380,500
397,000
136,178
148,869
185,000
175,156
142,579
130,000
174,000
174,000
184,000
212,678
1,531,416
1,208,130
29,644
35,931
34,245
35,730
12,256
13,398
16,650
15,764
12,832
11,700
15,660
15,660
16,560
10,763
151,245
125,548
$
327,600
117,000
39,600
29,700
29,700
19,800
0
0
29,700
19,800
TOTAL
209,934
155,227
414,745
432,730
148,434
162,267
201,650
190,920
155,411
141,700
189,660
189,660
200,560
223,441
1,682,661
1,333,678
1) M Anderson took part in a strategic review of advertising sales across the Group from 1 March 2013 to 31 May 2013 and acted as Executive
Chairman of Fairfax Radio from 27 October 2011 to 1 March 2012. He received salary of $149,083 (2012: $279,942) for these services.
2) R Corbett agreed to reduce his Directors fees by $35,970 from 1 January 2013
3) J Cowin was appointed on 19 July 2012
4) J Millar was appointed on 1 July 2012
44
REMUNERATION REPORT (AUDITED)
9. FIVE YEAR FINANCIAL PERFORMANCE OF THE COMPANY IN KEY SHAREHOLDER VALUE MEASURES
The financial performance of the Company in key shareholder value measures over the past five years is shown below.
Table 13
Underlying operating revenue
Underlying net profit after tax
Earnings per share after significant items
Dividends per share
*Total Shareholder Returns (TSR)
IFRS 2013 (1)
IFRS 2012
IFRS 2011
IFRS 2010
IFRS 2009
$m
$m
Cents
Cents
%
2,074
143.5
5.4
2.0
(3.4)
2,328
212.0
8.7
3.0
(40.5)
2,466
285.0
11.6
3.0
(23.9)
2,482
290.7
11.8
2.5
11.3
2,600
241.3
12.4
2.0
(52.1)
* TSR comprises share price appreciation and dividends, gross of franking credits, reinvested in the shares. Source: Bloomberg.
1) Trade Me revenue has been included in 2013 for comparative purposes up to the date of sale on 21 December 2012 (refer note 5)
CORPORATE GOVERNANCE
FAIRFAX MEDIA LIMITED 2013
45
The Company’s compliance with the ASX Corporate Governance Council’s Corporate Governance Principles and
Recommendations, 2nd edition (“ASX Recommendations”) is set out in the following table.
COMPLIANCE
PAGES
Principle 1: lay solid foundations for management and oversight
1.1
Establish the functions reserved to the Board and those delegated to senior executives and disclose
those functions
1.2
1.3
Disclose the process for evaluating the performance of senior executives
Provide the information indicated in the Guide to reporting on Principle 1
Principle 2: Structure the Board to add value
2.1
A majority of the Board should be independent Directors
2.2
2.3
2.4
2.5
2.6
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
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 legal obligations and the reasonable expectations
of shareholders, and
• the responsibility and accountability of individuals for reporting and investigating reports of
unethical practices
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
3.2
3.3
3.4
3.5
Principle 4: Safeguard integrity in financial reporting
The Board should establish an audit committee
4.1
4.2
Structure the audit committee so that it:
• consists of only Non-Executive Directors
• consists of a majority of independent Directors
•
is chaired by an independent chair, who is not chair of the Board, and
• has at least three members.
The audit committee should have a formal charter
Provide the information indicated in Guide to reporting on Principle 4
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
5.2
Provide the information indicated in Guide to reporting on Principle 5
Principle 6: Respect the rights of shareholders
6.1
Design a communications policy for promoting effective communication with shareholders and
encouraging their participation at general meetings and disclose the policy or a summary of the policy
6.2
Provide the information indicated in Guide to reporting on Principle 6
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
ü
46
31 – 42
31 –42, 46
47
47
47
47
47
22 – 23,
26, 47, 48
48
53
53
53
48, 53
47
47
49
26, 49
50
50
50
50
46
CORPORATE GOVERNANCE
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
7.2
7.3
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
7.4
Provide the information indicated in Guide to reporting on Principle 7
Principle 8: Remunerate fairly and responsibly
8.1
The Board should establish a remuneration committee
8.2
8.3
8.4
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
COMPLIANCE
PAGES
ü
ü
ü
ü
ü
ü
ü
ü
50, 51
50, 51
50, 51
50, 51
47
47
31 –43
26, 32,
41, 52
The key corporate governance principles of the Fairfax Group are set out below. This section 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, securities trading policy (including policy on hedging unvested securities issued
as part of remuneration) and the Diversity Policy and data. The People and Culture Committee Charter is summarised in the
Remuneration Report.
BOARD OF DIRECTORS
The Board of Directors is responsible for the long-term growth and profitability of the Group.
The Board has adopted a Board Charter which sets out the responsibilities of the Board and its structure and governance
requirements. Under the Board Charter, the 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.
CORPORATE GOVERNANCE
FAIRFAX MEDIA LIMITED 2013
47
Membership of the Board and its committees at the date of this report is set out below.
DIRECTOR
R Corbett
G Hywood
M Anderson
J Cowin
S McPhee
J Millar
S Morgan
L Nicholls
P Young
MEMBERSHIP TYPE
Independent Chair
CEO/Managing Director
Independent
Independent
Independent
Independent
Independent
Independent
Independent
COMMITTEE MEMBERSHIP
AUDIT AND RISK
NOMINATIONS
PEOPLE AND CULTURE
Member
Chair
–
–
–
–
Member
–
Chair
Member
–
–
–
–
Member
–
Member
Member
Member
–
Member
Member
Chair
–
–
–
–
SUSTAINABILITY
AND CORPORATE
RESPONSIBILITY
Member
–
Chair
–
Member
–
Member
–
–
The qualifications and other details of each member of the Board are set out on pages 22 – 23 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 with the
Non Executive Directors participating.
48
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.
CORPORATE GOVERNANCE
FAIRFAX MEDIA LIMITED 2013
49
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 26. 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.
50
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 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.
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.
CORPORATE GOVERNANCE
FAIRFAX MEDIA LIMITED 2013
51
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 Manager, Corporate Risk and Assurance 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 and Risk function is independent from the external auditor
and the Manager, Corporate Risk and Assurance may meet with the Audit and Risk Committee in the absence of management.
Internal Audit and Risk reports its results to each meeting of the Audit and Risk Committee and the Manager, Corporate Risk
and Assurance attends the meetings.
The Board has received written assurances from the Chief Executive and the Chief Financial Officer that in their opinion:
(a) the financial statements and associated notes comply in all material respects with the accounting standards as required by
the Corporations Act 2001
(b) the financial statements and associated notes give a true and fair view, in all material respects, of the financial position as
at 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 29.
TRADING IN COMPANY SECURITIES
Directors and managers 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.
52
CORPORATE GOVERNANCE
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
The Board has established a Sustainability and Corporate Responsibility Committee. The Committee’s Charter is
summarised below.
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. 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
2.
fostering a workplace culture which values sustainable and socially responsible business practices
3.
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
4. considering and endorsing proposals by management to enhance the Group’s CSR profile, reputation and activities
5. ensuring the Board, employees, the investment community and other stakeholders are kept properly informed of the
Group’s CSR initiatives and performance
6. overseeing the Group’s compliance with corporate governance and legal requirements in relation to CSR issues and
related reporting
7. monitoring that executives are remunerated having regard to performance metrics that recognise both tangible and
intangible value creation
8. 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
9. 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 26. 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.
CORPORATE GOVERNANCE
FAIRFAX MEDIA LIMITED 2013
53
DIVERSITY
The Company is committed to creating a workplace that is fair and inclusive. The measures and actions undertaken to achieve
our commitments in the financial year are outlined in the following table:
OVERARCHING MEASURE
SUPPORTING ACTIONS UNDERTAKEN
30% female participation in
Senior Management by 2015
• Conducted a pilot “Women in Leadership” presentation and
focus group session comprising of 20 senior women from
across the Company.
•
Increased opportunities for flexible work arrangements by expanding
the ability to take additional annual leave each year to more staff.
• Where identified, high potential women were strategically matched
with senior leaders across the business as part of the Fairfax
Mentoring Program. More than half of the participants in the
program were female.
• More than half of the participants in the 2013 Fairfax Leadership
Programs were female.
PERFORMANCE
On track to achieving target.
There was an increase in the
percentage of females in senior
management positions to 28%
this year, compared to 26%
last year.
ACTIONS COMMITTED IN THE LAST REPORT
PROGRESS
Conduct further research to gather
robust diversity metrics across
the business and in individual
business units.
New reporting has been introduced providing management with monthly data on employee
demographics. This includes diversity metrics including employment type, gender, tenure, age
bracket and job family.
The 2013 Workplace Gender Equality Agency report in Australia has been submitted in accordance
with the Act. In line with the Act, the report is available on the Fairfax website and the intranet for
comment by staff, employee organisations and shareholders.
The Company is a member of the Diversity Council of Australia and has recently joined the HR
Corporate Executive Board. This enables managers and Human Resources staff to gain access to
market trends on and best practice on diversity.
Conduct a pay equity audit across
Fairfax Media
To complement the data collected for the 2013 Workplace Gender Equality Act report in Australia,
additional analysis was conducted regarding pay equity. Some preliminary findings included:
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.
• Across Australia the female percentage difference of average annualised total package value (TPV)
for full time and part time staff is -32%.
• The largest disparity in job families between male and female TPV is in Printing and Distribution
(-35%) and the lowest is in Editorial (-17%).
• Further data collection and analysis will be conducted in next financial year to determine possible
causes of negative percentage difference for female employees. This will in turn help support
specific action plans.
There have been several senior executive roles appointed this year where at least one female was
included in the recruitment process, and where appropriate, a female candidate was included in the
shortlist. Senior executive roles have included:
• Chief Financial Officer
• Director of Strategy
• Managing Director, New Zealand
• Group Director, Digital Ventures
• Director, Life Media
Further work will occur in 2014 for this process to become a standard way of working across
the Company.
The Company has submitted and is compliant with the Workplace Gender Equality Act 2012 report in Australia.
The workforce gender demographics were, as at 30 June 2013:
• Proportion of women on the Board: 25%
• Proportion of women in senior management: 28%
• Proportion of women across the organisation: 52%
54
MANAGEMENT DIsCUssION AND ANALYsIs REPORT
TRADING OVERVIEW
The 2013 financial year saw a continuation of difficult trading conditions with subdued advertising markets in both Australia
and New Zealand. Total reported Group revenue declined by 8.2% to $2,033.8 million from the prior year. Operating segment
revenue trends, as compared to the prior year, show Metropolitan Media down 11.9%, Regional Media down 10.4% and New
Zealand Media down 4.7%. Broadcasting revenue improved 8.1% from the prior year. Group digital revenue increased to
$295 million and now comprises 14% of total revenue.
During the year there was a focus on improving circulation revenue by removing unprofitable distribution channels, a reduction in
discounting, and a series of cover price increases. As a result, Metropolitan Media circulation revenue increased by 5% in the year.
Our real estate business, Domain, continues to move through the transition from a largely print-based business to a predominantly
digital business with 2013 being the first year where digital advertising exceeded print.
The Regional and New Zealand divisions saw deterioration in revenue which accelerated in the second half of the year.
Revenue declines were experienced across most advertising categories and improvement in cost reduction run rates assisted
in offsetting some of the impact on profitability.
Performance of the Radio division improved in the year, with revenue and market share growth, improved profitability and
a higher degree of integration into other parts of the Fairfax Media business.
The decline in Group revenue has been mitigated to some extent by an on-going focus on cost management. Total Group
expenses declined by 5.9% to $1,690.5 million, excluding significant items. Metropolitan Media cost reduced by 10.7%, Regional
Media by 8.0% and New Zealand Media by 2.3% offset by an increase of 4.8% in Broadcasting and costs associated with the
implementation of the Fairfax of the Future program.
The business remains on track to deliver the Fairfax of the Future savings that have previously been communicated.
Annualised run-rate savings of $311 million are on track to be delivered by June 2015. We continue to work on further revenue
and cost opportunities.
The second half of the financial year saw a number of significant milestones and operational changes, including the launch
of the weekday compact editions of The Sydney Morning Herald and The Age in March 2013. We also announced a major
restructure of our Australian operations with the formation of Australian Publishing Media as well as moving a number of digital
operating businesses to act on a more standalone basis.
In July 2013 we introduced a digital subscriptions model for The Sydney Morning Herald and The Age. We are pleased with the
early progress of this important initiative.
As reported in the December 2012 interim results, the company disposed of its US Agricultural Media business for US$79.9m
on 14 November 2012, and its remaining 51% interest in Trade Me Group Ltd for A$605.5 million (net of transaction fees) on 21
December 2012. As previously stated, proceeds from the sale of these businesses have been applied to the reduction of debt.
The Group booked a significant impairment charge of $444.6 million after tax in 2013. The charge was predominately in the
Regional Media business along with smaller impairment charges in the Metropolitan Media and Broadcasting segments. Details
of the nature of the impairment charges can be found in Note 4 and the assumptions used in the estimation of the recoverable
amount of intangible assets and the sensitivities around the key assumptions are outlined in Note 14.
FINANCIAL POSITION
Net cash inflow from operating activities was $186.5 million. After capital expenditure of $60.6 million, dividends paid of $61.4
million, the impact of the sale of Trade Me and US Agricultural Media and repayment of borrowings, cash and cash equivalents
increased by $171.1 million.
Net debt for covenant purposes was $154.5 million at 30 June 2013 and remains within covenant limits. The Company continues
to have substantial headroom with debt repayments in the 2014 financial year covered by $533.5 million of cash on deposit and
undrawn committed facilities, plus free cash flows that will be generated during the year.
On 25 July 2013 the Company completed the redemption of US$224 million of US Private Placement (USPP) notes.
MANAGEMENT DIsCUssION AND ANALYsIs REPORT
FAIRFAX MEDIA LIMITED 2013
55
RECONCILIATION OF STATUTORY TO UNDERLYING PERFORMANCE
AS REPORTED
SIGNIFICANT ITEMS (IV)
TRADING PERFORMANCE
EXCLUDING SIGNIFICANT ITEMS
30 June 2013
$’000
NOTE
24 JUNE 2012
$’000
30 June 2013
$’000
24 JUNE 2012
$’000
30 June 2013
$’000
24 JUNE 2012
$’000
Total revenue
Associate (losses)/profits
Expenses
(i)
2,033,786
2,214,487
19,830
(2,239)
1,311
–
–
–
2,013,956
2,214,487
(2,239)
1,311
(2,150,758)
(4,860,417)
(460,302)
(3,064,628)
(1,690,456)
(1,795,789)
operating eBiTdA
(119,211)
(2,644,619)
(440,472)
(3,064,628)
321,261
420,009
Depreciation and amortisation
(100,762)
(103,478)
–
–
(100,762)
(103,478)
eBiT
(219,973)
(2,748,097)
(440,472)
(3,064,628)
220,499
316,531
Net finance costs
(ii)
(54,967)
(109,731)
–
–
(54,967)
(109,731)
net profit/(loss) before tax
(274,940)
(2,857,828)
(440,472)
(3,064,628)
165,532
206,800
Tax (expense)/benefit
(37,912)
73,043
12,569
126,807
(50,481)
(53,764)
net profit/(loss) after tax
from continuing operations
Net profit after tax from
discontinued operations
(312,852)
(2,784,785)
(427,903)
(2,937,821)
115,051
153,036
(iii)
311,881
58,982
283,444
–
28,437
58,982
net profit/(loss) after tax
(971)
(2,725,803)
(144,459)
(2,937,821)
143,488
212,018
Net profit attributable to
non-controlling interest
net profit/(loss) attributable to
members of the Company
(15,461)
(6,594)
–
–
(15,461)
(6,594)
(16,432)
(2,732,397)
(144,459)
(2,937,821)
128,027
205,424
earnings/(loss) per share
(0.7)
(116.2)
5.4
8.7
notes:
(i) Revenue from ordinary activities excluding interest income and trading results of discontinued operations.
(ii) Finance costs less interest income.
