fairfax media
conversations
that matter
annual report 2014
60%
of Australians
consume fairfax
content
80%
of new Zealanders
consume fairfax
content
AcroSS prinT, web, Mobile And TAbleT plATforMS
fairfax new Zealand
reaches
2.9m
people daily
Aged 15+
fairfax Australia
reaches
10.6m
people a month
Aged 14+
new Zealand’s number 1
6.3m
print
7.1m
web
2m
Mobile/
Tablet
newS & Mobile webSiTe
fAirfAx plATforM uSerS
13
WalKleY aWards
froM 27 noMinATionS in 2013
Melbourne’S no. 1 rAdio STATion
out of
18
41
advertising
& marKeting
aWards
out of
14
33
neWspaper
of the Year
aWards
in 2014
in 2014
pAid digiTAl SubScripTionS for THe Sydney Morning HerAld And THe Age*
140,000+
111,000
exiSTing SMH/THe Age prinT SubScriberS Signed up for digiTAl AcceSS*
*AS AT 11 AuguST 2014
#1
$7.5m
raised by fairfax
events for hundreds
of charities across
Australia
The Australian financial
review is the most widely
read business news
brand among Australia’s
‘business elite’
Winner
north richmond
aWarded panpa
print site of
the Year 2014
doMAin AgenT SubScriberS8550+ up
12%
5.4m
3.4m
1.4m
806k
The Sydney
Morning Herald
The
Age
The Australian
financial review
The canberra
Times
ToTAl MASTHeAd reAderSHip per MonTH
1.2 million
AuSTrAliAnS AcceSS THe SMH on A Mobile or TAbleT per MonTH
The Sydney Morning Herald is number 1 in total masthead
readership. SMH has the largest total masthead readership
in Australia across print, web, mobile and tablet
fairfax media
is at the heart of
conversations that matter.
our independent journalism
and QualitY content Keeps
people informed and connected
– and We have been doing
it for more than 180 Years.
We are a trusted voice, informing,
engaging and entertaining audiences and
communities in Australia and New Zealand
via our newspapers, websites, radio stations,
events and dynamic digital venues.
Every day thousands of our reporters
connect millions of people with our news
and media business. They perform their jobs
with independence, insight and integrity.
All of this is possible because our audience,
our customers, are at the centre of everything
we do. And our advertisers know it.
Every day Fairfax becomes a stronger
company. We are a more agile, more
focused, more digital-centric media business.
Fairfax is ready for today and more prepared
than ever for tomorrow as we grow and
extend our media core into a broadly based
services business – spanning marketing,
property, data, entertainment and beyond
– to sustain the important work we do.
independent. alWaYs.
// 1
//pursue
conversations that matter.
// eddie obeid confronted bY media after icac
inQuirY appearance in februarY 2013.
2 // fairfax annual report // conversations that matter
// Kate McClymont
Investigative Journalist,
The Sydney Morning Herald
i often thanK mY
lucKY stars that
i became a journalist
With the sYdneY
morning herald.
It is both a joy and a privilege to have a job where
you know your endeavours can actually make
a difference to society. A train driver recently
jumped out of his cabin, slapped me on the
back and told me: “We are all behind what you
do!” The fact that our readers support us in
our efforts is both heartening and energising.
We are the public’s eyes and ears. We are their
conscience. What we do, we do for them.
Investigative journalism is flourishing because
Fairfax Media is unflinching in its desire to
support and promote the kind of work that
we do. If The Sydney Morning Herald’s motto
is “Independent. Always.”, mine is “Fearless.
Always.” And if I am afraid, I don’t let on because,
if journalists don’t shine a light on serious
corruption, who will?
// 3
PHOTO: ROB HOMER
independent. alWaYs.
// Sinead Boucher
Group Executive Editor,
Fairfax Media New Zealand
everY daY our journalists
use their immense talents
to touch the lives of
more than tWo million
neW Zealanders.
They welcome us into their lives, allowing us
to tell their stories and champion their causes
in our newspapers, websites and magazines.
Our 600 journalists are in every community
in New Zealand. They make up the biggest
news force in the country and are united as
a virtual team – One Newsroom – producing
the highest-quality journalism for our audiences
in a range of compelling and innovative ways.
They cover the issues and achievements that
matter, from what’s going on in small towns
to holding the nation’s most powerful people
to account.
They work across our digital and print platforms.
They offer our audiences a strong voice
through the community digital platform Stuff
Nation where they contribute their own stories
and opinions for publication on New Zealand’s
biggest news site stuff.co.nz. By putting our
audiences and customers at the heart of
everything we do, we can build a sustainable
digital-centric business for the future while
keeping our communities strong and vital.
4 // fairfax annual report // conversations that matter
independent. alWaYs.
//create
conversations that matter.
neW Zealand’s lorde relishes her time
in the spotlight as a pop music sensation.
PHOTO: CYBELE MALINOWSKI
// 5
//voice
conversations that matter.
//orphan and sex abuse victim graham rundle Wrote
a booK titled ‘44’. he also told his storY to journalist
joanne mccarthY for a profile in julY 2014.
PHOTO: JONATHAN CARROLL
6 // fairfax annual report // conversations that matter
// Chad Watson
Editor,
Newcastle Herald
We are proudlY parochial
– the voice of the hunter
– and With that comes
great responsibilitY.
The Newcastle Herald’s mantra is local
stories about local people and local events.
We celebrate, commiserate, agitate, investigate,
advocate and, most importantly, we participate.
And we are doing it across more platforms
and reaching more people than ever. Regional
newspapers are different from metropolitan
mastheads, but their positive message can
be even more powerful.
It’s no longer enough to set the agenda;
we sometimes need to shift the agenda.
We must stand up for our communities, battle
for greater recognition, argue for a fairer share
of government funding, and we must fight for
justice. As the Voice of the Hunter, we are a loud
hailer for those who can’t speak out themselves.
Which is what we did with our “Shine the Light”
campaign into sex abuse within the Catholic
Church. Gold Walkley-winning reporter Joanne
McCarthy campaigned fearlessly and selflessly
for the current Royal Commission.
That sort of tenacity, combined with
innovative approaches to serving our region
and delivering our journalism, has earned the
Newcastle Herald back-to-back newspaper
and website of the year awards from the Pacific
Area Newspaper Publishers’ Association.
// 7
independent. alWaYs.
chairman’s
report
Total Group revenue declined 3% to $1,972.7 million
from the prior year. After taking into account
significant items, the Company reported a net profit
after tax of $224.4 million. The reported net profit
result includes profit on significant items after tax
of $66.7 million.
Significant items comprised a gain from the sales
of Stayz Group and other controlled entities totalling
$100.4 million, which was offset by restructuring and
redundancy costs of $16.9 million and impairments
of property, plant and equipment of $16.8 million,
mainly relating to print site closures.
The almost $1 billion reduction in net debt over the
past two years has played a big part in restructuring
the Company’s balance sheet. It puts us in a very
strong position given the changing circumstances
of our industry and allowed us to finish the year
with net cash of $68 million.
leading the change
In the face of dramatic industry change, happening
internationally and now being experienced in
Australia and New Zealand, it has been necessary
for us to restructure our business to provide
for greater levels of productivity and efficiency.
The changes have been absolutely vital in the face
of reducing revenues. Critical to these changes has
been the preservation of the quality and scope of our
journalism, which is of course the defining necessity
to ensure the ongoing success of our publications with
our audiences. In fact, of the redundancies that resulted
from the re-engineering of our business, only a small
proportion was from the ranks of our journalists.
In the 2013 Annual Report, I set out a number of
the elements that would contribute to our ongoing
objective of simplifying our business and reducing costs.
In 2014, we made substantial progress in delivering the
benefits of Fairfax of the Future, announced in February
2012 as a three-to-four year program.
It is delivering the outcomes we intended, with core
operating costs for the year down 6.3% on a continuing
business basis. Publishing costs were down 13.8%.
We are on track to achieve our target of $311 million
in annualised savings by 2015. The program delivered
the success of fairfax media’s
strategies for adapting to
ongoing change in the media
industrY is reflected in the
companY’s financial performance
this Year. the companY’s operating
earnings stabilised as We reshaped
the business for future groWth.
For the 2014 financial year, Fairfax delivered
operating earnings before interest, tax, depreciation
and amortisation (EBITDA) of $306.4 million for
continuing businesses, which was about 2% higher
than the $300.9 million recorded in the prior year.
For continuing businesses we grew earnings per
share from 3.7 cents to 6.6 cents and doubled the
full-year dividend.
Among media stocks around the world, this was
a unique performance. Shareholders would also
be aware of the differing performance of other
companies in this sector in Australia.
The growth in full-year profit was achieved in an
international and local environment of continuing
print revenue declines, reflecting a continued structural
shift away from print advertising. This was almost
completely offset by revenue growth in Domain,
digital revenue growth and new revenue streams.
8 // fairfax annual report // conversations that matter
as We looK to the future,
We Will be disciplined,
pragmatic and innovative
as We execute our strategY.
roger corbett
chairman
an incremental EBITDA contribution of $120 million
in 2014. Cost savings are ongoing.
Significant developments and milestones that
contributed to our progress included:
// Closure of Chullora and Tullamarine print sites.
These sites were operating under capacity. We now
print at our smaller, upgraded plants at North
Richmond and Ballarat. It was terrific that the North
Richmond print site was recognised as Print Centre
of the Year at the 2014 PANPA Newspaper of the
Year awards.
// Contracting with APN News & Media in New
Zealand for APN to provide printing services
at its Ellerslie facility in Auckland for several
of our New Zealand newspapers, allowing us to
avoid around NZ$20 million in capital investment.
// Becoming a leaner, more agile organisation with
the achievement of cost efficiencies through
initiatives including partnering with TeleTech for
contact centre services, outsourcing of advertising
production, sub-letting of real-estate at our
main Sydney and Melbourne offices, and use
of centralised sub-editing services.
// Growing digital subscriptions for smh.com.au
and theage.com.au strongly in the first year since
they were introduced. Digital subscriptions for the
SMH, The Age and The Australian Financial Review
contributed total revenue of $24 million in 2014.
A number of significant transactions were completed
in our Digital Ventures division, including the
strategic divestment of Stayz in December 2013 for
approximately $220 million, the sale of InvestSMART
in August 2013 for $7 million, and the merger of RSVP
and Oasis Active announced in June 2014.
The merger brings together two of Australia’s largest
online dating services. Fairfax holds a 58% interest
in the merged RSVP/Oasis entity.
These transactions followed our previous initiative
to sell Trade Me – a business we acquired for
NZ$750 million in 2006, grew, and sold in 2012 when
its market capitalisation was NZ$1.6 billion.
Stayz was sold on an extremely pleasing multiple
of 16.8x FY13 EBITDA. We had acquired this business in
// 9
// chairman’s report cont’d
$224.4m
statutory
net profit
$154.8m
underlying
net profit
AfTer TAx
AfTer TAx for conTinuing buSineSSeS
2005 and expanded it significantly with only modest
additional capital investment. We believe that, as digital
markets evolve, Stayz’s growth prospects are more
secure in the hands of a global player with global reach,
resources and expertise in the holiday rental space.
groWing our business
Our Digital Ventures portfolio now comprises seven
high-potential digital businesses and investments.
Investments during the year included a minority
interest in Sydney-based digital health services
company Healthshare, and a joint venture with
leading international job search engine Adzuna
to provide a new platform for recruiters and job
seekers in Australia.
The Domain Group is going from strength to strength,
continuing its national expansion strategy with the
acquisition of property data business Property Data
Solutions for approximately $30 million in December
2013 and the acquisition of Canberra’s leading
real-estate listings business Allhomes, which was
announced in July 2014.
During the year we completed our review of our
Australian Community Media business. This business
consists of more than 150 rural and regional
newspapers and websites. We will transform this
business into a more powerful network that will
deliver an even better news and advertising service
to Australian rural communities. Our Chief Executive
elaborates further on this in his report.
We are building on our core media assets and
leveraging our strengths. Our business model
now extends to a range of services businesses
– marketing services, property services, data services
and entertainment. This provides the core for future
investment focus and the development of new
revenue streams, all driven by our fundamental
capabilities as a leading multi-media business with
large-scale audiences.
In late August 2014, Fairfax entered into a 50:50
joint-venture with Nine Entertainment Co. to launch
an Australian subscription video-on-demand (SVOD)
service in the 2015 financial year.
This service will offer a broad range of local and
international programs to subscribers on their
various devices for a fixed monthly subscription
fee with no minimum term. SVOD is expected
to grow significantly in Australia in the next decade
with media consumers looking to supplement
their free-to-air viewing with on-demand,
internet-delivered content. This is an exciting
investment by Fairfax as we continue to find new
ways to connect with and deliver content to our
large-scale audiences.
Our strategy and strong balance sheet put us
in a position to invest in existing and new business
areas where our content gives us competitive
strength. Education, travel, health and lifestyle are
segments of the economy that have been identified
as major growth opportunities for the future.
During the year we made pleasing progress with
several new revenue growth areas, including Events,
Small to Medium Enterprise (SME) Digital and
Marketing Services (now integrated with Australian
Community Media), Content Marketing and Data.
Our Marketing Services division was created during
the year and includes Content Marketing and Events
businesses to take a 360-degree view of clients’
needs – not only advertising, but a full suite of
services beyond traditional marketing. The Events
business is building a good portfolio and expanding
into new geographic markets via key platforms
including food and sport.
Content Marketing continues to attract significant
interest from major corporations and has a strong
pipeline of activity. We continue to develop our
data strategy. It represents a significant opportunity
to provide additional value and services to our
advertisers and subscribers.
10 // fairfax annual report // conversations that matter
4¢
total
dividends
$68m
net cash
fully frAnked
AT 29 June 2014
our future
Your Board is mindful of the possibility of media
ownership law reform as the media landscape
continues to evolve. Fairfax would welcome reform
in this area. We believe the current regulatory
framework is outdated and no longer meets the
needs of the industry and the community.
The rules are decades old and addressed
a pre-internet industry. They are now largely
unsuited to the world today. The methods of
delivering real-time news have changed dramatically.
Clearly consumers can now choose whatever
methods of delivery suit their circumstances and
lifestyles. Media companies like Fairfax need to
have the flexibility to operate across all available
media platforms.
There is a multitude of possible scenarios should the
legislation change. The strength of our balance sheet,
reduced cost structures and mastheads means that
Fairfax is in a strong position to take advantage of any
market rationalisation that might arise to the benefit
of our audiences and consumers – and to maximise
value for our shareholders – should the Government
embrace what is a compelling case for change.
A further important note is that 2014 is the first year
of operation of the remuneration arrangements that
received strong support from shareholders at the
2013 Annual General Meeting. These arrangements
were developed to support the achievement of the
Company’s strategic transformation by concentrating
most incentives on the longer term and setting
annual targets that represent milestones on the way.
That is why it is structured to be heavily weighted
to longer term equity opportunities. More detail can
be found in the Remuneration Report. Your ongoing
support of these new arrangements is well justified
by the results to date.
At the 2014 Annual General Meeting we will have
three serving Directors standing for election or
re-election. I am one of the Directors who will
stand for re-election, along with Peter Young.
Todd Sampson stands for election for the first time.
I joined the Board in February 2003 and took on the
position of Chairman in October 2009. Peter Young
is a highly experienced investment banker and
Chairman of Barclays Australia and New Zealand.
Todd Sampson was appointed as a Director in
May this year and brings to the Board his extensive
experience in the media, marketing and advertising
industry and his commercial success as national
CEO of Leo Burnett, one of Australia’s leading
communication companies.
Finally, on behalf of the Board, I would like to thank
all of our people for their tireless efforts in achieving
significant progress for the Company in the past year.
I would also like to acknowledge my fellow Board
members for the invaluable skills and expertise they
bring to this Company.
I would note in particular the outstanding
contribution of Sam Morgan who retired from the
Board in May 2014. Sam is a highly successful digital
entrepreneur and we thank him for his input into
the Company’s strategic thinking over the past six
years. Sam decided that the time was right for him
to move on and will be devoting more time to his
philanthropic and business ventures in various parts
of the world.
As we look to the future, we will be disciplined,
pragmatic and innovative as we execute our strategy.
I am confident that we are well placed.
roger corbett, ao
chairman
// 11
it is noW almost four Years since
We commenced reshaping fairfax
media in earnest. our progress is
reflected in the results for the
2014 financial Year. theY shoW
stabilitY in operating earnings,
a stronger balance sheet With a
net cash position and substantiallY
improved bottom line profitabilitY.
Underpinning this is a vibrant workforce adept at
using the modern tools of media to drive audience
engagement and commercial success.
Transforming a business as diverse as Fairfax was
always going to be a multi-year undertaking, and
our progress so far is very pleasing. Successful
execution of our strategy is creating a leaner,
more digital-centric structure.
Now more than ever, Fairfax is well-positioned
to continue to adapt to an evolving industry.
It is encouraging to see our strategic decisions
and the performance of our people reflected
in financial results.
Major initiatives such as our Fairfax of the Future
program, which will deliver a total of $311 million
in annualised cost savings by the end of fiscal 2015,
contributed significantly to the performance of our
publishing businesses at a time when print advertising
continues to experience structural decline.
Our Metropolitan Media publishing division, excluding
Domain, recorded earnings before interest, tax,
depreciation and amortisation (EBITDA) up 44.6%
to almost $66 million, driven by digital subscription
revenue, our profitable circulation strategy and cost
initiatives. The improvement in our metropolitan
publishing businesses augurs well for the long-term
viability of our newspapers and websites.
We have changed the operating model and
embraced new ways of working. Fairfax’s metro
newsrooms are now genuinely digital first, operating
with significantly reduced costs, with activities
outsourced where appropriate.
12 // fairfax annual report // conversations that matter
in all parts of our
business our people are
focused and committed
to maKing fairfax
a stronger business
and more prepared than
ever for the future.
greg hYWood
chief executive officer and managing director
ceo’s
report
// 13
Meanwhile, in New Zealand, a new business structure
and marketing practices drove revenue growth and
cost reduction.
The Domain Group is growing profitability rapidly,
with digital advertising revenue growth of 40.5%
for the financial year. Overall Group digital revenue
increased a more modest 5% and our Digital Ventures
division now has a portfolio of seven high-potential
digital businesses and investments with strategy
to build, grow and invest.
The Chairman’s Report noted that Australian
Community Media will undergo a major restructure
during the next 18 months. We expect to deliver
annualised savings of at least $40 million by 2016.
The implementation plan follows a review of the
business which drew heavily on the successful
restructuring of our other publishing businesses.
The new model involves reducing duplication
and costs, delivering our journalism in the most
effective ways possible, and responding to changes
in audience habits.
We are moving to a flatter management structure
for the Australian Community Media business, which
includes more than 150 regional and agricultural
mastheads and NSW community titles.
The changes will see a hub-and-spoke model
adopted – underpinned by strong local editorial and
sales capability – with sharing of all services (including
finance, technology, circulation and distribution and
human resources) that can be centralised effectively.
The new model for Australian Community Media
is not predicated on closing mastheads or leaving
markets. There may be some limited consolidation
of papers where there is significant overlap of
readership or where it makes business sense. We are
making these changes to bolster the long-term
viability of our newspapers and websites in order
to make a modern, stronger and more sustainable
rural and regional media network – spanning the
many hundreds of local communities we serve.
// ceo’s report cont’d
$306m
underlying ebiTdA
Metro
radio
5
32
new Zealand
20
Australian community Media
43
excluding buSineSSeS diveSTed
SHAre of underlying ebiTdA for conTinuing buSineSSeS
excludeS corporATe/oTHer (%)
people and culture
We remain committed to our long-standing
core capabilities, investment in our people and
maintenance of our culture. These are crucial
elements without which we could not produce the
outstanding content we provide across a spectrum
of media platforms.
Quality journalism has always been what makes our
business tick, and we are proud of the leading role
we play in driving the conversations that matter
across Australia and New Zealand.
We do this while retaining absolute independence
and integrity. We reach an extensive audience
of more than 13.5 million readers in Australia and
New Zealand through our publishing mastheads
and 1.9 million listeners through our national news,
talk and sports radio network.
We put thousands of reporters into communities
across Australia and New Zealand every day.
These people are at the forefront of changing work
practices, driving innovation as we adapt to evolving
industry dynamics.
Technology has changed the way our people interact
with an engaged audience, and journalism has
evolved into a broader community conversation.
Right across the Fairfax team we have embraced
these changes to reshape what was a legacy-based,
vertically integrated newspaper business into
a genuinely multi-platform media company.
A more commercial, collaborative approach underpins
a reinvigorated Fairfax culture. We are future-focused,
resilient and ready for change. We are driving
innovation and our business is alive with a new
generation of talent which is balanced with experience.
Young people are now being given the opportunity
to take on the sort of responsibilities that were
available to, and for many years tightly held by,
my generation. There’s plenty of opportunity for
passionate individuals looking to grab their future
with both hands. Generational change has been
good for Fairfax.
At the heart of our strategy and our culture
is journalism. In an era of change, we have
kept thousands of reporters in our communities.
We have worked hard to find efficiencies in
management ranks and in the support services
underpinning our journalism.
More than 1,000 new people have joined Fairfax
in the past year in a mix of replacement and new
roles as we have developed our business and
expanded in new areas.
focus on groWth
We will grow by building new audiences and
extending our media core into a broadly based
services business – marketing services, property
services, data services and our recently-announced
Australian subscription video-on-demand joint
venture with Nine Entertainment Co.
14 // fairfax annual report // conversations that matter
$284m
cashflow
280.7
179.4
204.0
print Advertising
digital Advertising
print circulation
digital circulation
24.0
other print revenue
41.0
other digital revenue
74.1
froM TrAding
MeTropoliTAn MediA revenue Mix ($m)
continue our transformation. We will be leveraging
our audience to invest in and build new businesses.
We have a contemporary business model
underpinning our contemporary journalism.
As we look to the future, we are confident in our
strategy and our ongoing transformation. In all
parts of our business our people are focused and
committed to making Fairfax a stronger business
and more prepared than ever for the future.
There’s great opportunity ahead.
greg hYWood
chief executive officer and managing director
This provides the basis for future investment and
the development of new revenue streams, all driven
by our fundamental capabilities as a leading news
and media business with large-scale audiences
interacting with us around the clock.
Our progress can be seen in areas including:
// Domain – Continues its aggressive national
expansion, benefiting from investment in
additional sales and product capability and
several strategic acquisitions.
// Digital Subscriptions – The Sydney Morning Herald
and The Age have more than 140,000 paid digital
subscribers, and an additional 111,000 eligible print
subscribers who have signed up for digital access,
as at 11 August 2014.
// Marketing Services – New division created.
The Events business is building on a solid portfolio
and expanding into new geographic markets via
key platforms including Food and Sport. Content
Marketing continues to attract significant interest
from major corporations and has a strong pipeline
of activity.
// Data – Well-progressed and in active discussions
with potential partners as well as having positive
commercial discussions with a number of
Australia’s largest advertisers.
Fairfax has the balance sheet strength required
to build and invest in new business areas where our
content gives us competitive advantage – including
education, travel, health and lifestyle – as we
// 15
// Matt Pearce
Head of Development,
Weatherzone
We’re a highlY-sKilled
team of meteorologists,
developers and data
specialists operating
and building unrivalled
Weather-related products
and services.
Weather is always top of mind, not just for
me as a trained meteorologist, but mainly
because nobody wants to be caught without
an umbrella. At Weatherzone we provide
accurate and timely information to multiple
audiences – in all sorts of ways – and to our
clients in varied industries.
We started out small 15 years ago compiling
weather graphics and scripts for TV. Today,
we’re a highly-skilled team of meteorologists,
developers and data specialists operating and
building unrivalled weather-related products
and services – for example, our custom aviation
dashboard for Qantas and our market-leading
geospatial viewer that shows radar, lightning,
weather observations and more. It’s great to
be the market leader, but we’re working harder
than ever to stay one step ahead and continuing
to innovate to meet our customers’ needs.
16 // fairfax annual report // conversations that matter
independent. alWaYs.
PHOTO: SIMON O’DWYER
//feel
conversations that matter.
// cooling off in carboor victoria in
januarY 2014 When the temperature soared.
// 17
//Win
conversations that matter.
// going, going, gone at an auction for
a propertY on iconic holbrooK avenue
Kirribilli sYdneY in november 2013.
PHOTO: DALLAS KILPONEN
18 // fairfax annual report // conversations that matter
// Damon Pezaro
Product Director,
Domain Property Group
each month, four million
australians turn to
domain as a vital service
in helping them navigate
the home-buYing or
selling process.
Buying a home can be an incredibly significant
and emotional experience. For most people,
it is the biggest investment they ever make.
Aspirations, dreams and quite literally the
foundations of many Australians’ futures
are embedded in the experience.
We are continuously innovating within the
digital space and leading the way in driving
mobile experiences. It’s a source of great
pride that Domain’s mobile apps regularly
win industry awards and have the highest
consumer ratings in Australia across all the
major mobile platforms.
Whether it is through our property data
empowering home buyers and real-estate
agents, or our suite of agent products and
technology that reaches around 10,000
agent offices and makes for a seamless
customer experience, Domain continues
to be both a driving force and trusted source
for the Australian real-estate industry.
// 19
independent. alWaYs.
// Joanna Savill
Festival Director,
Fairfax Events
it’s a source of great
personal joY to be
bringing our mastheads
to life in such a festive,
sharing and convivial WaY.
Good Food Month arrived 16 years ago
so restaurants could celebrate their listing
in the prestigious Good Food Guide by
holding one-off events throughout October.
Now it’s bigger than ever!
Almost two million people attended Good Food
Month events during the past 12 months, across
Sydney, Melbourne, Canberra and Brisbane.
