Fairfax takes $220 mln dividend from Trade Me to cancel related party debt

Tuesday 8th November 2011

Fairfax Media took a $220 million dividend from Trade Me in its final year of full ownership to pay down related-party debt before the sale of a third of the online auction site in an initial public offer, according to its financial statements.

The Australian media group, which publishes the Dominion Post, Press, and Sydney Morning Herald newspapers, took the $1,129.77-per-share dividend on May 27, according to Trade Me’s financial statements for the 12 months ended June 30.

That was offset against treasury funding receivable from the New Zealand branch of the media company, which saw loans to Fairfax Media Group Finance drop to $39.2 million from $193.1 million a year earlier.

Trade Me lifted net profit 9.6 percent to $69.7 million in the year ended June 30, on revenue of $128.8 million, which grew from $114.4 million a year earlier. Pretax profit rose almost 11 percent to $101.3 million.

The dividend payment details emerged as Fairfax puts up between 30 percent and 35 percent of the auction site for sale in a partial float on the NZX and ASX. The media company needs to free up some cash in the face of shrinking advertising revenues and write-downs in the value of its mastheads.

That process began yesterday, with brokers and institutions participating in a bookbuild set to end this morning which will deliver an idea as to share allocations and an indicative price for the $2.30 and $2.70 per share range. The prospectus is expected to be formally lodged with the Companies Office tomorrow.

The sale is expected to bring in $310 million and $365 million, which Fairfax said it would use to repay debt and increase its dividends when it signalled the sale in August.

Trade Me has been considered the jewel in Fairfax’s crown, growing revenue and underlying earnings since the media group bought it under former chief executive David Kirk in 2006 for some $700 million, a price considered steep by analysts at the time.

Fairfax reported a loss of A$401 million in the year ended June 30, reflecting write-downs of A$651 million on the value of its mastheads, customer relations and goodwill. That turned around a profit of A$270 million in the 2010 year.

The write-downs added to the A$513 million impairment it took in 2009 against mastheads and goodwill that resulted in a loss that year and saw the company's credit rating cut below investment grade to BB+.

Fairfax Digital and Trade Me were the stand-out performers in the latest year, with revenue gaining 10 percent to A$234 million and earnings before interest, tax, depreciation and amortisation gaining 6.6 percent to $118 million.

Shares in Fairfax, which continued to trade through the Trade Me bookbuild, fell 1.1 percent to 93 Australian cents on the ASX yesterday, having shed almost a third of its value this year, valuing it at A$2.21 billion by market capitalisation.

BusinessDesk.co.nz

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