(iii) The remaining 51% of Trade Me Group Ltd was disposed of on 21 December 2012 and classified as a discontinued operation. The “As
reported” net profit after tax from discontinued operations includes both trading results of this business up to the date of disposal and
the profit on disposal. Certain numbers shown here do not correspond to the 2012 financial statements and reflect adjustments due to
discontinued operations as detailed in Note 5.
(iv) Significant items are those items of such a nature or size that separate disclosure will assist users to understand the accounts. Refer to
Note 4 for further details of significant items.
RECONCILIATION OF TRADING TO OPERATING CASH FLOW
Cash flow from trading activities
Redundancy payments
Interest and dividends received
Finance costs and income tax paid
Net cash flow from operating activities
30 June 2013
$’000
376,645
(96,018)
14,330
(108,506)
186,451
24 JUNE 2012
$’000
534,903
(42,511)
13,591
(238,334)
267,649
56
CONsOLIDATED INCOME sTATEMENT
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
Continuing operations
Revenue from operations
Other revenue and income
Total revenue and income
Share of net (losses)/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 continuing operations before income tax expense
Income tax (expense)/benefit
net loss from continuing operations after income tax expense
discontinued operations
Net profit from discontinued operations after income tax expense
net loss after income tax expense
net profit/(loss) 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)
earnings per share from continuing operations (cents per share)
Basic loss per share (cents per share)
Diluted loss per share (cents per share)
NOTE
30 June 2013
$’000
24 JUNE 2012
RESTATED*
$’000
2(A)
2(B)
2,010,488
34,902
2,045,390
12(C)
(2,239)
2,199,881
25,064
2,224,945
1,311
3(A)
3(B)
3(C)
6
5
25
25
25
25
(1,690,820)
(1,995,357)
(100,762)
(103,478)
(459,938)
(2,865,060)
(66,571)
(120,189)
(274,940)
(2,857,828)
(37,912)
73,043
(312,852)
(2,784,785)
311,881
58,982
(971)
(2,725,803)
15,461
(16,432)
6,594
(2,732,397)
(971)
(2,725,803)
(0.7)
(0.7)
(13.3)
(13.3)
(116.2)
(116.2)
(118.4)
(118.4)
*
Certain numbers shown here do not correspond to the 2012 financial statements and reflect adjustments due to discontinued operations
as detailed in Note 5.
The above Consolidated Income Statement should be read in conjunction with the accompanying Notes.
CONsOLIDATED sTATEMENT OF COMPREHENsIVE INCOME
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
FAIRFAX MEDIA LIMITED 2013
57
Net loss after income tax expense
other comprehensive income
Items that may be reclassified to profit or loss:
Changes in fair value of available for sale financial assets
Changes in fair value of cash flow hedges
Changes in value of net investment hedges
Exchange differences on translation of foreign operations
Income tax relating to these items
Items that will not be reclassified to profit or loss:
Actuarial gain/(loss) on defined benefit plans
Income tax relating to these items
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
30 June 2013
$’000
24 JUNE 2012
$’000
(971)
(2,725,803)
6
6
296
3,407
(18,431)
28,033
4,532
(675)
(11,869)
(3,568)
14,352
4,545
2,353
(702)
19,488
18,517
(3,732)
1,117
170
(2,725,633)
15,461
3,056
18,517
6,594
(2,732,227)
(2,725,633)
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the accompanying Notes.
58
CONsOLIDATED BALANCE sHEET
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES AS AT 30 JUNE 2013
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
35(B)
8
9
16
10(A)
11
8
12
13
14
15
16
17(A)
21(A)
11
18
19
16
10(B)
20
19
16
17(A)
20
21(A)
30 June 2013
$’000
24 JUNE 2012
$’000
533,531
298,330
30,908
11,018
6,979
8,466
4,386
893,618
1,046
80,490
1,929
358,364
334,466
36,622
123
25,674
2,592
3,914
761,755
2,479
30,811
1,991
1,438,034
2,502,045
478,933
7,815
107,895
709
6,222
547,004
27,040
122,530
149
10,768
2,123,073
3,016,691
3,244,817
4,006,572
235,919
284,323
47,978
–
191,319
1,333
760,872
282,637
6,439
–
4,956
193,887
10,680
498,599
353,889
1,200,934
26,939
3,581
53,942
1,273
–
439,624
1,200,496
1,816,195
95,628
15,225
149,305
3,933
271
1,465,296
1,963,895
2,042,677
22
23
24
4,646,248
4,646,248
35,517
(45,520)
(2,867,387)
(2,805,566)
1,814,378
1,817
1,795,162
247,515
1,816,195
2,042,677
The above Consolidated Balance Sheet should be read in conjunction with the accompanying Notes.
net cash inflow from operating activities
35(A)
CONsOLIDATED CAsH FLOw sTATEMENT
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
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
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, net of transaction fees and cash disposed *
Loans repaid by other parties
net cash inflow/(outflow) from investing activities
Cash flows from financing activities
Payment for purchase of non-controlling interests in subsidiaries
Proceeds from disposal of non-controlling interest in subsidiary, net of transaction fees **
Proceeds from borrowings and other financial liabilities
Repayment of borrowings and other financial liabilities
Dividends paid to shareholders
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
FAIRFAX MEDIA LIMITED 2013
59
30 June 2013
$’000
NOTE
24 JUNE 2012
$’000
2,326,259
2,564,435
(1,949,614)
(2,029,532)
(96,018)
10,963
3,367
(60,456)
(48,050)
186,451
(51,935)
(10,048)
(60,584)
2,047
644,099
6,056
529,635
(2,999)
–
–
(480,586)
(47,040)
(14,407)
(545,032)
171,054
358,364
4,113
7
35(B)
533,531
(42,511)
9,986
3,605
(127,633)
(110,701)
267,649
(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
*
The proceeds relate to the disposal of the remaining 51% interest in Trade Me Group Ltd on 21 December 2012 and the disposal of the US
Agricultural Media business on 14 November 2012.
** The proceeds relate to the sale of 34% of Trade Me Group Ltd on 13 December 2011 and the further 15% divestment on 21 June 2012.
The above Consolidated Cash Flow Statement should be read in conjunction with the accompanying Notes.
60
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61
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62
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
1. sUMMARY OF sIGNIFICANT ACCOUNTING POLICIEs
The principal accounting policies adopted in the preparation
of the financial report are set out below. These policies
have been consistently applied to all the years presented,
unless otherwise stated. The financial report includes the
consolidated entity consisting of Fairfax Media Limited and its
controlled entities.
The financial report is for the period 25 June 2012 to
30 June 2013 (2012: the period 27 June 2011 to 24 June
2012). Reference in this report to ‘a year’ is to the period
ended 30 June 2013 or 24 June 2012 respectively, unless
otherwise stated.
Fairfax Media Limited is a for profit company limited by
ordinary shares incorporated in Australia whose shares are
publicly traded on the Australian Securities Exchange. The
nature of the operations and principal activities of the Group
are described in the Directors’ Report.
(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 Act 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 38.
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.
(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.
FAIRFAX MEDIA LIMITED 2013
63
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
1. sUMMARY OF sIGNIFICANT ACCOUNTING POLICIEs (CONTINUED)
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 the income statement.
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 the income
statement 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
Intangibles, property, plant and equipment and investments
accounted for using the equity method are tested for
impairment annually, or at each reporting date where
there is an indication that the asset may be impaired.
An impairment loss is recognised for the amount by which
the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value
less costs to sell and value in use. In assessing value in use,
the estimated future cash flows are discounted to their
present value using a post-tax discount rate that reflects
current market assessments of the time value of money
and the risks specific to the asset.
For the purposes of assessing impairment, assets are grouped
at the lowest levels for which there are separately identifiable
cash inflows which are largely independent of the cash inflows
from other assets, or groups of assets, which are called cash
generating units.
Assets other than goodwill that suffered an impairment are
reviewed for possible reversal of the impairment at the end of
each reporting period.
(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 entity 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 not amortised. It is carried at cost less
accumulated impairment losses. Impairment losses relating
to goodwill cannot be reversed in future periods. Goodwill is
allocated to a cash generating unit (CGU) for the purposes of
impairment testing. Impairment is determined for goodwill
by assessing the recoverable amount of each CGU (or group
of CGUs) to which goodwill relates. Refer to Note 1(D).
Gains and losses on the disposal of an entity include the
carrying amount of goodwill relating to the entity disposed.
(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 and are carried at cost less accumulated
impairment losses. Mastheads and tradenames are tested for
impairment in accordance with Note 1(D).
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 are 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 and
are carried at cost less accumulated impairment losses.
Radio licences are tested for impairment in accordance
with Note 1(D).
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
Computer software licences acquired 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 life 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.
64
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
1. sUMMARY OF sIGNIFICANT ACCOUNTING POLICIEs (CONTINUED)
(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 entity 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 monthly exchange rates during the
financial year; 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 entity are 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, online services, 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.
Dividend revenue is recognised when the Group’s right to
receive the payment is established, which is generally when
the Board declares the dividend.
Interest revenue is recognised as it accrues, based on the
effective yield of the financial asset.
(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 reporting 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.
FAIRFAX MEDIA LIMITED 2013
65
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
1. sUMMARY OF sIGNIFICANT ACCOUNTING POLICIEs (CONTINUED)
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 reporting 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 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.
(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.
66
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
1. sUMMARY OF sIGNIFICANT ACCOUNTING POLICIEs (CONTINUED)
(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 reporting date.
(N) INVESTMENTS AND OTHER FINANCIAL ASSETS
The Group classifies its investments in the following
categories: financial assets at fair value through profit or loss,
loans and receivables, held to maturity investments and
available for sale financial assets. The classification depends
on the purpose for which the investments were acquired.
Management determines the classification of its investments
at initial recognition and, in the case of assets classified
as held to maturity, re-evaluates this designation at each
reporting date.
The consolidated entity classifies and measures its
investments as follows:
(i) FinAnCiAl ASSeTS AT FAiR VAlue THRouGH
PRoFiT And loSS
This category has two sub-categories: financial assets held
for trading and those designated at fair value through profit
and loss on initial recognition. The policy of management is
to designate a financial asset at fair value through profit and
loss if there exists the possibility it will be sold in the short
term and the asset is subject to frequent changes in fair
value. These assets are measured at fair value and realised
and unrealised gains and losses arising from changes in fair
value are included in the income statement in the period in
which they arise.
(ii) loAnS And ReCeiVABleS
Loans and receivables are non-derivative financial assets
with fixed or determinable payments that are not quoted
in an active market and are included in receivables and
other financial assets in the balance sheet. These assets
are 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 the income statement.
FAIRFAX MEDIA LIMITED 2013
67
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
1. sUMMARY OF sIGNIFICANT ACCOUNTING POLICIEs (CONTINUED)
(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 the income statement. 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.
(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.
68
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
1. sUMMARY OF sIGNIFICANT ACCOUNTING POLICIEs (CONTINUED)
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 reporting 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) NON-CURRENT ASSETS HELD FOR SALE AND
DISCONTINUED OPERATIONS
The Group classifies non-current assets and disposal groups
as held for sale if their carrying amounts will be recovered
principally through a sale transaction rather than through
continuing use. Non-current assets and disposal groups
classified as held for sale are measured at the lower of their
carrying amount and fair value less costs to sell. The criteria
for held for sale classification is regarded as met only when
the sale is highly probable and the asset or disposal group
is available for immediate sale in its present condition.
Management must be committed to the sale, which should be
expected to qualify for recognition as a completed sale within
one year from the date of classification.
Discontinued operations are excluded from the results of
continuing operations and are presented as a single amount
as profit or loss after tax from discontinued operations in the
income statement.
Property, plant and equipment and intangible assets are not
depreciated or amortised once classified as held for sale.
(Q) TRADE AND OTHER PAYABLES
Liabilities for trade creditors and other amounts are carried at
amortised cost which is the fair value of the consideration to
be paid in the future for goods and services received. Loans
payable to related parties are carried at amortised cost and
interest payable is recognised on an accruals basis.
(R) PROVISIONS
Provisions are recognised when the Group has a legal,
equitable or constructive obligation to make a future sacrifice
of economic benefits to others as a result of past transactions,
or past events, it is probable that a future sacrifice of
economic benefits will be required and a reliable estimate can
be made of the amount of the obligation. Provisions are not
recognised for future operating losses.
Provisions are measured at the present value of
management’s best estimate of the expenditure required
to settle the present obligation at the reporting 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 reporting date.
(S) INTEREST BEARING LIABILITIES
Subsequent to initial recognition at fair value, net of
transaction costs incurred, interest bearing liabilities are
measured at amortised cost. Any difference between the
proceeds (net of transaction costs) and the redemption
amount is recognised in the income statement over the
period of the borrowings using the effective interest method.
Finance lease liabilities are determined in accordance with the
requirements of AASB 117 Leases (refer to Note 1(I)).
BoRRoWinG CoSTS
Borrowing costs include interest, amortisation of discounts
or premiums relating to borrowings, amortisation or
ancillary costs incurred in connection with arrangement
of borrowings and foreign exchange losses net of hedged
amounts on borrowings, including trade creditors and lease
finance charges.
Borrowing costs are expensed as incurred unless they relate
to qualifying assets. Qualifying assets are assets which take
more than twelve 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.
FAIRFAX MEDIA LIMITED 2013
69
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
1. sUMMARY OF sIGNIFICANT ACCOUNTING POLICIEs (CONTINUED)
(T) EMPLOYEE BENEFITS
(i) WAGeS, SAlARieS, AnnuAl leAVe And lonG
SeRViCe leAVe
Current liabilities for wages and salaries, holiday pay, annual
leave and long service leave are recognised in the provision
for employee benefits and measured at the amounts
expected to be paid when the liabilities are settled.
The employee benefit liability expected to be settled within
twelve months from reporting 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 reporting 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 reporting 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 equity instruments.
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 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 equity instruments issued to employees
for no cash consideration under the Long Term Incentive
Plan is recognised as an employee benefits expense over the
vesting period (refer to Note 31).
Shares purchased, but which have not yet vested to the
employee as at reporting date are offset against contributed
equity of the Group (refer to Note 1(U)).
(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
reporting date, calculated annually by independent actuaries
using the projected unit credit method. Consideration is given
to expected future wage and salary levels, experience of
employee departures and periods of service. Actuarial gains
and losses are recognised in retained earnings in the periods
in which they arise.
Contributions made by the Group to defined contribution
superannuation funds are charged to the income statement
in the period the employee’s service is provided.
(iV) TeRMinATion BeneFiTS
Termination benefits are payable when employment is
terminated before the normal retirement date, or when an
employee accepts voluntary redundancy in exchange for
these benefits. The Group recognises termination benefits
when it is demonstrably committed to either terminating the
employment of current employees according to a detailed
formal plan without possibility of withdrawal or providing
termination benefits as a result of an offer made to encourage
voluntary redundancy.
(V) BonuS PlAnS
The Group recognises a provision and an expense for
bonuses where contractually obliged or where there is a past
practice that has created a constructive obligation.
(U) CONTRIBUTED EQUITY
Ordinary shares are classified as equity.
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.
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.
70
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
1. sUMMARY OF sIGNIFICANT ACCOUNTING POLICIEs (CONTINUED)
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.
(V) EARNINGS PER SHARE
BASiC eARninGS PeR SHARe
Basic earnings per share (EPS) is calculated by dividing the net
profit attributable to members, adjusted to exclude costs of
servicing equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding during the
financial year, adjusted for any bonus elements in ordinary
shares issued during the financial year.
diluTed eARninGS PeR SHARe
Diluted earnings per share is calculated by dividing the basic
EPS earnings adjusted by the after tax effect of interest
and other financing costs associated with dilutive potential
ordinary shares and the effect on revenues and expenses
of conversion to ordinary shares associated with dilutive
potential ordinary shares by the weighted average number of
ordinary shares and dilutive potential ordinary shares adjusted
for any bonus issue.
(W) SEGMENT REPORTING
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 37.
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”.
(X) 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 date
where there is an indication of impairment. This requires
an estimation of the recoverable amount of the cash
generating units (CGU), using a value in use methodology,
as detailed in Note 1(D).
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 14.