We also hold the monthly Pyrmont Growers’
Market and the NSW Food & Wine Festival
in February. It’s a fantastic way to connect
with our readers – who are fanatical consumers
of our food and drink sections, guides and
online content – as well as pay tribute to our
chefs, restaurateurs and food producers.
Our growth mirrors the incredible expansion
of the Fairfax Events division – which now covers
everything from fitness to business events.
And there’s more to come.
20 // fairfax annual report // conversations that matter
independent. alWaYs.
PHOTO: CHRIS HYDE
//join
conversations that matter.
// fairfax’s night noodle marKets made
its debut in brisbane in julY 2014.
// 21
// sustainabilitY & corporate
social responsibilitY
the commercial success and financial sustainabilitY of
fairfax media are vitallY important to the companY’s abilitY
to provide long-term benefits to the communities We serve.
Sustainability begins with being financially
sustainable and serving shareholders’ interests
so as to be able to fulfil our business objectives
and serve communities with high-quality
independent journalism – across print, digital
and radio – in Australia and New Zealand.
Fairfax’s journalism is a profoundly important public
good. Our journalism makes communities stronger
– more civil, more open and transparent.
Our ability to continue delivering quality journalism
to huge audiences is dependent upon the successful
execution of our strategy to build, and profitably
monetise, our audiences in a variety of ways.
Fairfax has addressed the challenges the media
faces and shaped a new model and structure
to sustain quality journalism. We are meeting
or exceeding our key milestones in the Company’s
transformation program.
It holds governments and the powerful up to public
scrutiny and to account.
Our transformation has involved making the
necessary tough decisions.
This contributes to making our society the kind
of place in which we all want to live. We engage
and inform the communities we serve.
At Fairfax, we strive to be as accurate and
fair-minded in our reporting as possible. We have
established internal processes which aim to ensure
this happens. We embrace self-regulation for the
industry, which we support and fund.
We have identified four key areas of corporate
social responsibility as integral to the important
community role that we have. Those are:
// editorial integrity;
// environment;
// people and culture; and
// community.
PHOTO: COLE BENNETT
22 // fairfax annual report // conversations that matter
// indigenous australian soccer
star KYah simon is ambassador for
the boots for Kids program in 2014.
Whether via comments, letters or
social media, the smh communitY is
a large and varied group stronglY
engaged in contributing to the
national debate via our print
and digital editions.
KathrYn WicKs
communitY editor, the sYdneY morning herald
// editorial integritY
Fairfax is proud of its quality independent journalism.
We maintain an uncompromising approach to media
ethics and integrity.
Fairfax has a long and proud history of independent
journalism. In August 2013, we launched the
“Independent. Always.” tagline to celebrate our point
of difference and competitive advantage as a news
media organisation.
The simple fact is that not all news is created equal.
Quality independent journalism has been the guiding
principle at Fairfax for the past 180 years. Our journalists
pursue the truth without fear or favour. Vested interests
don’t get in the way. Our journalists operate with a robust
code of ethics that demands balance and fairness.
Independence is at the core of who we are and what
we do. Our journalists give their communities the facts.
They tell it like it is. They expose corruption. They expose
the truth.
Fairfax has deeply-engaged audiences – spanning
print, digital and radio. Our audiences also interact
with us on conversational platforms such as social
media, or at community forums and events run by
our mastheads or radio stations.
Fairfax mastheads and radio stations have received more
than 140 individual, team, masthead or radio station
journalism awards in recognition of their work in the
past year. Such awards often recognise the power Fairfax
journalism has in influencing change and the social
agenda, sparking public interest and debate, and serving
as a source of timely and reliable information. Examples
of such journalism are below.
// Institutionalised political corruption was exposed
through our journalism which prompted the
Independent Commission Against Corruption
inquiries. A group of former ministers was labelled
“corrupt” – Eddie Obeid four times. Reporters for
The Sydney Morning Herald, Kate McClymont and
Michaela Whitbourn, kept readers informed via their
stories and social media.
// The Sydney Morning Herald successfully enlisted
readers to help comb through hundreds of
expense-claim documents of federal parliamentarians.
The process unearthed anomalies which led to major
stories by reporters Jonathan Swan and Lisa Visentin.
// Allegations that Royal Australian Navy sailors had
deliberately burned the hands of asylum seekers on a hot
exhaust pipe were dismissed by the Federal Government
and questioned by News Corp and the ABC’s Media
Watch program. As other media outlets argued over a
thin and contradictory factual basis, Fairfax’s Michael
Bachelard tracked down multiple sources, including an
eye witness on board the Navy vessel, built a compelling
account, and transformed debate about the incident.
// Work by Fairfax investigative journalists triggered the
Victorian State Parliamentary inquiry into institutional
child abuse and the current Royal Commission; and
revelations about the CFMEU, the Australian Workers
Union and widespread union corruption led to the
Royal Commission into unions.
// A Walkley Award-winning investigation by journalists
Adele Ferguson and Chris Vedelago persuaded the
Commonwealth Bank to address public concern and
substantially lift their compensation to victims of bad
financial advice. The reporting also prompted a Senate
inquiry into the financial services industry.
// The Sydney Morning Herald and The Age editors
made coverage of NSW bushfires in October 2013
freely available to readers on digital platforms
as part of providing them with accurate and timely
information about the emergency situation. As the
bushfires threatened lives and homes across NSW,
Fairfax reporters, photographers and videographers
filed hundreds of reports. A live blog ran for 10 days.
This was followed by coverage advocating for better
insurance protection and improvements in firefighting
and early-warning practices.
// The Newcastle Herald’s investigation into high rates
of domestic violence in NSW prompted police
commissioner Andrew Scipione to call the issue out
as being one of the “biggest issues modern society
has to face”. The Herald’s year-long “Shine the Light”
editorial series detailed the names, faces and stories
behind seven recent domestic murders of women
whose deaths were otherwise unreported.
// 23
The piece won praise from advocates and other
media for giving the issue prominence. In June,
the NSW government restored $8.6 million to
homeless services, including an extra $2 million
for women’s services.
// Uncovering multiple suicides and instances
of drug abuse among more than 400 victims
of sexual abuse involving the Catholic Church
in the Hunter Valley, the Newcastle Herald’s “Shine
the Light” campaign was led by reporter Joanne
McCarthy, and has resulted in a Royal Commission.
Joanne received the Gold Walkley at the prestigious
Walkley Awards in November 2013.
// 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.
Fairfax holds an influential position in terms of
educating and informing the community about
environmental issues – at the same time as
taking seriously its responsibility to care for and
protect the environment in which it operates.
The Company’s Environment Policy sets out
its commitment to improving environmental
performance across all business activities.
Fairfax recognises its key impacts are in the areas
of waste generation, air and water emissions and
recycled waste.
communitY education
Fairfax makes an important contribution to
environmental sustainability by educating and
informing the community about environmental
matters. It does this through regular editorial coverage
of relevant issues such as climate change, water,
and health and safety. For example, The Sun‑Herald
provided continued support to the Taronga
Conservation Society via its “Zoo Month” initiative,
which involved giving the Society 10 cents from every
paper sold during the month, while highlighting both
the scourge of animal trafficking and the important
sustainability work that the Society does.
energY audit & emissions target
Fairfax maintains focus on energy efficiency and
cost-saving initiatives, which reflects the Company’s
continued interest in operational improvement and
environmental sustainability.
We have made good progress with our internal
emissions reduction campaigns through office
and print facility consolidation, recycling and
waste minimisation programs, and energy
reduction through the use of efficient lighting
and service equipment.
Fairfax made a commitment in 2011 to reduce
its carbon emissions by 20-25% by 2020. At the
end of the 2014 financial year, the Company has
achieved a combined saving in excess of 16% in
electricity consumption alone. Fairfax is achieving
its overall target through projects that include:
// Completion of an energy efficient lighting
program in 2014 involving 10 Australian-based
regional printing plants. The project received
government support through the AusIndustry
– Clean Technology Investment Program (CTIP).
Key outcomes were:
- 1,119,072 KW reduction per annum;
- 970 tonnes of CO2 saved per annum;
- ROI less than two years at current energy prices;
and
- reduced lighting maintenance costs.
// The closure of the Chullora and Tullamarine
printing facilities and the relocation of this
work to the smaller regional print sites resulted
in further improvements in energy efficiency
and CO2 savings. We expect an 80% reduction
in energy consumption in our printing division.
// The Company has achieved significant real-estate
footprint reduction at its main Sydney and
Melbourne offices. Floor space was reduced by
two levels in Sydney and three levels in Melbourne.
Further reorganisation of Fairfax’s offices across both
Australia and New Zealand is being considered, and
is expected to further reduce the Company’s energy
requirements and carbon emissions.
24 // fairfax annual report // conversations that matter
the closure of the chullora
and tullamarine printing
facilities and move to smaller
regional print sites resulted
in significant improvements
in energY efficiencY and
carbon savings.
bob locKleY
group director, printing and distribution
printing and the environment
With the Commonwealth Government and
leading newsprint supplier, Norske Skog, and
others, Fairfax Media is a co-signatory to the
National Environmental Sustainability Agreement.
The Company maintains a strong commitment
to using sustainable technologies and materials
such as inks with a vegetable oil base and
newsprint from sustainable sources.
Fairfax print facilities are proactive about waste
minimisation, recycling, water management and
energy efficiency. Each facility sets weekly targets
for the reduction of newsprint and ink-related waste.
Sites are benchmarked against each other and against
the wider industry to ensure that best-practice
processes are in place. In the 2014 financial year,
Fairfax’s printing plants reduced printed waste
by 16% over the previous year through a combination
of reduced print volumes and improved efficiency.
Fairfax’s printing division is also a member of the
Publishers’ National Environment Bureau (PNEB),
an association of Australian newspaper and
magazine publishers known as The Newspaper
Works that promotes the sustainable recovery
of old newspapers and magazines. Visit
thenewspaperworks.com.au/facts-and-figures
for more information about the success of the
Newspaper Works’ environmental programs.
real-estate consolidation
Fairfax has outsourced its property maintenance
and asset management to property services
specialist, DTZ.
As part of the project, a review and consolidation of
property assets is underway. Although we are only part
way through the process, a key benefit has already
been achieved this financial year after we submitted
a request for proposals to market for electricity supply
for our large Australian sites that resulted in a cost
saving of $3.4 million over three years. The full roll-out
of the property and facilities management outsourcing
project will further reduce Fairfax’s environmental
footprint and energy consumption associated with
office and administration facilities.
// people & culture
A diverse, innovative and engaged workforce
is important in enhancing the quality and creativity
that underpins our brands and businesses, and
makes Fairfax a good place to work.
The transformation of Fairfax has involved
extraordinary change and the adoption of new
business practices and behaviours. While change
has involved large numbers of staff leaving the
business, the Company’s strategy remains centred
on maintaining at-scale high-quality journalism.
The brunt of structural changes has been borne
by people in management and support services.
Job loss is confronting but has been necessary
to sustain our journalism over the longer term.
While there have been staff losses in some areas,
the business has hired in other areas where
it is expanding and growing revenue.
Fairfax’s businesses continue to attract the best talent
across their operations, from sales to journalism.
Indeed, our recruitment program for trainee
journalists saw hundreds of talented, highly-qualified
young people compete for positions we created at
The Age, The Sydney Morning Herald, The Australian
Financial Review, and in our publications across
regional and rural Australia, and in New Zealand.
Health and safety is of paramount importance
in our business. Fairfax’s Printing and Distribution
site in Newcastle won a PANPA award for Health
and Safety in 2013.
culture and values
The launch of Fairfax’s Culture and Values program
in 2012 marked the start of several initiatives
to establish a new set of cultural values at Fairfax.
Initiatives included a more robust performance
management system and process. New recognition
awards have also been established to acknowledge
our most outstanding employees.
Our values and cultural drivers are also embedded
within our internal projects such as the Fairfax
mentoring program and our leadership development
programs. During the past year, more than 250
// 25
employees have participated in leadership programs
across the business, more than 100 participated
in manager communication training, while 450
employees took part in the mentoring program.
in 2014:
652 staff
use company-subsidised gym facilities
neW WaYs of WorKing
Fairfax has won international praise for the
implementation of innovative workspace and
technology solutions in its Sydney and Melbourne
offices. Real-time working practices continue
to attract high levels of positive feedback from
employees. It involves a mix of flexible seating
arrangements and adaptive-use space, coupled
with technology to support productivity outcomes,
which also facilitates working from home when
appropriate. The solutions were recently rolled
out to new offices in Wellington and are being
considered for other locations. Improved spatial
agility afforded by the new approach allows for
greater collaboration across the business.
health & safetY
Fairfax continued to improve its safety performance
in the 2014 financial year. Since the 2009/2010
financial year, the Company has reduced the number
of Lost Time Injuries by 50% and the number of
workers’ compensation claims by 62%. While some
of these reductions may be attributed to the reduction
in overall headcount across the business, the majority
of the reduction is because of a significantly improved
focus on driving safety accountability through various
policy, training and educational measures.
The Group Lost Time Injury Frequency Rate
(LTIFRMAT) target for FY14 was achieved. The June
2014 LTIFRMAT was 2.58, which was better than
the targeted 2.99. This was a 22% overall reduction
on the 2012-2013 financial year result.
australia and
neW Zealand
took up offer for free flu vaccination
1981emploYees in
699 emploYees
received
free entrY
in fairfax’s running and swimming events
employees and their immediate families, as well as an
independent external “whistleblower” hotline for staff
to report concerns about ethics and harassment.
As part of the Company’s commitment to employee
health and wellbeing we have continued to engage
Optum as our employee assistance provider.
The service allows employees and their immediate
family members to access 24-hour counselling
services covering a wide range of issues. In the
2014 financial year, 308 staff and family members
accessed the service for direct counselling and
support. More than 1000 employees accessed
information directly from the Optum website.
// communitY
diversitY
Fairfax is committed to creating a workplace that
is fair and inclusive. Fairfax values, respects and
encourages diversity across its business and in all
aspects. More information on diversity can be found
in the Corporate Governance section of this report.
Fairfax makes a positive contribution to 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 foundation
The Fairfax Foundation was established in 1959
and operates separately from Fairfax Media with
the purpose of helping current and former Fairfax
employees and their dependents. During the 2014
financial year, the Foundation provided $371,165
in financial grants, loans and other benefits to
eligible recipients.
emploYee support services
Fairfax offers independent, confidential external
assistance and counselling services to all Fairfax
fairfax events
Fairfax’s large-scale audiences, spanning print and
digital, also extend to events it holds in communities
around Australia and New Zealand, such as City2Surf
(Sydney), City2Sea (Melbourne) and City2South
(Brisbane). Many of the organised events result
in important funds being raised for charity partners.
These community events are an important way that
the Company builds and maintains key partnerships
with charities, clubs and associations.
Since 1971, Fairfax Events have raised more than
$30 million for more than 1000 charities. In the 2014
26 // fairfax annual report // conversations that matter
financial year, Fairfax Events have raised $7.5 million
in charitable contributions.
Every year more than 80,000 people register to take
part in the 14km Sun‑Herald City2Surf, the world’s
biggest community run. This year, the event raised
more than $4.5 million for participating charities.
Started in 1972 with just 1200 runners, the Round
the Bays event in New Zealand has become another
of the world’s largest fun runs. Co-owned by Fairfax
Media and the Auckland Joggers Club, the 8.4km
run follows the contours of Auckland’s Waitemata
harbour, and now attracts more than 35,000
participants every year. Online fundraising with
Everyday Hero was incorporated into the last run,
with more than NZ$85,000 being raised.
The Sydney Morning Herald Half Marathon has been
testing serious runners for 23 years. This year’s event
attracted 12,517 participants and raised more than
$558,000 for charity. And in March, more than 3600
swimmers lined up for the Cole Classic at Manly while
the Sun Run had 5491 entrants. Between them, the
Cole Classic and Sun Run raised more than $190,000.
Fairfax’s food events also make a significant
community contribution in their own right and
via charity. One example of our positive community
connection is via The Sydney Morning Herald
Growers’ Market. Held on the first Saturday every
month, the Growers’ Market attracts up to 15,000
people to its 60-80 stallholders, and focuses on
state-grown produce and goods. A key element of
Good Food Month, held in three states, is the Night
Noodle Markets, attracting thousands of people each
year. This year, the Night Noodle Markets in Sydney’s
Hyde Park attracted 300,000 people over the 16
nights and raised $13,000 for OzHarvest, which was
able to deliver 26,000 meals to Australians in need.
charitable contributions
There are many heroic organisations that perform
vital roles of protection and support in our
communities, and that have raised needed funds for
hundreds of special groups and projects. Fairfax is
proud to have helped many hundreds of organisations
during the past 12 months, contributing more than
$6 million in cash and kind to a range of charitable and
community causes during the year.
For example, Fairfax Radio Network supports
communities its radio stations broadcast to by being
directly involved in community-based activities,
sponsorships, and community service announcements,
and through the participation of our staff in community
events. Fairfax Radio Network also assisted hundreds
of non-profit organisations by providing community
service announcement airtime.
The total value of that airtime across the network
was approximately $2.4 million. In addition, Fairfax’s
national content distribution company, Fairfax Radio
each Year more
than 80,000 people
register to taKe part
in the 14Km sun-herald
citY2surf presented
bY Westpac. it’s the
World’s largest
run and sYdneY’s
favourite sporting
event. more than
$30 million has been
raised for charitY
across fairfax events
since 1971.
angus dillon
chief operating officer,
fairfax events
// 27
Syndication, supplied free commercial distribution
and campaign monitoring for a number of charities.
WorKplace giving program
Fairfax’s Australian businesses participate in
a workplace-giving program called More Than
Words. The program encourages and enables
employees to donate part of their pre-tax salary
to certain nominated charities. More than $799,000
has been donated since the program started in 2005.
literacY programs
Early childhood literacy is energetically promoted
by Fairfax in New Zealand through the Fairfax First
Books program. Established in 2006, Fairfax First
Books distributes about 16,000 books each year
to kindergartens throughout New Zealand.
In collaboration with the New Zealand Kindergarten
Association, Fairfax often picks out a kindergarten
in a low socio-economic area for additional support.
Editors and staff across Fairfax mastheads personally
visit the kindergartens in their respective areas to
hand out the books.
boots for Kids
Fairfax started Boots for Kids in Victoria in 2013
and is supporting it for a second year. The program
encourages families to donate new or their children’s
pre-loved football boots to go to thousands of
children in remote indigenous communities around
Australia. Many of the children in those remote
and financially disadvantaged areas play sports
barefoot. Coles provides the collection points, Linfox
provides transport support, while cleaning company
Sunnyfield – a not-for-profit organisation offering
employment for people with disabilities – sorts and
cleans the shoes. In its second year, the donation
program now includes New South Wales.
celebrating diversitY
The Australian Financial Review is in its third year
partnering with Westpac to run the highly successful
100 Women of Influence Awards. In New Zealand,
Fairfax works with Westpac to run the 60 Women
of Influence Awards. The purpose of the awards
is to recognise women in a broad range of roles,
and to celebrate their successes and contributions
to Australia and New Zealand.
Creative Spirit (creativespirit.org.nz) is a Fairfax
initiative in New Zealand which sets the challenge
to employers in the media and advertising industries
to provide employment to people with disabilities.
Fairfax in New Zealand started the Creative Spirit
journey in 2012 with two young people who
job-shared in the creative communication space
and the program has grown from there.
anYthing that
encourages reading
and a connection
With the printed
Word is important.
bernadette courtneY
editor, the dominion post
28 // fairfax annual report // conversations that matter
table of contents
FairFax Media LiMited and ControLLed entities
For the period ended 29 June 2014
Board of Directors ......................................................................... 30
Directors’ Report ............................................................................ 32
Auditor’s Independence Declaration......................................... 36
Remuneration Report ................................................................... 37
Corporate Governance ................................................................. 59
Management Discussion and Analysis Report ........................ 68
Consolidated Income Statement ................................................71
Consolidated Statement of Comprehensive Income ............ 72
Consolidated Balance Sheet ....................................................... 73
Consolidated Cash Flow Statement .......................................... 74
Consolidated Statement of Changes in Equity ....................... 75
Notes to the Financial Statements
1. Summary of significant accounting policies ..................... 77
2. Revenues ...................................................................................88
3. Expenses .................................................................................... 89
4. Significant items .......................................................................90
5. Discontinued operations ....................................................... 91
6. Income tax expense ................................................................ 92
7. Dividends paid and proposed .............................................. 93
8. Receivables ...............................................................................94
9. Inventories ................................................................................. 95
10. Assets and liabilities held for sale ......................................... 95
11. Other financial assets ............................................................. 96
12. Investments accounted for using the equity method ..... 96
13. Available for sale investments ............................................... 98
14. Intangible assets ...................................................................... 98
15. Property, plant and equipment .......................................... 101
16. Derivative financial instruments ......................................... 103
17. Deferred tax assets and liabilities ....................................... 105
18. Payables ...................................................................................106
19. Interest bearing liabilities ..................................................... 107
20. Provisions ................................................................................108
21. Pension assets and liabilities ...............................................109
22. Contributed equity ................................................................ 112
23. Reserves ................................................................................... 113
24. Earnings per share ................................................................. 115
25. Commitments ........................................................................ 116
26. Contingencies ........................................................................ 117
27. Controlled entities ................................................................. 117
28. Acquisition and disposal of controlled entities ............... 122
29. Business combinations ........................................................ 123
30. Employee benefits ................................................................. 124
31. Remuneration of auditors .................................................... 125
32. Related party transactions .................................................. 126
33. Notes to the cash flow statement ..................................... 127
34. Financial and capital risk management ............................128
35. Segment reporting ................................................................ 135
36. Parent entity information .....................................................138
37. Events subsequent to reporting date ................................138
Directors’ Declaration ................................................................. 139
Independent Auditor’s Report...................................................140
Shareholder Information ............................................................ 142
Directory ........................................................................................144
FAIRFAX MEDIA LIMITED 2014
ACN 008 663 161
// 29
board of directors
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 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 and Chairman of the University of New South Wales Centre
for Healthy Brain Ageing Advisory Board.
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 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 Ltd. The company was
founded in 1969. Competitive Foods owns and operates over 350 fast food restaurants in Australia, it also operates
several food manufacturing plants for the supermarket and food service industries exporting to 29 countries.
Mr Cowin is a Director of Network Ten, BridgeClimb and Chandler Macleod Pty Ltd, and is Chairman of Domino’s
Pizza Enterprises Ltd.
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.
saNdra McPHee, aM
non-exeCutiVe direCtor,
appointed to the Board 26 FeBruarY 2010
Ms McPhee is a Director of AGL Energy Limited, Scentre Group (previously Westfield Retail Trust), Kathmandu
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, including 10 years with Qantas Airways Limited.
30 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
board of directors
JaMes MiLLar, aM
non-exeCutiVe direCtor,
appointed to the Board 1 JuLY 2012
Mr Millar is a Director of a number of organisations and companies including Mirvac Limited and Helloworld
Limited. Mr Millar is also Chairman of The Smith Family and former Chairman of Fantastic Holdings Limited. 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. Mr Millar is a Director, trustee or member of a number of not-for-profit and charitable
organisations. He has qualifications in business and accounting and is a Fellow of both the Institute of Chartered
Accountants and the Australian Institute of Company Directors.
LiNda NicHoLLs, ao
non-exeCutiVe direCtor,
appointed to the Board 26 FeBruarY 2010
Mrs Nicholls has more than 30 years’ experience as a senior executive and company director in Australia, New
Zealand and the United States. She is currently the chairman of Yarra Trams and Japara Healthcare, and a Director
of Pacific Brands, Medibank Private and Sigma Pharmaceutical Group. Previously, Mrs Nicholls held the position
of chairman at Healthscope and Australia Post, and was a Director of St George Bank. Mrs Nicholls has a Bachelor
of Arts in Economics from Cornell University and a Masters of Business Administration from Harvard Business
School, where she was formerly Trustee and Vice President of The Harvard Business School Alumni Board.
todd saMPsoN
non-exeCutiVe direCtor,
appointed to the Board 29 MaY 2014
Mr Sampson is the national Chief Executive Officer of Australia’s leading communications company, Leo Burnett
Australia. He has an MBA and has spent nearly 20 years working as a strategic advisor with a diverse range of
expertise including marketing, communication, digital transformation, new media, reputational risk and corporate
turnaround. He is also a writer, producer and host on a number of TV shows including the Gruen Planet, The Project
and the award winning documentary Redesign My Brain.
Peter YoUNG, aM
non-exeCutiVe direCtor,
appointed to the Board 16 septeMBer 2005
Over the last 30 years, Mr Young has been an investment banking executive in Australia, New Zealand and the U.S.A.
He is currently the Chairman of Barclays Australia and New Zealand and Chairman of Standard Life Investments
Australia. Mr Young 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, Chairman of Queensland Investment
Corporation and a Director of PrimeAg Australia. 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. Mr Young is also a member of Standard Life plc Asia Advisory Board, a member of the
Barangaroo Delivery Authority Board, a member of the Board of the Great Barrier Reef Foundation, and Governor
of the Taronga Foundation. He is involved in a number of community, environmental and artistic activities.
// 31
directors’ rePort
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 29 June 2014
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
MicHaeL aNdersoN
Non-Executive Director
JacK coWiN
Non-Executive Director
GreGorY HYWood
Chief Executive Officer and Managing Director
saNdra McPHee, aM
Non-Executive Director
JaMes MiLLar, aM
Non-Executive Director
saM MorGaN
Non-Executive Director
Resigned 29 May 2014
LiNda NicHoLLs, ao
Non-Executive Director
todd saMPsoN
Non-Executive Director
Appointed 29 May 2014
Peter YoUNG, aM
Non-Executive Director
A profile of each Director holding office at the date of this report is included in the Board of Directors section
of this report.
