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Fairfax's INL buy lines up as a goldplated earner

By Frank Church

Thursday 17th April 2003

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John Fairfax Holdings' bold takeover of half of New Zealand's newspaper market will pay rich dividends.

Financial analysts said yesterday an increase in revenue of only 5% across the INL newspaper group would provide a profit boost of up to $25 million a year for the new Australian owner.

And Cavell Capital executive chairman David Belcher noted that the price/earnings ratio of about l6 paid for INL was in line or lower than the p/e ratios for major media companies in Australia.

Fairfax will pay $l.l88 billion for the INL group's 69 publications, subject to shareholder and Overseas Investment Commission approval.

Mr Belcher said the average p/e for Australian companies was much higher than Fairfax had paid here. News Ltd was at about 37, Fairfax itself at 22.

"What Fairfax paid is not out of line with the norms in the market," he said. "And the price paid may be quite reasonable when you factor in the opportunity costs.

"Where else in the world could you gain access to half a country's newspaper business in one deal? How many other countries allow such foreign ownership moves?

"The business is easy to manage. It's basically in the right time zone, easier than that in Perth even. And you have to take into consideration the opportunity Fairfax has in transtasman advertising deals.

"It will be in a position to offer companies like Qantas regional advertising deals between publications."

Fairfax chief executive Fred Hilmer has warned his company will be looking actively at advertising rates and newspaper cover prices to increase revenue.

INL's last annual report showed a pretax operating profit of $63.36 million for its publications.

Fairfax's last foray into New Zealand newspaper publishing was in the late 1980s when it acquired The National Business Review.

As a daily, NBR racked up multimillion-dollar losses and was sold to Barry Colman's Liberty Press Group in l991.

Liberty salvaged the paper and returned it rapidly to profit in a restructure that reintroduced its traditional Friday morning delivery where advertising and readership support had remained strong.

Last year. Fairfax introduced the daily edition of the Australian Financial Review into New Zealand but has to date not released circulation figures for the venture. They are believed to be low.

NBR has a readership of l00,000.

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