(ii) inCoMe TAxeS
The Group is subject to income taxes in Australia and
jurisdictions where it has foreign operations. Judgement is
required in determining the Group’s 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 independent valuer using a
Monte Carlo model, using the assumptions detailed in Note 31.
FAIRFAX MEDIA LIMITED 2013
71
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
1. sUMMARY OF sIGNIFICANT ACCOUNTING POLICIEs (CONTINUED)
(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 21.
(V) ReSTRuCTuRinG And RedundAnCy PRoViSion
A provision for restructuring and redundancy has been
disclosed in Note 20 as a result of the Group having a
constructive obligation and a detailed formal plan for
restructuring.
(Y) ROUNDING OF AMOUNTS
The consolidated entity is of a kind referred to in Class Order
98/0100, as amended by Class Order 04/667, issued by the
Australian Securities and Investments Commission relating
to the “rounding off” of amounts in the financial report.
Amounts in this report have been rounded to the nearest
thousand dollars in accordance with that Class Order, unless
otherwise indicated.
(Z)
NEW ACCOUNTING STANDARDS AND URGENT
ISSUES GROUP (UIG) INTERPRETATIONS
(i) CHAnGeS in ACCounTinG PoliCy And
diSCloSuRe
As of 25 June 2012, the Group has adopted AASB 2011-9
Amendments to Australian Accounting Standards – AASB 101
Presentation of Items of Other Comprehensive Income. The
adoption resulted in a disclosure change in the Statement of
Comprehensive Income.
(ii) ACCounTinG STAndARdS And inTeRPReTATionS
iSSued BuT noT yeT eFFeCTiVe
Certain new accounting standards and interpretations have
been published that are not mandatory for 30 June 2013
reporting periods. The Group’s assessment of the impact of
these new standards and interpretations is as follows:
• AASB 10 Consolidated Financial Statements (applicable to
the Group from 1 July 2013)
This standard broadens the situations where an entity
is likely to be considered to control another entity and
includes new guidance for determining control of an entity.
Based on investments held at 30 June 2013 there will be no
impact on the Group.
• AASB 11 Joint Arrangements (applicable to the Group
from 1 July 2013)
This standard uses the principle of control in AASB
10 to define joint control and removes the option to
choose to account for jointly controlled entities using the
proportionate consolidation method or the equity method.
This standard will have no impact on the Group.
• AASB 12 Disclosure of Interests in Other Entities (applicable
to the Group from 1 July 2013)
The standard introduces new disclosures 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. This standard is
not expected to have a significant impact on the Group.
• AASB 13 Fair Value Measurement (applicable to the Group
from 1 July 2013)
The standard establishes a single source of guidance
for determining the fair value of assets and liabilities.
This standard is not expected to have a significant
impact on the Group.
• AASB 119 Employee Benefits (applicable to the Group
from 1 July 2013)
This amendment revises the accounting for defined benefit
plans and changes the definition of short-term employee
benefits. The Group has yet to fully assess the prior year
impact of this amendment.
• AASB 2011-4 Amendments to Australian Accounting
Standards to Remove Individual Key Management
Personnel Disclosure Requirements [AASB 124] (applicable
to the Group from 1 July 2013)
This amendment deletes from AASB 124 individual key
management personnel (KMP) disclosure requirements for
disclosing entities that are not companies. It also removes
the individual KMP disclosure requirements for all disclosing
entities in relation to equity holdings, loans and other
related party transactions. This amendment is not expected
to have a significant impact on the Group.
• AASB 2012-2 Amendments to Australian Accounting
Standards – Disclosures – Offsetting Financial Assets and
Financial Liabilities [AASB 7 and AASB 132] (applicable to the
Group from 1 July 2013)
This amendment requires disclosure of the effect or
potential effect of netting arrangements. This amendment
will have no impact on the Group.
The Group has yet to fully assess the impact the following
accounting standards and amendments to accounting
standards will have on the financial statements, when applied
in future periods:
• AASB 2012-3 Amendments to Australian Accounting
Standards – Offsetting Financial Assets and Financial
Liabilities [AASB 132] (applicable to the Group from 30
June 2014); and
• AASB 9 Financial Instruments (applicable to the Group
from 29 June 2015).
72
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
2. 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
Gains on sale of controlled entities
Gain on derivative at fair value through profit and loss
Other
Total other revenue and income
Total revenue and income
30 June 2013
$’000
24 JUNE 2012
RESTATED *
$’000
489,764
1,520,724
2,010,488
453,931
1,745,950
2,199,881
11,604
112
1,541
1,011
19,830
785
19
34,902
10,458
142
8,767
135
–
3,900
1,662
25,064
2,045,390
2,224,945
*
Certain numbers shown here do not correspond to the 2012 financial statements and reflect adjustments due to discontinued operations
as detailed in Note 5.
** Revenue from the sale of goods includes revenue from circulation, subscription, printing and printing-related products. Circulation revenue
will be impacted by fees payable for home delivery of newspapers which were previously netted against revenue in the prior year.
Following a change in contractual terms, the fees have been disclosed in distribution costs in the current year.
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
3. ExPENsEs
FAIRFAX MEDIA LIMITED 2013
73
30 June 2013
$’000
24 JUNE 2012
RESTATED *
$’000
(A) EXPENSES BEFORE IMPAIRMENT, DEPRECIATION, AMORTISATION AND FINANCE COSTS
Staff costs excluding staff redundancy costs
786,915
Redundancy costs
Newsprint and paper
Distribution costs **
Production costs
Promotion and advertising costs
Rent and outgoings
Repairs and maintenance
Outsourced services
Communication costs
Maintenance and other computer costs
Fringe benefits tax, travel and entertainment
Other
Total expenses before impairment, depreciation, amortisation and finance costs
(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 parties
Finance lease
Hedge ineffectiveness
Total finance costs
(D) DETAILED EXPENSE DISCLOSURES
Operating lease rental expense
Defined contribution superannuation expense
Share-based payment expense
522
165,487
151,069
157,801
107,831
63,903
29,129
3,517
19,812
25,218
25,179
154,437
1,690,820
5,370
60,024
3,745
31
29,485
2,107
100,762
56,734
4,513
5,324
66,571
43,077
53,275
1,695
844,693
199,533
209,988
138,320
183,368
109,537
59,899
29,767
–
22,174
24,352
25,468
148,258
1,995,357
5,109
65,520
4,287
28
26,155
2,379
103,478
118,954
3,896
(2,661)
120,189
40,455
57,689
916
* Certain numbers shown here do not correspond to the 2012 financial statements and reflect adjustments due to discontinued operations
as detailed in Note 5.
** In the prior year, fees payable for home delivery of newspapers were netted against revenue. Following a change in contractual terms, the
fees have been disclosed in distribution costs in the current year.
74
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
4. sIGNIFICANT ITEMs
The net profit after tax includes the following items whose disclosure is relevant in explaining the financial performance of the
consolidated entity.
Significant items are those items of such a nature or size that separate disclosure will assist users to understand the
financial statements.
impairment of intangibles, investments, inventories and property, plant and equipment – Comprising:
Impairment of mastheads, goodwill, licences, customer relationships and software
Impairment of investments, inventories and property, plant and equipment
Income tax benefit
impairment of intangibles, investments, inventories and property, plant
and equipment, net of tax
Restructuring and redundancy – Comprising:
Restructuring and redundancy charges
Income tax benefit
Restructuring and redundancy, net of tax
Gains on sale of controlled entities – Comprising:
Gain on sale of US Agricultural Media business disclosed in other revenue and income *
Gain on sale of Trade Me business disclosed in net profit from discontinued operations **
Income tax expense
Gains on sale of controlled entities, net of tax
30 June 2013
$’000
24 JUNE 2012
$’000
(418,655)
(2,758,061)
(37,189)
11,232
(106,120)
66,689
(444,612)
(2,797,492)
(4,458)
1,337
(3,121)
(200,447)
60,118
(140,329)
19,830
283,444
–
303,274
–
–
–
–
net significant items after income tax
(144,459)
(2,937,821)
* On 14 November 2012, the Group disposed of the US Agricultural Media business for US$79.9 million.
** On 21 December 2012, the Group disposed of its remaining 51% interest in Trade Me Group Ltd for proceeds of A$605.5 million net of
transaction fees. Previous disposals of the Group’s interest in this entity have resulted in a gain on sale of $182.8 million recorded in equity as
an acquisition reserve while the Group still retained control.
FAIRFAX MEDIA LIMITED 2013
75
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
5. DIsCONTINUED OPERATIONs
On 21 December 2012, the Group disposed of its remaining 51% interest in Trade Me Group Ltd for proceeds of A$605.5 million
net of transaction fees.
The Trade Me business had its own operating segment within the segment reporting disclosures (refer Note 37).
As at 30 June 2013, the Trade Me business has been classified as a discontinued operation. The financial information presented
below is for the period ended 21 December 2012 and the comparative period is for the year ended 24 June 2012.
Total revenue and income
Share of net profits of associates and joint ventures
Expenses
net profit before income tax expense
Income tax expense
net profit after income tax expense
Gain on sale of discontinued operations *
Income tax expense
2013
$’000
60,871
–
(21,229)
39,642
(11,205)
28,437
283,444
–
2012
$’000
114,243
435
(34,694)
79,984
(21,002)
58,982
–
–
net profit from discontinued operations after income tax expense
311,881
58,982
* The gain on sale is associated with the disposal of the Group’s 51% interest in Trade Me Group Ltd. Previous disposals of the Group’s
interest in this entity have resulted in a gain on sale of $182.8 million recorded in equity as an acquisition reserve while the Group still
retained control.
earnings per share
Basic earnings per share from discontinued operations
Diluted earnings per share from discontinued operations
Cash flows of discontinued operations
The net cash flows incurred by discontinued operations are as follows:
Operating
Investing
Financing
net cash (outflow)/inflow
2013
¢ PeR SHARe
2012
¢ PER SHARE
13.3
13.3
2013
$’000
2.5
2.5
2012
$’000
27,010
(4,020)
(26,894)
(3,904)
56,489
(21,275)
(9,393)
25,821
76
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
6.
INCOME TAx ExPENsE
CONSOLIDATED INCOME STATEMENT
Income tax expense is reconciled to prima facie income tax payable as follows:
Net loss from continuing operations before income tax expense
Net profit from discontinued operations before income tax expense
Profit/(loss) before income tax expense
Prima facie income tax at 30% (2012: 30%)
Tax effect of differences:
Overseas tax rate and accounting differentials
Share of net losses/(profits) of associates and joint ventures
Capital gains not taxable
Non-assessable dividends
(Under)/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 expense/(benefit)
Income tax expense/(benefit) for continuing operations
Income tax expense for discontinued operations
income tax expense/(benefit)
The major components of income tax expense in the income statement are:
Current income tax expense
Deferred income tax expense/(benefit)
(Under)/over provision in respect of current tax in prior financial years
income tax expense/(benefit) in the income statement
30 June 2013
$’000
24 JUNE 2012
$’000
(274,940)
(2,857,828)
323,086
48,146
79,984
(2,777,844)
14,444
(833,353)
(8,030)
1,313
(83,774)
(5)
(941)
(966)
125,486
2,309
–
(719)
49,117
37,912
11,205
49,117
27,620
11,233
(941)
37,912
4,289
(442)
(552)
(11)
3,420
(5,475)
780,269
2,861
(2,612)
(435)
(52,041)
(73,043)
21,002
(52,041)
39,325
(115,584)
3,216
(73,043)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Deferred tax related to items charged or credited directly to other comprehensive income during the year:
Unrealised gain/(loss) on available for sale financial assets
Net (loss)/gain on actuarial gains and losses
Net (loss)/gain on revaluation of cash flow hedges
Net gain on hedge of net investment
Net gain on exchange differences on translation of foreign operations
income tax on items of other comprehensive income
30 June 2013
$’000
24 JUNE 2012
$’000
4
(702)
(1,022)
5,530
20
3,830
(90)
1,117
3,561
1,070
4
5,662
FAIRFAX MEDIA LIMITED 2013
77
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
7. DIVIDENDs PAID AND PROPOsED
(A) ORDINARY SHARES
ConSolidATed
30 June 2013
$’000
CONSOLIDATED
24 JUNE 2012
$’000
CoMPAny
30 June 2013
$’000
COMPANY
24 JUNE 2012
$’000
Interim 2013 dividend: fully franked 1.0 cent – paid 20 March 2013
(2012: fully franked dividend 2.0 cents – paid 21 March 2012)
23,520
47,039
23,520
47,039
2012 dividend: fully franked 1.0 cent – paid 21 September 2012
(2011: fully franked dividend 1.5 cents – paid 27 September 2011)
Total dividends paid
23,520
47,040
35,279
82,318
23,520
47,040
35,279
82,318
(B) DIVIDENDS PROPOSED AND NOT RECOGNISED AS A LIABILITY
Since reporting date the Directors have declared a dividend of 1.0 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 17 September 2013 out of profits, but not
recognised as a liability at the end of the year, is expected to be $23.5 million.
(C) FRANKED DIVIDENDS
Franking account balance as at reporting date at 30% (2012: 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
CoMPAny
2013
$’000
COMPANY
2012
$’000
60,043
74,182
(3,901)
(778)
–
Total franking credits available for subsequent financial years based on a tax rate of 30%
56,142
73,404
On a tax-paid basis, the Company’s franking account balance is approximately $60.0 million (2012: $74.2 million). The impact on
the franking account of the dividend declared by the Directors since reporting date will be a reduction in the franking account
of approximately $10.1 million.
78
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
8. 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
30 June 2013
$’000
24 JUNE 2012
$’000
274,797
(10,014)
264,783
3,045
11,919
18,583
316,940
(10,059)
306,881
52
12,763
14,770
298,330
334,466
716
330
1,046
1,539
940
2,479
* Trade debtors are non-interest bearing and are generally on 7 to 45 day terms.
IMPAIRED TRADE DEBTORS
As at 30 June 2013, trade debtors of the Group with a nominal value of $10.0 million (2012: $10.1 million) were impaired and
provided for. No individual amount within the provision for doubtful debts is material. Refer to Note 36(C) for the factors
considered in determining whether trade debtors are impaired.
As at 30 June 2013, 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
30 June 2013
$’000
24 JUNE 2012
$’000
205,999
45,960
8,291
4,533
224,013
64,103
11,633
7,132
264,783
306,881
Based on the credit history of the trade debtors, it is expected that these amounts will be received. All other receivables are not
past due and do not contain impaired assets.
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
Discontinued operations
Receivables written off as uncollectible
Exchange differences
Balance at the end of the financial year
2013
$’000
10,059
4,807
–
(80)
(56)
(4,886)
170
10,014
2012
$’000
10,061
3,576
5
(318)
–
(3,290)
25
10,059
FAIRFAX MEDIA LIMITED 2013
79
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
9.
INVENTORIEs
Raw materials and stores – at net realisable value
Finished goods – at cost
Work in progress – at cost
Total inventories
30 June 2013
$’000
24 JUNE 2012
$’000
25,552
4,358
998
30,908
31,815
4,242
565
36,622
During the year, newsprint and paper expense (excluding cartage) of $164.0 million (2012: $208.6 million) was recognised in the
income statement.
During the year, a $6.1 million (2012: nil) write down to net realisable value on raw materials and stores was recognised within
other expenses in the income statement.
10. AssETs AND LIABILITIEs HELD FOR sALE
(A) Assets held for sale
Freehold land and buildings
Plant and equipment
Fairfax Community Network Ltd disposal group
Intangible assets
Other assets
Total assets held for sale
(B) liabilities directly associated with held for sale assets
Fairfax Community Network Ltd disposal group
Provisions
Other liabilities
Total liabilities directly associated with held for sale assets
30 June 2013
$’000
24 JUNE 2012
$’000
6,979
–
–
–
6,979
8,949
514
15,262
949
25,674
–
–
–
3,918
1,038
4,956
FReeHold lAnd And BuildinGS
Assets held for sale comprise properties in Australia and New Zealand that are being actively marketed and for which the sale is
highly probable. During the current year, three of these properties were sold.
Prior to being transferred to held for sale, the properties are remeasured at the lower of carrying amount and fair value less
costs to sell. An impairment charge of $0.5 million (2012: nil) was recognised in the income statement against the assets.