32 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
directors’ rePort
coMPaNY secretarY
Gail Hambly is Group General Counsel and Company
Secretary. She has over 25 years experience as
a commercial and media law specialist. Ms Hambly
is 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,
a member of Chartered Secretaries Australia and of the
Australian Institute of Company Directors. She holds
degrees in Law, Economics and Science.
corPorate strUctUre
Fairfax Media Limited is a company limited by shares
that is incorporated and domiciled in Australia.
PriNciPaL actiVities
During the course of the financial year the consolidated
entity operated as a multi-platform media, marketing
services and property services Group.
The principal activities were the publishing of news,
information and entertainment, advertising sales in print
and digital formats, and radio broadcasting. In addition,
the Group operated or held investments in several
digital businesses.
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 profit attributable to the consolidated entity for the
financial year was $224,432,000 (2013: $16,432,000 loss).
diVideNds
An interim fully franked dividend of 2 cents per ordinary
share and debenture was paid on 19 March 2014
in respect of the year ended 29 June 2014.
Since the end of the financial year, the Board has declared
a fully franked dividend of 2.0 cents per ordinary share
and debenture in respect of the year ended 29 June 2014.
This dividend is payable on 9 September 2014.
reVieW of oPeratioNs
Revenue for the Group was lower than the prior year
at $1,988 million (2013: $2,045 million). After significant
items of $66.7 million the Group generated a net
profit after tax of $224.4 million (2013: $16.4 million
loss). Earnings per share increased to 9.5 cents
(2013: loss 0.7 cents).
Further information is provided in the Management
Discussion and Analysis Report.
siGNificaNt cHaNGes iN tHe state of affairs
Significant changes in the state of affairs of the
consolidated entity during the financial year
were as follows:
The Company repurchased some of its outstanding
Senior Notes in July 2013. Of the outstanding total
of US$430 million, US$224 million were repurchased.
On 6 December 2013, the Company disposed of the
Stayz business for gross proceeds of $218 million.
The Company acquired 100% of the shares in
Property Data Solutions Pty Ltd on 13 December 2013
for $30 million.
LiKeLY deVeLoPMeNts aNd eXPected resULts
The consolidated entity’s prospects and strategic
direction are discussed in the Management Discussion
and Analysis 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 2014
financial year.
The Company reported to the Department of Climate
Change on the total carbon emissions of the Group
generated in the 2013 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 79,174
(2013: 84,976) tonnes CO2-e.
eVeNts after rePortiNG date
The Group completed an agreement to merge
RSVP.com.au Pty Limited with 3H Group Pty Ltd
on 1 July 2014. Following the merger, the Group
will hold a 58% interest in RSVP.com.au Pty Limited.
The Group will no longer consolidate this entity as
it does not control the financial and operating policies
of the entity. The investment will be accounted for using
the equity method.
// 33
directors’ rePort
On 10 July, the Group entered into an agreement to acquire All Homes Pty Ltd and All Data Australia Pty Ltd subject
to regulatory approval. Total consideration is expected to be $50 million.
On 10 July, the Group repaid US$105 million (A$125 million) of senior notes.
reMUNeratioN rePort
A remuneration report is set out on the pages that follow 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 are disclosed in the remuneration report.
directors’ MeetiNGs
The following table shows the number of Board and Committee meetings held during the financial year ended
29 June 2014 and the number attended by each Director or Committee member.
MeetinGs *
Board MeetinG
audit and risk
noMinations
peopLe and CuLture
no.
heLd
8
8
8
8
8
8
7
8
2
8
no.
attended
7
8
8
7
7
8
6
8
2
7
no.
heLd
5
5
–
–
–
5
–
5
–
5
no.
attended
5
4
–
–
–
5
–
5
–
4
no.
heLd
3
–
–
–
–
3
–
3
–
3
no.
attended
3
–
–
–
–
3
–
3
–
1
no.
heLd
8
8
8
8
8
–
–
–
–
–
no.
attended
8
7
8
7
8
–
–
–
–
–
R Corbett **
G Hywood ***
M Anderson
J Cowin
S McPhee
J Millar
S Morgan
L Nicholls
T Sampson
P Young
sustainaBiLitY
and Corporate
responsiBiLitY #
no.
heLd
1
1
1
–
1
–
1
–
–
–
no.
attended
1
1
1
–
1
–
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.
# The Sustainability and Corporate Responsibility Committee was dissolved in December 2013.
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.
34 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
directors’ rePort
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 31
to the financial statements.
The Board of Directors has received advice from the
Audit and Risk Committee and is satisfied that the
provision of the non-audit services did not compromise
the auditor independence requirements of the
Corporations Act 2001 because none of the services
undermine the general principles relating to auditor
independence as set out in Professional Statement F1,
including reviewing or auditing the auditor’s own work,
acting in a management or a decision-making capacity
for the Company, acting as advocate for the Company
or jointly sharing economic risk and rewards.
A copy of the auditor’s independence declaration
under section 307C of the Corporations Act 2001
follows 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 $178,249
• Overseas $71,948
Other assurance and non-assurance services:
• Australia $110,164
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
14 August 2014
// 35
aUditor’s iNdePeNdeNce decLaratioN
aUditor’s iNdePeNdeNce decLaratioN
36 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
reMUNeratioN rePort
reMUNeratioN rePort
Dear shareholder
On behalf of the Board, I am pleased to present Fairfax Media’s Remuneration Report for 2014.
At the 2013 Annual General Meeting shareholders approved the Remuneration Report including the Transformation
Incentive Plan (TIP). The TIP was developed to support the achievement of the Company’s strategic transformation
by concentrating most incentives on the longer term and setting annual targets which represent milestones on the
way. This is why the TIP incentives are heavily weighted to longer term equity opportunities. We are not proposing
any changes to the executive remuneration structure for 2015.
The Company’s strategic goals are referred to later in this report.
We implemented the TIP in 2014. This replaced the previous short term and long term incentive plans.
The TIP strongly aligns executive rewards with shareholder interests because any incentive award for executive
Key Management Personnel (KMP) is made entirely in equity, through a combination of options and deferred
performance shares which are subject to achievement of hurdles.
Seventy percent of the TIP equity is in the form of options. These options are only exercisable if a challenging
performance hurdle linked to Total Shareholder Return (TSR) over a three to four year period is achieved.
The remaining 30% of the TIP incentive is an annual grant of deferred performance shares. Performance shares are allocated
if annual targets in the Company’s transformation plan are achieved. The targets are set at the beginning of each year and
are largely financial. They include earnings before interest, tax, depreciation and amortisation (EBITDA), revenue, targets
and cost reduction. Details of the objectives and outcomes for 2014 are set out in detail later in this Report.
2014 saw significant improvement in returns to shareholders:
• the share price increased significantly;
• dividends doubled;
• earnings per share increased 78% (for continuing businesses and after significant items);
• costs savings continued to favourably impact profitability;
• Domain EBITDA grew by 39% year on year;
• debt reduced by $222 million resulting in a net cash position of $68 million at year end; and
• portfolio assets reviewed to maximize long term value resulted in the very successful sale of the Stayz business
for $218 million.
The options awarded under the TIP provide no short term reward. Their exercise is subject to the achievement of an
absolute TSR performance condition measured over an initial 3 year period, so no options were tested for vesting in
2014. The strong performance in 2014 is however reflected in the number of deferred performance shares granted to
the executive KMP. The value of these performance shares in the future, after the deferral of entitlement will depend on
the value of Fairfax shares at the time so they continue to motivate the executives to improve the value of the Company.
In addition to the TIP the following changes to the remuneration framework were introduced during 2014:
• KMP volunteered to sacrifice 10% of their annual fixed remuneration into Fairfax shares;
• 10% reduction in Non-Executive Directors base fees from 1 July 2013;
• reduction in total Board Committee fees by discontinuing the Sustainability and Corporate Responsibility
Committee and dividing its responsibilities between the Audit & Risk and the People & Culture Committees from
January 2014; and
• no fees for Nomination Committee membership.
On behalf of the Board, I would like to thank our executives for their tireless efforts in achieving significant progress
for the Company in the past year.
The Board recommends the Remuneration Report to you and asks that you support our remuneration policies and
practices by voting in favour of this Report at our 2014 Annual General Meeting.
Yours faithfully
Sandra McPhee, AM
Chair – People and Culture Committee
// 37
reMUNeratioN rePort (aUdited)
1. iNtrodUctioN
This report forms part of the Company’s 2014 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.
The KMP for the financial year are set out in Table 1.
Table 1
naMe
Non-Executive Directors
Roger Corbett
Michael Anderson
Jack Cowin
Sandra McPhee
James Millar
Sam Morgan (1)
Linda Nicholls
Todd Sampson (2)
Peter Young
Executive Director
Greg Hywood
Other Executives
David Housego
Gail Hambly
Allen Williams
(1) Sam Morgan retired from the Board on 29 May 2014.
(2) Todd Sampson joined the Board on the 29 May 2014.
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
Non-Executive Director
Chief Executive Officer
Chief Financial Officer
Group General Counsel/Company Secretary
Managing Director, Australian Publishing Media
38 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
reMUNeratioN rePort (aUdited)
2. KeY reMUNeratioN cHaNGes dUriNG 2014 to sUPPort
tHe coMPaNY’s traNsforMatioN strateGY
The Board implemented a number of changes to the Company’s remuneration framework during 2014. The changes
were set out in the Company’s 2013 Remuneration Report which was approved by shareholders. Overall the targets
for the Transformation Incentive Plan for senior executives (TIP) are set to drive the transformation strategy. The
company is transforming an old publishing business into a multi-platform media organisation and growing new
businesses such as property, marketing and data services, events and related digital businesses. Ultimately the goal
is a sustainable growing business which delivers consistent value to shareholders. Details of the TIP targets are set
out later in this Report.
As well as the TIP the following changes were made in 2014:
• executive KMP volunteered to sacrifice 10% of their annual fixed remuneration to purchase Fairfax shares;
• the freeze on fixed remuneration for the vast majority of our senior executives continued; and
• Non-Executive Directors agreed to a reduction of 10% in their base fees, no Nominations Committee fees
have been paid, and the responsibilities of the Sustainability and Corporate Responsibility Committee were
incorporated into the Audit & Risk and the People & Culture Committees.
Further details of the TIP are set out below.
The new remuneration structure aligns executive rewards with our shareholders over the medium and longer term
and provides an appropriate incentive to deliver on our strategy. The diagram below demonstrates the link between
the Company performance in 2014 and the value of the CEO’s annual incentive. The annual incentive earned by the
CEO for 2014 is in line with the performance of the Company. Under the TIP rules, the annual incentive earned in
2014 by KMP will be entirely delivered by the grant of deferred performance shares.
SHARE PRICE AND CEO ANNUAL INCENTIVE
$1.2
$1.0
$0.8
$0.6
$0.4
$0.2
$0.0
E
C
I
R
P
E
R
A
H
S
$1,200
$1,000
$800
$600
$400
$200
0
)
0
0
0
$
(
I
T
S
O
E
C
1200
1000
800
600
400
200
0
24 June 2012
30 June 2013
29 June 2014*
SHARE PRICE
CEO ANNUAL INCENTIVE
Note – share price relates to closing price at financial year end date.
*
Introduction of TIP with annual incentive awarded in the form of deferred performance shares. Prior to 2014 the short term
incentive arrangements was paid in cash.
// 39
reMUNeratioN rePort (aUdited)
3. reMUNeratioN fraMeWorK aNd GoVerNaNce
Please Note. The following principles and framework were detailed in the Company’s 2013 Remuneration Report
and approved by shareholders. In 2014 the approved principles and framework were implemented.
3.1 reMUNeratioN PriNciPLes aNd fraMeWorK
fairfaX Media eXecUtiVe reMUNeratioN fraMeWorK
The objectives of the Company’s executive remuneration framework are to align executive remuneration with the creation
of value for shareholders, achievement of strategic objectives, and to have regard to the employment market so as to be
able to attract and retain key people.
The executive remuneration framework comprises a mix of fixed and performance based components.
The framework aims to:
• align remuneration with achievement of business strategy;
• fairly remunerate and reward for achievement of Group strategic milestones, with incentive payments
deferred to promote alignment with shareholder interests;
• attract, retain and motivate talented, qualified and experienced people in the context of industry changes; and
• be transparent and fair.
Fixed remuneration package
Performance Based Incentives – Transformation Incentive Plan
• set to attract and retain high calibre
• the new Transformation Incentive Plan (TIP) was
talent to drive the Company’s
transformation strategy
• has regard to the scope of the
individual’s role, level of knowledge
and experience, and the market
(including Fairfax’s competitors)
• most senior executives’ fixed
implemented during 2014 replacing the former short
term and long term incentive plans. The TIP better aligns
executive outcomes with shareholder interests and
provides rewards on delivery of our strategy
• the TIP is designed to reward the most senior executives
if they achieve the transformation plan for the
Company over 3–4 years
remuneration was frozen in 2014
• steps in the transformation are designed to translate into
• for 2014, executive KMP volunteered
to sacrifice 10% of their annual fixed
remuneration into Fairfax shares
• acknowledging the voluntary
sacrifice, and as a further retention
mechanism, if the executive KMP is
still employed at the end of a 2 year
period, then Fairfax will provide one
additional bonus share for every five
shares purchased by the executive
through the voluntary salary
sacrifice arrangement
40 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
enhancement of shareholder wealth over time
• under the TIP, long term options are issued. The options are
exercisable only if challenging absolute shareholder return
objectives are achieved at the end of the vesting period
• a smaller proportion of deferred performance shares
are granted if specific annual business metrics linked
to the transformation of the Company (including linked
to EBITDA, revenue and cost reduction) are achieved.
Metrics are measurable and are weighted and tailored
according to each executive’s responsibilities
• rewards under the TIP are delivered in equity for
executive KMP (i.e. no cash payments) in order to further
incentivise growth in shareholder returns
• any performance shares earned are deferred so that
executives do not become entitled to the equity until later
in the transformation process which also promotes and
rewards longer term service by the executives
reMUNeratioN rePort (aUdited)
3.2 reMUNeratioN GoVerNaNce
The Board’s goal is that Fairfax’s executive remuneration strategy aligns with Company performance and shareholder
interests and supports achievement of the business strategy.
Importantly, the Board is focused on delivering a remuneration framework that attracts and retains the right
executive team to establish and deliver upon Company strategy, and that remuneration arrangements support
achievement of that strategy and growth in shareholder value.
The People and Culture Committee (P&CC), comprising solely of Non-Executive Independent Directors, assists the
Board in discharging its duties.
The members of the P&CC during 2014 were:
• Sandra McPhee (Chair);
• Roger Corbett;
• Michael Anderson; and
• Jack Cowin.
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 rules of the
Committee. The Committee’s primary responsibilities include making recommendations in relation to executive
remuneration that support the remuneration strategy and the performance conditions that underpin it, to promote
the achievement of the Group’s strategy, make recommendations to the Board on Non-Executive Directors fees and
review and recommend the aggregate remuneration pool of Non-Executive Directors, within the maximum amount
approved by shareholders. 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 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
implementation of the changes to remuneration arrangements summarised in Section 3.1 above. The fees paid to
JWS Consulting were $25,000 plus GST.
JWS Consulting has 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.
// 41
reMUNeratioN rePort (aUdited)
3.3 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 provides the executive KMP remuneration
mix for the 2014 financial year at maximum achievable value.
AT RISK: Deferred
Performance Shares
20%
47%
AT RISK: Long Term Options
FIXED: Base Salary, Allowances
and Superannuation
30%
3%
FIXED: Sacrifice of Fixed
Remuneration to purchase
Company shares
Note – Long Term Options are granted at on-target performance. Determination of further options up to the maximum
opportunity will be at the Board’s discretion based on the outcomes against the performance hurdles at the conclusion of the
performance period.
3.4 eXecUtiVe sHareHoLdiNGs
The Company encourages executives to hold Fairfax Media shares to align their interests with our shareholders,
and the Company’s new remuneration framework has been developed with this in mind.
To reinforce this, as summarised in Section 3.1, during 2014 executive KMP sacrificed 10% of their fixed remuneration,
post-tax, into Company shares. Furthermore as detailed in section 4.1, the Transformation Incentive Plan rewards
executives with the issue of long term options exercisable only if challenging absolute shareholder return objectives
are achieved, and also with the achievement of annual objectives through delivery of Performance Shares that are
restricted for a period.
Executive KMP equity holdings disclosure as at 29 June 2014 is set out below:
42 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
reMUNeratioN rePort (aUdited)
(A) ShAreholdingS of executive KMP
Table 2
2014
exeCutiVe kMp
G. Hywood
D. Housego
G. Hambly
A. Williams
Total
BAlANCE AT
30 JuNE 2013
318,343
291,139
104,815
–
714,297
NET
CHANGE (1)
110,912
57,182
43,321
44,200
255,615
BAlANCE AT
29 JuNE 2014
429,255
348,321
148,136
44,200
969,912
POST
YEAR-END
ACquISITIONS
–
–
–
–
–
POST
YEAR-END
DISPOSAlS
–
–
–
–
–
POST
YEAR-END
BAlANCE
429,255
348,321
148,136
44,200
969,912
(1)
Includes shares acquired by sacrifice of 10% of fixed remuneration.
2013
exeCutiVe kMp
G. Hywood
D. Housego
G. Hambly
A. Williams
B. Cassell (2)
Total
BaLanCe at
24 June 2012
118,343
–
104,815
–
1,061,014
1,284,172
net ChanGe
200,000
291,139
–
–
–
491,139
BaLanCe at
30 June 2013
318,343
291,139
104,815
–
1,061,014
1,775,311
post
Year-end
aCquisitions
–
–
–
–
post
Year-end
disposaLs
–
–
–
–
–
–
post
Year-end
BaLanCe
318,343
291,139
104,815
–
1,061,014
1,775,311
(2) The closing balance represents the number of shares at the date of resignation. Mr Cassell ceased in the position of CFO
on 3 Dec 2012 and resigned on 1 July 2013.
(B) rightS over ShAreholdingS of executive KMP
Details of the TIP can be found in section 4.1 and the Long Term Incentive Plan prior to 2014 in section 6.
Table 3
2014
exeCutiVe kMp
G. Hywood
D. Housego
G. Hambly
A. Williams
Total
2013
Executive KMP
G. Hywood
D. Housego
G. Hambly
A. Williams
B. Cassell (1)
Total
BAlANCE AT
30 JuNE 2013
10,403,380
3,666,667
2,690,313
1,837,124
18,597,484
BaLanCe at
24 June 2012
1,514,491
–
717,949
–
785,983
3,018,423
GRANTED AS
REMuNERATION
8,000,000
4,125,000
3,125,000
3,875,000
19,125,000
Granted as
reMuneration
8,888,889
3,666,667
2,083,333
1,837,124
–
16,476,013
NET CHANGE (2)
–
–
(56,488)
–
(56,488)
ClOSING BAlANCE AT
29 JuNE 2014 (3)
18,403,380
7,791,667
5,758,825
5,712,124
37,665,996
net ChanGe (2)
–
–
(110,969)
–
(121,057)
(232,026)
CLosinG BaLanCe at
30 June 2013
10,403,380
3,666,667
2,690,313
1,837,124
664,926
19,262,410
(1) The closing balance represents the number of rights over shareholdings at the date of resignation. Mr Cassell ceased in the
position of CFO on 3 Dec 2012 and resigned on 1 July 2013. Any unvested rights were forfeited.
(2) Net change movements due to forfeitures.
(3) The number of deferred Performance Shares granted under the 2014 Transformation Incentive Plan is determined based on
the Volume Weighted Average Price (VWAP) of the Company share price in the 5 days commencing the day after the August
2014 results announcement. The rights over shares for this plan have therefore not been included in the above table for 2014.
// 43
reMUNeratioN rePort (aUdited)
4. iNceNtiVe reMUNeratioN of eXecUtiVe KMP
4.1 traNsforMatioN iNceNtiVe PLaN (tiP) aPProVed at 2013 aGM
The following table sets out how the Company’s TIP operated during the 2014 financial year.
Table 4
detaiL oF transForMation inCentiVe pLan
What is the TIP and who
participates?
As summarised in Section 3.1, the TIP is designed to reward executives for achieving objectives
linked to the Company’s transformation strategy and for creating growth in shareholder value.
The TIP is weighted heavily to the long term.
Senior executives whose roles and skills are critical to the strategy of the Group are eligible to
participate in the TIP.
Executive KMP are offered an incentive opportunity that comprises:
• options (70% of total incentive opportunity); and
• deferred performance shares (30% of total incentive opportunity).
oPtioNs
How is the options grant
determined?
Options are granted each year with an exercise price determined by the Volume Weighted Average
Price (VWAP) of Fairfax shares over the 5 trading day period commencing on the day after the
Fairfax AGM.
Each option entitles the participant to one ordinary Company share, subject to achievement of the
performance and service conditions and payment of the exercise price.
The value of options granted depends on the participant’s role and responsibilities. The number
of options granted is set by an independent valuation based on the Monte Carlo pricing model.
Before the options can vest and be exercised, the granted options are subject to an absolute total
shareholder return (absolute TSR) condition which must be satisfied over the 3 year performance
period.
Options are granted at on-target opportunity. Determination of further options up to the maximum
opportunity will be at the Board’s discretion based on the outcomes against the performance
hurdles at the conclusion of the performance period.
What is the performance
period?
Initially, three years.
Are the performance
conditions re-tested?
There are re-tests of the performance hurdles in the fourth year if the performance hurdles are not
achieved in the initial 3 year performance period. Two further re-testing opportunities at six monthly
intervals will occur.
In order for the condition to be met on re-testing, absolute TSR on a cumulative basis will be tested
over the extended period.
If the condition is met over the extended period, the Board considers it appropriate that executives
should be rewarded along with shareholders.
Any options that remain unvested after the final re-test will lapse immediately.
The Board is cognisant that a number of factors can impact the outcome against an absolute
TSR condition, including general market volatility at the time, which is outside of the influence
of executives. Accordingly, the Board wants to ensure that executives are not penalised for factors
outside of their control.
44 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
reMUNeratioN rePort (aUdited)
detaiL oF transForMation inCentiVe pLan
What are the performance
hurdles?
Why were they chosen?
Options will not vest unless the compound annual growth rate (CAGR) targets for absolute total
shareholder return growth (absolute TSR) are met. Absolute TSR measures growth in shareholder
wealth over the performance period as it takes into account both share price growth as well as
dividends paid to shareholders.
The applicable targets are set out in the table below.
Performance
Threshold
Target
Stretch
% exercisable
25%
50%
100%
Absolute TSR growth
15% CAGR
20% CAGR
25% CAGR
The Board adopted absolute TSR as the performance condition for the options as it considers share
price growth and other distributions to shareholders to be a key indicator of Fairfax’s success over
the coming years.
The Board believes that the level of growth required in order for the options to vest would result
in a healthy rate of return to shareholders. The Board also considers absolute return targets to
be appropriate during the current rebuilding phase, rather than a relative measure against a variety
of companies that are not facing the issues Fairfax currently faces.
Notwithstanding these targets, the Board has discretion to deem performance conditions not met
if vesting would otherwise only occur as a result of extraneous factors, such as speculation about
a takeover bid for the Company. The Company considers it important that any award of options
reflects the quality of the Company’s performance and excludes any independent factors.
deferred PerforMaNce sHares
How is the grant of deferred
performance shares
determined?
Performance shares are granted if participants achieve certain annual objectives that are linked
to the Company’s transformation strategy.
The actual number of performance shares granted will be dependent on the participants’
performance outcomes for the year and the Volume Weighted Average Price (VWAP) of the
Company share price in the 5 days commencing on the day after the August 2014 results
announcement.
The objectives are set annually by the Board to provide flexibility to moderate, change or introduce
new measures as the transformation strategy progresses through each stage of implementation.
Performance shares are granted on a deferred basis to ensure that the value of any award continues
to be linked to shareholder value. Accordingly, 50% of the shares allocated to a participant following
testing in 2014 are deferred for 12 months (i.e. until 2015) and the remaining 50% are deferred for
24 months (i.e. until 2016).
// 45
reMUNeratioN rePort (aUdited)
detaiL oF transForMation inCentiVe pLan
What are the performance
conditions?
Performance shares are granted at the end of the relevant financial year if a participant achieves
specific performance conditions linked to the transformation strategy.
Why were they chosen?
For every participant in the TIP, the majority of their opportunity is tied to financial milestones
such as EBITDA, revenue and costs targets. The remaining portion of the opportunity comprises
non-financial milestones that drive performance against key business outcomes.
The specific targets and weighting are tailored to each executive based on their role (and including,
for example, whether it is tied to Group or business unit metrics). Further detail around the targets
for 2014, and the weightings that apply in respect to executive KMP, are set out in the table below:
tarGet
EBITDA
Achieve group and/or divisional
EBITDA targets set in reference to the
FY14 budget and FY13 performance.
Revenue
Achieve revenue growth and/or
revenue adjacency targets at group
and/or division level.
Cost
Achieve cost reduction targets for
group and/or division.
Key Business Outcomes
Achieve strategic outcomes relating
to business plan and transformation
strategy.
Safety
Achieve reduction targets relating to
LTIFR and HSE plan initiatives.
Transformation Strategy
GreG
hYwood
50%
daVid
houseGo
50%
GaiL
haMBLY
50%
aLLen
wiLLiaMs
50%
20%
10%
5%
20%
15%
20%
10%
10%
10%
15%
30%
15%
5%
5%
5%
5%
Overall, the targets are set to drive the transformation strategy. The Board believes that generating
new revenue streams and containing our cost structure should translate into shareholder value.
The Board selected these milestones with a view to setting clear and measurable objectives, over
which executives have a clear line of sight.
We are transforming our old publishing business into a multi-platform media organisation and
growing new businesses, such as property, marketing and data services, events and related digital
businesses. Ultimately the goal is a sustainable, growing business which delivers consistent value
to shareholders.
