Fairfax Media Limited Annual Report 2007 – Part 1 FAIRFAX MEDIA >UNLIMITED > DEFENDING AND GROWING OUR NEWSPAPER BUSINESS > AGGRESSIVE GROWTH ONLINE > BUILDING A DIGITAL MEDIA COMPANY FOR THE 21ST CENTURY ABN 15 008 663 161 www.fxj.com.au AT A007 GLANCE 2007 “Since we last reported to you a year ago, our company has irrevocably changed for the better, entering a dimension not seen possible in the past.” CONTENTS RONALD WALKER, Chairman 01 HIGHLIGHTS 04 CHAIRMAN’S REPORT: LOOKING BEYOND THE HORIZON “This has been a successful year of 06 CHIEF EXECUTIVE OFFICER’S achievement and growth. Our three-pronged REPORT: A YEAR OF ACHIEVEMENT strategy of (1) defending and growing our AND INNOVATION 08 BOARD OF DIRECTORS newspapers, (2) accelerated growth online 10 BRIAN MCCARTHY: AUSTRALIAN and (3) building a digital media company PUBLISHING AND PRINTING is working. Fairfax Media is substantially 12 SANKAR NARAYAN: GROUP FINANCE 13 GAIL HAMBLY: GROUP more diversifi ed and is growing. We are GENERAL COUNSEL signifi cantly stronger today than we were 14 AWARDS: AHEAD OF THE PACK two years ago, and we have excellent 20 MICHAEL GILL: FAIRFAX prospects for the future.” BUSINESS MEDIA 21 JACK MATTHEWS: FAIRFAX DIGITAL DAVID KIRK, Chief Executive Offi cer 22 JOAN WITHERS: FAIRFAX NEW ZEALAND 23 SAM MORGAN: TRADE ME 24 EARTH HOUR: TURNING OFF FOR THE FUTURE 25 LINDA PRICE: IT & HUMAN RESOURCES 26 ROSTER OF PUBLICATIONS 29 GET ONLINE: SHAREHOLDER divdivevvevererrCOMMUNICATION UPDATE FAIRFAX MEDIA HAS SUCCESSFULLY COMBINED TRADITIONAL AND NEW MEDIA TO BECOME AUSTRALASIA’S LEADING MEDIA COMPANY TRADING EBIT GREW NET PROFIT REVENUE UP 12.2% TO AFTER TAX 11.0% TO $477.4 MILLION UP 9.9% $2,117.6 MILLION TRADING REVENUE EBIT NET PROFIT ORDINARY EARNINGS $M $M AFTER TAX DIVIDENDS PER SHARE $M PER SHARE CENTS CENTS 2500 500 300 25 30 250 25 2000 400 20 200 20 1500 300 15 150 15 1000 200 10 100 10 500 100 5 50 5 0 03 04 05 06 07 0 03 04 05 06 07 0 03 04 05 06 07 0 03 04 05 06 07 0 03 04 05 06 07 The above fi gures and graphs exclude the effects of signifi cant items and refl ect the underlying trading results of the Company. About Fairfax Media Fairfax Media Limited is Australasia’s leading media FAIRFAX DIGITAL is the #1 online news site company. In May 2007, in Australia, with over 14.3 million unique Fairfax Media and Rural Press Limited completed their browsers, over 4 million video downloads merger, creating the largest per month and strong growth in revenues, integrated metropolitan, rural and regional, print and online earnings and market share. digital media company in Australasia, with publications and websites in every State Continued growth in metropolitan and the ACT in Australia, and throughout New Zealand. newspaper circulation, with THE SUNDAY Fairfax Media has leading AGE THE FASTEST GROWING NEWSPAPER online businesses Fairfax Digital in Australia (including IN THE COUNTRY. the #1 online news sites) and Trade Me and stuff.co.nz in New Zealand. Superior performance at RURAL PRESS in In July 2007, Fairfax Media the face of the worst drought conditions joined with Macquarie Media Group Limited in a proposal in memory. Strong earnings growth in the to acquire Southern Cross US agriculture publications. Broadcasting (Australia) Limited pursuant to a scheme of arrangement. If the acquisition is completed, Fairfax Magazines command the most Fairfax Media will acquire Southern Cross’ radio business attractive audiences in the industry. GOOD (including metropolitan radio WEEKEND THE #1 MAGAZINE REVENUE stations in Sydney, Melbourne, Brisbane, and Perth), the EARNER IN THE COUNTRY. Southern Star television production business, Satellite Music Australia and other TRADE ME POSTS EARNINGS OF NZ$50.4 associated businesses. MILLION, and grows strongly across all categories: auctions, cars, property, jobs. AGM Travel launched in September 2007. The Fairfax Media Annual General Meeting will be held on Friday, November 30 2007, Sheraton-on-the-Park Hotel, FAIRFAX MAGAZINES in NEW ZEALAND 161 Elizabeth Street, Hyde Park, Sydney, at 10:30am REACH OVER 50% of all New Zealanders over the age of 10 years. Credits Fairfax Media Annual Report designed and produced by Text Pacifi c Publishing www.textpacifi c.com.au Photography by Phil Carrick www.philcarrickphotography.com www.fxj.com.au 2 www.fxj.com.au FAIRFAX MEDIA REACHES OVER 6 MILLION PEOPLE WORLDWIDE EVERY DAY IN PRINT, ONLINE, ON MOBILE DEVICES AND WITH VIDEO DOWNLOADS LOOKING BEYOND THE HORIZON Chairman’s Report by Ronald J. Walker AC CBE Since we last reported My Board and I are pleased to report to you, To date, Fairfax Media has identifi ed our shareholders, that Fairfax Media is a $22 million in cost synergies with Rural to you a year ago, our more dynamic and entirely more modern Press in the 2008 