FAiRFAx CoMMuniTy neTWoRk lTd diSPoSAl GRouP
On 13 July 2012, the sale of Fairfax Community Network Ltd was completed.
80
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
11. 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
30 June 2013
$’000
24 JUNE 2012
$’000
4,386
4,386
3,914
3,914
67
6,155
6,222
67
10,701
10,768
The loan receivable has quarterly repayments, consisting of both interest and principal, and matures on 30 September 2015.
12. 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
Australian Associated Press Pty Ltd
PRINCIPAL ACTIVITY
News agency business and
information service
Digital Radio Broadcasting Melbourne Pty Ltd (i) Digital audio broadcasting
Digital Radio Broadcasting Perth Pty Ltd
Digital audio broadcasting
Digital Radio Broadcasting Brisbane Pty Ltd
Digital audio broadcasting
Digital Radio Broadcasting Sydney Pty Ltd (i)
Digital audio broadcasting
Earth Hour Limited
Environmental promotion
Homebush Transmitters Pty Ltd
Rental of a transmission facility
MMP Holdings Pty Ltd (ii)
Newspaper House Limited (iii)
New Zealand Press Association Ltd
NGA.net Pty Ltd
Perth FM Facilities Pty Ltd
Community newspaper publisher
Property ownership
News agency business and financial
information service
Provider of e-recruitment software
to corporations
Rental of a transmission facility
The Video Network Pty Ltd (iv)
Internet delivered television network
Times Newspapers Limited
Xchange IT Software Pty Ltd
Xchange IT Newsagents Pty Ltd
Newspaper publishing
Provider of EDI software
Provider of EDI software
NOTE
(A)
(B)
30 June 2013
$’000
24 JUNE 2012
$’000
63,103
17,387
80,490
12,671
18,140
30,811
OWNERSHIP INTEREST
PLACE OF
INCORPORATION
30 June 2013
24 JUNE 2012
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
Australia
Australia
Australia
New Zealand
Australia
Australia
47.0%
18.2%
33.3%
25.0%
11.3%
33.3%
50.0%
50.01%
–
49.2%
24.6%
33.3%
28.6%
49.9%
33.3%
25.0%
47.0%
18.2%
33.3%
25.0%
11.3%
33.3%
50.0%
–
45.5%
49.2%
24.6%
33.3%
–
49.9%
33.3%
25.0%
(i) The Group has significant influence in the entity due to its right to participate in policy setting for the entity.
(ii) Investment was acquired on 13 July 2012. The Group does not have control of this company as it does not have power to govern the financial
and operating policies of the company, such as power over budget, operational plans and appointment and removal of key personnel.
The investment has been classified as an associate, rather than a joint venture, as all significant decisions do not require unanimous consent.
(iii) Company was deregistered on 23 April 2013.
(iv) Investment was acquired on 21 December 2012.
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
12. INVEsTMENTs ACCOUNTED FOR UsING THE EqUITY METHOD (CONTINUED)
(i) Share of associates’ profits
Revenue
Loss before income tax expense
Non-recurring impairment charge in associate
Income tax (expense)/benefit
net loss after income tax expense
(ii) Share of associates’ assets and liabilities
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
FAIRFAX MEDIA LIMITED 2013
81
30 June 2013
$’000
24 JUNE 2012
RESTATED (v)
$’000
76,193
(1,856)
(2,805)
(96)
(4,757)
18,205
30,685
48,890
13,627
3,280
16,907
44,586
(1,029)
–
29
(1,000)
15,136
24,158
39,294
11,057
4,315
15,372
(v) Certain income statement numbers shown here do not correspond to the 2012 financial statements and reflect adjustments due to
discontinued operations as detailed in Note 5.
(B) INTERESTS IN JOINT VENTURES
NAME OF COMPANY
PRINCIPAL ACTIVITY
OWNERSHIP INTEREST
PLACE OF
INCORPORATION
30 June 2013
24 JUNE 2012
Dog Lovers Show Pty Limited
Organisation of canine industry exhibitions
Australia
Farm Progress/VX LLC (vi)
Organisation of agricultural events
Fermax Distribution Company Pty Ltd
Letterbox distribution of newspapers
Gilgandra Newspapers Pty Ltd
Newspaper publishing and printing
Gippsland Regional Publications Partnership Newspaper publishing and printing
Torch Publishing Company Pty Ltd
Newspaper publishing and printing
USA
Australia
Australia
Australia
Australia
(vi) Investment was disposed as part of the US Agricultural Media business sale on 14 November 2012.
(i) Share of joint ventures’ profits
Revenues
Expenses
Profit before income tax expense
Income tax expense
net profit after income tax expense
(ii) 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 (LOSSES)/PROFITS OF ASSOCIATES AND JOINT VENTURES
(Loss)/profit before income tax expense
Income tax expense
net (loss)/profit after income tax expense
50.0%
–
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
30 June 2013
$’000
24 JUNE 2012
$’000
11,257
(8,631)
2,626
(108)
2,518
4,786
16,466
21,252
1,223
257
1,480
(2,035)
(204)
(2,239)
11,274
(8,812)
2,462
(151)
2,311
4,107
16,990
21,097
1,198
339
1,537
1,433
(122)
1,311
82
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
13. AVAILABLE FOR sALE INVEsTMENTs
Listed equity securities – at fair value
Total available for sale investments
30 June 2013
$’000
24 JUNE 2012
$’000
1,929
1,929
1,991
1,991
Available for sale investments consist of investments in ordinary shares at fair value and have no fixed maturity date.
During the year, an impairment charge of $0.4 million was recognised in the income statement due to a significant decline in
the share price in respect of one investment.
14. INTANGIBLE AssETs
Mastheads and tradenames
Goodwill
Radio licences
Software
Customer relationships
Total intangible assets
RECONCILIATIONS
30 June 2013
$’000
966,223
294,385
114,037
56,840
6,549
24 JUNE 2012
$’000
1,286,843
1,009,085
121,637
76,006
8,474
1,438,034
2,502,045
Reconciliations of the carrying amount of each class of intangible at the beginning and end of the current financial year
are set out below:
MASTHEADS &
TRADENAMES
$’000
NOTE
GOODWILL
$’000
RADIO
LICENCES
$’000
SOFTWARE
$’000
CUSTOMER
RELATIONSHIPS
$’000
TOTAL
$’000
At 26 June 2011
Cost
Accumulated amortisation and impairment
net carrying amount
Period ended 24 June 2012
Balance at beginning of the financial year
Additions
Capitalisations from works in progress
15
Reallocation from purchase price
accounting
Disposals
Assets classified as held for sale
Acquisition through business combinations
Amortisation for continuing operations
3(B)
Amortisation for discontinued operations
Impairment
Exchange differences
At 24 June 2012, net of accumulated
amortisation and impairment
3,714,053
2,468,101
(459,657)
(669,083)
3,254,396
1,799,018
156,678
(24,461)
132,217
253,229
(182,205)
71,024
8,008
6,600,069
(4,555)
(1,339,961)
3,453
5,260,108
3,254,396
1,799,018
132,217
1,443
–
–
–
(15,211)
2,895
(28)
–
46
–
(8,263)
(2,000)
(11)
6,518
–
–
(1,963,624)
(794,295)
6,972
8,072
–
–
–
(10,580)
–
–
–
–
–
–
71,024
17,011
7,843
2,899
(134)
(40)
5,675
(26,155)
(2,113)
(251)
247
3,453
5,260,108
–
–
7,384
–
–
–
18,500
7,843
2,020
(12,714)
(15,262)
15,088
(2,379)
(28,562)
–
–
16
(2,113)
(2,758,170)
15,307
1,286,843
1,009,085
121,637
76,006
8,474
2,502,045
FAIRFAX MEDIA LIMITED 2013
83
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
14. INTANGIBLE AssETs (CONTINUED)
MASTHEADS &
TRADENAMES
$’000
NOTE
GOODWILL
$’000
RADIO
LICENCES
$’000
SOFTWARE
$’000
CUSTOMER
RELATIONSHIPS
$’000
TOTAL
$’000
At 24 June 2012
Cost
3,692,719
2,455,250
Accumulated amortisation and impairment
(2,405,876)
(1,446,165)
net carrying amount
1,286,843
1,009,085
143,700
(22,063)
121,637
269,976
(193,970)
76,006
15,417
6,577,062
(6,943)
(4,075,017)
8,474
2,502,045
Period ended 30 June 2013
Balance at beginning of the financial year
Additions
Capitalisations from works in progress
15
Disposals
Discontinued operations
Disposal of controlled entities
Acquisition through business combinations
Amortisation for continuing operations
3(B)
Amortisation for discontinued operations
Impairment
Exchange differences
At 30 June 2013, net of accumulated
amortisation and impairment
At 30 June 2013
Cost
1,286,843
1,009,085
121,637
76,006
8,474
2,502,045
–
–
–
–
–
–
(26,199)
(585,939)
(26,196)
1,766
(23,143)
13,872
(31)
–
–
–
–
–
–
–
–
–
–
–
7,954
9,364
(286)
(8,814)
(96)
2,154
(29,485)
(2,010)
–
–
–
–
–
375
(2,107)
–
7,954
9,364
(286)
(620,952)
(49,435)
18,167
(31,623)
(2,010)
(280,100)
(130,706)
(7,600)
–
(249)
(418,655)
10,140
11,216
–
2,053
56
23,465
966,223
294,385
114,037
56,840
6,549
1,438,034
3,707,070
1,809,157
143,700
276,874
15,921
5,952,722
Accumulated amortisation and impairment
(2,740,847)
(1,514,772)
(29,663)
(220,034)
(9,372)
(4,514,688)
net carrying amount
966,223
294,385
114,037
56,840
6,549
1,438,034
The carrying value of intangibles should be considered with reference to accounting policies described in Note 1(D) and (E).
The carrying value of intangible assets is an area of significant accounting estimate and judgement as described in Note 1(X)
of the Group’s accounting policies. The assumptions used in this estimation of recoverable amount and the sensitivities around
the key assumptions are outlined in (i)-(ii) below.
iMPAiRMenT oF CASH GeneRATinG uniTS (CGu) inCludinG GoodWill And indeFiniTe liFe ASSeTS
(i)
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 2014 which includes the impact of the Fairfax of the Future program.
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 3% and
8.5% have been used in publishing where management expect the cyclical downturn and structural change to continue.
In the digital businesses, revenue growth of 5% to 25% depending on the maturity of the market, 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% (2012: 3.5%) has been used for digital cash flows. Metropolitan Media, Australian Regional Media,
New Zealand Media and Printing Operations were calculated at nil growth (2012: Regional/New Zealand 2.5%; Metropolitan/
Printing nil) and Broadcasting calculated at 2.5% (2012: 2.5%).
84
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
14. INTANGIBLE AssETs (CONTINUED)
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 11.0% for Australian and 10.9% for New Zealand Media (2012: Aust: 11.5%; NZ: 11.2%), 12.9% for Australian
Online (2012: 12.8%) and 12.7% for New Zealand Online (2012: 12.6%).
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 $50
million would arise for the Regional, Metropolitan, Agricultural and New Zealand CGU Groups. If year 1 cash flow forecasts
increased by 5%, in aggregate, the impairment would be reduced by $34 million.
Holding all assumptions constant, if year 3 cash flow forecasts declined by 5%, an additional impairment in aggregate of $64
million would arise for the Regional, Metropolitan, Agricultural and New Zealand CGU Groups. If year 3 cash flow forecasts
increased by 5%, in aggregate, the impairment would be reduced by $21 million.
Holding all assumptions constant, if the discount rate applied to the cash flow projections was increased by 0.5%, an additional
impairment of $59 million would arise for the Regional, Metropolitan, Agricultural and New Zealand CGU Groups. If the rate was
decreased by 0.5%, the impairment would be reduced by $25 million.
Holding all assumptions constant, if terminal growth factors were reduced by a further 0.5% across all CGU’s then a further
impairment of $49 million would arise for the Regional, Metropolitan, Agricultural and New Zealand CGU Groups. If terminal
growth factors were increased by 0.5% across all CGU’s then the impairment would be reduced by $22 million.
(iii) AlloCATion oF GoodWill, liCenCeS, MASTHeAdS And TRAdenAMeS To CGuS
For the financial year ended 30 June 2013, 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(W) and Note 37 with further disclosure on the results for each operating segment.
At 30 June 2013
Allocation to CGu Groups
Metropolitan Media
Australian Digital Transactions
Australian Regional Media
Agricultural Media
Broadcasting
New Zealand Media
OPERATING SEGMENT
Metropolitan Media
Metropolitan Media
Fairfax Regional Media
Fairfax Regional Media
Broadcasting
New Zealand Media
LICENCES,
MASTHEADS AND
TRADENAMES
$’000
GOODWILL
$’000
33,041
205,159
–
–
56,185
–
393,389
18,739
283,519
122,333
114,037
148,243
TOTAL
$’000
426,430
223,898
283,519
122,333
170,222
148,243
Total goodwill, licences, mastheads and tradenames
294,385
1,080,260
1,374,645
At 24 June 2012
Allocation to CGu Groups
Metropolitan Media
Australian Digital Transactions
Australian Regional Media
Agricultural Media
Broadcasting
New Zealand Media
OPERATING SEGMENT
Metropolitan Media
Metropolitan Media
Fairfax Regional Media
Fairfax Regional Media
Broadcasting
New Zealand Media
Trade Me (discontinued operation)
Trade Me
LICENCES,
MASTHEADS AND
TRADENAMES
$’000
GOODWILL
$’000
33,041
192,057
121,987
31,861
56,185
–
573,954
393,390
23,750
473,453
232,747
121,637
137,790
25,713
Total goodwill, licences, mastheads and tradenames
1,009,085
1,408,480
TOTAL
$’000
426,431
215,807
595,440
264,608
177,822
137,790
599,667
2,417,565
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
15. 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
RECONCILIATIONS
FAIRFAX MEDIA LIMITED 2013
85
30 June 2013
$’000
24 JUNE 2012
$’000
273,198
(59,774)
213,424
257,582
(38,220)
219,362
110,574
(70,785)
39,789
103,904
(36,166)
67,738
1,061,360
(868,862)
192,498
1,083,690
(831,535)
252,155
33,222
7,749
478,933
547,004
Reconciliations of the carrying amount of each class of property, plant and equipment during the financial year
are set out below:
At 26 June 2011
Cost
Accumulated depreciation and impairment
net carrying amount
Period ended 24 June 2012
Balance at beginning of financial year
Additions/capitalisations
Capitalisation to software
Disposals
Acquisition through business combinations
Depreciation for continuing operations
Depreciation for discontinued operations
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
net carrying amount
CAPITAL WORKS
IN PROGRESS
$’000
NOTE
FREEHOLD
LAND &
BUILDINGS
$’000
LEASEHOLD
BUILDINGS
$’000
PLANT AND
EQUIPMENT
$’000
TOTAL
$’000
16,547
–
16,547
16,547
(936)
(7,843)
(38)
–
–
–
–
–
19
267,103
(34,530)
232,573
232,573
781
–
(2,654)
–
(5,109)
–
(6,881)
–
652
100,101
(25,285)
74,816
1,112,149
(713,739)
398,410
1,495,900
(773,554)
722,346
74,816
3,274
–
(181)
11
(4,287)
–
(96)
(6,039)
240
398,410
23,917
–
(2,044)
185
(65,520)
(1,912)
(783)
722,346
27,036
(7,843)
(4,917)
196
(74,916)
(1,912)
(7,760)
(100,559)
(106,598)
461
1,372
7,749
219,362
67,738
252,155
547,004
14
3(B)
10
7,749
–
7,749
257,582
(38,220)
219,362
103,904
1,083,690
(36,166)
67,738
(831,535)
252,155
1,452,925
(905,921)
547,004
86
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
15. PROPERTY, PLANT AND EqUIPMENT (CONTINUED)
CAPITAL WORKS
IN PROGRESS
$’000
NOTE
FREEHOLD
LAND &
BUILDINGS
$’000
LEASEHOLD
BUILDINGS
$’000
PLANT AND
EQUIPMENT
$’000
Period ended 30 June 2013
Balance at beginning of financial year
Additions/capitalisations
Capitalisation to software
Disposals
Disposal of controlled entities
Discontinued operations
Acquisition through business combinations
Depreciation for continuing operations
Depreciation for discontinued operations
Assets classified as held for sale
Reclasses between asset categories
Impairment
Exchange differences
At 30 June 2013, net of accumulated
depreciation and impairment
At 30 June 2013
Cost
Accumulated depreciation and impairment
net carrying amount
14
3(B)
10
7,749
35,715
(9,364)
–
–
(1,047)
–
–
–
–
123
–
46
219,362
2,313
–
(259)
(979)
–
1,350
(5,370)
–
1,052
4,838
(11,430)
2,547
67,738
762
–
–
(209)
(46)
4
252,155
13,130
–
(2,132)
(406)
(3,111)
1,218
TOTAL
$’000
547,004
51,920
(9,364)
(2,391)
(1,594)
(4,204)
2,572
(3,745)
(60,024)
(69,139)
–
–
2,692
(27,534)
127
(1,114)
524
(7,653)
(1,967)
1,878
(1,114)
1,576
–
(40,931)
4,598
33,222
213,424
39,789
192,498
478,933
33,222
–
33,222
273,198
(59,774)
213,424
110,574
(70,785)
39,789
1,061,360
1,478,354
(868,862)
(999,421)
192,498
478,933
During the current year, an impairment charge of $40.9 million was recorded on property, plant and equipment. This impairment primarily
relates to leasehold improvements and freehold land and buildings at various sites in the Group’s print network. The impairment was
recognised following a review of the fair value less costs to sell.