What is the performance
period?
One year. Performance Shares are awarded by reference to transformational objectives that are set
at the start of each year. Performance shares are granted at the end of the relevant financial year
if specific goals are achieved.
Are the performance
conditions re-tested?
No.
GeNeraL
Is there an ability to claw
back awards under the TIP?
Yes. The Board has the discretion to claw back awards made under the TIP to ensure that
participants do not unfairly benefit, including in the event of fraud, dishonesty or a breach of
obligation to the Company.
In addition, the Board may also claw back awards in the case of material risk or where financial
information becomes available after awards are granted, which suggests that the initial grant was
not justified.
46 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
reMUNeratioN rePort (aUdited)
detaiL oF transForMation inCentiVe pLan
Is there a restriction on
executives hedging awards
under the TIP?
What happens in a change
of control?
Yes. The rules prohibit employees from creating any encumbrance on unvested awards. All
executives must operate under the Fairfax Security Trading Policy.
In the event of a takeover bid or other transaction, event or state of affairs that in the Board’s
opinion is likely to result in a change in control of the Company, the Board has discretion to
determine that vesting of some or the entire TIP should be accelerated.
If the Board needs to exercise its discretion regarding a change of control event it would be guided
by the time remaining before the set vesting test date, whether if, the performance hurdles were
applied at the date of the likely change of control, the vesting test would be achieved, and, the best
interest of shareholders.
What happens if the
executive ceases
employment?
Where an executive resigns or their employment is terminated by mutual agreement, the unvested
transformation incentives will remain on foot and subject to the original performance hurdle (in
the case of Options) and the deferral period (in the case of Performance Shares), as though the
executive has not ceased employment.
However, the Board may at its discretion determine to lapse any or all of the unvested
transformation incentives and ordinarily, in the case of resignation, would be expected to do so.
Where an executive is terminated for cause such as misconduct or poor performance all of the
unvested transformation incentives will lapse or be forfeited, unless the Board determines otherwise.
The following diagram provides a timeline and overview of the how the 2014 TIP operates, demonstrating the strong
alignment of the plan with shareholder interests.
1/7/13
30/6/14
30/6/15
30/6/16
70%
OPTIONS
Vesting subject to achievement of longer term
shareholder wealth objectives
30% DEFERRED PERFORMANCE SHARES
If transformation
objectives met
performance
shares granted
50% become
unrestricted
50% become
unrestricted
31/12/16
30/6/17
1
s
t
t
e
s
t
2
n
d
t
e
s
t
3
r
d
t
e
s
t
// 47
reMUNeratioN rePort (aUdited)
4.2 2014 oUtcoMes UNder tHe traNsforMatioN iNceNtiVe PLaN
(A) AnnuAl coMPonent: deferred PerforMAnce ShAreS
The positive outcome on the 2014 annual transformational objectives has resulted in executive KMP receiving an
annual allocation of deferred performance shares. The outcomes reflect that EBITDA performance was broadly in
line with plans. However due to the continued challenges in revenue this was largely achieved through significant
cost reductions across the group. Safety performance has improved remarkably.
The average outcomes for executive KMP was 77% of maximum opportunity. The diagrams below represent the
dollar value earned by each executive KMP. The amount of deferred performance shares to be granted will be
determined based on the VWAP of Company shares in the five trading days commencing on the day after the
August 2014 results announcement.
GREG HYWOOD
DAVID HOUSEGO
GAIL HAMBLY
ALLEN WILLIAMS
ON-TARGET $480,000
MAXIMUM $960,000
Not earned
EBITDA
Revenue Costs
Strategic Safety
ON-TARGET $247,500
MAXIMUM $495,000
Not earned
EBITDA
Revenue Costs
Strategic Safety
ON-TARGET $187,500
MAXIMUM $375,000
EBITDA
Revenue Costs
Strategic
Safety
ON-TARGET $232,500
MAXIMUM $465,000
Not earned
Not earned
EBITDA
Revenue
Costs Strategic Safety
The following table provides the weightings and performance achieved for each measure for each executive KMP:
Table 5
naMe
G. Hywood
D. Housego
G. Hambly
A. Williams
legend:
eBitda
reVenue
50%
50%
50%
50%
20%
10%
5%
20%
keY
Business
outCoMes
10%
15%
30%
15%
Costs
15%
20%
10%
10%
saFetY
5%
5%
5%
5%
Minimum performance target not achieved
Overall performance below on-target, but some performance elements achieved
Overall performance either met on-target, or achieved above targets
Maximum performance target achieved
48 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
reMUNeratioN rePort (aUdited)
Performance summary:
EBITDA(1)
Strong Group EBITDA result achieved which provided awards above on-target performance for Group
EBITDA.
Because Mr Williams has 25% of his incentive based on Group performance and 25% based on Australian
Publishing Media performance he achieved overall EBITDA performance below his target.
Revenue
Mr Williams exceeded his target for the transformational digital growth revenue targets. The rest of KMP
had targets based on Group Revenue measures.
Costs
Cost reduction targets have been achieved, with the targets in the Fairfax of the Future exceeded.
Key Business
Outcomes
Key annual milestones and initiatives in the transformation journey were achieved. For example, for the
CEO these outcomes included targeted assets sales (e.g. Stayz); closure of non-profitable products; and
deliver on growth of Domain.
Safety
Targets were based on year on year improvement of Lost Time Injury Frequency Rates, and were exceeded.
(1) The EBITDA targets set were based on the Group’s 2014 budget and were adjusted for significant acquisitions and disposals
made during the year.
Summary of TIP deferred performance share awards for the 2014
Table 6
naMe
G. Hywood
D. Housego
G. Hambly
A. Williams
(1) As a percentage of Fixed Remuneration
MaxiMuM
opportunitY
annuaL
perForManCe
Based sti (1)
% oF
MaxiMuM
opportunitY
earned
% oF
MaxiMuM
opportunitY
ForFeited
60%
60%
60%
60%
78%
81%
79%
67%
22%
19%
21%
33%
// 49
reMUNeratioN rePort (aUdited)
(B) oPtionS grAnted
The options are subject to achievement of an absolute TSR performance measured over 3 years aligned to the
strategic plan. No options were available to vest under the TIP during 2014. The diagram below provides the starting
share price and the forecast share price required at the end of the 3 year period for the absolute TSR target to be
achieved and vesting to occur. The Company share price after the first year of the performance period is tracking
at a level that would meet maximum vesting if this performance continues over the 3 to 4 year period.
FXJ FORECAST SHARE PRICE REQUIRED TO MEET 2014 OPTIONS ABSOLUTE TSR PERFORMANCE HURDLE
$1.0
$0.80
$0.60
76% INCREASE FROM OPENING SHARE PRICE TO 30 JUNE 2014
MAXIMUM
TARGET
THRESHOLD
E
C
I
R
P
E
R
A
H
S
$0.40
1 July 13
(start of the FY14 options period)
30 June 14
30 June 15
30 June 16
(end of 3 year period)
SHARE PRICE
THRESHOLD
TARGET
STRETCH
Note – Target share price required (incorporating a conservative dividend assumption) calculated by PricewaterhouseCoopers (PwC).
50 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
reMUNeratioN rePort (aUdited)
5. eXecUtiVe KMP reMUNeratioN aNd eQUitY GraNted iN 2014
5.1 reMUNeratioN of KeY MaNaGeMeNt PersoNNeL
This table sets out details of remuneration during the financial year.
Table 7
G. Hywood
– Chief Executive Officer
D. Housego
– Chief Financial Officer (1)
G. Hambly
– Group General Counsel
& Company Secretary
Allen Williams
– Managing Director Australian
Publishing Media (2)
B. Cassell
– Chief Financial Officer (3)
TOTAl
Base
saLarY &
other
BeneFits (4)
1,575,000
1,575,000
760,000
464,166
554,210
554,210
750,000
184,083
2014
2013
2014
2013
2014
2013
2014
2013
2013
274,411
Cash
Bonus
–
–
–
100,000
–
–
super-
annuation
25,000
25,000
25,000
26,923
70,790
70,790
LonG serViCe
LeaVe
expense
17,394
11,239
2,357
–
10,829
10,830
totaL
exCLudinG
shares /
riGhts
1,617,394
1,611,239
787,357
591,089
635,829
635,830
VaLue oF
shares /
riGhts (5)
1,244,877
371,468
545,748
250,556
427,365
82,366
totaL
inCLudinG
shares /
riGhts
2,862,271
1,982,707
1,333,105
841,645
1,063,194
718,196
–
–
–
25,000
2,885
14,655
2,966
789,655
189,934
406,923
125,537
1,196,578
315,471
9,615
14,654
298,680
(79,828)
218,852
2014
2013
3,639,210
3,051,870
–
100,000
145,790
135,213
45,235
39,689
3,830,235
3,326,772
2,624,913
750,099
6,455,148
4,076,871
(1) D. Housego commenced with the Company on the 3 December 2012.
(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 ceased in the position of CFO on 3 December 2012 and was no longer deemed to be KMP.
(4) Executive KMP voluntary salary sacrifice of 10% of their fixed annual remuneration to purchase Company shares is on
a post-tax basis.
(5) Amount includes the amortised cost of the fair value of rights to shares and options issued but not yet vested.
// 51
reMUNeratioN rePort (aUdited)
5.2 eQUitY GraNted to eXecUtiVes WHo are KeY MaNaGeMeNt PersoNNeL dUriNG tHe fiNaNciaL Year
Table 8
G. Hywood
– Chief Executive Officer
D. Housego
– Chief Financial Officer
G. Hambly
– Group General Counsel
& Company Secretary
Allen Williams
– Managing Director Australian
Publishing Media
equitY
award (1)
perForManCe
Condition (2)
Options
Performance
Shares
Options
Performance
Shares
Options
Performance
Shares
Options
Performance
Shares
Absolute TSR
Transformation
Objectives
Absolute TSR
Transformation
Objectives
Absolute TSR
Transformation
Objectives
Absolute TSR
Transformation
Objectives
nuMBer oF
options/
shares
Granted (3)
8,000,000
Fair VaLue
per options/
shares (4)
$0.14
n/a
4,125,000
n/a
3,125,000
n/a
3,875,000
n/a
n/a
$0.14
n/a
$0.14
n/a
$0.14
n/a
MaxiMuM
VaLue
oF Grant (5)
$1,120,000
$750,644
$1,870,644
$577,500
$401,277
$978,777
$437,500
$294,496
$731,996
$542,500
$309,604
$852,104
The maximum value of unvested shares for executive KMP in the LTI plans for FY2011, FY2012, and FY2013 is $5,163,520.
The minimum total value of all unvested shares for all plan years is nil.
1) The Performance Share grants made to executives for 2014 are subject to the terms summarised in section 4.1 and will not
be known until after the Company results announcement in August 2014, in line with the plan rules.
2) Performance Shares and Options are subject to performance hurdles that are outlined in section 4.1. Rights to Performance
Shares and Options lapse where the applicable performance conditions are not satisfied on testing. As the Performance
Shares and Options only vest on satisfaction of performance conditions which are to be tested in future years, the 2014
Performance Shares and Options have not yet been forfeited or vested.
3) Options are granted at on-target performance. Determination of further options up to the maximum opportunity will be at
the Board’s discretion based on the outcomes against the performance hurdles at the conclusion of the performance period.
4) Fair value per Option was calculated by independent consultants PwC as at the grant date of 8 November 2013.
5) 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).
52 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
reMUNeratioN rePort (aUdited)
6. LoNG terM iNceNtiVe PLaN Prior to 2014
Prior to 2014, the Company operated a short term incentive plan and a separate long term incentive plan (LTIP).
These plans were discontinued from 2014. The following table sets out how the LTIP prior to 2014 operates.
Table 9
detaiL oF Ltip arranGeMent
How was the lTIP grant
determined?
In 2013, LTIP participants received an allocation of performance rights (rights) which allowed
the executive to acquire shares for no consideration subject to achievement of the performance
hurdles. No dividends were payable to participants on the unvested rights.
Allocations were set at a fixed percentage of the executive’s Fixed Remuneration at the time they
participate in the LTIP. The value of the rights at the time of allocation was determined by an
independent external valuer using the industry standard valuation method.
In the allocations for the 2011 and 2012 financial years, participants in the LTIP received an
allocation of Company shares. The shares were allocated to the executives and held in trust until
they either vest, or forfeited.
What was the performance
period?
Three years.
For allocations prior to 2013, if an allocation did not vest at the end of the three year period,
a re-test of the performance hurdles occurred at the end of the fourth. This re-test was removed
in respect of the 2013 allocation.
What were the performance
hurdles?
For an allocation to vest, there were two performance hurdles, both linked to the Company’s return
to shareholders.
Fifty percent of an allocation vested on achievement of the total shareholder return (TSR) target.
TSR was measured against the S&P/ASX 300 Consumer Discretionary Index and allocations vested
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
Vested on a straight line basis
100%
The other 50% of the allocation vested if the Company achieves the earnings per share (EPS) target.
EPS was measured by the compound annual growth rate (CAGR) of the Company’s EPS and vested
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%
Vested on a straight line basis
100%
The base case to be used for the EPS performance hurdle test for the 2013 allocation is 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 happened if there
was a change of control
of the Company?
The Board had discretion regarding vesting.
If the Board needs to exercise its discretion regarding a change of control event it would be guided
by the time remaining before the set vesting test date, whether if, the performance hurdles were
applied at the date of the likely change of control, the vesting test would be achieved, and, the best
interest of shareholders
What happened if
the executive ceased
employment?
If an executive resigned, unvested allocations were, in general forfeited. On termination for
misconduct, allocations were forfeited.
If an executive was terminated without cause, for example made redundant or died or permanently
disabled, then vesting was at the Board’s discretion.
// 53
reMUNeratioN rePort (aUdited)
Status and dates – lTIP Prior to 2014 (unvested awards)
Table 10
Grant date
award instruMent
17 November 2010
Performance Shares
perForManCe
testinG window
1 July 2010
– 30 June 2013
13 September 2011
Performance Shares
1 July 2011
– 30 June 2014
expirY date
(iF hurdLe not Met)*
award stiLL
eLiGiBLe For VestinG?
30 June 2014
No. Performance
hurdles not achieved,
shares have
been forfeited
30 June 2015
In re-testing period.
Base EPS FY11 = 11.6c.
Three year test
minimum FY14 = 14.2c.
Minimum
retest FY15 = 15.2c
Performance
testing window
not yet complete.
Base EPS FY12 = 8.7c.
Three year test
minimum FY15 = 10.7c.
31 October 2012
Performance Rights
1 July 2012
– 30 June 2015
n/a
* Retest of conditions performed in the fourth year in respect of LTIP 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.
Of the two remaining LTIP grants prior to 2014, the EPS hurdles are currently not being achieved but progress on the
TSR hurdle for the 31 October 2012 grant is tracking on target to achieve part vesting. The following diagram shows
the current TSR progress against the S&P/ASX 300 Consumer Discretionary Index vesting hurdle.
TSR Progress on existing Long Term Incentive Grants
100%
75%
50%
25%
0%
)
E
L
I
T
N
E
C
R
E
P
(
E
C
N
A
M
R
O
F
R
E
P
R
S
T
100% VESTING
71%
50% VESTING
STRAIGHT
LINE PRO RATA
41%
NO VESTING
13 September 2011 Grant
13 October 2012 Grant
FXJ RELATIVE TSR RANK
Note – Forecast tracking of relative TSR against the S&P/ASX 300 Consumer Discretionary Index provided by
PricewaterhouseCoopers (PwC).
54 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
reMUNeratioN rePort (aUdited)
Retirement Benefits for Executives
Except for a small number of long serving executives who are members of a defined-benefit superannuation plan,
retirement benefits are delivered through 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.
7. eXecUtiVe serVice aGreeMeNts
The remuneration and other terms of employment for the executive KMP are set out in written service 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 incentive opportunities and termination
rights and obligations.
The Company may terminate the employment of the executive without notice and without payment in lieu of
notice in some circumstances, including if the executive commits an act of serious misconduct or a material breach
of the executive service agreement or is charged with any criminal offence which, in the reasonable opinion of the
Company, may embarrass or bring the Fairfax Group into disrepute.
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 11
naMe oF
exeCutiVe
Greg Hywood
CoMpanY
terMination
notiCe period
12 months
eMpLoYee
terMination
notiCe period
6 months
David Housego
12 months
4 months
Gail Hambly (1)
18 months
3 months
Allen Williams
12 months
6 months
post-eMpLoYMent restraint
12 month no solicitation of employees or clients
6 months no work for a competitor of the Fairfax Group
12 month no solicitation of employees or clients
6 months no work for a competitor of the Fairfax Group
12 month no solicitation of employees or clients
6 months no work for a competitor of the Fairfax Group
12 month no solicitation of employees or clients
6 months no work for a competitor of the Fairfax Group
(1) Participant in the Fairfax defined benefit superannuation scheme.
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 approved by shareholders at the 2010 Annual General Meeting and set
at $2,100,000 per annum. Within this limit, the Board annually reviews Directors’ remuneration with advice from
the P&CC. The Board also considers survey data on Directors’ fees paid by comparable companies, and any
independent expert advice commissioned.
In addition to the reduction in fees implemented during 2013, as foreshadowed in our 2013 Remuneration Report,
Directors’ base fees were reduced by 10% as of 1 July 2013.
A further reduction in Board Committee fees was realised by incorporating the responsibilities of the Sustainability
and Corporate Responsibility Committee into the Audit & Risk and the People & Culture Committees
from January 2014.
// 55
reMUNeratioN rePort (aUdited)
Board and committee fees payable as at the date of this report are as follows:
Table 12
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
$
327,600
117,000
44,000
33,000
33,000
22,000
0
0
*
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 13
M. Anderson
R. Corbett
J. Cowin (1)
J. Millar
S. McPhee
S. Morgan (2)
L. Nicholls
T. Sampson (3)
P. Young
Directors
non-exeCutiVe
direCtors Fees
156,883
180,290
327,600
380,500
140,426
136,178
151,538
148,869
162,510
185,000
117,472
142,579
162,651
174,000
12,150
151,538
184,000
1,382,768
1,531,416
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2013
2014
2014
2013
2014
2013
super-
annuation
14,512
29,644
30,303
34,245
12,989
12,256
14,017
13,398
15,032
16,650
10,866
12,832
15,045
15,660
1,124
14,017
16,560
127,905
151,245
totaL
171,395
209,934
357,903
414,745
153,415
148,434
165,555
162,267
177,542
201,650
128,338
155,411
177,696
189,660
13,274
165,555
200,560
1,510,673
1,682,661
(1) J. Cowin joined the Board on 19 July 2012.
(2) S. Morgan retired from the Board on the 29 May 2014.
(3) T. Sampson joined the Board on the 29 May 2014.
56 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
reMUNeratioN rePort (aUdited)
8.3 NoN-eXecUtiVe directors’ sHareHoLdiNGs
Non-Executive Director equity holdings disclosure as at 29 June 2014 is set out below:
Table 14
2014
non-exeCutiVe
direCtor
M. Anderson
R. Corbett
J. Cowin
J. Millar
S. McPhee
S. Morgan (1)
L. Nicholls
T. Sampson (2)
P. Young
Total
2013
exeCutiVe kMp
M. Anderson
R. Corbett
J. Cowin
J. Millar
S. McPhee
S. Morgan
L. Nicholls
P. Young
Total
BAlANCE AT
30 JuNE 2013
–
99,206
3,000,000
100,000
110,893
1,564,668
107,758
–
131,117
5,113,642
BaLanCe at
24 June 2012
–
99,206
–
–
40,220
1,564,668
40,387
131,117
1,875,598
NET CHANGE
OTHER
–
–
–
–
29,902
–
28,085
–
–
57,987
net ChanGe
other
–
–
3,000,000
100,000
70,673
–
67,371
–
3,238,044
BAlANCE AT
29 JuNE 2014
–
99,206
3,000,000
100,000
140,795
1,564,668
135,843
–
131,117
5,171,629
BaLanCe at
30 June 2013
–
99,206
3,000,000
100,000
110,893
1,564,668
107,758
131,117
5,113,642
POST
YEAR-END
ACquISITIONS
–
–
–
–
–
–
–
–
–
–
post
Year-end
aCquisitions
–
–
–
–
–
–
–
–
–
POST
YEAR-END
DISPOSAlS
–
–
–
–
–
–
–
–
–
–
post
Year-end
disposaLs
–
–
–
–
–
–
–
–
–
POST
YEAR-END
BAlANCE
–
99,206
3,000,000
100,000
140,795
1,564,668
135,843
–
131,117
5,171,629
post
Year-end
BaLanCe
–
99,206
3,000,000
100,000
110,893
1,564,668
107,758
131,117
5,113,642
(1) S. Morgan retired from the Board on the 29 May 2014. The closing balance represents the number of shares at the date
retired from the Board.
(2) T. Sampson joined the Board on the 29 May 2014.
9. LoaNs to 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 29 June 2014 (2013: nil).
There are no outstanding loans for the financial years ended 29 June 2014 and 30 June 2013.
// 57
reMUNeratioN rePort (aUdited)
10. 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 15
Underlying operating revenue
Underlying net profit after tax
Earnings per share after significant items
Dividends per share
Total Shareholder Returns (TSR)*
$m
$m
Cents
Cents
%
IFRS
2014
1,866
158.5
6.7
4.0
97.5
iFrs
2013 (1)
2,074
143.5
5.4
2.0
(3.4)
iFrs
2012
2,328
212.0
8.7
3.0
(40.5)
iFrs
2011
2,466
285.0
11.6
3.0
(23.9)
iFrs
2010
2,482
290.7
11.8
2.5
11.3
* 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).
58 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
corPorate GoVerNaNce
corPorate GoVerNaNce
The Company’s compliance with the ASX Corporate Governance Council’s Corporate Governance Principles and
Recommendations, 2nd edition (“ASX Recommendations”) is set out in the following table.
CoMpLianCe
Principle 1: lay solid foundations for management and oversight
1.1
Establish the functions reserved to the Board and those delegated to senior executives and disclose
those functions
Disclose the process for evaluating the performance of senior executives
1.2
Provide the information indicated in the Guide to reporting on Principle 1
1.3
Principle 2: Structure the Board to add value
2.1
2.2
2.3
2.4
2.5
A majority of the Board should be independent Directors
The chair should be an independent Director
The roles of chair and Chief Executive Officer should not be exercised by the same individual
The Board should establish a nomination committee
Disclose the process for evaluating the performance of the Board, its committees and individual Directors
Provide the information indicated in Guide to reporting on Principle 2
2.6
Principle 3: Promote ethical and responsible decision making
3.1
Establish a code of conduct and disclose the code or a summary of the code as to:
• the practices necessary to maintain confidence in the Company’s integrity
• the practices necessary to take into account legal obligations and the reasonable expectations
of shareholders, and
• the responsibility and accountability of individuals for reporting and investigating reports of
unethical practices
3.2
3.3
3.4
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
3.5
Principle 4: Safeguard integrity in financial reporting
The Board should establish an audit committee
4.1
Structure the audit committee so that it:
4.2
• 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
4.3
Provide the information indicated in Guide to reporting on Principle 4
4.4
Principle 5: Make timely and balanced disclosure
5.1
Establish written policies and procedures designed to ensure compliance with ASX Listing Rule disclosure
requirements and to ensure accountability at a senior executive level for that compliance and disclose those
policies or a summary of those policies
Provide the information indicated in Guide to reporting on Principle 5
5.2
Principle 6: Respect the rights of shareholders
6.1
Design a communications policy for promoting effective communication with shareholders and encouraging
their participation at general meetings and disclose the policy or a summary of the policy
Provide the information indicated in Guide to reporting on Principle 6
6.2
// 59
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
Board should require management to design and implement the risk management and internal control
system to manage the company’s material business risks and report to it on whether those risks are being
managed effectively. The Board should disclose that management has reported to it as to the effectiveness of
the Company’s management of its material business risks
Board should disclose whether it has received assurance from the Chief Executive (or equivalent) that the
declaration provided in accordance with section 295A of the Corporations Act is founded on a sound system
of risk management and internal control and that the system is operating effectively in all material respects in
relation to financial reporting risks
Provide the information indicated in Guide to reporting on Principle 7
7.4
Principle 8: Remunerate fairly and responsibly
8.1
8.2
The Board should establish a remuneration committee
The remuneration committee should be structured so that it consists of a majority of independent directors,
is chaired by an independent director and has at least three members
Clearly distinguish the structure of Non-Executive Directors’ remuneration from that of executive Directors
and senior executives
Provide the information indicated in Guide to reporting on Principle 8
7.2
7.3
8.3
8.4
CoMpLianCe
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, 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. The Committee and Board Charters are also available
at www.fairfaxmedia.com.au.
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.
60 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
corPorate GoVerNaNce
Membership of the Board and its committees during the 2014 year is set out below.
CoMMittee MeMBership
direCtor
R. Corbett
G. Hywood
M. Anderson
J. Cowin
S. McPhee
J. Millar
S. Morgan*
L. Nicholls
T. Sampson**
P. Young
MeMBership tYpe
Independent Chair
CEO/Managing
Director
Independent
Independent
Independent
Independent
Independent
Independent
Independent
Independent
Resigned 29 May 2014
*
** Appointed 29 May 2014
# Committee dissolved in December 2013
audit and risk
Member
–
noMinations
Chair
–
peopLe and CuLture
Member
–
–
–
–
Member
–
Chair
–
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 in the Board of Directors section of the
2014 Annual 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;
// 61
corPorate GoVerNaNce
• 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.
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;
• has a material contractual relationship with the Group other than as a Director;
• has close family ties with any person who falls within any of the categories described above; and
• has been a director of the entity for such a period that his or her independence may be compromised.
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; and
• 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;
62 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
corPorate GoVerNaNce
• 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.
