selling

A major shareholder in Fairfax Media (FXJ) has given last month's weak result the thumbs down by selling more than 50 million shares in 10 days.

The National Australia Bank's funds management arm, MLC, told the ASX yesterday that it had cut its stake in Fairfax to 7.010% or 164.869 million shares, which is still a considerable holding.

But that is down from 8.275% held in late August and 9.625% on August 23 when the selling started the day after the company revealed its 2012-13 loss and further impairments.

All told, MLC sold 32.4 million shares from August 23 to August 29, and then a further 29.8 million shares from August 29 to yesterday, September 3.

The selling and the indifferent reception to the result forced Fairfax's shares down from the 58.5c on the day of the profit announcement to 52.5. They recovered to 56c yesterday.

The Fairfax result saw a net loss of $16 million reported on an after tax basis.

That was after impairment charges of $444.6 million (mostly on the goodwill in its rural and regional papers) and reported revenue of $2.03 billion for the year. In 2011-12, Fairfax posted a net loss of $2.7 billion on the back of write-downs of its mastheads.

Fairfax said trading in the first six weeks of the financial year "saw a slight moderation of previous trends, with year-on-year revenue down 8 per cent on the comparable period". That means the pressure on the revenue side continues and that part of the announcement saw investors wonder if Fairfax was heading for another rough year.

Underlying earnings - before interest, taxation, depreciation and amortisation and excluding significant items were $366 million (down), but above guidance.

Fairfax had net debt of $154 million at June 30, down sharply from the $914 million a year earlier, with cash of $533 million (and burning a hole in its pocket judging from its talk of acquisitions).

What did really worry some analysts was the weak performance of the Domain property business.

Domain reported a 31% jump in digital EBITDA for the year to $29.4 million, compared with $22.5 million a year ago. But the print side of Domain saw a 45% drop in ebitda to just $12.1 million as print property ads plunged 33%. It is no REA Group, as some in the Fairfax camp claim.

The company's metropolitan media: its heartland which includes the Sydney Morning Herald, Melbourne Age, the AFR, the community papers, the Canberra papers, magazines, classified and Australian news and transaction sites (digital) saw a 21.1% fall in ad revenues to $633.6 million, but a 17.4% rise in circulation revenues to $221 million.

Other income rose to $140 million, up 1.4%. The upshot was a 12% fall in total revenues to $996 million. Costs fell 10.7% to $917.6 million and adjusted earnings before interest, tax and depreciation (ebitda) fell nearly 33% to $48.8 million from $72.6 million.

And if you look at the metro papers and digital, the picture is even more disheartening. While total revenues fell by just 7.6% to $745 million, print ad and classified revenues fell by more than double that - 15.7%. Costs fell 5.8% to $692.5 million and adjusted ebitda fell 38% to just $35 million.

Fairfax said advertising revenue "decreased 24.9% in Metro Print and increased 3.4% in Metro Digital".

That is an unsustainable rate of decline and obviously worries investors, such as the MLC?

http://www.sharecafe.com.au/sharecafe.asp?a=AV&ai=27431