FAIRFAX MEDIA LIMITED 2013
87
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
16. DERIVATIVE FINANCIAL INsTRUMENTs
Current assets
Cross currency swap – cash flow hedge
Cross currency swap – net investment hedge
Forward contracts
Call option derivative
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
Forward contracts
Obligation under put option *
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
30 June 2013
$’000
24 JUNE 2012
$’000
3,193
5,617
1,808
400
11,018
7,107
708
–
7,815
4,381
598
35,741
822
6,436
47,978
19,453
7,290
196
–
26,939
–
–
123
–
123
2,464
23,976
600
27,040
–
–
–
–
–
–
27,243
59,172
1,792
7,421
95,628
* Present value of exercise price of the put option over subsidiary shares. The put and the call option are 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.
HEDGING ACTIVITIES
(i) CASH FloW HedGeS – inTeReST RATe And CRoSS CuRRenCy SWAPS
At 30 June 2013, 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.
88
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
16. DERIVATIVE FINANCIAL INsTRUMENTs (CONTINUED)
At 30 June 2013, 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
2013
7.52%
7.46%
2012
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 30 June 2013, 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 30 June 2013, 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
2013
6.52%
2012
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 30 June 2013, the above hedges were assessed to be highly effective with a combined unrealised gain in fair value of $1.7
million (2012: $8.3 million loss) recognised in equity for the period. During the period an unrealised loss of $0.4 million (2012: $0.1
million unrealised gain) was recognised in the income statement attributable to the ineffective portion of the cash flow hedges.
During the year there was no gain or losses transferred from equity to the income statement (2012: $1.2 million gain).
(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 30 June 2013, the Group held forward exchange contracts of $1.0 million (2012: $0.1 million).
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 30 June 2013, the Group held cross currency swap agreements designated as hedging changes in the underlying value
of USD denominated senior notes (refer to Note 19). 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, as discussed in Note (iv) below.
At 30 June 2013, the cross currency swap agreements had a combined derivative liability position of $43.0 million (2012:
$59.2 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.
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
FAIRFAX MEDIA LIMITED 2013
89
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
16. DERIVATIVE FINANCIAL INsTRUMENTs (CONTINUED)
For the Group, the remeasurement of the hedged items resulted in a loss before tax of $21.4 million (2012: $11.0 million loss) and
the changes in the fair value of the hedging instruments resulted in a gain before tax of $16.1 million (2012: $14.6 million gain)
resulting in a net loss before tax of $5.3 million (2012: $3.6 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 30 June 2013, the hedges were assessed to be highly effective with an unrealised loss of $12.9 million (2012: $2.5 million loss)
recognised in equity. During the current financial period there was an unrealised loss of $0.8 million (2012: $0.2 million gain)
recognised in the income statement attributable to the ineffective portion of the net investment hedges.
17. 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
30 June 2013
$’000
24 JUNE 2012
$’000
30 June 2013
$’000
24 JUNE 2012
$’000
30 June 2013
$’000
24 JUNE 2012
$’000
Property, plant and equipment
11,607
16,117
Inventories
Investments
Intangible assets
Other assets
Provisions
Payables
Other liabilities
Tax losses
Other
Gross deferred tax assets/liabilities
Set-off of deferred tax assets/liabilities
net deferred tax assets/liabilities
–
–
6,286
16,946
62,524
10,669
9,747
8,144
1,415
127,338
(19,443)
107,895
–
–
6,278
18,792
100,620
15,004
4,917
–
2,853
164,581
(42,051)
122,530
10,111
3,055
515
5,038
4,182
–
–
475
–
(352)
23,024
(19,443)
3,581
22,275
3,121
1,133
13,018
17,487
–
–
393
–
(151)
57,276
(42,051)
15,225
1,496
(3,055)
(515)
1,248
12,764
62,524
10,669
9,272
8,144
1,767
104,314
–
(6,158)
(3,121)
(1,133)
(6,740)
1,305
100,620
15,004
4,524
–
3,004
107,305
–
104,314
107,305
(B) MOVEMENT IN TEMPORARY DIFFERENCES DURING THE FINANCIAL YEAR
Property, plant and equipment
Inventories
Investments
Intangible assets
Other assets
Provisions
Payables
Other liabilities
Tax losses
Other
BALANCE
24 JUNE 2012
RECOGNISED
ON
ACQUISITION
RECOGNISED
IN INCOME
RECOGNISED
IN EQUITY
BALANCES
DISPOSED
DISCONTINUED
OPERATIONS
BAlAnCe
30 June 2013
(6,158)
(3,121)
(1,133)
(6,740)
1,305
100,620
15,004
4,524
–
3,004
107,305
(102)
–
–
(113)
–
195
47
–
–
4
31
7,659
66
614
(647)
10,205
(38,078)
(4,058)
4,881
8,144
(19)
(11,233)
–
–
4
–
4,190
–
–
–
–
(1,211)
2,983
55
–
–
8,748
(1,987)
–
–
–
–
–
42
–
–
–
(949)
(213)
(324)
(133)
–
(11)
1,496
(3,055)
(515)
1,248
12,764
62,524
10,669
9,272
8,144
1,767
6,816
(1,588)
104,314
90
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
17. DEFERRED TAx AssETs AND LIABILITIEs (CONTINUED)
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
DISCONTINUED
OPERATIONS
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
–
–
26,410
34
9,872
27,825
(567)
50,618
2,865
(6)
(587)
(1,959)
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
(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 $280.0
million (2012: $216.5 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 $770.2
million (2012: $684.7 million).
(D) FUTURE ASSESSABLE TEMPORARY DIFFERENCES
At 30 June 2013, 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 should the associates or joint ventures retained
earnings be distributed (2012: Nil).
18. 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.
30 June 2013
$’000
24 JUNE 2012
$’000
160,726
9,445
65,748
235,919
204,233
12,038
66,366
282,637
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
19. INTEREsT BEARING LIABILITIEs
Current interest bearing liabilities – unsecured
Other loans
Senior notes
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
FAIRFAX MEDIA LIMITED 2013
91
NOTE
30 June 2013
$’000
24 JUNE 2012
$’000
(C)
(D)
(D)
(B)
(C)
(D)
(D)
277,700
2,185
4,438
284,323
–
2,308
4,131
6,439
123,548
718,177
220,508
466,302
3,819
6,014
6,003
10,452
353,889
1,200,934
(533,531)
284,323
353,889
49,812
154,493
(358,364)
6,439
1,200,934
65,089
914,098
* Debt hedging instruments are 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
$154.5 million as at 30 June 2013 (2012: $914.1 million).
The Group has sufficient unused committed facilities and cash at the reporting date to finance maturing current interest bearing
liabilities. The Group has a number of finance facilities which are guaranteed by Fairfax Media Limited and are covered by deeds
of negative pledge.
(B) BANK BORROWINGS
A $441.6 million syndicated bank facility (2012: $1,155.6 million) is available to the Group maturing in April 2015. At 30 June 2013,
$125.0 million was drawn down (2012: $590.0 million). The interest rate for drawings under this facility is the applicable bank bill
rate plus a credit margin.
(C) SENIOR NOTES
The Group issued Senior Notes in the US private placement market with a principal value of US$230 million (A$289.8 million)
in January 2004 with a fixed coupon of between 4.7% p.a. and 5.9% p.a. payable semi-annually in arrears. The interest and
principal on the Senior Notes are payable in US dollars and were swapped into floating rate New Zealand dollars and floating
rate Australian dollars via cross currency swaps. This issue of Senior Notes comprises maturities ranging from January 2011
to January 2019. In January 2011 Senior Notes of US$50 million were repaid. The weighted average maturity of the issue is
approximately 2.7 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.
92
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
19. INTEREsT BEARING LIABILITIEs (CONTINUED)
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 2013 to July 2017. The weighted average maturity of this issue is
approximately 2.1 years. The issued notes include fixed rate coupon notes, paying a weighted average coupon of 6.9% 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 1.0% p.a. step up margin is
payable on the coupons, effective from 10 July 2009.
Refer to Note 39 for details of events that have occurred subsequent to reporting date in relation to the early redemption of
the Senior Notes.
(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 30
September 2015. This comprises a finance lease of $10.5 million (2012: $14.6 million), which was entered into in February 1996,
and principal and interest outstanding of $6.0 million (2012: $8.3 million) in the form of a fixed rate loan with an established
repayment schedule.
20. PROVIsIONs
Current
Employee benefits
Defamation
Property
Restructuring and redundancy
Other
Total current provisions
non-current
Employee benefits
Property
Restructuring and redundancy
Other
Total non-current provisions
30 June 2013
$’000
24 JUNE 2012
$’000
92,198
3,072
686
94,640
723
191,319
12,529
40,433
–
980
99,385
2,849
576
90,889
188
193,887
14,750
37,539
97,016
–
53,942
149,305
FAIRFAX MEDIA LIMITED 2013
93
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
20. PROVIsIONs (CONTINUED)
RECONCILIATION
Reconciliations of the carrying amount of each class of provision, other than employee benefits, during the financial year
are set out below:
At 24 June 2012
Current
Non-current
Total provisions, excluding employee benefits
Period ended 30 June 2013
Balance at beginning of the financial year
Additional provision
Utilised
Transfers from liabilities classified as held for sale
Discontinued operations
Exchange differences
DEFAMATION
$’000
PROPERTY
$’000
RESTRUCTURING
AND
REDUNDANCY
$’000
2,849
–
2,849
2,849
1,751
(1,528)
–
–
–
576
37,539
38,115
38,115
4,603
(1,619)
–
(54)
74
90,889
97,016
187,905
187,905
522
(96,018)
2,083
–
148
OTHER
$’000
188
–
188
188
1,896
(381)
–
–
–
Balance at end of the financial year
3,072
41,119
94,640
1,703
At 30 June 2013
Current
Non-current
Total provisions, excluding employee benefits
NATURE AND TIMING OF PROVISIONS
3,072
–
3,072
686
40,433
41,119
94,640
–
94,640
723
980
1,703
(i) eMPloyee BeneFiTS
Provisions for employee benefits include liabilities for annual leave and long service leave and are measured at the amounts
expected to be paid when the liabilities are settled, refer to Note 1(T)(i).
(ii) deFAMATion
From time to time, entities in the Group are sued for defamation and similar matters in the ordinary course of business. The
defamation provision maintained is with respect to various matters across the Group. At the date of this report there were no
legal actions against the consolidated entity that have not been adequately provided for or that are expected to have a material
impact on the Group.
(iii) PRoPeRTy
The provision for property costs is in respect of make good provisions, deferred lease incentives and onerous lease provisions.
The make good provisions and deferred lease incentives are amortised over the shorter of the term of the lease or the useful
life of the assets, being up to sixteen years.
(iV) ReSTRuCTuRinG And RedundAnCy
The provision is in respect of amounts payable in connection with restructuring and redundancies, including termination
benefits, on-costs, outplacement and consultancy services.
(V) oTHeR
Other provisions includes various other costs relating to the business.
94
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
21. PENsION AssETs AND LIABILITIEs
SUPERANNUATION PLAN
The Group contributes to defined contribution and defined benefit plans which provide benefits to employees and their
nominated 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 $59.2 million (2012: $49.8 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
NOTE
30 June 2013
$’000
24 JUNE 2012
$’000
709
(1,273)
(564)
(14,128)
13,564
(564)
149
(3,933)
(3,784)
(21,974)
18,190
(3,784)
(B)
(C)
(B) ReConCiliATion oF THe PReSenT VAlue oF deFined BeneFiT PlAn oBliGATion
Balance at the beginning of the financial year
21,974
22,644
Current service cost
Interest cost
Contributions by employees
Actuarial (gains)/losses
Benefits paid
Taxes, premiums and expenses paid
Exchange differences on foreign plans
Curtailments
Settlements
Balance at the end of the financial year
(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
768
497
160
(463)
(3,376)
(109)
24
(924)
(4,423)
14,128
18,190
1,131
1,890
204
(3,376)
(109)
57
(4,423)
13,564
917
999
234
2,364
(1,585)
(590)
4
(410)
(2,603)
21,974
19,309
1,257
(1,368)
3,761
(1,585)
(590)
9
(2,603)
18,190
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
21. PENsION AssETs AND LIABILITIEs (CONTINUED)
(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
FAIRFAX MEDIA LIMITED 2013
95
30 June 2013
$’000
24 JUNE 2012
$’000
768
497
(924)
(1,131)
(790)
917
999
(410)
(1,257)
249
2,527
(40)
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
30 June 2013
%
24 JUNE 2012
%
26
18
26
17
4
9
2013
%
2.7
6.8
4.0
6
25
28
19
7
15
2012
%
2.6
7.0
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 6.8% p.a. rate of return, net of tax and expenses (2012: 7.0% p.a.).
(G) EMPLOYER CONTRIBUTIONS
Employer contributions to the defined benefit section of the plans are based on recommendations by the plans’ actuaries.
Actuarial assessments are made at two yearly intervals for Australia and the last actuarial assessment of Fairfax Media Super
was carried out as at 1 July 2012 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 2014 financial year are $0.9 million.
96
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
21. PENsION AssETs AND LIABILITIEs (CONTINUED)
(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 $2 million at the most recent financial position of the plans, being 1 July 2012 for Australia and
1 April 2011 for New Zealand. In accordance with the actuarial assessment of Fairfax Media Super as at 1 July 2012, additional
contributions are being made to meet the financing objective of the plan.
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 2012 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
deficit
Experience adjustments arising on plan liabilities
Experience adjustments arising on plan assets
22. CONTRIBUTED EqUITY
2009
$’000
(20,560)
17,875
(2,685)
(1,513)
6,283
2010
$’000
(21,512)
16,712
(4,800)
1,551
(756)
2011
$’000
(22,644)
19,309
(3,335)
(490)
(585)
2012
$’000
(21,974)
18,190
(3,784)
–
1,184
2013
$’000
(14,128)
13,564
(564)
795
(841)
ordinary shares
2,351,955,725 ordinary shares authorised and fully paid (2012: 2,351,955,725)
unvested employee incentive shares
11,723,026 unvested employee incentive shares (2012: 11,723,026)
debentures
281 debentures fully paid (2012: 281)
Total contributed equity
* Amount is less than $1000
30 June 2013
$’000
NOTE
24 JUNE 2012
$’000
(A)
4,667,944
4,667,944
(B)
(21,696)
(21,696)
(C)
*
*
4,646,248
4,646,248
RECONCILIATIONS
Movements for each class of contributed equity, by number of shares and dollar value, are set out below:
(A) ORDINARY SHARES
Balance at beginning of the financial year
Balance at end of the financial year
30 June 2013
no. oF SHAReS
24 JUNE 2012
NO. OF SHARES
30 June 2013
$’000
24 JUNE 2012
$’000
2,351,955,725
2,351,955,725
2,351,955,725
2,351,955,725
4,667,944
4,667,944
4,667,944
4,667,944
(B) UNVESTED EMPLOYEE INCENTIVE SHARES
Balance at beginning of the financial year
Balance at end of the financial year
11,723,026
11,723,026
11,723,026
11,723,026
(21,696)
(21,696)
(21,696)
(21,696)
FAIRFAX MEDIA LIMITED 2013
97
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
22. CONTRIBUTED EqUITY (CONTINUED)
(C) DEBENTURES
Balance at beginning of the financial year
Balance at end of the financial year
Total contributed equity
* Amount is less than $1000
30 June 2013
no. oF SHAReS
24 JUNE 2012
NO. OF SHARES
30 June 2013
$’000
24 JUNE 2012
$’000
281
281
281
281
*
*
*
*
2,363,678,751
2,363,678,751
4,646,248
4,646,248
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 and are entitled to one
vote per share at a meeting of the Company.