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,
to monitor the quality and reliability of financial information for the Group, and from December 2013, to manage
certain sustainability and corporate responsibility matters. 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;
• 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 with the goal to ensure compliance with all
regulatory requirements;
• monitors compliance with all regulatory and ethical requirements;
• identifies and monitors current and emerging sustainability and corporate responsibility trends, risks and
opportunities and ensuring that the Board is kept up to date with market and investor expectations on
sustainability and corporate responsibility activities;
• oversees the Group’s compliance with corporate governance and legal requirements in relation to sustainability
and corporate responsibility issues and related reporting;
• ensures there is an appropriate framework for compliance with all legal and Australian Securities
Exchange requirements;
• reviews the external audit process with the external auditor, including in the absence of management;
• reviews the performance of internal audit and has input into the performance review and remuneration of the
Internal Audit Manager;
• recommends to the Board the appointment and dismissal of the Internal Audit Manager;
• reviews and approves the internal audit plan;
• Receives internal audit summaries of significant reports prepared by internal audit;
• meets with the Internal Audit Manager including in the absence of management if considered necessary; and
• deals with such matters as the Committee deems necessary to carry out the functions set out above.
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 in the Directors’ Report. 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.
// 63
corPorate GoVerNaNce
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.
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.
64 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
corPorate GoVerNaNce
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; and
• under the direction of the Audit and Risk Committee, Internal Audit conducts a program of internal process
control reviews over key areas, based on their importance to the Company, and provides assurance over the
internal control assessments undertaken by management.
The Company’s risk framework is overseen and monitored by both the Board and the Audit and Risk Committee.
As part of the risk framework, specific policies and approval processes have been developed to cover key risk areas
such as material investments and contracts, treasury, capital expenditure approval, occupational health and safety
and environmental processes.
The Company’s Internal Audit function comprises the 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; and
// 65
corPorate GoVerNaNce
(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.
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.
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 determined that the Sustainability and Corporate Responsibility Committee will no longer continue from
effect from December 2013. Sustainability and corporate responsibility matters were transferred to other Board
Sub-Committees.
diVersitY
Fairfax Media is committed to creating a workplace that is fair and inclusive and reflects the diversity of the
communities in which we operate. Fairfax Medial values, respects and encourages diversity of board members,
employees, customers and suppliers. The Company believes diversity includes but is not limited to gender, age,
ethnicity and cultural background.
66 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
corPorate GoVerNaNce
Fairfax Media recognises the importance of its employees and aims to attract, motivate, retain and engage high
performing employees. The Company recognises that each employee brings their own unique capabilities,
experiences and characteristics to their work, and values such diversity at all levels of the Company in all that it does.
Encouraging diversity broadens the pool for the recruitment of talented employees, enhances retention and
supports innovation. Increasing the focus on high quality employees supports the Company to improve its financial
performance and achieve its strategic objectives.
The Company’s workforce gender demographics were:
• Proportion of women who are Non-Executive Directors on the Board: 25%
• Proportion of women in senior management: 30%
• Proportion of women across the organisation: 53%
As at 29 June 2014 female gender representation among senior managers was 30 per cent. The Company has
achieved its objective of 30 percent female gender representation among senior managers by 2015. It will aim
to maintain this and set new targets over the course of the next 12 months.
In line with the new Workplace Gender Equality Act 2012 requirements, this year the Company updated its definition
of senior managers, and this definition will be used of senior managers in the future. If a “like-for-like” comparison
was used for the definition of senior managers in the 2013 Annual Report, the proportion of women in senior
management would be 29%. This is still an improvement of 2013 figures.
Fairfax Media continues to focus on gender diversity, and in 2013, the Fairfax Women of Influence Awards was
introduced. Fairfax Women of Influence Awards is an internal reward and recognition award aiming to celebrate
the contributions and successes of high-achieving female Fairfax employees to raise their leadership profiles.
The awards comprised of six categories: young leader, community leadership, public agenda setting, leadership,
innovation, and change champion. Judging panel included members of the Board in addition to senior leaders
across the business. Participation in the awards was high and the calibre and diversity of nominees was outstanding.
The program has made a significant impact in raising the leadership profiles of females across the business.
The Company is moving in the right direction with regards to its targets to have a senior female included in all
panels for senior executive roles and at least one female candidate in the shortlist for senior roles. This financial
year a senior female has been on the recruitment panel for senior positions such as the new Commercial Director,
MD Events and CEO Domain. Based on merit, a female has also been included in the candidate shortlist for senior
roles. Fairfax Media will continue to make these practises standard.
Analysis into gender pay equity has begun and the Company will continue to conduct further research to gather
diversity metrics across the business and in individual business units. Data submitted for the 2014 WGEA report
indicates that in Australia, the following employment terms that can positively impact on women’s participation
in the workforce are available to Fairfax employees:
• Flexible work hours;
• Compressed working weeks;
• Time-in-lieu;
• Telecommuting;
• Part-time work job sharing;
• Carer’s leave;
• Purchased leave; and
• Unpaid leave.
The Company has submitted and is compliant with the Workplace Gender Equality Act 2012 report in Australia.
More detailed analysis of pay equity and further research to gather robust diversity metrics across the business will
be key areas of focus in FY15.
// 67
MaNaGeMeNt discUssioN aNd aNaLYsis rePort
tradiNG oVerVieW
Fairfax Media Group reported a statutory net profit after significant items and tax of $224.4 million with underlying
operating earnings before interest tax depreciation and amortisation (EBITDA) of $312.7 million. This was a pleasing
result for the Group. EBITDA for continuing businesses of $306.4 million was 1.8% above last year.
The 2013 financial year included 53 weeks while the 2014 financial year had 52 weeks. This had a positive impact
in 2013 of $38 million revenue and $5.6 million EBITDA.
The Australian Metro Media segment performed strongly with EBITDA growth of 41.3%, excluding significant
items. Contributing to this result was revenue from digital subscriptions that were launched at the beginning of the
financial year, growth in the Domain Group and an ongoing focus on cost. Advertising revenue remained challenged
in the 2014 financial year with print revenue declines of 23.5%. Digital advertising revenue increased by 5.6%.
There was pleasing growth of digital subscriptions for The Sydney Morning Herald, The Age, and The Australian
Financial Review during the 2014 financial year, with total revenue from those products of $24 million, $19.2 million
higher than the prior year.
Australian Metro Media continues to attract strong audience numbers. The Sydney Morning Herald is Australia’s most
read masthead – attracting an audience of 5.6 million a month across print, web, mobile in May 2014 – according
to the Enhanced Media Metrics Australia survey. The Age attracted an audience of 3.4 million in May 2014, while
The Australian Financial Review attracted an audience of 1.4 million during the same period.
The Domain Group continued to accelerate its digital growth and manage declines in print. During the financial year,
Domain’s total digital revenue grew 40.5% year-on-year and EBITDA increased by 47%. Domain’s online revenue
(excluding Australian Property Monitors, Commercial Real Estate, Property Data Solutions and Commerce Australia)
was 33% higher than the prior year. Domain had more than 8,550 agent subscribers at the end of the financial year,
which was 12% higher than the prior year, representing approximately 80% market penetration.
Domain continued its national expansion strategy with the acquisition of property data business Property Data
Solutions (PDS) for approximately $30 million in December 2013. PDS provides property data research to more
than 5,000 subscribers with the majority being real estate businesses. The acquisition of Canberra’s leading
real estate listings business Allhomes was announced in July after the end of the 2014 financial year, subject
to regulatory approval.
Digital Ventures continued its strategy of growing existing portfolio businesses and investing in and building new
businesses through international and local partnerships. There were a number of strategic divestments during
the financial year, including the sale of Stayz in December 2013 for approximately $220 million and the sale of
InvestSmart in August 2013 for $7 million. Investments made during the financial year included a minority interest
in Sydney-based digital health services company Healthshare in November 2013, and a joint venture with leading
international job search engine Adzuna to provide a major new platform for recruiters and job seekers in Australia.
A merger between RSVP and competitor Oasis Active was announced in June 2014, with Fairfax holding a 58%
interest in the merged entities following the transaction. The merger of RSVP and Oasis brings together two
of Australia’s largest online dating services businesses.
Australian Community Media continued to experience revenue declines in the 2014 financial year although there
was some improvement in the second half. Advertising revenue in the segment was down 16.1% with the drought
in the Eastern states and a downturn in the resource sector being contributing factors. Costs are being tightly
managed across the business.
Australian Community Media conducted a review of its business and operating model during the financial year.
The outcome of the review involves adopting a flatter management structure and the phased introduction of
a new operating model.
In the New Zealand segment for the 2014 financial year, total revenue was down 5.4%, with advertising revenue
down 5.2%. The New Zealand print advertising market is not experiencing the same rate of decline seen in the
Australian market. A new business structure was implemented in the second half of the 2014 financial year to drive
revenue and efficiencies. The changes have contributed to the improved trend in the segment’s second half revenue.
There was a focus on cost reduction during the 2014 financial year as well as investment in growth initiatives.
68 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
MaNaGeMeNt discUssioN aNd aNaLYsis rePort
Radio experienced a decline in revenue of 6% in the 2014 financial year. The total metro radio advertising market
grew 2% during that same period. New programming line-ups were put in place at five of the seven stations in the
second half of the 2014 financial year. Management has been implementing changes to strengthen the position
of the business. Sales teams have been restructured to have a national focus resulting in changes to three out
of four of the sales leadership teams. Melbourne’s 3AW and 96fm in Perth continued to have strong ratings and
audience share.
Fairfax continued to deliver against its Fairfax of the Future transformation targets, with total annualised run-rate
savings of $300 million achieved to the end of the 2014 financial year. Fairfax is making pleasing progress in growing
several new revenue initiatives, including Events, Small to Medium Enterprise (SME) Digital and Marketing Services,
Content Marketing and Data.
The second half of the 2014 financial year also saw the closures of Chullora and Tullamarine print sites and transition
of work done at those sites to smaller regional print sites of North Richmond and Ballarat.
The 2014 financial year recorded significant items net of tax totalling $66.7 million for the Group. This included gains
from the sales of Stayz and other controlled entities totalling $106.5 million, offset by restructuring and redundancy
costs of $24.0 million and impairments of property, plant and equipment (with the majority relating to Chullora and
Tullamarine closures).
fiNaNciaL PositioN
Net cash inflow from operating activities was $171.5 million. After capital expenditure of $72.3 million, dividends paid
of $71.4 million, the impact of the sale of Stayz and other controlled businesses, repayments of borrowings, cash
and cash equivalents decreased by $80.8 million.
Net cash was $67.6 million at 29 June 2014.
// 69
MaNaGeMeNt discUssioN aNd aNaLYsis rePort
recoNciLiatioN of statUtorY to UNderLYiNG PerforMaNce
Total revenue
Associate profits/(losses)
Expenses
as reported
siGniFiCant iteMs (iV)
tradinG perForManCe
exCLudinG siGniFiCant iteMs
note
(i)
29 JuNE 2014
$’000
30 June 2013
$’000
29 JuNE 2014
$’000
30 June 2013
$’000
29 JuNE 2014
$’000
30 June 2013
$’000
1,972,694
8,007
(1,609,387)
2,033,786
(2,239)
(2,150,758)
106,477
–
(47,909)
19,830
–
(460,302)
1,866,217
8,007
(1,561,478)
2,013,956
(2,239)
(1,690,456)
Operating EBITDA
371,314
(119,211)
58,568
(440,472)
312,746
321,261
Depreciation and amortisation
(93,517)
(100,762)
–
–
(93,517)
(100,762)
EBIT
277,797
(219,973)
58,568
(440,472)
219,229
220,499
Net finance costs
(ii)
(10,428)
(54,967)
–
–
(10,428)
(54,967)
Net profit/(loss) before tax
267,369
(274,940)
58,568
(440,472)
208,801
165,532
Tax (expense)/benefit
(42,201)
(37,912)
8,108
12,569
(50,309)
(50,481)
Net profit/(loss) after tax
from continuing operations
Net profit after tax from
discontinued operations
225,168
(312,852)
66,676
(427,903)
158,492
115,051
(iii)
–
311,881
–
283,444
–
28,437
Net profit/(loss) after tax
225,168
(971)
66,676
(144,459)
158,492
143,488
Net profit attributable to
non-controlling interest
Net profit/(loss) attributable
to members of the Company
(736)
(15,461)
–
–
(736)
(15,461)
224,432
(16,432)
66,676
(144,459)
157,756
128,027
Earnings/(loss) per share
9.5
(0.7)
6.7
5.4
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
in 2013. 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.
(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 for impairments, restructuring and redundancy and gains on sale of
controlled entities consistent with prior period disclosures.
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
70 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
29 JuNE 2014
$’000
284,343
(86,397)
17,821
(44,285)
171,482
30 June 2013
$’000
376,645
(96,018)
14,330
(108,506)
186,451
coNsoLidated iNcoMe stateMeNt
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
Continuing operations
Revenue from operations
Other revenue and income
Total revenue and income
Share of net profits/(losses) 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 profit/(loss) from continuing operations before income tax expense
Income tax expense
Net profit/(loss) from continuing operations after income tax expense
Discontinued operations
Net profit from discontinued operations after income tax expense
Net profit/(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 earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
Earnings per share from continuing operations (cents per share)
Basic earnings/(loss) per share (cents per share)
Diluted earnings/(loss) per share (cents per share)
note
29 JuNE 2014
$’000
30 June 2013
$’000
2(A)
2(B)
12(C)
3(A)
3(B)
3(C)
6
5
24
24
24
24
1,856,762
130,806
1,987,568
8,007
2,010,488
34,902
2,045,390
(2,239)
(1,585,928)
(93,517)
(23,459)
(25,302)
267,369
(42,201)
225,168
(1,690,820)
(100,762)
(459,938)
(66,571)
(274,940)
(37,912)
(312,852)
–
225,168
311,881
(971)
736
224,432
225,168
15,461
(16,432)
(971)
9.5
9.5
9.5
9.5
(0.7)
(0.7)
(13.3)
(13.3)
The above Consolidated Income Statement should be read in conjunction with the accompanying Notes.
// 71
coNsoLidated stateMeNt of coMPreHeNsiVe iNcoMe
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
Net profit/(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 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
29 JuNE 2014
$’000
225,168
30 June 2013
$’000
(971)
6
6
707
511
(11,231)
22,451
3,387
518
(149)
16,194
241,362
736
240,626
241,362
296
3,407
(18,431)
28,033
4,532
2,353
(702)
19,488
18,517
15,461
3,056
18,517
The above Consolidated Statement of Comprehensive Income should be read in conjunction with the
accompanying Notes.
72 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
coNsoLidated baLaNce sHeet
FairFax Media LiMited and ControLLed entities as at 29 June 2014
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
Total non-current liabilities
Total liabilities
NET ASSETS
EquITY
Contributed equity
Reserves
Retained losses
Total parent entity interest
Non-controlling interest
TOTAl EquITY
note
29 JuNE 2014
$’000
30 June 2013
$’000
33(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)
22
23
452,687
295,424
25,362
213
91,494
8,725
4,858
878,763
1,232
88,801
2,488
1,312,111
407,978
1,551
86,022
1,195
1,369
1,902,747
2,781,510
218,052
119,721
13,278
4,202
118,959
9,290
483,502
235,526
21,957
–
49,416
440
307,339
790,841
1,990,669
4,646,525
55,432
(2,713,145)
1,988,812
1,857
1,990,669
533,531
298,330
30,908
11,018
6,979
8,466
4,386
893,618
1,046
80,490
1,929
1,438,034
478,933
7,815
107,895
709
6,222
2,123,073
3,016,691
235,919
284,323
47,978
–
191,319
1,333
760,872
353,889
26,939
3,581
53,942
1,273
439,624
1,200,496
1,816,195
4,646,248
35,517
(2,867,387)
1,814,378
1,817
1,816,195
The above Consolidated Balance Sheet should be read in conjunction with the accompanying Notes.
// 73
coNsoLidated casH fLoW stateMeNt
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
Cash flows from operating activities
Receipts from customers (inclusive of GST)
Payments to suppliers and employees (inclusive of GST)
Redundancy payments
Interest received
Dividends and distributions received
Finance costs paid
Net income taxes paid
Net cash inflow from operating activities
Cash flows from investing activities
Payment for purchase of controlled entities, associates and joint ventures (net of cash
acquired)
Payment for purchase of businesses, including mastheads
Payment for property, plant, equipment and software
Proceeds from sale of property, plant and equipment
Proceeds from sale of investments, net of transaction fees and cash disposed *
Loans repaid by other parties
Net cash inflow from investing activities
Cash flows from financing activities
Payment for purchase of non-controlling interests in subsidiaries
Proceeds from borrowings and other financial liabilities
Repayment of borrowings and other financial liabilities
Payment of facility fees
Dividends paid to shareholders
Dividends paid to non-controlling interests in subsidiaries
Net cash outflow from financing activities
Net (decrease)/increase in cash and cash equivalents held
Cash and cash equivalents at beginning of the financial year
Reclassification to held for sale
Effect of exchange rate changes on cash and cash equivalents
Cash and cash equivalents at end of the financial year
29 JuNE 2014
$’000
30 June 2013
$’000
note
2,044,784
(1,760,441)
(86,397)
12,933
4,888
(31,162)
(13,123)
171,482
2,326,259
(1,949,614)
(96,018)
10,963
3,367
(60,456)
(48,050)
186,451
33(A)
(33,713)
(482)
(72,321)
12,260
222,444
4,986
133,174
(3,983)
12,871
(319,457)
(1,475)
(70,559)
(884)
(383,487)
(78,831)
533,531
(8,439)
6,426
452,687
(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
533,531
7
10
33(B)
*
The 2014 proceeds primarily relate to the disposal of the Stayz business on 6 December 2013. The 2013 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 above Consolidated Cash Flow Statement should be read in conjunction with the accompanying Notes.
74 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
,
8
6
1
5
2
2
6
3
7
,
2
3
4
4
2
2
–
4
9
1
6
1
,
–
9
6
3
5
2
8
5
1
,
2
6
3
1
4
2
,
6
3
7
1
0
8
4
2
2
,
5
2
8
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1
,
)
9
5
5
0
7
(
,
–
)
9
5
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0
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(
,
–
)
6
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(
)
6
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(
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,
–
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,
)
8
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76 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
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 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.
The financial report is for the period 1 July 2013
to 29 June 2014 (2013: the period 25 June 2012
to 30 June 2013). Reference in this report to ‘a year’
is to the period ended 29 June 2014 or 30 June 2013
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 36.
Historical cost convention
These financial statements have been prepared
on a going concern basis and on the basis of historical
cost principles except for those assets and liabilities
disclosed in Note 34(E) 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.
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.
Associates and joint ventures
(ii)
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,
and 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.
// 77
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
1. sUMMarY of siGNificaNt accoUNtiNG PoLicies (coNtiNUed)
When the Group acquires a business, it assesses the
financial assets and liabilities assumed for appropriate
classification and designation in accordance with the
contractual terms, economic conditions, the Group’s
operating or accounting policies and other pertinent
conditions as at the acquisition date. This includes the
separation of embedded derivatives in host contracts
of the acquiree.
If the business combination is achieved in stages, the
acquisition date fair value of the acquirer’s previously
held equity interest in the acquiree is remeasured
to fair value at the acquisition date through 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 (CGUs).
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
Goodwill
(i)
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 and joint ventures is included in the
investment in associates and joint ventures.
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 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 licence 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).
Software, databases and websites
Computer software licences and databases acquired are
capitalised as an intangible asset. Internal and external
costs directly incurred in the purchase or development
of software or databases are capitalised, 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 six years.
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.
78 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
1. sUMMarY of siGNificaNt accoUNtiNG PoLicies (coNtiNUed)
Capitalised software, databases and website costs are
reviewed annually for potential impairment.
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.
(f) foreign currencY
Currency of presentation
(i)
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).
Transactions and balances
(ii)
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 dividend has been declared.
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.
// 79
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
1. sUMMarY of siGNificaNt accoUNtiNG PoLicies (coNtiNUed)
Deferred income tax liabilities are recognised for all
taxable temporary differences:
• except where the deferred income tax liability arises
from the initial recognition of an asset or liability in
a transaction that is not a business combination and,
at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
• in respect of taxable temporary differences associated
with investments in subsidiaries, associates and
interests in joint ventures, except where the timing
of the reversal of the temporary differences can
be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred income tax assets are recognised for all
deductible temporary differences, carry-forward
of unused tax assets and unused tax losses, to the
extent that it is probable that taxable profit will be
available against which the deductible temporary
differences, and the carry-forward of unused tax assets
and unused tax losses can be utilised:
• except where the deferred income tax asset relating
to the deductible temporary difference arises from
the initial recognition of an asset or liability in
a transaction that is not a business combination and,
at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss; and
• in respect of deductible temporary differences
associated with investments in subsidiaries, associates
and interests in joint ventures, deferred tax assets
are only recognised to the extent that it is probable
that the temporary differences will reverse in the
foreseeable future and taxable profit will be
available against which the temporary differences
can be utilised.
The carrying amount of deferred income tax assets
is reviewed at each reporting date and reduced to the
extent that it is no longer probable that sufficient taxable
profit will be available to allow all or part of the deferred
income tax asset to be utilised.
Deferred income tax assets and liabilities are measured
at the tax rates that are expected to apply to the year
when the asset is realised or the liability is settled, based
on tax rates (and tax laws) that have been enacted
or substantively enacted at the 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.
80 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
1. sUMMarY of siGNificaNt accoUNtiNG PoLicies (coNtiNUed)
(i)
leASeS
Finance leases
(i)
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.
Operating leases
(ii)
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.
cASh And cASh eQuivAlentS
(J)
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:
Financial assets at fair value through profit and loss
(i)
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.
// 81
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
1. sUMMarY of siGNificaNt accoUNtiNG PoLicies (coNtiNUed)
loans and receivables
(ii)
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.
(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.
82 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
1. sUMMarY of siGNificaNt accoUNtiNG PoLicies (coNtiNUed)
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.
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 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.
// 83
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
1. sUMMarY of siGNificaNt accoUNtiNG PoLicies (coNtiNUed)
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.
(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.
Share-based payment transactions
(ii)
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 30).
Shares purchased, but which have not yet vested
to the employee as at reporting date are offset against
contributed equity of the Group (refer to Note 1(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.
Bonus plans
(v)
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.
84 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
1. sUMMarY of siGNificaNt accoUNtiNG PoLicies (coNtiNUed)
Debentures
Debentures have been included as equity as the
rights attaching to them are in all material respects
comparable to those attaching to the ordinary shares.
Such debentures are unsecured non-voting securities
that have interest entitlements equivalent to the
dividend entitlements attaching to the ordinary voting
shares and rank equally with such shares on any
liquidation or winding up. These interest entitlements
are treated as dividends.
The debentures are convertible into shares on
a one-for-one basis at the option of the holder
provided that conversion will not result in a breach
of any of the following:
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 35.
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
(i) any provision of the Foreign Acquisitions and
the services; and if applicable
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.
• 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.
Income taxes
(ii)
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.
// 85
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
1. sUMMarY of siGNificaNt accoUNtiNG PoLicies (coNtiNUed)
Principles of consolidation – subsidiaries and
joint arrangements
AASB 10 replaces the guidance on control and
consolidation in AASB 127 Consolidated and Separate
Financial Statements and in Interpretation 112
Consolidation – Special Purpose Entities. Under the new
principles, the Group controls an entity when the Group
is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect
those returns through its power over the entity.
The Group has reviewed its investments in other
entities to assess whether the consolidation conclusion
in relation to these entities is different under AASB 10
than under AASB 127. No differences were found and
therefore no adjustments to any of the carrying amounts
in the financial statements are required as a result of the
adoption of AASB 10.
Under AASB 11 investments in joint arrangements are
classified as either joint operations or joint ventures
depending on the contractual rights and obligations
each investor has, rather than the legal structure of the
joint arrangement. The Group has assessed the nature
of its joint arrangements and determined it only has
joint ventures.
Under the previous standard, investments in joint
ventures could be accounted for using either the
proportionate consolidation method or the equity
method. Under AASB 11, investments in joint ventures
may only be accounted for using the equity method.
For the Group, this has resulted in no change or
adjustments in the financial statements as the Group’s
policy is to account for all joint ventures using
the equity method.
Employee benefits
The adoption of the revised AASB 119 changed the
accounting for the Group’s annual leave provisions.
As the Group does not expect all annual leave to be
taken within 12 months of the respective service being
provided, annual leave provisions are now assessed
as long term employee benefits. This has changed the
measurement of these provisions, as the provisions are
now measured on a discounted basis. However, it has
not changed the balance sheet classification of the
annual leave provision as current. The financial impact
of this change is considered not to be material.
(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 30.
(iv) Defined benefit plans
Various actuarial assumptions are required when
determining the Group’s superannuation plan
obligations. These assumptions and the related
carrying amounts are discussed in Note 21.
Restructuring and redundancy provision
(v)
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
Changes in accounting policy and disclosure
(i)
The Group has changed some of its accounting policies
as a result of new or revised accounting standards
which became effective for the annual reporting period
commencing on 1 July 2013.
The affected policies and standards are:
• Principles of consolidation – new standards AASB 10
Consolidated Financial Statements and AASB 11
Joint Arrangements;
• Accounting for employee benefits – revised AASB 119
Employee Benefits;
• Recoverable amount disclosures for non-financial assets
– amendments to AASB 136 Impairment of Assets.
Other new standards that are applicable for the first
time for the June 2014 year end report are AASB 13
Fair Value Measurement, AASB 2012-2 Amendments
to Australian Accounting Standards – Disclosures
– Offsetting Financial Assets and Financial Liabilities and
AASB 2012-5 Amendments to Australian Accounting
Standards arising from Annual Improvements 2009-
2011. These standards have introduced new disclosures
but did not affect the Group’s accounting policies or any
of the amounts recognised in the financial statements.