Financial Year, with company has irrevocably media company than at any time in our $45 million in such synergies by the changed for the better, proud 176 years of history in Australia. end of the 2009 Financial Year. entering a dimension not Fairfax Media is a truly digital media We also entered into a partnership with seen possible in the past. company, with our content available in Macquarie Media to acquire the radio print, online, radio and mobile devices. assets of Southern Cross, which include Our market capitalisation has increased by Fairfax Media will lead the way on other award-winning AM stations 3AW and 1278, over 50%, EBITDA up 13.1% and dividends information, entertainment and commercial 2UE, 4BC and 6PR – the leading talk radio by 2.6% – a record. Our costs in Australian platforms. stations in their markets – as well as video publishing have been reduced by $52 production company Southern Star Group, million over the past two years. This has been the most dynamic year in Australia’s leading independent creator our history with the $3 billion merger with Operating profi t increased by 13.1% to and producer of television programming, Rural Press, embracing 200 publications in $571.4 million on an 11.0% increase in and esteemed producer Carnival Films & Australia and New Zealand, including the revenue to $2.117 billion. Our dividend Television in the UK. prestigious Canberra Times, 23 publications to shareholders this year is the highest in the USA and 11 radio stations. We also Trade Me, our internet business in New on record. purchased The Border Mail, the Riverina Zealand, enjoys outstanding market Our company is now the largest media Media Group, and signifi cantly expanded leadership in online auctions, real estate, company in Australasia with a unique online with Brisbanetimes.com.au – an cars, travel and employment. footprint in the USA, coupled with a online newspaper bringing media diversity These assets will continue to add wealth growing international infl uence. to Brisbane and Queensland with over to our shareholders in coming years. 470,000 unique browsers per month. 4 www.fxj.com.au RURAL PRESS FLAGSHIP PUBLICATIONS IN FAIRFAX STABLE The Land and The Canberra Times are key titles among the more than 200 publications in Australia, New Zealand and the US associated with the successful merger between Fairfax Media Limited and Rural Press Limited, completed in May 2007. We reach over 6 million people, in print and Among many awards won by our mastheads On 7 March 2007, a Garuda Airlines plane online, daily – in Australia, New Zealand, and websites across the company, we crashed in Yogyakarta, Indonesia. Morgan America and worldwide. We are the leaders are very proud of The Age being named Mellish, a Walkley Award-winning journalist in online news in Australia. Fairfax Digital Newspaper of the Year 2007 by the Pacifi c with the Australian Financial Review, was has over 14 million unique browsers per Area Newspaper Publishers Association. killed, and Cynthia Banham, National month online – a growth rate of over 33%. Fairfax Media has a great future, led by Security Correspondent for The Sydney We own 100% of our portfolio of internet dynamic people, backed by a very focussed Morning Herald, was grievously injured. sites – a very strong competitive position, and hard working Board. We met 17 times Cynthia is one of the most courageous and we are poised for further growth as a in the current fi nancial year. This year, people I have ever met, and after months digital media company for the 21st century. we have had the privilege of welcoming of the most extraordinary treatment and After a period of successful expansion, we three additional directors: John B. Fairfax, therapy, she has recently returned to work are now focussed fi rst and foremost on Nicholas Fairfax and Bob Savage. for us in Canberra. the earnings, and earnings growth, we will After 176 years, there are not many media We honour Morgan’s life, achievements deliver to our shareholders. EPS growth companies that can say they are stronger and memory (please see page 15) and we based on the investments we have made than ever before – but we can, and we are. celebrate Cynthia’s return to journalism. is our core objective. We are proud of our heritage, our tradition of In November, we will move our Sydney excellence in journalism, and the respect we operations to new premises at One Darling have in Australasia and worldwide. Island, which will provide our staff with the most up-to-date workplace amenities. In the We face the future with great confi dence. coming days, our new landmark Melbourne Fairfax Media’s best days are still ahead of us. RONALD J. WALKER AC CBE headquarters will be announced, revitalising As always, I thank our staff for a great result.