(C) deBenTuReS
Debenture holders terms and conditions are disclosed in Note 1(U).
23. 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
Impairment losses transferred to the income statement
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
Disposal of subsidiaries, net of tax
Tax effect of net changes on foreign currency translation reserve
Balance at end of the financial year
30 June 2013
$’000
NOTE
24 JUNE 2012
$’000
(A)
(B)
(C)
(D)
(E)
(F)
(G)
41
(132,599)
(4,703)
(10,232)
8,799
181,048
(6,837)
35,517
(259)
(61)
357
4
41
(259)
(219,528)
(7,088)
2,669
7,764
177,759
(6,837)
(45,520)
506
(675)
–
(90)
(259)
(219,528)
28,033
58,876
20
(233,884)
14,356
–
–
(132,599)
(219,528)
98
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
23. REsERVEs (CONTINUED)
(C) CASHFLOW HEDGE RESERVE
Balance at beginning of the financial year
Gains/(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
Disposal of subsidiaries, net of tax
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
Balance at end of the financial year
(G) GENERAL RESERVE
Balance at beginning of the financial year
Balance at end of the financial year
nATuRe And PuRPoSe oF ReSeRVeS
30 June 2013
$’000
24 JUNE 2012
$’000
(7,088)
2,543
864
–
(1,022)
(4,703)
2,669
(18,431)
5,530
(10,232)
7,764
2,038
(495)
(508)
8,799
177,759
(3,005)
6,294
–
181,048
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
(6,837)
(6,837)
(6,837)
(6,837)
(A) Asset revaluation reserve
The asset revaluation reserve is used to record increments and decrements on the revaluation of non-current assets. From
1 July 2004, changes in the fair value of investments classified as available for sale investments are recognised in the asset
revaluation reserve, as described in Note 1(M).
(B) Foreign currency translation reserve
The foreign currency translation reserve is used to record exchange differences arising on translation of foreign controlled
entities and associated funding of foreign controlled entities, as described in Note 1(F).
(C) Cashflow hedge reserve
The hedging reserve is used to record the portion of gains and losses on a hedging instrument in a cash flow hedge that is
determined to be an effective hedge, as described in Note 1(N). Refer to further disclosures at Note 16.
(d) net investment hedge reserve
The net investment hedge reserve is used to record gains and losses on a hedging instruments in a fair value hedge, as
described in Note 1(N). Refer to further disclosures at Note 16.
(e) Share-based payment reserve
The share-based payment reserve is used to recognise the fair value of shares issued but not vested and transfers to fund the
acquisition of Share Trust shares, as described in Note 1(T)(ii).
FAIRFAX MEDIA LIMITED 2013
99
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
23. REsERVEs (CONTINUED)
(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.
(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.
24. RETAINED PROFITs
Balance at beginning of the financial year
Net loss for the financial year
Actuarial gain/(loss) on defined benefit plans, net of tax
Dividends paid
Balance at end of the financial year
25. EARNINGs PER sHARE
Basic earnings per share
Net loss attributable to owners of the parent
Net loss from continuing operations
diluted earnings per share
Net loss attributable to owners of the parent
Net loss from continuing operations
earnings reconciliation – basic
Net loss attributable to owners of the parent
Net loss from continuing operations
earnings reconciliation – diluted
Net loss attributable to owners of the parent
Net loss from continuing operations
Weighted average number of ordinary shares used in calculating basic ePS
NOTE
30 June 2013
$’000
(2,805,566)
24 JUNE 2012
$’000
11,764
(16,432)
(2,732,397)
1,651
7
(47,040)
(2,615)
(82,318)
(2,867,387)
(2,805,566)
30 June 2013
¢ PeR SHARe
24 JUNE 2012
¢ PER SHARE
(0.7)
(13.3)
(0.7)
(13.3)
(116.2)
(118.4)
(116.2)
(118.4)
30 June 2013
$’000
24 JUNE 2012
$’000
(16,432)
(312,852)
(2,732,397)
(2,784,785)
(16,432)
(312,852)
(2,732,397)
(2,784,785)
30 June 2013
nuMBeR
’000
24 JUNE 2012
NUMBER
$’000
2,351,956
2,351,956
Weighted average number of ordinary shares used in calculating diluted ePS
2,351,956
2,351,956
100
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
26. 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
30 June 2013
$’000
24 JUNE 2012
$’000
39,861
122,219
284,111
446,191
41,805
140,921
311,320
494,046
Non-cancellable leases have varying terms, escalation clauses and renewal rights. On renewal, the terms of the leases can be
renegotiated. The leases have remaining terms of between five and sixteen years. All property leases include a clause to enable
upward revision of the 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 $8.2 million (2012: $28.9 million).
The lease has a remaining term of two years (2012: three years) and a weighted average interest rate of 13.3% (2012: 13.3%).
Future minimum lease payments under the finance lease together with the present value of the net minimum lease payments
are as follows:
Within one year
Later than one year and not later than five years
Later than five years
Minimum lease payments
Less future finance charges
Total finance lease liability
MINIMUM
PAYMENTS
2013
$’000
5,076
6,344
–
11,420
(968)
10,452
NOTE
19(D)
PRESENT
VALUE OF
PAYMENTS
2013
$’000
4,438
6,014
–
10,452
–
10,452
MINIMUM
PAYMENTS
PRESENT
VALUE OF
PAYMENTS
2012
$’000
5,076
11,420
–
16,496
(1,913)
14,583
2012
$’000
4,131
10,452
–
14,583
–
14,583
CONTINGENT RENTALS UNDER FINANCE LEASE
A component of the finance lease payments are contingent on movements in the consumer price index. At reporting date,
the rent payable over the remaining lease term of two years which is subject to such movements amounts to $10.4 million
(2012: $14.4 million).
CAPITAL COMMITMENTS
At 30 June 2013, 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
30 June 2013
$’000
24 JUNE 2012
$’000
30,407
1,322
–
–
–
–
30,407
1,322
Commitments contracted at reporting date include a $29.1 million upgrade to the regional printing network.
FAIRFAX MEDIA LIMITED 2013
101
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
27. CONTINGENCIEs
GUARANTEES
Under the terms of ASIC Class Order 98/1418 (as amended), the Company and certain controlled entities (refer Note 28), have
guaranteed any deficiency of funds if any entity to the class order is wound-up. No such deficiency exists at reporting date.
The Group has provided a bank guarantee of $2.5 million in relation to a property sublease for a period of 30 months
commencing 4 July 2013.
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 20, that are
expected to result in a material impact.
28. CONTROLLED ENTITIEs
The following entities were controlled as at the end of the financial year:
OWNERSHIP INTEREST
Fairfax Media Limited
ConTRolled enTiTieS
2GTHR Pty Ltd
ACN 000 128 281 Pty Ltd
ACN 000 834 257 Pty Ltd
ACN 001 004 815 Pty Ltd
ACN 001 260 671 Pty Ltd
ACN 091 950 462 Pty Ltd
ACN 101 806 302 Pty Ltd
ACN 113 587 527 Pty Ltd
Agricultural Publishers Pty Limited
Allure Media Pty Ltd
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
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
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 Newspapers Pty Limited
Fairfax Corporation Pty Limited
NOTES
(a)
(a), (b)
(n)
(h)
(m)
(l)
(j)
(a)
(k)
(a)
(a), (b)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(g)
(a)
(f)
(a)
(a)
(a)
(a)
(a)
(a)
COUNTRY OF
INCORPORATION
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
New Zealand
Australia
Australia
Australia
Australia
New Zealand
Australia
Singapore
Singapore
Malaysia
Australia
Australia
2013
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
100
–
100
100
60
100
100
100
100
100
100
100
100
2012
%
–
100
100
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
60
100
100
100
100
100
100
100
100
102
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
28. CONTROLLED ENTITIEs (CONTINUED)
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
Fairfax Media Group Finance Pty Limited
Fairfax Media Management Pty Limited
Fairfax Media Operations Limited
Fairfax Media Productions UK Limited
Fairfax Media Publications 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 Newspapers 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
Lime Digital Pty Limited
Mackamedia Pty Ltd
Mamiko Co Pty Ltd
Mayas Pty Ltd
Mayas Unit Trust
Media Investments Pty Ltd
Micosh Pty Ltd
OWNERSHIP INTEREST
NOTES
COUNTRY OF
INCORPORATION
2013
%
New Zealand
New Zealand
Australia
Australia
New Zealand
United Kingdom
Australia
Australia
New Zealand
United Kingdom
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
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(d)
(d)
(d)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(d)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
–
–
–
100
100
66
100
100
100
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
2012
%
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
66
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
28. CONTROLLED ENTITIEs (CONTINUED)
FAIRFAX MEDIA LIMITED 2013
103
OWNERSHIP INTEREST
Miller Publishing Co, Inc
Milton Ulladulla Publishing Co. Pty Ltd
Mistcue Pty Limited
MMP Community Network Limited
Mountain Press Pty Ltd
Namoi Media & Marketing Pty Ltd
Netus Pty Ltd
Newcastle Newspapers Pty Ltd
Newsagents Direct Distribution Pty Ltd
North Australian News Pty Ltd
Northern Newspapers Pty Ltd
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
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
NOTES
(d)
(a)
(c), (i)
(a)
(a), (b)
(a)
(a)
(a)
(a)
(g)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(d)
(d)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
COUNTRY OF
INCORPORATION
United States
Australia
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
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
United States
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
2013
%
–
100
65
–
88
100
100
100
100
100
100
–
97
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
97
97
100
2012
%
100
100
65
100
88
100
–
100
100
100
100
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
75
100
100
95
95
100
104
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
28. CONTROLLED ENTITIEs (CONTINUED)
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
TheVine.com.au Pty Limited
The Wagga Daily Advertiser Pty Ltd
The Warrnambool Standard Pty Ltd
The Weather Company Pty Limited
Trade Me Group Ltd
Trade Me Ltd
Tricom Group Pty Ltd
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
OWNERSHIP INTEREST
NOTES
COUNTRY OF
INCORPORATION
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(a)
(e)
(e)
(a)
(a)
(a)
(a)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
Australia
Japan
Australia
Australia
Australia
Australia
Australia
Australia
2013
%
100
100
100
100
100
100
63
100
100
70
100
100
75
–
–
100
75
100
100
75
75
100
100
2012
%
100
100
100
100
100
100
63
100
100
70
100
100
75
51
51
100
75
100
100
75
75
100
100
(a) The Company and the controlled entities incorporated within Australia are party to Class Order 98/1418 (as amended) issued by the
Australian Securities & Investment Commission. These entities have entered into a Deed of Cross Guarantee dated June 2007 (as varied
from time to time) under which each entity guarantees the debts of the others. These companies represent a ‘Closed Group’ for the
purposes of the Class Order and there are no other members of the ‘Extended Closed Group’. Under the Class Order, these entities have
been relieved from the requirements of the Corporations Act 2001 with regard to the preparation, audit and publication of accounts.
(b) Acquired on 21 December 2012.
(c) This company was formerly called Fairfax Community Network Ltd and was disposed on 13 July 2012.
(d) Disposed on 14 November 2012.
(e) Disposed on 21 December 2012.
(f) Amalgamated with Fairfax New Zealand Limited on 1 July 2012.
(g) Amalgamated with Fairfax New Zealand Limited on 1 October 2012.
(h) This company was formerly called Cudgegong Newspapers Pty Ltd.
(i) This company was formerly called Fairfax Community Network Limited.
(j) This company was formerly called Fairfax Media Operations Pty Limited.
(k) This company was formerly called Fairfax New Zealand Finance Pty Limited.
(l) This company was formerly called Leeton Newspapers Pty Ltd.
(m) This company was formerly called Riverina Newspapers (Griffith) Pty Ltd.
(n) This company was formerly called The Murrumbidgee Irrigator Pty Ltd.
FAIRFAX MEDIA LIMITED 2013
105
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
28. CONTROLLED ENTITIEs (CONTINUED)
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 30 June 2013 and consolidated balance sheet as at 30 June 2013,
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
30 June 2013
$’000
24 JUNE 2012
$’000
449,780
244,349
25,394
11,018
3,176
3,200
4,386
56,029
263,250
31,756
123
18,268
14,345
3,914
741,303
387,685
19,611
80,396
1,929
1,213,572
406,958
7,815
109,159
647,107
2,486,547
3,227,850
176,052
284,323
41,957
–
175,630
–
677,962
258,134
30,551
1,991
1,637,134
470,352
27,040
119,635
1,042,873
3,587,710
3,975,395
203,475
6,439
–
4,956
180,090
2,595
397,555
353,889
1,070,560
26,939
51,467
1,273
433,568
1,111,530
89,607
146,534
3,933
1,310,634
1,708,189
2,116,320
2,267,206
4,646,248
4,646,248
(66,921)
(2,463,007)
2,116,320
(53,283)
(2,325,759)
2,267,206
106
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
28. CONTROLLED ENTITIEs (CONTINUED)
(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 (expense)/benefit
net loss from operations after income tax expense
1,834,598
1,782,584
(2,251)
1,244
(1,895,265)
(3,956,037)
(58,683)
(121,601)
(13,812)
(135,413)
(66,569)
(2,238,778)
76,738
(2,162,040)
29. 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
Beaudesert Times Pty Ltd
Tradevine Limited
YesBookit Partnership
Midac Technologies Pty Ltd
PRINCIPAL ACTIVITY
Newspaper publisher
Online e-commerce management
Online accommodation advertising
Online accommodation advertising
Baches and Holiday Homes to Rent Limited
Holiday accommodation classifieds
2GTHR Pty Ltd
Netus Pty Ltd
Allure Media Pty Ltd
Investor in online business
Investor in online business
Online publisher
DATE OF ACQUISITION
27 August 2012
27 August 2012
29 October 2012
29 October 2012
12 December 2012
21 December 2012
21 December 2012
21 December 2012
OWNERSHIP
INTEREST
(i)
(ii)
(iii)
(iii)
(ii)
100%
100%
100%
(i) The business of Beaudesert Times Pty Ltd was acquired.
(ii) The businesses of Tradevine Limited and Baches and Holiday Homes to Rent Limited were acquired by Trade Me Group Ltd.
The businesses were subsequently disposed of with Trade Me Group Ltd (refer Note 29(B)).
(iii) The businesses of YesBookit Partnership and Midac Technologies Pty Ltd were acquired.
(B) DISPOSALS
The Group disposed of its interests in the following businesses during the year:
ENTITY OR BUSINESS DISPOSED
PRINCIPAL ACTIVITY
Fairfax Community Network Ltd
Community newspaper publisher
Rural Press USA Ltd
Rural Press USA Inc
Farm Progress Holding Company Inc
Farm Progress Companies Inc
The Miller Publishing Company Inc
Farm Progress Insurance Services Inc
Agricultural publishing
Agricultural publishing
Agricultural publishing
Agricultural publishing
Agricultural publishing
Agricultural publishing
Indiana Prairie Farmer Insurance Services Inc
Agricultural publishing
Trade Me Group Ltd
Trade Me Ltd
Internet-auction website
Internet-auction website
DATE OF DISPOSAL
13 July 2012
14 November 2012
14 November 2012
14 November 2012
14 November 2012
14 November 2012
14 November 2012
14 November 2012
21 December 2012
21 December 2012
OWNERSHIP
INTEREST
100% (i)
100%
100%
100%
100%
100%
100%
100%
51%
51%
(i) Fairfax Community Network Ltd was sold to the MMP Holdings Pty Ltd venture. Refer to Note 12 for the Group’s share of this venture.