86 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
1. sUMMarY of siGNificaNt accoUNtiNG PoLicies (coNtiNUed)
Recoverable amount disclosures for
non-financial assets
The amendments to AASB 136 introduced via 2013-3
remove the unintended consequences of AASB 13
on the disclosures required under AASB 136. In addition,
these amendments require disclosure of the recoverable
amounts for the assets or CGUs for which impairment
loss has been recognised or reversed during the period.
These amendments are effective retrospectively for
annual periods beginning on or after 1 January 2014
with earlier application permitted, provided AASB 13
is also applied. The Group has early adopted these
amendments to AASB 136 in the current period since
the amended/additional disclosures provide useful
information as intended by the AASB. Accordingly,
these amendments have been considered while making
disclosures for impairment of non financial assets.
These amendments would continue to be considered
for future disclosures.
(ii)
Accounting standards and interpretations issued
but not yet effective
Certain new accounting standards and interpretations
have been published that are not mandatory for
29 June 2014 reporting periods. The Group has elected
not to early adopt these new standards or amendments
in the financial statements. 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 9 Financial Instruments;
• Annual Improvements 2010–2012 Cycle;
• Annual Improvements 2011–2013 Cycle;
• AASB 2013-9 Amendments to Australian Accounting
Standards – Conceptual Framework, Materiality and
Financial Instruments (Part B and Part C);
• AASB 1031 Materiality; and
• IFRS 15 Revenue from Contracts with Customers.
Other standards and interpretations that have been
issued but are not yet effective are not expected
to have any significant impact on the Group’s financial
statements in the year of their initial application.
// 87
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
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
29 JuNE 2014
$’000
30 June 2013
$’000
503,919
1,352,843
1,856,762
489,764
1,520,724
2,010,488
14,874
147
3,817
868
106,477
354
4,269
130,806
1,987,568
11,604
112
1,541
1,011
19,830
785
19
34,902
2,045,390
*
Revenue from the sale of goods includes revenue from circulation, subscription, printing and printing-related products.
88 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
3. eXPeNses
(A) exPenSeS Before iMPAirMent, dePreciAtion, AMortiSAtion And finAnce coStS
Staff costs excluding staff redundancy costs
Redundancy costs
Newsprint and paper
Distribution costs
Production costs
Promotion and advertising costs
Rent and outgoings
Repairs and maintenance
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 property
Amortisation of tradenames
Amortisation of software
Amortisation of customer relationships
Total depreciation and amortisation
(c) finAnce coStS
External parties
Gain on partial redemption of senior notes
Finance lease
Hedge ineffectiveness
Total finance costs
(d) detAiled exPenSe diScloSureS
Operating lease rental expense
Defined contribution superannuation expense
Share-based payment expense
29 JuNE 2014
$’000
30 June 2013
$’000
731,502
22,126
141,752
144,155
135,155
91,997
59,815
25,832
22,477
18,630
24,763
25,174
142,550
1,585,928
786,915
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
6,275
54,629
4,370
33
27,451
759
93,517
31,172
(10,183)
4,073
240
25,302
40,580
47,658
3,870
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
// 89
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
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 and customer relationships
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
–
(23,890)
7,056
(418,655)
(37,189)
11,232
(16,834)
(444,612)
29 JuNE 2014
$’000
30 June 2013
$’000
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 Stayz business and other controlled entities disclosed in other revenue and
income (i)
Gain on sale of US Agricultural Media business disclosed in other revenue and income (ii)
Gain on sale of Trade Me business disclosed in net profit from discontinued operations (iii)
Income tax expense
Gains on sale of controlled entities, net of tax
Net significant items after income tax
(24,019)
7,094
(16,925)
(4,458)
1,337
(3,121)
106,477
–
–
(6,042)
100,435
–
19,830
283,444
–
303,274
66,676
(144,459)
(i) On 6 December 2013, the Group disposed of the Stayz business for gross proceeds of $218.0 million.
(ii) On 14 November 2012, the Group disposed of the US Agricultural Media business for US$79.9 million.
(iii) 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.
90 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
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 35).
As at 30 June 2013, the Trade Me business was classified as a discontinued operation and the results for the period
ended 30 June 2013 are presented below. For the period ended 29 June 2014, no operations were classified
as discontinued.
Total revenue and income
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
Net profit from discontinued operations after income tax expense
2014
$’000
–
–
–
–
–
–
–
–
2013
$’000
60,871
(21,229)
39,642
(11,205)
28,437
283,444
–
311,881
*
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
2014
¢ PER SHARE
2013
¢ per share
–
–
2014
$’000
13.3
13.3
2013
$’000
–
–
–
–
27,010
(4,020)
(26,894)
(3,904)
// 91
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
6. iNcoMe taX eXPeNse
coNsoLidated iNcoMe stateMeNt
Income tax expense is reconciled to prima facie income tax payable as follows:
Net profit/(loss) from continuing operations before income tax expense
Net profit from discontinued operations before income tax expense
Profit before income tax expense
Prima facie income tax at 30% (2013: 30%)
Tax effect of differences:
Overseas tax rate and accounting differentials
Share of net (profits)/losses of associates and joint ventures
Capital gains not taxable
Non-assessable dividends
Adjustments in respect of current income tax of previous years*
Adjustments in respect of deferred income tax of previous years
Temporary differences not recognised on intangible and other asset write-offs
Non-deductible items
Other
Income tax expense
Income tax expense for continuing operations
Income tax expense for discontinued operations
Income tax expense
*
The 2014 adjustment includes $9.8 million of prior year R&D claims finalised in the current year.
The major components of income tax expense in the income statement are:
Current income tax expense
Deferred income tax expense
Adjustments in respect of current income tax of previous years
Income tax expense in the income statement
29 JuNE 2014
$’000
267,369
–
267,369
30 June 2013
$’000
(274,940)
323,086
48,146
80,211
14,444
(811)
(1,813)
(24,581)
(11)
(11,686)
–
(891)
1,642
141
42,201
42,201
–
42,201
(8,030)
1,313
(83,774)
(5)
(941)
(966)
125,486
2,309
(719)
49,117
37,912
11,205
49,117
32,842
21,045
(11,686)
42,201
27,620
11,233
(941)
37,912
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
29 JuNE 2014
$’000
5
(149)
13
3,369
–
3,238
30 June 2013
$’000
4
(702)
(1,022)
5,530
20
3,830
92 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
7. diVideNds Paid aNd ProPosed
(A) ordinArY ShAreS
Interim 2014 dividend: fully franked 2.0 cents – paid 19 March 2014
(2013: fully franked dividend 1.0 cent – paid 20 March 2013)
2013 dividend: fully franked 1.0 cent – paid 17 September 2013
(2012: fully franked dividend 1.0 cent – paid 21 September 2012)
Total dividends paid
CONSOlIDATED
29 JuNE 2014
$’000
47,039
ConsoLidated
30 June 2013
$’000
COMPANY
29 JuNE 2014
$’000
47,039
CoMpanY
30 June 2013
$’000
23,520
70,559
23,520
23,520
47,040
23,520
70,559
23,520
23,520
47,040
(B) dividendS ProPoSed And not recogniSed AS A liABilitY
Since reporting date the Directors have declared a dividend of 2.0 cents per fully paid ordinary share, fully franked at
the corporate tax rate of 30%. The aggregate amount of the dividend to be paid on 9 September 2014 out of profits,
but not recognised as a liability at the end of the year, is expected to be $47.0 million.
(c) frAnKed dividendS
Franking account balance as at reporting date at 30% (2013: 30%)
Reduction in franking credits that will arise from the receipt of income tax receivable balances as at
the end of the financial year
Franking credits that will arise from the payment of income tax payable balances as at the end of the
financial year
Total franking credits available for subsequent financial years based on a tax rate of 30%
COMPANY
2014
$’000
CoMpanY
2013
$’000
34,063
60,043
–
(3,901)
1,262
35,325
–
56,142
On a tax-paid basis, the Company’s franking account balance is approximately $34.1 million (2013: $60.0 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 $20.2 million.
// 93
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
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
29 JuNE 2014
$’000
30 June 2013
$’000
266,955
(8,253)
258,702
2,766
20,250
13,706
295,424
977
255
1,232
274,797
(10,014)
264,783
3,045
11,919
18,583
298,330
716
330
1,046
*
Trade debtors are non-interest bearing and are generally on 7 to 45 day terms.
iMPaired trade debtors
As at 29 June 2014, trade debtors of the Group with a nominal value of $8.3 million (2013: $10.0 million) were
impaired and provided for. No individual amount within the provision for doubtful debts is material. Refer to
Note 34(C) for the factors considered in determining whether trade debtors are impaired.
As at 29 June 2014, 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
29 JuNE 2014
$’000
190,229
48,026
9,885
10,562
258,702
30 June 2013
$’000
205,999
45,960
8,291
4,533
264,783
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
2014
$’000
10,014
2,608
33
(523)
–
(4,072)
193
8,253
2013
$’000
10,059
4,807
–
(80)
(56)
(4,886)
170
10,014
94 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
9. iNVeNtories
Raw materials and stores – at net realisable value
Finished goods – at cost
Work in progress – at cost
Total inventories
29 JuNE 2014
$’000
19,990
4,753
619
25,362
30 June 2013
$’000
25,552
4,358
998
30,908
During the year, newsprint and paper expense (excluding cartage) of $139.7 million (2013: $164.0 million) was
recognised in the income statement.
During the year, a $0.4 million (2013: $6.1 million) 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
RSVP.com.au Pty Limited disposal group
Cash
Intangible assets
Other assets
Total assets held for sale
(B) liabilities directly associated with held for sale assets
RSVP.com.au Pty Limited disposal group
Payables
Other liabilities
Total liabilities directly associated with held for sale assets
29 JuNE 2014
$’000
30 June 2013
$’000
36,244
6,979
8,439
46,262
549
91,494
4,066
136
4,202
–
–
–
6,979
–
–
–
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 2014, 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 $7.9 million (2013: $0.5 million) was recognised in the income
statement against the assets.
rsVP.coM.aU PtY LiMited disPosaL GroUP
On 24 June 2014, an agreement was signed for the merger of RSVP.com.au Pty Limited with 3H Group Pty Ltd
with the merger being completed subsequent to the reporting date. RSVP.com.au Pty Limited will no longer
be consolidated and as a result, the assets and liabilities of this company have been transferred to held for sale.
// 95
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
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
29 JuNE 2014
$’000
30 June 2013
$’000
4,858
4,858
4,386
4,386
67
1,302
1,369
67
6,155
6,222
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 audio broadcasting
note
(A)
(B)
29 JuNE 2014
$’000
69,457
19,344
88,801
30 June 2013
$’000
63,103
17,387
80,490
ownership interest
pLaCe oF
inCorporation 29 JuNE 2014
47.0%
Australia
30 June 2013
47.0%
Australia
Australia
Australia
Australia
Australia
Australia
Digital Radio Broadcasting Melbourne
Pty Ltd (i)
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
Environmental promotion
Earth Hour Ltd (ii)
Information technology tools
Healthshare Pty Ltd (iii)
for healthcare practitioners and
consumers
Rental of a transmission facility
Community newspaper publisher
News agency business and financial
information service
Provider of e-recruitment software
to corporations
Rental of a transmission facility
Australia
Internet delivered television network Australia
Newspaper publishing
Provider of EDI software
Provider of EDI software
Perth FM Facilities Pty Ltd
The Video Network Pty Ltd
Times Newspapers Ltd
Xchange IT Software Pty Ltd
Xchange IT Newsagents Pty Ltd
Homebush Transmitters Pty Ltd
MMP Holdings Pty Ltd (iv)
New Zealand Press Association Ltd
NGA.net Pty Ltd
Australia
Australia
Australia
New Zealand
New Zealand
Australia
Australia
18.2%
18.2%
33.3%
25.0%
11.3%
–
19.7%
50.0%
50.01%
49.2%
23.7%
33.3%
28.6%
49.9%
33.3%
25.0%
33.3%
25.0%
11.3%
33.3%
–
50.0%
50.01%
49.2%
23.7%
33.3%
28.6%
49.9%
33.3%
25.0%
The Group has significant influence in the entity due to its right to participate in policy setting for the entity.
(i)
(ii) The Group resigned as a member of this entity (a company limited by guarantee) on 16 April 2014.
(iii)
The investment was acquired on 5 November 2013. The Group has significant influence in this entity due to its representation
on the Board and its participation in policy-making processes.
(iv) 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.
96 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
12. iNVestMeNts accoUNted for UsiNG tHe eQUitY MetHod (coNtiNUed)
29 JuNE 2014
$’000
30 June 2013
$’000
79,853
8,284
–
(2,398)
5,886
28,001
28,363
56,364
14,333
3,634
17,967
76,193
(1,856)
(2,805)
(96)
(4,757)
18,205
30,685
48,890
13,627
3,280
16,907
pLaCe oF
inCorporation
Australia
Australia
ownership interest
29 JuNE 2014
50.0%
–
30 June 2013
–
50.0%
(i) Share of associates’ profits
Revenue
Profit/(loss) before income tax expense
Non-recurring impairment charge in associate
Income tax expense
Net profit/(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
(B) intereStS in Joint ventureS
naMe oF CoMpanY
Adzuna Australia Pty Ltd (v)
Dog Lovers Show Pty Ltd (vi)
Fermax Distribution Company Pty Ltd
Gilgandra Newspapers Pty Ltd
Gippsland Regional Publications
Partnership
Pricemaker Ltd (vii)
Torch Publishing Company Pty Ltd
prinCipaL aCtiVitY
Job advertisements search engine
Organisation of canine industry
exhibitions
Letterbox distribution of newspapers
Newspaper publishing and printing
Newspaper publishing and printing
Australia
Australia
Australia
Online shopping platform
Newspaper publishing and printing
New Zealand
Australia
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
50.0%
–
50.0%
(v) This company was incorporated on 31 October 2013 and established as a joint venture investment on 13 November 2013.
(vi) This investment was disposed of on 31 July 2013.
(vii) This investment was acquired on 6 June 2014.
(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 ProfitS/(loSSeS) of ASSociAteS And Joint ventureS
Profit/(loss) before income tax expense
Income tax expense
Net profit/(loss) after income tax expense
29 JuNE 2014
$’000
30 June 2013
$’000
10,449
(8,208)
2,241
(120)
2,121
5,126
17,789
22,915
1,330
177
1,507
11,257
(8,631)
2,626
(108)
2,518
4,786
16,466
21,252
1,223
257
1,480
10,525
(2,518)
8,007
(2,035)
(204)
(2,239)
// 97
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
13. aVaiLabLe for saLe iNVestMeNts
Listed equity securities – at fair value
Total available for sale investments
29 JuNE 2014
$’000
2,488
2,488
30 June 2013
$’000
1,929
1,929
Available for sale investments consist of investments in ordinary shares at fair value and have no fixed maturity date.
In the prior 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
29 JuNE 2014
$’000
972,022
177,898
114,037
46,974
1,180
1,312,111
30 June 2013
$’000
966,223
294,385
114,037
56,840
6,549
1,438,034
recoNciLiatioNs
Reconciliations of the carrying amount of each class of intangible at the beginning and end of the current financial
year are set out below:
At 24 June 2012
Cost
Accumulated amortisation and
impairment
Net carrying amount
Period ended 30 June 2013
Balance at beginning of the financial year
Additions
Capitalisations from works in progress
Disposals
Discontinued operations
Disposal of controlled entities
Acquisition through business
combinations
Amortisation for continuing operations
Amortisation for discontinued
operations
Impairment
Exchange differences
At 30 June 2013, net of accumulated
amortisation and impairment
At 30 June 2013
Cost
Accumulated amortisation and
impairment
Net carrying amount
Mastheads &
tradenaMes
$’000
note
GoodwiLL
$’000
radio
LiCenCes
$’000
soFtware
$’000
CustoMer
reLationships
$’000
totaL
$’000
3,692,719
2,455,250
143,700
269,976
15,417
6,577,062
(2,405,876)
1,286,843
(1,446,165)
1,009,085
(22,063)
121,637
(193,970)
76,006
(6,943)
8,474
(4,075,017)
2,502,045
15
1,286,843
–
–
–
(26,199)
(26,196)
1,009,085
–
–
–
(585,939)
(23,143)
1,766
13,872
3(B)
(31)
–
–
(280,100)
10,140
–
(130,706)
11,216
121,637
–
–
–
–
–
–
–
–
(7,600)
–
76,006
7,954
9,364
(286)
(8,814)
(96)
8,474
–
–
–
–
–
2,502,045
7,954
9,364
(286)
(620,952)
(49,435)
2,154
375
18,167
(29,485)
(2,107)
(31,623)
(2,010)
–
2,053
–
(249)
56
(2,010)
(418,655)
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
(2,740,847)
966,223
(1,514,772)
294,385
(29,663)
114,037
(220,034)
56,840
(9,372)
6,549
(4,514,688)
1,438,034
98 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
14. iNtaNGibLe assets (coNtiNUed)
Period ended 29 June 2014
Balance at beginning of the financial year
Additions
Capitalisations from works in progress
Disposals
Disposal of controlled entities
Assets classified as held for sale
Acquisition through business
combinations
Amortisation
Exchange differences
At 29 June 2014, net of accumulated
amortisation and impairment
At 29 June 2014
Cost
Accumulated amortisation and
impairment
Net carrying amount
Mastheads &
tradenaMes
$’000
note
GoodwiLL
$’000
radio
LiCenCes
$’000
soFtware
$’000
CustoMer
reLationships
$’000
totaL
$’000
966,223
–
–
–
(2,867)
(5,850)
–
(33)
14,549
294,385
–
–
–
(104,149)
(39,717)
26,890
–
489
114,037
–
–
–
–
–
–
–
–
15
3(B)
56,840
12,735
8,028
(1,327)
(3,803)
(695)
1,350
(27,451)
1,297
6,549
–
–
–
(4,695)
–
–
(759)
85
1,438,034
12,735
8,028
(1,327)
(115,514)
(46,262)
28,240
(28,243)
16,420
972,022
177,898
114,037
46,974
1,180
1,312,111
3,791,271
1,676,208
143,700
285,513
8,342
5,905,034
(2,819,249)
972,022
(1,498,310)
177,898
(29,663)
114,037
(238,539)
46,974
(7,162)
1,180
(4,592,923)
1,312,111
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 2015 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 5% and 8% 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 18% 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% (2013: 3.5%) has been used for Australian Digital Transactions cash flows.
Metropolitan Media, Australian Regional Media and New Zealand Media were calculated at nil growth (2013: nil)
and Radio calculated at 2.5% (2013: 2.5%)
Discount rate
The discount rate is an estimate of the post-tax rate that reflects current market assessment of the time value
of money and the risks specific to the CGU. The post-tax discount rates applied to the CGU Groups’ cash flow
projections were in a range producing a mid point of 11.0% for Australian and 11.3% for New Zealand Media
(2013: Aust: 11.0%; NZ: 10.9%) and 12.5% for Australian Digital Transactions (2013: 12.9%).
// 99
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
14. iNtaNGibLe assets (coNtiNUed)
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
structural change in print 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 other assumptions constant, if year 1 cash flow forecasts declined by 5% across all CGU’s then an
impairment would arise of $45 million in Metro, $1 million in Regional and $14 million in New Zealand CGU
Groups. If year 1 cash flow forecasts increased by 5% across all CGU’s then there would be a reversal of prior
period impairments of $47 million in Metro, $8 million in Regional, $1 million in Agricultural and $15 million
in New Zealand CGU Groups.
Holding all other assumptions constant, if year 3 cash flow forecasts declined by 5% across all CGU’s then an
impairment would arise of $35 million in Metro, $16 million in Regional, $6 million in Agricultural and $11 million
in New Zealand CGU Groups. If year 3 cash flow forecasts increased by 5% across all CGU’s then there would be
a reversal of prior period impairments of $36 million in Metro, $23 million in Regional, $6 million in Agricultural and
$11 million in New Zealand CGU Groups.
Holding all assumptions constant, if the discount rate applied to the cash flow projections was increased by 0.5%
across all CGU’s then an impairment would arise of $25 million in Metro, $13 million in Regional, $5 million in
Agricultural and $9 million in New Zealand CGU Groups. If the rate was decreased by 0.5% across all CGU’s then
there would be a reversal of prior period impairments of $29 million in Metro, $23 million in Regional, $6 million
in Agricultural and $10 million in New Zealand CGU Groups.
Holding all assumptions constant, if terminal growth factors were reduced by a further 0.5% for Digital Transactions
and Radio then there would still be no impairment in any CGU Groups. If terminal growth factors were increased
by 0.5% across all CGU’s there would be a reversal of prior period impairments of $25 million in Metro, $20 million
in Regional, $5 million in Agricultural and $9 million in New Zealand CGU Groups.
(iii) Allocation of goodwill, licences, mastheads and tradenames to CGus
For the financial year ended 29 June 2014, 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 35 with further disclosure on the results for each operating segment.
At 29 June 2014
Allocation to CGu Groups
Metropolitan Media
Australian Digital Transactions
Australian Regional Media
Agricultural Media
Radio
New Zealand Media
Total goodwill, licences, mastheads
and tradenames
At 30 June 2013
Allocation to CGu Groups
Metropolitan Media
Australian Digital Transactions
Australian Regional Media
Agricultural Media
Radio
New Zealand Media
Total goodwill, licences, mastheads
and tradenames
operatinG seGMent
Australian Metro Media
Australian Metro Media
Australian Community Media
Australian Community Media
Radio
New Zealand Media
operatinG seGMent
Australian Metro Media
Australian Metro Media
Australian Community Media
Australian Community Media
Radio
New Zealand Media
LiCenCes,
Mastheads and
tradenaMes
$’000
GoodwiLL
$’000
91,558
30,155
–
–
56,185
–
387,135
564
299,224
122,333
114,037
162,766
totaL
$’000
478,693
30,719
299,224
122,333
170,222
162,766
177,898
1,086,059
1,263,957
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
294,385
1,080,260
1,374,645
In the current year, there has been a reallocation between CGUs for some goodwill, mastheads and tradenames
following changes to the structure of the organisation.
100 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
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
29 JuNE 2014
$’000
30 June 2013
$’000
226,959
(34,956)
192,003
273,198
(59,774)
213,424
115,711
(66,245)
49,466
110,574
(70,785)
39,789
1,091,328
(942,820)
148,508
1,061,360
(868,862)
192,498
18,001
33,222
407,978
478,933
recoNciLiatioNs
Reconciliations of the carrying amount of each class of property, plant and equipment during the financial year
are set out below:
At 24 June 2012
Cost
Accumulated depreciation and impairment
Net carrying amount
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
CapitaL
works in
proGress
$’000
FreehoLd
Land &
BuiLdinGs
$’000
note
LeasehoLd
BuiLdinGs
$’000
pLant and
equipMent
$’000
totaL
$’000
7,749
–
7,749
257,582
(38,220)
219,362
103,904
(36,166)
67,738
1,083,690
(831,535)
252,155
1,452,925
(905,921)
547,004
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
(3,745)
–
–
2,692
(27,534)
127
252,155
13,130
–
(2,132)
(406)
(3,111)
1,218
(60,024)
(1,114)
524
(7,653)
(1,967)
1,878
547,004
51,920
(9,364)
(2,391)
(1,594)
(4,204)
2,572
(69,139)
(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
(868,862)
192,498
1,478,354
(999,421)
478,933
// 101
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
15. ProPertY, PLaNt aNd eQUiPMeNt (coNtiNUed)
Period ended 29 June 2014
Balance at beginning of financial year
Additions/capitalisations
Capitalisation to software
Disposals
Disposal of controlled entities
Acquisition through business combinations
Depreciation for continuing operations
Assets classified as held for sale
Reclasses between asset categories
Impairment
Exchange differences
At 29 June 2014, net of accumulated
depreciation and impairment
At 29 June 2014
Cost
Accumulated depreciation and impairment
Net carrying amount
CapitaL
works in
proGress
$’000
FreehoLd
Land &
BuiLdinGs
$’000
note
LeasehoLd
BuiLdinGs
$’000
pLant and
equipMent
$’000
14
3(B)
10
33,222
(930)
(8,028)
(4)
–
–
–
(20)
(6,340)
–
101
213,424
17,716
–
(4,611)
–
–
(6,275)
(32,782)
13,303
(12,388)
3,616
39,789
8,497
–
(696)
–
–
(4,370)
–
6,044
–
202
192,498
34,524
–
(2,553)
(112)
51
(54,629)
(99)
(13,007)
(10,421)
2,256
totaL
$’000
478,933
59,807
(8,028)
(7,864)
(112)
51
(65,274)
(32,901)
–
(22,809)
6,175
18,001
192,003
49,466
148,508
407,978
18,001
–
18,001
226,959
(34,956)
192,003
115,711
(66,245)
49,466
1,091,328
(942,820)
148,508
1,451,999
(1,044,021)
407,978
During the current year, an impairment charge of $22.8 million (2013: $40.9 million) was recorded on property,
plant and equipment. This impairment primarily relates to freehold land and buildings and plant and equipment
at various sites in the Group’s print network. The impairment was recognised following a review of the fair value
less costs to sell.
102 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
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
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
Cross currency swap – net investment hedge
Total non-current derivative liabilities
29 JuNE 2014
$’000
30 June 2013
$’000
–
–
213
–
213
1,551
–
1,551
–
4
13,274
–
–
13,278
14,711
5,254
73
1,919
21,957
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
*
Present value of exercise price of the put option over subsidiary shares. The put option was exercised on the 14 August 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.
// 103
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
16. deriVatiVe fiNaNciaL iNstrUMeNts (coNtiNUed)
HedGiNG actiVities
(i) Cash flow hedges – interest rate and cross currency swaps
At 29 June 2014, the Group held cross currency swaps designated as hedges of future contracted interest payments
on the USD denominated senior notes issued in July 2007. The cross currency swaps are being used to hedge
a combination of future movements in interest rates and foreign currency exchange rates.
At 29 June 2014, 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$22.6m
interest rate
MaturitY date
10 July 2017
10 July 2017
2014
7.52%
7.46%
2013
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 29 June 2014, 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 29 June 2014, 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
2014
6.52%
2013
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 29 June 2014, the above hedges were assessed to be highly effective with a combined unrealised gain in fair
value of $1.2 million (2013: $1.7 million gain) recognised in equity for the period. During the period no material
ineffectiveness (2013: $0.4 million unrealised loss) was recognised in the income statement attributable to the
cash flow hedges.
During the year there was a gain transferred from equity to finance costs of $0.1 million (2013: nil).
(ii) Cash flow hedges – foreign exchange contracts
During the year, forward exchange contracts were used by the Group to hedge future foreign capital and
non-capital purchase commitments across the Australian and New Zealand business. The contracts are timed
to mature as payments are scheduled to be made to suppliers. At 29 June 2014, the Group held forward exchange
contracts of $0.2 million (2013: $1.0 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 29 June 2014, 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 29 June 2014, the cross currency swap agreements had a combined derivative liability position of $18.5 million
(2013: $43.0 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.
104 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
16. deriVatiVe fiNaNciaL iNstrUMeNts (coNtiNUed)
The terms of these cross currency swaps are as follows:
Pay floating AUD receive fixed USD – USD$105m
Pay floating NZD receive fixed USD – USD$19m
MaturitY date
10 July 2014
15 January 2016
For the Group, the remeasurement of the hedged items resulted in a gain before tax of $13.9 million
(2013: $21.4 million loss) and the changes in the fair value of the hedging instruments resulted in a loss before tax
of $14.0 million (2013: $16.1 million gain) resulting in a net loss before tax of $0.1 million (2013: $5.3 million loss)
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 29 June 2014, the hedges were assessed to be highly effective with an unrealised loss of $7.9 million
(2013: $12.9 million loss) recognised in equity. During the current financial period there was an unrealised loss
of $0.2 million (2013: $0.8 million loss) 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:
Property, plant and equipment
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
assets
LiaBiLities
net
29 JuNE 2014
$’000
15,987
–
–
6,120
16,677
44,980
7,208
5,134
–
941
97,047
(11,025)
86,022
30 June 2013
$’000
11,607
–
–
6,286
16,946
62,524
10,669
9,747
8,144
1,415
127,338
(19,443)
107,895
29 JuNE 2014
$’000
7,177
1,068
364
2,059
194
–
–
130
–
33
11,025
(11,025)
–
30 June 2013
$’000
10,111
3,055
515
5,038
4,182
–
–
475
–
(352)
23,024
(19,443)
3,581
29 JuNE 2014
$’000
8,810
(1,068)
(364)
4,061
16,483
44,980
7,208
5,004
–
908
86,022
–
86,022
30 June 2013
$’000
1,496
(3,055)
(515)
1,248
12,764
62,524
10,669
9,272
8,144
1,767
104,314
–
104,314
// 105
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
17. deferred taX assets aNd LiabiLities (coNtiNUed)
(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
Property, plant and equipment
Inventories
Investments
Intangible assets
Other assets
Provisions
Payables
Other liabilities
Tax losses
Other
BaLanCe
30 June 2013
1,496
(3,055)
(515)
1,248
12,764
62,524
10,669
9,272
8,144
1,767
104,314
reCoGnised
on
aCquisition
–
–
–
(405)
–
95
10
–
–
–
(300)
reCoGnised
in inCoMe
7,417
1,987
146
1,695
336
(17,434)
(3,431)
(4,068)
(8,143)
450
(21,045)
reCoGnised
in equitY
–
–
5
–
3,383
–
–
–
–
(1,309)
2,079
BaLanCes
disposed
(103)
–
–
1,523
–
(205)
(40)
(200)
(1)
–
974
disContinued
operations
–
–
–
–
–
–
–
–
–
–
–
BAlANCE
29 JuNE 2014
8,810
(1,068)
(364)
4,061
16,483
44,980
7,208
5,004
–
908
86,022
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)
–
–
–
–
–
6,816
42
–
–
–
(949)
(213)
(324)
(133)
–
(11)
(1,588)
1,496
(3,055)
(515)
1,248
12,764
62,524
10,669
9,272
8,144
1,767
104,314
(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 $146.0 million (2013: $280.0 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 $755.6 million (2013: $770.2 million).
(d) future ASSeSSABle teMPorArY differenceS
At 29 June 2014, 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 (2013: Nil).
18. PaYabLes
Trade and other payables *
Income in advance
Interest payable
Total current payables
*
Trade payables are non-interest bearing and are generally on 30 day terms.
106 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
29 JuNE 2014
$’000
155,599
56,413
6,040
218,052
30 June 2013
$’000
160,726
65,748
9,445
235,919
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
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
Cash and cash equivalents
Current interest bearing liabilities
Non-current interest bearing liabilities
Derivative financial instruments liabilities *
Net (cash)/debt
note
29 JuNE 2014
$’000
30 June 2013
$’000
(C)
(D)
(D)
(B)
(C)
(D)
(D)
111,637
3,316
4,768
119,721
277,700
2,185
4,438
284,323
138,055
123,548
95,722
503
1,246
235,526
220,508
3,819
6,014
353,889
(452,687)
119,721
235,526
29,879
(67,561)
(533,531)
284,323
353,889
49,812
154,493
* 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 cash, taking into account all debt related derivative financial instruments, was $67.6 million as at
29 June 2014 (2013: Net debt of $154.5 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 the Group and
are covered by deeds of negative pledge.
(B) BAnK BorroWingS
A $275.0 million syndicated bank facility (2013: $441.6 million) is available to the Group with maturities in February
2017 and February 2018. At 29 June 2014, $125.0 million was drawn (2013: $125.0 million). The interest rate for
drawings under this facility is the applicable bank bill rate plus a credit margin.
A NZ$40.0 million revolving cash advance facility is available to the Group until April 2016. At 29 June 2014,
NZ$15.5 million was drawn (2013: Nil). 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. Senior notes of US$50 million were repaid in January 2011,
US$148 million were repaid in July 2013 and US$13.0 million were repaid in January 2014. The weighted average
maturity of the issue is approximately 1.5 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.
// 107
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
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. Senior notes
of US$76 million were repaid in July 2013. The weighted average maturity of this issue is approximately 1.2 years.
The issued notes include fixed and floating rate coupon notes, paying a weighted average coupon of 7.4% p.a.
semi-annually in arrears. 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.
(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 $6.0 million (2013: $10.5 million), which was entered into
in February 1996, and principal and interest outstanding of $3.8 million (2013: $6.0 million) in the form of a fixed rate
loan with an established repayment schedule.
20. ProVisioNs
Current
Employee benefits
Restructuring and redundancy
Property
Other
Total current provisions
Non-current
Employee benefits
Property
Other
Total non-current provisions
29 JuNE 2014
$’000
30 June 2013
$’000
85,478
25,394
1,116
6,971
118,959
8,287
41,129
–
49,416
92,198
94,640
686
3,795
191,319
12,529
40,433
980
53,942
recoNciLiatioN
Reconciliations of the carrying amount of each class of provision, other than employee benefits, during the financial
year are set out below:
At 30 June 2013
Current
Non-current
Total provisions, excluding employee benefits
Period ended 29 June 2014
Balance at beginning of the financial year
Additional provision
Utilised
Acquisition through business combinations
Disposal of controlled entities
Exchange differences
Balance at end of the financial year
At 29 June 2014
Current
Non-current
Total provisions, excluding employee benefits
108 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
restruCturinG
and
redundanCY
$’000
94,640
–
94,640
94,640
23,210
(92,785)
–
–
329
25,394
25,394
–
25,394
propertY
$’000
686
40,433
41,119
41,119
2,378
(1,381)
70
(55)
114
42,245
1,116
41,129
42,245
other
$’000
3,795
980
4,775
4,775
4,605
(2,246)
–
(163)
–
6,971
6,971
–
6,971
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
20 ProVisioNs (coNtiNUed)
NatUre aNd tiMiNG of ProVisioNs
(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) 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.
(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 fifteen years.
(iv) Other
Other provisions includes defamation and various other costs relating to the business.
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 two funds – Fairfax NZ Retirement Fund
and Fairfax NZ Senior Executive Superannuation Scheme. Both 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 $58.0 million (2013: $59.2 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 assets/(liabilities)
Present value of the defined benefit plan obligation
Fair value of defined benefit plan assets
Net pension assets/(liabilities)
note
29 JuNE 2014
$’000
30 June 2013
$’000
1,195
(440)
755
(12,358)
13,113
755
709
(1,273)
(564)
(14,128)
13,564
(564)
(B)
(C)
// 109
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
21. PeNsioN assets aNd LiabiLities (coNtiNUed)
(B) reconciliAtion of the PreSent vAlue of defined Benefit PlAn oBligAtion
Balance at the beginning of the financial year
Current service cost
Interest cost
Contributions by employees
Actuarial gains arising from changes in financial assumptions
Actuarial losses arising from liability experience
Benefits paid
Transfers in
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
Interest income
Actual return on plan assets
Contributions by Group companies and employees
Benefits paid
Transfers in
Taxes, premiums and expenses paid
Exchange differences on foreign plans
Settlements
Balance at the end of the financial year
(d) AMountS recogniSed in incoMe StAteMent
The amounts recognised in the income statement are as follows:
Current service cost
Net interest income
Curtailments
Total included in employee benefits expense
Actual return on plan assets
29 JuNE 2014
$’000
30 June 2013
$’000
14,128
589
386
83
(65)
786
(1,765)
2,100
(325)
25
133
(3,717)
12,358
13,564
401
1,239
1,522
(1,765)
2,100
(325)
94
(3,717)
13,113
21,974
768
497
160
(1,141)
678
(3,376)
–
(109)
24
(924)
(4,423)
14,128
18,190
1,131
1,890
204
(3,376)
–
(109)
57
(4,423)
13,564
589
(15)
133
707
768
(634)
(924)
(790)
1,297
2,527
(e) cAtegorieS of PlAn ASSetS
The major categories of plan assets as a percentage of the fair value of the total defined benefit plan assets are as follows:
Cash
Australian equities
International equities
Fixed interest securities
Property
Other
110 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
29 JuNE 2014
%
20
23
27
17
9
4
30 June 2013
%
26
18
26
17
4
9
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
21. PeNsioN assets aNd LiabiLities (coNtiNUed)
(f) 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. As at reporting date,
the 2014 actuarial assessment for New Zealand had not been finalised. Fairfax NZ Senior Executive Superannuation
Scheme is a defined contribution fund and does not require an actuarial assessment.
The objective of funding is to ensure that the benefit entitlements of members and other beneficiaries are fully
funded by the time they become payable. To achieve this objective, the actuary has adopted a method of funding
benefits known as the aggregate funding method. This funding method seeks to have benefits funded by means of
a total contribution which is expected to be a constant percentage of members’ salaries over their working lifetimes.
Total employer contributions expected to be paid by Group companies for the 2015 financial year are $0.7 million.
(g) 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.
(h) SignificAnt ActuAriAl ASSuMPtionS
The significant actuarial assumptions used to determine the present value of the defined benefit plan obligation
(expressed as weighted averages) were as follows:
Discount rate
Future salary increases
2014
%
3.4
2.9
2013
%
2.7
4.0
(i) SenSitivitY AnAlYSiS
A quantitative sensitivity analysis for significant actuarial assumptions as at 29 June 2014 is as shown below:
assuMptions
sensitiVitY LeVeL
Impact on the net defined benefit plan obligation
disCount rate
Future saLarY inCreases
0.5% inCrease
$'000
(152)
0.5% deCrease
$'000
168
0.5% inCrease
$'000
160
0.5% deCrease
$'000
(149)
The sensitivity analysis above has been determined based on a method that extrapolates the impact on the
net defined benefit plan obligation as a result of reasonable changes in key assumptions at the end of the
reporting period.
The average duration of the defined benefit plan obligation at the end of the reporting period is 4.4 years.
// 111
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
22. coNtribUted eQUitY
Ordinary shares
2,351,955,725 ordinary shares authorised and fully paid (2013: 2,351,955,725)
unvested employee incentive shares
11,594,031 unvested employee incentive shares (2013: 11,723,026)
Debentures
281 debentures fully paid (2013: 281)
Total contributed equity
*
Amount is less than $1000
note
29 JuNE 2014
$’000
30 June 2013
$’000
(A)
(B)
(C)
4,667,944
4,667,944
(21,419)
(21,696)
*
4,646,525
*
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
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
29 JuNE 2014
NO. OF SHARES
30 June 2013
no. oF shares
29 JuNE 2014
$’000
30 June 2013
$’000
(B) unveSted eMPloYee incentive ShAreS
Balance at beginning of the financial year
Reclassification due to prior distribution of shares
Balance at end of the financial year
(c) deBentureS
Balance at beginning of the financial year
Balance at end of the financial year
Total contributed equity
*
Amount is less than $1000
terMs aNd coNditioNs of coNtribUted eQUitY
11,723,026
(128,995)
11,594,031
11,723,026
–
11,723,026
(21,696)
277
(21,419)
(21,696)
–
(21,696)
281
281
281
281
*
*
*
*
4,646,525
4,646,248
(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).
112 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
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
Disposal of available for sale investments
Tax effect on available for sale investments
Balance at end of the financial year
(B) foreign currencY trAnSlAtion reServe
Balance at beginning of the financial year
Exchange differences on currency translation
Disposal of subsidiaries, net of tax
Tax effect of net changes on foreign currency translation reserve
Balance at end of the financial year
(c) cAShfloW hedge reServe
Balance at beginning of the financial year
Gains arising during the year on interest rate and cross currency swaps
(Losses)/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
Reclassification due to prior distribution of shares
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
Balance at end of the financial year
note
(A)
(B)
(C)
(D)
(E)
(F)
(G)
29 JuNE 2014
$’000
753
(110,148)
(4,179)
(18,094)
11,231
182,706
(6,837)
55,432
30 June 2013
$’000
41
(132,599)
(4,703)
(10,232)
8,799
181,048
(6,837)
35,517
41
820
16
(129)
5
753
(259)
(61)
357
–
4
41
(132,599)
22,451
–
–
(110,148)
(219,528)
28,033
58,876
20
(132,599)
(4,703)
1,410
(774)
(125)
13
(4,179)
(7,088)
2,543
864
–
(1,022)
(4,703)
(10,232)
(11,231)
3,369
(18,094)
2,669
(18,431)
5,530
(10,232)
8,799
(277)
3,870
–
(1,161)
11,231
7,764
–
2,038
(495)
(508)
8,799
181,048
1,658
–
182,706
177,759
(3,005)
6,294
181,048
// 113
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
23. reserVes (coNtiNUed)
(g) generAl reServe
Balance at beginning of the financial year
Balance at end of the financial year
NatUre aNd PUrPose of reserVes
29 JuNE 2014
$’000
30 June 2013
$’000
(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).
(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.
114 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
24. earNiNGs Per sHare
Basic earnings per share
Net profit/(loss) attributable to owners of the parent
Net profit/(loss) from continuing operations attributable to owners of the parent
Diluted earnings per share
Net profit/(loss) attributable to owners of the parent
Net profit/(loss) from continuing operations attributable to owners of the parent
Earnings reconciliation – basic
Net profit/(loss) attributable to owners of the parent
Net profit/(loss) from continuing operations attributable to owners of the parent
Earnings reconciliation – diluted
Net profit/(loss) attributable to owners of the parent
Net profit/(loss) from continuing operations attributable to owners of the parent
Weighted average number of ordinary shares used in calculating basic EPS
29 JuNE 2014
¢ PER SHARE
30 June 2013
¢ per share
9.5
9.5
9.5
9.5
(0.7)
(13.3)
(0.7)
(13.3)
29 JuNE 2014
$’000
30 June 2013
$’000
224,432
224,432
(16,432)
(312,852)
224,432
224,432
(16,432)
(312,852)
29 JuNE 2014
NuMBER
’000
2,351,956
30 June 2013
nuMBer
$’000
2,351,956
Weighted average number of ordinary shares used in calculating diluted EPS
2,365,174
2,351,956
// 115
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
25. coMMitMeNts
oPeratiNG Lease coMMitMeNts – GroUP as Lessee
The Group has entered into commercial leases on office and warehouse premises, motor vehicles and
office equipment.
Future minimum rentals payable under non-cancellable operating leases as at the period end are as follows:
Within one year
Later than one year and not later than five years
Later than five years
Total operating lease commitments
29 JuNE 2014
$’000
42,661
143,080
266,212
451,953
30 June 2013
$’000
39,861
122,219
284,111
446,191
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 one and twenty-three years and
usually 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 $7.0 million
(2013: $8.2 million). The lease has a remaining term of one year (2013: two years) and a weighted average interest
rate of 13.3% (2013: 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
present
VaLue oF
paYMents
note
19(D)
2014
$’000
5,076
1,269
–
6,345
(331)
6,014
2014
$’000
4,768
1,246
–
6,014
–
6,014
MiniMuM
paYMents
2013
$’000
5,076
6,344
–
11,420
(968)
10,452
present
VaLue oF
paYMents
2013
$’000
4,438
6,014
–
10,452
–
10,452
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 one year which is subject to such movements
amounts to $6.0 million (2013: $10.4 million).
caPitaL coMMitMeNts
At 29 June 2014, the Group has commitments principally relating to the purchase of property, plant and equipment.
Commitments contracted for at reporting date but not recognised as liabilities are as follows:
Within one year
Later than one year and not later than five years
Later than five years
Total capital commitments
29 JuNE 2014
$’000
4,619
109
–
4,728
30 June 2013
$’000
30,407
–
–
30,407
116 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
26. coNtiNGeNcies
GUaraNtees
Under the terms of ASIC Class Order 98/1418 (as amended), the Company and certain controlled entities (refer
Note 27), have guaranteed any deficiency of funds if any entity to the class order is wound-up. No such deficiency
exists at 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.
27. coNtroLLed eNtities
The following entities were controlled as at the end of the financial year:
Fairfax Media Limited
CONTROllED ENTITIES
2GTHR Pty Limited
ACN 000 128 281 Pty Limited (in Liq)
ACN 000 834 257 Pty Limited
ACN 001 004 815 Pty Limited (in Liq)
ACN 001 260 671 Pty Limited (in Liq)
ACN 091 950 462 Pty Limited (in Liq)
ACN 101 806 302 Pty Limited
ACN 113 587 527 Pty Limited (in Liq)
Agricultural Publishers Pty Limited
Allure Media Pty Ltd
Associated Newspapers Pty Limited
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
Commerce Australia Pty Ltd
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
Fairfax Digital Holdings NZ Limited
Fairfax Digital Assets NZ Limited
Fairfax Digital Australia & New Zealand Pty Limited
notes
(A)
CountrY oF
inCorporation
Australia
ownership interest
2014
%
2013
%
(A)
(A)
(A)
(A)
(A), (B)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(C)
(C)
(A)
(A)
(D)
(D)
(A)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Singapore
Singapore
Malaysia
Australia
Australia
New Zealand
New Zealand
Australia
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
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
100
100
100
// 117
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
27. coNtroLLed eNtities (coNtiNUed)
ownership interest
notes
CountrY oF
inCorporation
2014
%
(A), (E)
Fairfax Digital Pty 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
Financial Essentials Pty Ltd (in Liq)
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
Integrated Publication Solutions Pty Limited
Internet Marketing Australia Pty Ltd
Internet Products Sales & Services Pty Ltd
InvestSMART Financial Services Pty Ltd
John Fairfax & Sons Pty Limited
John Fairfax (US) Limited
John Fairfax Pty Limited
Lime Digital Pty Limited (in Liq)
Mackamedia Pty Ltd
Mamiko Co Pty Ltd
Mapshed Pty Ltd
Mayas Pty Ltd
Mayas Unit Trust
Media Investments Pty Ltd
Micosh Pty Ltd (in Liq)
Milton Ulladulla Publishing Co. Pty Ltd
Mistcue Pty Limited
Mountain Press Pty Ltd
Namoi Media & Marketing Pty Ltd
Netus Pty Limited
Newcastle Newspapers Pty Ltd
Newsagents Direct Distribution Pty Ltd
118 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
(A)
(A)
Australia
New Zealand
United Kingdom
Australia
Australia
New Zealand
(F) United Kingdom
Australia
(A)
New Zealand
(G)
New Zealand
(G)
Australia
(A)
New Zealand
(D)
New Zealand
(D)
Australia
(A)
Australia
(A)
Australia
(A)
Australia
(A)
Australia
(A)
Australia
(A)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
United States
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
(A)
(A)
(A)
(H)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(I)
(A), (J)
(A), (K)
(A)
(A)
(A), (L)
(A), (M)
(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
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
65
100
100
100
100
100
2013
%
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
65
88
100
100
100
100
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
27. coNtroLLed eNtities (coNtiNUed)
ownership interest
North Australian News Pty Ltd
Northern Newspapers Pty Ltd
Occupancy Pty Limited
Ollority Pty Ltd
Online Marketing Group Pty Limited
OSF Australia Pty Limited (in Liq)
Personal Investment Direct Access Pty Limited
Port Lincoln Times Pty Ltd
Port Stephens Publishers Pty Ltd
Port Stephens Publishers Trust
Property Data Solutions Pty Ltd
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 Magic 882 Brisbane Pty Limited
Radio 6PR Perth Pty Limited
Radio 96FM Perth Pty Limited
Regional Press Australia Pty Limited (in Liq)
Regional Printers Pty Limited
Regional Publishers (Tasmania) Pty Ltd (in Liq)
Regional Publishers (Victoria) Pty Limited
Regional Publishers (Western Victoria) Pty Limited
Regional Publishers Pty Ltd
RSVP.com.au Pty Limited
Rural Press Printing (Victoria) Pty Limited
Rural Press Printing Pty Limited
Rural Press Pty Limited
Rural Press Queensland Pty Ltd
Rural Press Regional Media (WA) Pty Limited
Rural Publishers Pty Limited
Southern Weekly Partnership
S.A. Regional Media Pty Limited
Satellite Music Australia Pty Limited
Stayz Limited
Stayz Pty Limited
Stock Journal Publishers Pty Ltd
Suzannenic Pty Limited
The Advocate Newspaper Proprietary Limited
The Age Company Pty Limited
The Age Print Company Pty Ltd
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 (in Liq)
TheVine.com.au Pty Limited
The Wagga Daily Advertiser Pty Ltd
The Warrnambool Standard Pty Ltd
notes
CountrY oF
inCorporation
2014
%
(A)
(A)
(N)
(A)
(A)
(I)
(A)
(A)
(A), (L)
(A)
(A)
(A)
(A)
(A)
(A), (O)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(N)
(N)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
(A)
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
100
100
–
100
100
100
–
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
75
100
100
–
–
100
100
100
100
100
100
100
63
100
100
70
100
100
2013
%
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
100
100
100
100
100
100
63
100
100
70
100
100
// 119
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
27. coNtroLLed eNtities (coNtiNUed)
The Weather Company Pty Limited
Tricom Group Pty Ltd (in Liq)
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 (in Liq)
Winbourne Pty Limited
ownership interest
notes
CountrY oF
inCorporation
Australia
Australia
Japan
Australia
Australia
Australia
Australia
Australia
Australia
(A)
(A)
(A)
2014
%
75
100
75
100
100
75
75
100
100
2013
%
75
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) This company was formerly called Associated Newspapers Ltd.
(c) Disposed on 7 August 2013.
(d) Amalgamated with Fairfax Group Finance New Zealand Limited on 5 February 2014.
(e) This company was formerly called Fairfax Digital Limited.
(f) This company was formally dissolved on 19 November 2013, following members voluntary liquidation.
(g) Fairfax New Zealand Holdings Limited and Fairfax New Zealand Limited were amalgamated into Fairfax New Zealand
Holdings Limited on 31 March 2014. Fairfax New Zealand Holdings Limited subsequently adopted the name of Fairfax
New Zealand Limited.
(h) The remaining interest in this company was acquired on 12 December 2013.
(i) Disposed on 30 September 2013.
(j) This company was formerly called John Fairfax & Sons Ltd.
(k) This company was formerly called John Fairfax Limited.
(l) Acquired on 13 December 2013.
(m) The remaining interest in this company was acquired on 1 July 2013.
(n) Disposed on 6 December 2013.
(o) This company was formerly called Radio 4BH Brisbane Pty Limited.
120 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
27. 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 29 June 2014 and consolidated
balance sheet as at 29 June 2014, 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
29 JuNE 2014
$’000
30 June 2013
$’000
444,707
230,103
20,674
213
83,784
–
4,858
784,339
1,248
87,667
2,488
1,141,818
341,196
1,551
84,773
574,070
2,234,811
3,019,150
103,074
119,721
13,278
4,202
99,958
3,132
343,365
235,526
21,957
47,041
440
304,964
648,329
2,370,821
449,780
244,349
25,394
11,018
3,176
3,200
4,386
741,303
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
353,889
26,939
51,467
1,273
433,568
1,111,530
2,116,320
4,646,525
(12,711)
(2,262,993)
2,370,821
4,646,248
(66,921)
(2,463,007)
2,116,320
// 121
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
27. coNtroLLed eNtities (coNtiNUed)
(B) incoMe StAteMent
Total revenue
Share of net profits of associates and joint ventures
Expenses before finance costs
Finance costs
Net profit/(loss) from operations before income tax expense
Income tax expense
Net profit/(loss) from operations after income tax expense
29 JuNE 2014
$’000
1,637,018
8,012
(1,350,936)
12,040
306,134
(41,847)
264,287
30 June 2013
$’000
1,834,598
(2,251)
(1,895,265)
(58,683)
(121,601)
(13,812)
(135,413)
28. acQUisitioN aNd disPosaL of coNtroLLed eNtities
(A) AcQuiSitionS
The Group gained control over the following entities during the year:
entitY or Business aCquired
Property Data Solutions Pty Ltd
Mapshed Pty Ltd
prinCipaL aCtiVitY
Property data research subscriptions
Property data research subscriptions
date oF aCquisition
13 December 2013
13 December 2013
(B) diSPoSAlS
The Group disposed of its interest in the following entities during the year:
entitY or Business disposed
Fairfax Business Media Pte Ltd
Fairfax Business Media Sdn. Bhd.