FAIRFAX MEDIA LIMITED 2013
107
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
30. BUsINEss COMBINATIONs
ACQUISITIONS DURING THE PERIOD
Acquisitions, none of which were individually significant to the consolidated entity, are listed in Note 29(A).
The fair values of the identifiable assets and liabilities acquired were:
RECOGNISED ON ACQUISITION
$’000
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
Current tax liabilities
Deferred 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
Contingent consideration liability
Total purchase consideration
net cash outflow on acquisition
Net cash acquired with subsidiary
Cash paid
net cash outflow
13,159
1,269
225
2,572
2,470
4,295
285
24,275
1,549
649
209
254
2,661
21,614
13,872
35,486
32,372
3,114
35,486
13,159
(32,372)
(19,213)
The income statement includes revenue and net profit for the year ended 30 June 2013 of $11.9 million and $1.3 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 income statement would have included revenue and net profit of $16.5
million and $1.1 million respectively.
Included in the business acquisitions made during the reporting period were mastheads, trademarks, software, business
and domain names.
108
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
31. EMPLOYEE BENEFITs
(A) NUMBER OF EMPLOYEES
As at 30 June 2013 the consolidated entity employed 7,043 full-time employees (2012: 8,416) and 1,384 part-time and casual
employees (2012: 1,748). This includes 1,813 (2012: 2,094) full-time employees and 285 (2012: 310) 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 3, 5 or 7 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.
2008 – 2012 Financial year
Under this plan, the cash value of a percentage of an eligible executive’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.
2013 Financial year
For 2013, participants in the plan received an allocation of performance rights (rights) which allow the executive to acquire
shares for no consideration subject to achievement of the performance hurdles. No dividends are payable to participants on the
unvested rights.
The number of rights to which a participant is entitled will depend on the participant’s role and responsibilities. Allocations are
set at a fixed percentage of the executive’s fixed remuneration at the time they participate in the scheme. The value of the rights
at the time of allocation is determined by an independent external valuer.
FAIRFAX MEDIA LIMITED 2013
109
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
32. REMUNERATION OF AUDITORs
During the financial year the following amounts were paid or payable for services provided by the auditor of the Company and
its related parties:
Audit services
Ernst & Young Australia
Audit and review of financial reports
Affiliates of Ernst & Young Australia
Audit and review of financial reports
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
30 June 2013
$
24 JUNE 2012
$
1,088,401
1,031,030
244,044
266,770
26,498
1,358,943
25,854
1,323,654
243,809
225,449
238,692
376,167
98,020
–
213,515
603,008
8,151
–
11,818
–
575,429
1,934,372
1,443,200
2,766,854
–
–
–
–
1,000
–
–
1,000
1,934,372
2,767,854
110
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
33. DIRECTOR AND ExECUTIVE DIsCLOsUREs
(A) EQUITY INSTRUMENT DISCLOSURES RELATING TO KEY MANAGEMENT PERSONNEL
(i) SHAReHoldinGS
2013
directors
R Corbett
J Cowin
G Hywood
S McPhee
J Millar
S Morgan
L Nicholls
P Young
M Anderson
key management personnel
B Cassell *
G Hambly
D Housego
A Williams
Total
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 **
Total
BALANCE
24 JUNE 2012
NET CHANGE
OTHER
BALANCE
30 JUNE 2013
POST YEAR-END
ACQUISITIONS
POST YEAR-END
DISPOSALS
POST YEAR-END
BALANCE
99,206
–
99,206
–
3,000,000
3,000,000
118,343
40,220
200,000
70,673
318,343
110,893
–
100,000
100,000
1,564,668
–
1,564,668
40,387
131,117
–
1,061,014
104,815
67,371
–
–
–
–
–
–
291,139
–
107,758
131,117
–
1,061,014
104,815
291,139
–
3,159,770
3,729,183
6,888,953
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
99,206
3,000,000
318,343
110,893
100,000
1,564,668
107,758
131,117
–
1,061,014
104,815
291,139
–
6,888,953
BALANCE
26 JUNE 2011
NET CHANGE
OTHER
BALANCE
24 JUNE 2012
POST YEAR-END
ACQUISITIONS
POST YEAR-END
DISPOSALS
POST YEAR-END
BALANCE
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
99,206
3,892,481
118,343
40,220
1,383,168
1,564,668
34,986
–
–
–
–
(72,816)
–
–
–
40,387
47,899
131,117
–
1,061,014
104,815
–
641
1,281
–
–
–
13,156
–
12,875
–
–
–
–
–
–
–
–
5,602,954
1,499,118
7,102,072
26,031
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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
*
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. NJ Fairfax resigned from the Board on
29 November 2011 and R Savage on 30 June 2012. B Cassell ceased in the position of CFO on 3 December 2012, on which date he
was appointed Project Director and no longer considered KMP.
** Following the structural changes within the Group this person no longer met the definition of a KMP since 25 June 2012.
FAIRFAX MEDIA LIMITED 2013
111
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
33. DIRECTOR AND ExECUTIVE DIsCLOsUREs (CONTINUED)
(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.
2013
directors
G Hywood
key management personnel
B Cassell *
G Hambly
D Housego
A Williams
Total
2012
directors
G Hywood
key management personnel
B Cassell *
G Hambly
A Lam-Po-Tang **
C Maher **
M Williams **
Total
OPENING
BALANCE
24 JUNE 2012
GRANTED AS
REMUNERATION
NET CHANGE
OTHER ***
CLOSING
BALANCE
30 JUNE 2013
1,514,491
8,888,889
–
10,403,380
785,983
–
(121,057)
664,926
717,949
2,083,333
(110,969)
2,690,313
–
–
3,666,667
1,837,124
–
–
3,666,667
1,837,124
3,018,423
16,476,013
(232,026)
19,262,410
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
*
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. NJ Fairfax resigned from the Board on
29 November 2011 and R Savage on 30 June 2012. B Cassell ceased in the position of CFO on 3 December 2012, on which date
he was appointed Project Director and no longer considered KMP.
** Following the structural changes within the Group this person no longer met the definition of a KMP since 25 June 2012.
*** 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 30 June 2013 (2012: Nil).
(ii) indiViduAlS WiTH loAnS duRinG THe FinAnCiAl yeAR
There are no outstanding loans for the financial years ended 30 June 2013 and 24 June 2012.
(D) OPTIONS
No options over unissued shares in the Company were in existence at the beginning of the financial year, or granted during,
or since the end of the financial year.
112
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
34. 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 28.
(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 for the sale and purchase of goods and services occurred with related parties on normal market
terms and conditions:
Associates
30 June 2013
24 June 2012
Joint ventures
30 June 2013
24 June 2012
SALES TO
RELATED PARTIES
$’000
PURCHASES FROM
RELATED PARTIES
$’000
AMOUNT OWED BY
RELATED PARTIES
$’000
AMOUNT OWED TO
RELATED PARTIES
$’000
13,688
2,690
54
116
7,307
9,110
241
2,905
246
2,412
–
3
3,413
115
1
–
FAIRFAX MEDIA LIMITED 2013
113
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
35. 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 period
non-cash items
Depreciation and amortisation for continuing operations
Depreciation and amortisation for discontinued operations
Impairment of property, plant and equipment, intangibles and investments
Amortisation of borrowing costs
Share of losses 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 loss/(gain)
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 in other receivables
Decrease in inventories
Increase in other assets
(Decrease)/increase in payables
(Decrease)/increase in provisions
Increase/(decrease) in tax balances
net cash inflow from operating activities
NOTE
30 June 2013
$’000
24 JUNE 2012
$’000
(971)
(2,725,803)
3(B)
100,762
3,124
103,478
4,025
459,938
2,865,060
1,191
5,528
513
92
(299,413)
4,539
660
2,038
(833)
–
142
34,033
7,611
6,180
(788)
(41,020)
(100,942)
4,067
186,451
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)
267,649
(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
533,531
533,531
358,364
358,364
114
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
36. 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
and bank loans. 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; and
• forward rate agreements.
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 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, buy
back shareholder equity, issue new shares or sell assets to reduce debt. The Group reviews the capital structure to ensure:
• sufficient finance capacity 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
increased dividends or buy back of shareholder equity.
The net debt to EBITDA ratio for the Group at 30 June 2013 and 24 June 2012 is as follows:
Net debt for financial covenant purposes
EBITDA *
Net debt to EBITDA ratio
NOTE
19
2013
$’000
154,493
366,474
0.42
2012
$’000
914,098
506,022
1.81
* 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 2013
115
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
36. FINANCIAL AND CAPITAL RIsk MANAGEMENT (CONTINUED)
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 seeks to maintain 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 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 reporting date. For other financial instruments for which quoted prices in an
active market are available, fair value is determined directly from those quoted market prices.
Refer to Note 16 for further details of the Group’s derivative financial instruments and details of hedging activities.
At reporting date, the Group had the following mix of financial assets and financial liabilities exposed to interest rate risks:
As at 30 June 2013
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
Finance lease liability
Total interest bearing liabilities
Derivatives
Total financial liabilities
Total interest bearing liabilities
Notional principal hedged
net exposure to cash flow interest rate risk
FloATinG RATe
$’000
Fixed RATe
$’000
non-inTeReST
BeARinG
$’000
533,531
–
–
10,541
6,325
550,397
–
123,549
27,338
10,452
161,339
43,826
205,165
161,339
(123,526)
37,813
–
–
–
–
–
–
–
6,003
470,870
–
476,873
23,833
500,706
476,873
(116,495)
360,378
ToTAl
$’000
533,531
287,457
1,929
10,608
18,833
852,358
–
287,457
1,929
67
12,508
301,961
235,919
235,919
–
–
–
–
7,258
243,177
–
–
–
129,552
498,208
10,452
638,212
74,917
949,048
638,212
(240,021)
398,191
116
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
36. FINANCIAL AND CAPITAL RIsk MANAGEMENT (CONTINUED)
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
Finance lease liability
Total interest bearing liabilities
Derivatives
Total financial liabilities
Total interest bearing liabilities
Notional principal hedged
net exposure to cash flow interest rate risk
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
818,085
757,121
(122,132)
634,989
–
–
–
–
–
–
–
8,311
441,941
–
450,252
27,243
477,495
450,252
(108,525)
341,727
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
290,058
1,585,638
–
–
–
1,207,373
(230,657)
976,716
Sensitivity analysis
The table below shows the effect on net profit and equity after income tax if interest rates at reporting 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% (2012: 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 30 June 2013 from around
2.82% to 3.67% representing a 85 basis point shift (2012: 106 basis point shift).
In 2013, 66% (2012: 72%) 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)
IMPACT ON POST-TAX PROFIT
IMPACT ON EQUITY
2013
$’000
2012
$’000
2013
$’000
2012
$’000
(2,603)
(4,352)
1,670
2,663
2,603
4,352
(1,704)
(2,755)
(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.
FAIRFAX MEDIA LIMITED 2013
117
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
36. FINANCIAL AND CAPITAL RIsk MANAGEMENT (CONTINUED)
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 reporting date and consequently the net fair value
of the gains and losses on these contracts will be transferred from the cash flow hedging reserve to the income statement at
various dates during this period when the underlying exposure impacts earnings. The derivative contracts are carried at fair
value, being the market value as quoted in an active market.
The Group’s risk management policy for foreign exchange is to only hedge known or highly probable future transactions.
The policy only permits hedging of the Group’s underlying foreign exchange exposures.
Benefits or costs arising from currency hedges for revenue and expense transactions that are designated and documented in
a hedge relationship are brought to account in the income statement over the lives of the hedge transactions depending on the
effectiveness testing outcomes and when the underlying exposure impacts earnings. For transactions entered into that hedge
specific capital or borrowing commitments, any cost or benefit resulting from the hedge forms part of the initial asset or liability
carrying value.
When entered into, the Group formally designates and documents the financial instrument as a hedge of the underlying
exposure, as well as the risk management objectives and strategies for undertaking the hedge transactions. The Group formally
assesses both at the inception and at least semi-annually thereafter, whether the financial instruments that are used in hedging
transactions are effective at offsetting changes in either the fair value or cash flows of the related underlying exposure. Because
of the high degree of effectiveness between the hedging instrument and the underlying exposure being hedged, fluctuations
in the value of the derivative instruments are generally offset by changes in the fair values or cash flows of the underlying
exposures being hedged. Any ineffective portion of a financial instrument’s change in fair value is immediately recognised
in the income statement and this is mainly attributable to financial instruments in a fair value hedge relationship. Derivatives
entered into and not documented in a hedge relationship are revalued with the changes in fair value recognised in the income
statement. All of the Group’s derivatives are straight forward over the counter instruments with liquid markets.
Refer to Note 16 for further details of the Group’s derivative financial instruments and details of hedging activities.
SENSITIVITY ANALYSIS
The tables below show the effect on net profit and equity after income tax as at reporting 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 1.0045 and a 15% stronger Australian Dollar in an exchange rate of 1.3590 based on the year end rate of 1.1818.
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.
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)
IMPACT ON POST-TAX PROFIT
IMPACT ON EQUITY
(HEDGING RESERVES) *
2013
$’000
2012
$’000
2013
$’000
2012
$’000
852
1,092
(31,522)
(29,424)
(630)
(1,932)
23,299
21,748
* Hedging reserves includes both the cash flow hedge reserve and net investment hedge reserve
118
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
36. FINANCIAL AND CAPITAL RIsk MANAGEMENT (CONTINUED)
(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 0.7763 and a 15% stronger Australian Dollar in an exchange rate of 1.0503 based on the year end rate of
0.9133. 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
IMPACT ON EQUITY
(CASH FLOW HEDGE RESERVE)
2013
$’000
2012
$’000
2013
$’000
2012
$’000
1
(3)
(1)
(1,249)
(1,496)
(148)
1,786
2,955
(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 30 June 2013 counterparty credit
risk was limited to financial institutions with S&P 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 8 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.
(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 19(B) for details of the Group’s unused credit facilities at 30 June 2013.
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.
FAIRFAX MEDIA LIMITED 2013
119
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
36. FINANCIAL AND CAPITAL RIsk MANAGEMENT (CONTINUED)
As at 30 June 2013
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 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
(noMinAl CASH FloWS)
1 yeAR oR leSS
$’000
1 To 2 yeARS
$’000
2 To 5 yeARS
$’000
MoRe THAn
5 yeARS
$’000
(235,919)
–
(9,101)
(133,366)
–
(516)
(276,057)
(122,009)
(108,390)
(9,453)
(9,848)
(2,533)
248,714
27,388
28,203
(43,221)
(58,491)
(224,510)
(4,275)
(25,937)
(6,436)
122,009
108,443
–
–
–
–
(6,149)
(94,560)
(125,059)
(892)
(4,275)
–
–
–
(26,742)
(127,138)
–
–
(NOMINAL CASH FLOWS)
1 YEAR OR LESS
$’000
1 TO 2 YEARS
$’000
2 TO 5 YEARS
$’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)
–
(193,485)
(75,478)
(9,491)
75,073
527
–
(8,911)
(9,000)
(71,327)
(2,825)
–
(3,710)
–
(603,881)
(275,674)
(12,428)
251,027
24,873
–
(26,734)
(178,712)
(127,294)
(129,238)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
MORE THAN
5 YEARS
$’000
–
–
(142,900)
–
143,006
–
–
(119,221)
–
(54,264)
–
–
–
* 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.