InvestSMART Financial Services Pty Ltd
Personal Investment Direct Access Pty
Limited
Stayz Pty Ltd
Stayz Limited
Occupancy Pty Ltd
prinCipaL aCtiVitY
Business media publishing
Business media publishing
Agent to managed investment funds
Agent to managed investment funds
Online accommodation advertising
Online accommodation advertising
Online accommodation advertising
date oF disposaL
7 August 2013
7 August 2013
30 September 2013
30 September 2013
6 December 2013
6 December 2013
6 December 2013
For the above entities, the major classes of assets and liabilities disposed were as follows:
Cash and cash equivalents
Trade and other receivables
Income tax receivable
Intangible assets
Property, plant and equipment
Deferred tax assets
Total assets
Payables
Provisions
Deferred tax liabilities
Total liabilities
Net assets
122 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
ownership
interest
100%
100%
ownership
interest
100%
100%
100%
100%
100%
100%
100%
$’000
6,120
3,107
453
115,514
112
448
125,754
10,346
677
1,850
12,873
112,881
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
29. bUsiNess coMbiNatioNs
acQUisitioNs dUriNG tHe Period
The acquisition of Property Data Solutions Pty Ltd and Mapshed Pty Ltd is listed in Note 28(A).
The fair values of the identifiable assets and liabilities acquired were:
value of net assets acquired
Cash and cash equivalents
Receivables
Property, plant and equipment
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
Total purchase consideration
Net cash outflow on acquisition
Net cash acquired with subsidiary
Cash paid
Net cash outflow
reCoGnised
on
aCquisition
$’000
482
546
51
1,350
105
2,534
564
284
376
405
1,629
905
26,890
27,795
27,795
27,795
482
(27,795)
(27,313)
In addition to cash paid of $27.8 million, remuneration of up to $2.0 million is payable by the Group to specified
former shareholders if certain financial performance criteria is achieved. This is payable over a period of two years
with the final payment due on 31 December 2015.
As a result of this acquisition, the consolidated income statement includes revenue and net profit before tax for the
period ended 29 June 2014 of $4.8 million and $0.6 million respectively (including $0.9 million of earn out costs).
Had the acquisition occurred at the beginning of the reporting period, the consolidated income statement would
have included revenue and net profit before tax of $8.9 million and $1.9 million respectively (including $0.9 million
of earn out costs).
Goodwill of $26.9 million includes the acquired workforces and future growth opportunities.
// 123
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
30. eMPLoYee beNefits
(A) nuMBer of eMPloYeeS
As at 29 June 2014 the Group employed 6,410 full-time employees (2013: 7,043) and 1,211 part-time and casual
employees (2013: 1,384). This includes 1,636 (2013: 1,813) full-time employees and 259 (2013: 285) 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 was in
the form of allocated Fairfax shares, which are beneficially held in a trust. The shares vest if the eligible employee
remains in employment three years from the date the shares were allocated and certain performance hurdles are
satisfied. If the allocation does not vest at the end of year three post allocation, 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 was entitled depended 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
scheme. The value of the rights at the time of allocation was determined by an independent external valuer.
2014 Financial Year
For 2014, participants in the plan were granted options following the 2013 AGM with the exercise price set at the
share price around the time of issue. The options have a vesting hurdle of absolute total shareholder return over
three years from issue with a retest in the fourth year. No dividends are payable to participants on the unvested
options. The options have been valued using a Monte Carlo simulation model.
Participants are also entitled to receive performance shares for no consideration subject to achievement of certain
performance hurdles. Half of the shares granted are deferred for one year and the other half are deferred for two
years. Participants must remain employed during the deferral period or the shares will be forfeited.
124 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
31. reMUNeratioN of aUditors
During the financial year the following amounts were paid or payable for services provided by the auditor of the
Company and its related parties:
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
29 JuNE 2014
$
30 June 2013
$
885,800
1,088,401
228,521
244,044
23,251
1,137,572
26,498
1,358,943
178,249
110,164
243,809
225,449
71,948
–
98,020
–
2,160
–
362,521
1,500,093
8,151
–
575,429
1,934,372
–
–
–
–
–
–
1,500,093
–
–
1,934,372
// 125
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
32. reLated PartY traNsactioNs
(A) ultiMAte PArent
Fairfax Media Limited is the ultimate parent company.
(B) controlled entitieS
Interests in controlled entities are set out in Note 27.
(c) KeY MAnAgeMent PerSonnel
Transactions with Director-related entities
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.
Rights over shareholdings of key management personnel
Details of equity-based incentive schemes are included in the remuneration report.
2014
G Hywood
D Housego
G Hambly
A Williams
Total
2013
G Hywood
B Cassell *
D Housego
G Hambly
A Williams
Total
OPENING
BAlANCE
30 JuNE 2013
10,403,380
3,666,667
2,690,313
1,837,124
18,597,484
openinG
BaLanCe
24 June 2012
1,514,491
785,983
–
717,949
–
3,018,423
GRANTED AS
REMuNERATION
NET CHANGE
OTHER **
8,000,000
4,125,000
3,125,000
3,875,000
19,125,000
–
–
(56,488)
–
(56,488)
Granted as
reMuneration
8,888,889
–
3,666,667
2,083,333
1,837,124
16,476,013
net ChanGe
other **
–
(121,057)
–
(110,969)
–
(232,026)
ClOSING
BAlANCE
29 JuNE 2014
18,403,380
7,791,667
5,758,825
5,712,124
37,665,996
CLosinG
BaLanCe
30 June 2013
10,403,380
664,926
3,666,667
2,690,313
1,837,124
19,262,410
*
For KMP, the closing balance represents the number of shares at the date of resignation. B Cassell ceased in the position
of CFO on 3 December 2012 and resigned on 1 July 2013. Any unvested rights were forfeited.
** Net change movements include forfeitures.
126 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
32. reLated PartY traNsactioNs (coNtiNUed)
(d) trAnSActionS With relAted entitieS
The following transactions for the sale and purchase of goods and services occurred with related parties on normal
market terms and conditions:
Associates
29 June 2014
30 June 2013
Joint ventures
29 June 2014
30 June 2013
saLes to
reLated parties
$’000
purChases FroM
reLated parties
$’000
aMount owed BY
reLated parties
$’000
aMount owed to
reLated parties
$’000
3,588
13,688
348
54
17,753
7,307
3,101
241
343
246
35
–
64
3,413
155
1
33. Notes to tHe casH fLoW stateMeNt
(A) reconciliAtion of net Profit/(loSS) After incoMe tAx exPenSe
to net cASh infloW froM oPerAting ActivitieS
Net profit/(loss) for the period
225,168
(971)
note
29 JuNE 2014
$’000
30 June 2013
$’000
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 (profits)/losses of associates and joint ventures not received as dividends
Straight-line rent adjustment
Net (gain)/loss on disposal of property, plant and equipment
Net gain on disposal of investments and other assets
Fair value adjustment to derivatives
Net foreign currency (gain)/loss
Share-based payment expense
Non-cash superannuation expense
Gain on partial redemption of senior notes
Other non-operating gains
Changes in operating assets and liabilities, net of effects from acquisitions
Decrease in trade receivables
(Increase)/decrease in other receivables
Decrease in inventories
Increase in other assets
Decrease in payables
Decrease in provisions
Increase in tax balances
Net cash inflow from operating activities
3(B)
93,517
–
23,459
1,764
(3,266)
312
(121)
(106,345)
(157)
(5,526)
3,870
(731)
(10,183)
–
8,751
(11,153)
5,916
(1,286)
(3,287)
(78,298)
29,078
171,482
100,762
3,124
459,938
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
(B) reconciliAtion of cASh And cASh eQuivAlentS
Reconciliation of cash at end of the financial year (as shown in the Cash Flow Statement) 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
452,687
452,687
533,531
533,531
// 127
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
34. 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 (cash)/debt to EBITDA ratio for the Group at 29 June 2014 and 30 June 2013 is as follows:
Net (cash)/debt
EBITDA *
Net debt to EBITDA ratio
note
19
2014
$’000
(67,561)
312,452
(0.22)
2013
$’000
154,493
366,474
0.42
*
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.
128 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
34. 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:
FlOATING RATE
$’000
FIxED RATE
$’000
NON-INTEREST
BEARING
$’000
As at 29 June 2014
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
452,687
–
–
6,227
–
458,914
–
138,055
–
6,014
144,069
20,518
164,587
144,069
(123,654)
20,415
–
–
–
–
–
–
–
3,819
207,359
–
211,178
14,717
225,895
211,178
(78,012)
133,166
TOTAl
$’000
452,687
276,406
2,488
6,227
1,764
739,572
–
276,406
2,488
–
1,764
280,658
218,052
218,052
–
–
–
–
–
218,052
141,874
207,359
6,014
355,247
35,235
608,534
–
–
–
355,247
(201,666)
153,581
// 129
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
34. fiNaNciaL aNd caPitaL risK MaNaGeMeNt (coNtiNUed)
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
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% (2013: 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 29 June 2014 from around 2.71% to 3.52% representing a 81 basis point shift (2013: 85 basis point shift).
In 2014, 90% (2013: 66%) 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 floating rate Australian Dollar debt 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)
(737)
(2,603)
889
1,670
737
2,603
(900)
(1,704)
iMpaCt on post-tax proFit
iMpaCt on equitY
2014
$’000
2013
$’000
2014
$’000
2013
$’000
130 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
34. fiNaNciaL aNd caPitaL risK MaNaGeMeNt (coNtiNUed)
(B) foreign currencY riSK
Foreign currency risk refers to the risk that the value or the cash flows arising from a financial commitment,
or recognised asset or liability will fluctuate due to changes in foreign currency rates. The Group’s foreign
currency exchange risk arises primarily from:
• borrowings denominated in foreign currency; and
• firm commitments and/or highly probable forecast transactions for receipts and payments settled in foreign
currencies and prices dependent on foreign currencies respectively.
The Group is exposed to foreign exchange risk from various currency exposures, primarily with respect to:
• United States Dollars; and
• New Zealand Dollars.
Forward foreign exchange contracts are used to hedge the Group’s known non-debt related foreign currency risks.
These contracts generally have maturities of less than twelve months after the 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.
// 131
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
34. fiNaNciaL aNd caPitaL risK MaNaGeMeNt (coNtiNUed)
(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 0.9149 and a 15% stronger Australian Dollar in an exchange rate of 1.2378 based
on the year end rate of 1.0763. 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 1.0554 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) *
2014
$’000
107
(79)
2013
$’000
2014
$’000
2013
$’000
852
(3,613)
(31,522)
(630)
2,670
23,299
* Hedging reserves includes both the cash flow hedge reserve and net investment hedge reserve.
(b) AuD / uSD
Comparing the Australian Dollar exchange rate against the United States Dollar, a 15% weaker Australian Dollar
would result in an exchange rate of 0.8006 and a 15% stronger Australian Dollar in an exchange rate of 1.0832
based on the year end rate of 0.9419. 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 0.7783 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
2014
$’000
58
–
2013
$’000
1
(3)
iMpaCt on equitY
(Cash FLow hedGe reserVe)
2014
$’000
2013
$’000
(801)
(1,249)
1,136
1,786
(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 29 June 2014 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.
132 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
34. fiNaNciaL aNd caPitaL risK MaNaGeMeNt (coNtiNUed)
(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 29 June 2014.
The contractual maturity of the Group’s fixed and floating rate derivatives, other financial assets and other financial
liabilities are shown in the tables below. The amounts represent the future undiscounted principal and interest cash
flows and therefore may not equate to the values disclosed in the balance sheet.
As at 29 June 2014
Financial liabilities *
Payables
Bank borrowings and loans
Notes and bonds
Finance lease liability
Derivatives – inflows *
Cross currency swaps – foreign leg (fixed) **
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
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
(NOMINAl CASH FlOWS)
1 YEAR OR lESS
$’000
1 TO 2 YEARS
$’000
2 TO 5 YEARS
$’000
MORE THAN
5 YEARS
$’000
(218,052)
(10,153)
(126,273)
(9,848)
–
(144,842)
(26,213)
(2,533)
–
–
(78,886)
–
118,304
4,169
26,264
–
78,886
–
(6,149)
(125,043)
(938)
(4,706)
(4,112)
(6,149)
–
(29,341)
(126,177)
–
(88,411)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(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)
(276,057)
(9,453)
248,714
27,388
28,203
(43,221)
(58,491)
(224,510)
(4,275)
(25,937)
(6,436)
–
(133,366)
(122,009)
(9,848)
122,009
–
–
(6,149)
(125,059)
(892)
(4,275)
–
–
–
(516)
(108,390)
(2,533)
108,443
–
–
(94,560)
–
(26,742)
(127,138)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
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.
// 133
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
34. 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
2014
$’000
FAIR vAluE
2014
$’000
CarrYinG VaLue
2013
$’000
Fair VaLue
2013
$’000
452,687
276,406
1,764
2,488
6,227
739,572
452,687
276,406
1,764
2,488
6,227
739,572
533,531
287,457
18,833
1,929
10,608
852,358
533,531
287,457
18,833
1,929
10,608
852,358
218,052
218,052
235,919
235,919
141,874
207,359
6,014
35,235
608,534
143,220
207,386
10,859
35,235
614,752
129,552
498,208
10,452
74,917
949,048
131,003
498,848
17,929
74,917
958,616
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 5.57% to 13.29%
(2013: 1.93% to 13.29%).
The carrying value of all other balances approximate their fair value.
The Group uses various methods in estimating fair value. 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 assets and liabilities held at fair value, as well as the methods used to estimate the fair value,
are summarised in the table below:
As at 29 June 2014
Assets at fair value
Derivative assets
Available for sale investments
Assets held for sale
Freehold land and buildings
liabilities at fair value
Derivative liabilities
lEvEl 1
$’000
lEvEl 2
$’000
lEvEl 3
$’000
–
2,488
–
2,488
1,764
–
–
1,764
–
–
35,235
35,235
–
–
29,963
29,963
–
–
TOTAl
$’000
1,764
2,488
29,963
34,215
35,235
35,235
134 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
34. fiNaNciaL aNd caPitaL risK MaNaGeMeNt (coNtiNUed)
As at 30 June 2013
Financial assets
Derivative assets
Available for sale investments
Financial liabilities
Derivative liabilities
LeVeL 1
$’000
–
1,929
1,929
–
–
LeVeL 2
$’000
LeVeL 3
$’000
totaL
$’000
18,833
–
18,833
74,917
74,917
–
–
–
–
–
18,833
1,929
20,762
74,917
74,917
Held for sale freehold land and buildings are carried at the Directors’ determination of fair value which takes into
account latest independent valuations and evidence of fair value from disposal negotiations. The key assumptions
in determining the valuation of the properties are the estimated weighted average yield and costs of dismantling
plant and equipment where relevant. Significant movement in these assumptions in isolation would result in a higher
or lower fair value of the properties.
35. 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
Australian Metro Media, Australian Community Media and the New Zealand Media segments.
In the 2014 financial year, the Group has implemented changes to the structure of the organisation which has
resulted in a reclassification within its reportable segments. NSW community and ACT publications have been
moved from Australian Metro Media to Australian Community Media.
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.
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
Australian Community Media reportable segment. On 6 December 2013, the Group disposed of the Stayz business
which was part of the Australian Metro Media segment.
reportaBLe seGMent
Australian Community Media
Australian Metro Media
produCts and serViCes
Newspaper publishing and online for all Australian regional, community and agricultural media.
Metropolitan news, sport, lifestyle and business media across various platforms including
print, online, tablet and mobile. Also includes classifieds for metropolitan publications and
transactional businesses.
Newspaper, magazine and general publishing and online for all New Zealand media.
Metropolitan radio networks in Australia.
Comprises corporate and other entities not included in the segments above.
New Zealand Media
Radio
Other
Trade Me (discontinued operations) Transactional businesses of Trade Me in New Zealand.
// 135
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
35. seGMeNt rePortiNG (coNtiNUed)
(B) reSultS BY oPerAting SegMent
The segment information provided to the Board of Directors, CEO and CFO for the reportable segments for the
period ended 29 June 2014 and 30 June 2013 is as follows:
SEGMENT
REvENuE
$’000
INTERSEGMENT
REvENuE
$’000
REvENuE
FROM ExTERNAl
CuSTOMERS
$’000
SHARE OF
PROFITS OF
ASSOCIATES
AND JOINT
vENTuRES
$’000
uNDERlYING
EBIT
$’000
586,569
804,088
362,672
103,955
9,602
1,866,886
(89)
(895)
(6)
(130)
451
(669)
586,480
803,193
362,666
103,825
10,053
1,866,217
2,266
3,780
–
(3)
1,964
8,007
112,714
63,536
59,752
10,718
(27,491)
219,229
seGMent
reVenue
$’000
interseGMent
reVenue
$’000
reVenue
FroM externaL
CustoMers
$’000
687,658
894,001
337,585
110,762
(3,856)
2,026,150
60,187
2,086,337
(2,428)
(9,548)
55
(273)
–
(12,194)
–
(12,194)
685,230
884,453
337,640
110,489
(3,856)
2,013,956
60,187
2,074,143
share oF
proFits oF
assoCiates
and Joint
Ventures
$’000
2,367
(2,527)
–
55
(2,134)
(2,239)
–
(2,239)
underLYinG
eBit
$’000
145,009
36,891
49,510
16,052
(26,963)
220,499
41,650
262,149
29 June 2014
Australian Community Media
Australian Metro Media
New Zealand Media
Radio
Other
Total for the Group
30 June 2013
Australian Community Media
Australian Metro Media
New Zealand Media
Radio
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
Gains on sale of controlled entities
Total revenue and income
29 JuNE 2014
$’000
1,866,217
14,874
106,477
1,987,568
30 June 2013
$’000
2,013,956
11,604
19,830
2,045,390
Transactions between operating segments relating to management charges 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 $1,622.7 million (2013: $1,686.1 million) and the
amount of revenue from external customers in New Zealand is $364.9 million (2013: $359.3 million). Segment
revenues are allocated based on the country in which the customer is located.
136 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
35. seGMeNt rePortiNG (coNtiNUed)
(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. Gains on the sale of controlled entities 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 profit/(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 and customer relationships
Impairment of investments, inventories and property, plant and equipment
Restructuring and redundancy charges
Reported net profit/(loss) before tax
29 JuNE 2014
$’000
219,229
14,874
(25,302)
30 June 2013
$’000
220,499
11,604
(66,571)
106,477
–
(23,890)
(24,019)
267,369
19,830
(418,655)
(37,189)
(4,458)
(274,940)
A summary of significant items by operating segments is provided for the period ended 29 June 2014 and 30 June 2013.
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
CONTROllED
ENTITIES
$’000
–
–
–
–
–
406,055
5,000
7,600
–
418,655
440
15,058
5,539
2,853
23,890
–
36,832
–
357
37,189
–
–
5,589
18,430
24,019
–
–
–
(106,477)
(106,477)
2,844
–
–
1,614
4,458
–
–
–
(19,830)
(19,830)
TOTAl
$’000
440
15,058
11,128
(85,194)
(58,568)
408,899
41,832
7,600
(17,859)
440,472
29 June 2014
Australian Community Media
Australian Metro Media
New Zealand Media
Other
Consolidated entity
30 June 2013
Australian Community Media
Australian Metro Media
Radio
Other
Consolidated entity
(iii) Segment assets
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.
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 $1,608.4 million (2013: $1,773.0 million)
and the total of these non-current assets located in New Zealand is $204.2 million (2013: $227.4 million). Segment
assets are allocated to countries based on where the assets are located.
// 137
Notes to tHe fiNaNciaL stateMeNts
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
36. 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
Profit/(loss) for the period
Other comprehensive income
Total comprehensive income for the period
29 JuNE 2014
$’000
30 June 2013
$’000
1,492,947
1,900,484
13,395
13,395
1,419,568
1,829,633
12,912
13,438
4,646,525
(722)
(10,672)
11,231
(2,759,273)
1,887,089
4,646,248
(722)
(10,672)
8,799
(2,827,458)
1,816,195
138,744
–
138,744
(180,630)
–
(180,630)
Fairfax Media Limited has entered into a Deed of Cross Guarantee with the effect that the Company guarantees
debts in respect of its subsidiaries within the Closed Group. Further details regarding the deed are set out in Note 27.
oPeratiNG Lease coMMitMeNts – PareNt eNtitY as Lessee
In the prior year, Fairfax Media Limited had a commercial lease 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
29 JuNE 2014
$’000
–
–
–
–
30 June 2013
$’000
109
–
–
109
37. eVeNts sUbseQUeNt to rePortiNG date
The Group completed an agreement to merge RSVP.com.au Pty Limited with 3H Group Pty Ltd on 1 July 2014.
Following the merger, the Group will hold a 58% interest in RSVP.com.au Pty Limited. The Group will no longer
consolidate this entity as it does not control the financial and operating policies of the entity. The investment will
be accounted for using the equity method.
On 10 July, the Group entered into an agreement to acquire All Homes Pty Ltd and All Data Australia Pty Ltd subject
to regulatory approval. Total consideration is expected to be $50 million.
On 10 July, the Group repaid US$105 million (A$125 million) of senior notes.
138 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
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 29 June 2014 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) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they
become due and payable; and
(d) as at the date of this declaration, there are reasonable grounds to believe that the members of the Closed
Group identified in Note 27 will be able to meet any obligations or liabilities to which they are or may
become subject, by virtue of the Deed of Cross Guarantee.
2. This declaration has been made after receiving the declarations required to be made to the Directors from the
Chief Executive Officer and the Chief Financial Officer in accordance with section 295A of the Corporations Act
2001 for the financial year ended 29 June 2014.
On behalf of the Board
Roger Corbett, AO
Chairman
Greg Hywood
Chief Executive Officer and Managing Director
14 August 2014
// 139
iNdePeNdeNt aUditor’s rePort
140 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
iNdePeNdeNt aUditor’s rePort
// 141
sHareHoLder iNforMatioN
FairFax Media LiMited
tWeNtY LarGest HoLders of secUrities at 31 aUGUst 2014
ORDINARY SHARES (FxJ)
JP Morgan Nominees Australia Limited
National Nominees Limited
HSBC Custody Nominees (Australia) Limited
Timeview Enterprises Pty Ltd
Citicorp Nominees Pty Limited
BNP Paribas Noms Pty Ltd
HSBC Custody Nominees (Australia) Limited
AMP Life Limited
Hanrine Investments Pty Ltd
RBC Investor Services Australia Nominees Pty Limited
Citicorp Nominees Pty Limited
RBC Investor Services Australia Nominees Pty Limited
UBS Nominees Pty Ltd
National Nominees Limited
Pacific Custodians Pty Limited
QIC Limited
Merrill Lynch (Australia) Nominees Pty Limited
RBC Investor Services Australia Nominees Pty Limited
HSBC Custody Nominees (Australia) Limited - A/C 3
Sandhurst Trustees Ltd
DEBENTuRES
National Financial Services Corp.
oPtioNs
There were no options exercisable at the end of the financial year.
nuMBer oF
seCurities
419,309,231
390,981,511
388,971,567
328,382,124
235,426,915
59,306,940
40,807,144
26,015,427
24,073,540
20,503,818
16,390,191
16,005,581
13,095,020
12,253,533
11,809,256
9,373,807
8,994,316
6,744,442
5,336,759
4,490,049
%
17.83
16.62
16.54
13.96
10.01
2.52
1.74
1.11
1.02
0.87
0.70
0.68
0.56
0.52
0.50
0.40
0.38
0.29
0.23
0.19
2,038,271,171
86.67
281
100
142 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
sHareHoLder iNforMatioN
FairFax Media LiMited
sUbstaNtiaL sHareHoLders
Substantial shareholders as shown in substantial shareholder notices received by the Company as at 31 August 2014 are:
Hancock Prospecting Pty Ltd
Gutenberg Investments Pty Ltd
(pursuant to Consultation Agreement)
Ausbil Dexia Limited
Allan Gray Australia Pty Ltd
SAS Trustee Corporation
Dimensional Fund Advisors Group
distribUtioN of HoLdiNGs at 31 aUGUst 2014
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
352,455,644
149,340,606
133,458,373
118,279,205
117,713,482
no. oF
ordinarY
sharehoLders
no. oF
deBenture
hoLders
8,478
12,092
4,124
4,655
322
29,671
5,233
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.
// 143
directorY
FairFax Media LiMited and ControLLed entities For the period ended 29 June 2014
aNNUaL GeNeraL MeetiNG
The Annual General Meeting will be held at 10.30am on
Thursday, 6 November 2014 at the RACV club, Level 17,
501 Bourke Street, Melbourne.
Website
Corporate information and the Fairfax annual
report can be found via the Company’s website at
www.fairfaxmedia.com.au. The Company’s family of
websites can be accessed through this site.
February 2015
August 2015
November 2015
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 sHareHoLders
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.
fiNaNciaL caLeNdar 2015
Interim result
Preliminary final result
Annual General Meeting
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.
144 // faIRfaX annUal RePoRt // conVeRsatIons tHat MatteR
Produced by ArmstrongQ – www.armstrongQ.com.au
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