120
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
36. FINANCIAL AND CAPITAL RIsk MANAGEMENT (CONTINUED)
(e) FAiR VAlue
The carrying amounts and fair values of financial assets and financial liabilities at reporting 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
Senior notes
Finance lease liability
Derivative liabilities
CARRyinG VAlue
2013
$’000
533,531
287,457
18,833
1,929
10,608
FAiR VAlue
2013
$’000
CARRYING VALUE
2012
$’000
FAIR VALUE
2012
$’000
533,531
287,457
18,833
1,929
10,608
358,364
323,242
27,163
1,991
14,682
358,364
323,242
27,163
1,991
14,682
852,358
852,358
725,442
725,442
235,919
235,919
282,637
282,637
129,552
498,208
10,452
74,917
949,048
129,552
498,848
17,929
74,917
957,165
726,488
466,302
14,583
95,628
726,488
467,348
23,840
95,628
1,585,638
1,595,941
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 1.93% to 13.29% (2012: 2.12% to 13.32%).
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).
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 30 June 2013
Financial assets
Derivative assets
Available for sale investments
Financial liabilities
Derivative liabilities
As at 24 June 2012
Financial assets
Derivative assets
Available for sale investments
Financial liabilities
Derivative liabilities
leVel 1
$’000
–
1,929
1,929
–
–
LEVEL 1
$’000
–
1,991
1,991
–
–
leVel 2
$’000
18,833
–
18,833
74,917
74,917
LEVEL 2
$’000
27,163
–
27,163
95,628
95,628
leVel 3
$’000
–
–
–
–
–
LEVEL 3
$’000
–
–
–
–
–
ToTAl
$’000
18,833
1,929
20,762
74,917
74,917
TOTAL
$’000
27,163
1,991
29,154
95,628
95,628
FAIRFAX MEDIA LIMITED 2013
121
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
37. 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.
During the 2013 financial year, the Printing Operations division was restructured to form part of corporate services. As a result,
Printing Operations is no longer a reportable segment and its results have been allocated to the Metropolitan Media, Fairfax
Regional Media and New Zealand Media segments. The Group is organised into five reportable segments based on aggregated
operating segments determined by similar product and services provided, economic characteristics and geographical
considerations.
The prior year financial information has been restated under the new reportable segments. Refer to Note 1(W) for disclosure on
operating segments.
On 21 December 2012, the Group disposed of its remaining 51% interest in Trade Me Group Ltd. The Group disposed of the US
Agricultural Media business on 14 November 2012. The US Agricultural Media business was part of the Fairfax Regional Media
reportable segment.
REPORTABLE SEGMENT
Fairfax Regional Media
Metropolitan Media
PRODUCTS AND SERVICES
Newspaper publishing and online for all Australian regional and agricultural media.
Metropolitan news, sport, lifestyle and business media across various platforms including print,
online, tablet and mobile. Also includes classifieds for metropolitan and community publications and
transactional businesses.
New Zealand Media
Newspaper, magazine and general publishing and online for all New Zealand media.
Broadcasting
Other
Metropolitan radio networks.
Comprises corporate and other entities not included in the segments above.
Trade Me (discontinued operations)
Transactional businesses of Trade Me in New Zealand.
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 30
June 2013 is as follows:
30 June 2013
Fairfax Regional Media
Metropolitan Media
New Zealand Media
Broadcasting
Other
Total for continuing operations
Trade Me (discontinued operations)
Total for the Group
SeGMenT
ReVenue
$’000
inTeRSeGMenT
ReVenue
$’000
FRoM exTeRnAl
CuSToMeRS
$’000
undeRlyinG
eBiT
$’000
ReVenue
573,354
1,003,400
339,334
105,374
2,449
2,023,911
60,187
(2,281)
(9,695)
55
(273)
–
571,073
993,705
339,389
105,101
2,449
(12,194)
2,011,717
–
60,187
2,084,098
(12,194)
2,071,904
133,705
48,800
49,494
15,482
(26,982)
220,499
41,634
262,133
122
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
37. sEGMENT REPORTING (CONTINUED)
24 June 2012
Fairfax Regional Media
Metropolitan Media
New Zealand Media
Broadcasting
Other
Total for continuing operations
Trade Me (discontinued operations)
Total for the Group
(C) OTHER SEGMENT INFORMATION
(i) SeGMenT ReVenue
Segment revenue reconciles to total revenue and income as follows:
Total segment revenue from external customers for continuing operations
Interest income
Share of net losses/(profits) of associates and joint ventures
Gains on sale of controlled entities
Total revenue and income
SEGMENT
REVENUE
$’000
INTERSEGMENT
REVENUE
$’000
REVENUE
FROM EXTERNAL
CUSTOMERS
$’000
UNDERLYING
EBIT
$’000
634,050
1,132,997
348,262
97,164
8,670
2,221,143
114,014
2,335,157
(2,223)
(2,402)
(653)
(67)
–
631,827
1,130,595
347,609
97,097
8,670
(5,345)
2,215,798
–
114,014
168,670
72,571
59,539
11,304
4,447
316,531
81,987
(5,345)
2,329,812
398,518
30 June 2013
$’000
24 JUNE 2012
$’000
2,011,717
2,215,798
11,604
2,239
19,830
10,458
(1,311)
–
2,045,390
2,224,945
Revenue from external customers includes the operating segments share of net profits from associates and joint ventures.
Transactions between operating segments relating to advertising are at a discount from the rate card and management
charges between operating segments are on third party terms.
The consolidated entity operates predominantly in two geographic segments, Australia and New Zealand. The amount of its
revenue from external customers in Australia is $1,686.1 million (2012: $1,870.3 million) and the amount of revenue from external
customers in New Zealand is $359.3 million (2012: $354.6 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. The
gains on the sale of Trade Me and the US Agricultural Media business have been excluded from the reportable segment results.
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 for continuing operations
Interest income
Finance costs
Gains on sale of controlled entities in other revenue and income
Impairment of mastheads, goodwill, licences, customer relationships and software
Impairment of investments, inventories and property, plant and equipment
Restructuring and redundancy charges
Reported net loss before tax
30 June 2013
$’000
220,499
11,604
(66,571)
19,830
24 JUNE 2012
RESTATED *
$’000
316,531
10,458
(120,189)
–
(418,655)
(2,758,061)
(37,189)
(4,458)
(106,120)
(200,447)
(274,940)
(2,857,828)
FAIRFAX MEDIA LIMITED 2013
123
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
37. sEGMENT REPORTING (CONTINUED)
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.
• Certain numbers shown here do not correspond to the 2012 financial statements and reflect adjustments due to discontinued
operations as detailed in Note 5.
A summary of significant items by operating segments is provided for the period ended 30 June 2013 and 24 June 2012.
iMPAiRMenT oF
MASTHeAdS,
GoodWill,
liCenCeS And
CuSToMeR
RelATionSHiPS
$’000
iMPAiRMenT oF
inVeSTMenTS,
inVenToRieS
And PRoPeRTy,
PlAnT And
equiPMenT
$’000
ReSTRuCTuRinG
And
RedundAnCy
CHARGeS
$’000
GAin on
SAle oF uS
AGRiCulTuRAl
MediA
BuSineSS
$’000
406,055
5,000
–
7,600
–
418,655
–
36,832
–
–
357
37,189
2,844
–
–
–
–
–
–
–
1,614
4,458
(19,830)
(19,830)
IMPAIRMENT OF
MASTHEADS,
GOODWILL,
CUSTOMER
RELATIONSHIPS
AND SOFTWARE
$’000
IMPAIRMENT OF
PROPERTY,
PLANT AND
EQUIPMENT
AND
INVESTMENTS
$’000
RESTRUCTURING
AND
REDUNDANCY
CHARGES
$’000
1,186,746
912,823
608,351
50,000
141
2,758,061
–
92,926
10,266
721
2,207
106,120
10,625
102,269
70
720
86,763
200,447
ToTAl
$’000
408,899
41,832
–
7,600
(17,859)
440,472
TOTAL
$’000
1,197,371
1,108,018
618,687
51,441
89,111
3,064,628
30 June 2013
Fairfax Regional Media
Metropolitan Media
New Zealand Media
Broadcasting
Other
Consolidated entity
24 June 2012
Fairfax Regional Media
Metropolitan Media
New Zealand Media
Broadcasting
Other
Consolidated entity
In the prior year, $225.4 million of goodwill impairment and $159.7 million of other impairment and restructuring charges were
recorded in the Printing Operations segment. This has been restated by reallocating $225.4m to Fairfax Regional Media and
$159.7m to Metropolitan Media.
(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 $1,773.0 million (2012: $2,217.8 million) and the total of these
non-current assets located in New Zealand is $227.4 million (2012: $866.5 million). Segment assets are allocated to countries
based on where the assets are located.
124
NOTEs TO THE FINANCIAL sTATEMENTs
FAIRFAx MEDIA LIMITED AND CONTROLLED ENTITIES FOR THE PERIOD ENDED 30 JUNE 2013
38. 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
30 June 2013
$’000
24 JUNE 2012
$’000
1,419,568
1,829,633
12,912
13,438
1,647,871
2,061,419
18,323
18,742
4,646,248
4,646,248
(722)
(10,672)
8,799
(722)
(10,672)
7,612
(2,827,458)
(2,599,789)
1,816,195
2,042,677
(180,630)
(2,303,255)
–
–
(180,630)
(2,303,255)
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 28.
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
39. EVENTs sUBsEqUENT TO REPORTING DATE
30 June 2013
$’000
24 JUNE 2012
$’000
109
–
–
109
161
82
–
243
The Group undertook a tender offer to repurchase some of its outstanding Senior Notes in July 2013. Acceptances under the
tender totalled US$224 million of the outstanding total of US$430 million. The repurchased notes comprised US$25 million of
floating rate notes and US$199 million of fixed rate notes. Approximately A$270 million of funds were used to repurchase the
Senior Notes through the exercise of US$224 million of existing cross currency swaps. The early redemption of the Senior Notes
will result in a $4.6 million gain net of tax recorded in the income statement in the 2014 financial year.
In July 2013, the Group entered into a new loan facility for NZ$40 million. The loan facility is available to the Group
until July 2015.
On 13 August, the Group entered into an agreement to sell InvestSMART to Australasian Wealth Investments Limited (AWI) for
cash consideration of $7 million. The completion of the transaction is dependent on a capital raising process by AWI.
FAIRFAX MEDIA LIMITED 2013
125
DIRECTORs’ DECLARATION
In accordance with a resolution of the Directors of Fairfax Media Limited, we state that:
1.
In the opinion of the Directors:
(a)
the financial 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 30 June 2013 and of its performance for
the year ended on that date; and
(ii) 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)
(d)
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
as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed Group
identified in Note 28 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 30 June 2013.
On behalf of the Board
Roger Corbett, Ao
Chairman
Greg Hywood
Chief Executive Officer and Managing Director
22 August 2013
126
INDEPENDENT AUDITOR’s REPORT
INDEPENDENT AUDITOR’s REPORT
FAIRFAX MEDIA LIMITED 2013
127
128
sHAREHOLDER INFORMATION
FAIRFAX MEDIA LIMITED
TWENTY LARGEST HOLDERS OF SECURITIES AT 18 SEPTEMBER 2013
oRdinARy SHAReS (FxJ)
National Nominees Limited
Timeview Enterprises Pty Ltd
HSBC Custody Nominees (Australia) Limited
JP Morgan Nominees Australia Limited
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
JP Morgan Nominees Australia Limited
UBS Nominees Pty Ltd
RBC Investor Services Australia Nominees Pty Limited
Citicorp Nominees Pty Limited
Hanrine Investments Pty Ltd
AMP Life Limited
Pacific Custodians Pty Limited
QIC Limited
UBS Wealth Management Australia Nominees Pty Ltd
BNP Paribas Nominees Pty Ltd ACF Pengana
Share Direct Nominees Pty Ltd <10026 A/C>
Sandhurst Trustees Ltd
Y S Chains Pty Ltd
Woodross Nominees Pty Ltd
deBenTuReS
National Financial Services Corp.
OPTIONS
There were no options exercisable at the end of the financial year.
NUMBER OF
SECURITIES
543,506,169
328,382,124
316,973,001
263,817,996
179,060,681
83,608,351
51,824,649
26,360,242
24,916,653
24,803,569
24,073,540
19,510,165
12,089,742
9,657,478
8,860,948
6,500,000
6,151,261
5,951,849
5,500,000
4,433,198
1,945,981,616
%
23.11
13.96
13.48
11.22
7.61
3.55
2.20
1.12
1.06
1.05
1.02
0.83
0.51
0.41
0.38
0.28
0.26
0.25
0.23
0.19
82.74
281
100
SUBSTANTIAL SHAREHOLDERS
Substantial shareholders as shown in substantial shareholder notices received by the Company as at 18 September 2013 are:
Hancock Prospecting Pty Ltd
Gutenberg Investments Pty Ltd
(pursuant to Consultation Agreement)
Allan Gray Australia Pty Ltd
Maple-Brown Abbott Limited
National Australia Bank Limited Group
Ausbil Dexia Limited
Vinva Investment Management
SAS Trustee Corporation
IOOF Holdings Limited
Dimensional Fund Advisors Group
DISTRIBUTION OF HOLDINGS AT 18 SEPTEMBER 2013
NO. OF SECURITIES
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Total number of holders
Number of holders holding less than a marketable parcel
ORDINARY
SHARES
352,455,664
3,554,783
356,010,447
268,884,017
186,558,910
164,869,006
149,340,606
118,872,757
118,279,205
117,884,540
117,713,482
NO. OF
ORDINARY
SHAREHOLDERS
8,900
13,688
4,841
6,028
454
33,911
7,155
NO. OF
DEBENTURE
HOLDERS
1
–
–
–
–
1
–
VOTING RIGHTS
Voting rights of ordinary shareholders are governed by Rules 5.8 and 5.9 of the Company’s Constitution which provide that
every member present personally or by proxy, attorney or representative shall on a show of hands have one vote and on a poll,
shall have one vote for every share held. Debentures do not carry any voting rights.
FAIRFAX MEDIA LIMITED 2013
129
DIRECTORY
FAIRFAX MEDIA LIMITED
ANNUAL GENERAL MEETING
WEBSITE
The Annual General Meeting will be held at 10.30am on
Thursday, 7 November 2013 at the Banquet Hall, Level 1,
Sydney Masonic Centre, corner Castlereagh and Goulburn
Streets, Sydney NSW.
Corporate information and the Fairfax annual
report can be found via the Company’s website
at www.fairfaxmedia.com.au, where links to the
Company’s family of websites can also be accessed.
FINANCIAL CALENDAR 2014
HOW TO OBTAIN THE FAIRFAX ANNUAL REPORT
A soft copy of the annual report is available at
www.fairfaxmedia.com.au. To obtain a hard copy of the
report, contact Link Market Services – see contact details
under Share Registry.
CONSOLIDATION OF SHAREHOLDINGS
Shareholders who wish to consolidate their separate
shareholdings into one account should advise the Share
Registry in writing.
DIRECT PAYMENT TO SHAREHOLDERS’ ACCOUNTS
The Company pays dividends by direct credit to shareholders’
bank accounts. The Company no longer issues cheques
except in exceptional circumstances. A direct credit form
can be obtained from the Share Registry.
Payments are electronically credited on the dividend date
and confirmed by a mailed payment advice. Shareholders
are advised to notify the Share Registry (although it is not
obligatory) of their tax file number so that dividends can be
paid without tax being withheld.
Interim result
Preliminary final result
February 2014
August 2014
Annual General Meeting
November 2014
COMPANY SECRETARY
Gail Hambly
REGISTERED OFFICE
1 Darling Island Road,
Pyrmont NSW 2009
Ph: +61 2 9282 2833
Fax: +61 2 9282 1633
SHARE REGISTRY
Link Market Services Limited
Level 12
680 George Street
Sydney NSW 2000
Ph: 1300 888 062 (toll free within Australia)
Ph: +61 2 8280 7670
Fax: +61 2 9287 0303
Email: registrars@linkmarketservices.com.au
Website: www.linkmarketservices.com.au
SECURITIES EXCHANGE LISTING
The Company’s ordinary shares are listed on the Australian
Securities Exchange as FxJ.
Designed and produced by ArmstrongQ – www.armstrongQ.com.au
FAIRFAX MEDIA LIMITED
GPO 506
Sydney NSW 2001
1 Darling Island Road
Pyrmont NSW 2009
Telephone 02 9282 2833
www.fairfaxmedia.com.au