New accounting rules make masthead valuation “a nonsense.”

Under the new standards mastheads of publications created inside the company are noted in the balance sheet to be worth nothing, while those bought from outside must remain on the books at original cost. In a wide-ranging address to shareholders, Fairfax said Rural Press had its titles valued two years ago by independent valuers who agreed with the then current values in the financial statements.

“The new international standards say it is not possible to reliably value assets such as newspaper mastheads and that we must reverse the revaluations we have adopted. Our balance sheet will have to report that a masthead such as The Land [the largest selling agricultural newspaper] has no value. A nonsense in my view,” he said.

He emphasized the notation was a quirk arising from the new accounting standards and does not represent any underlying decline in the value of the company’s assets. “We say our mastheads are today worth a lot more than we paid for them. The write down will be a book entry only and we are not anticipating any impact on the company’s future profits, cash flows or dividends as a result.”

Rural Press posted a 27.3 per cent lift in net profit after tax to a record $87.1 million, driven by the company’s core Australian publishing and printing operations. A buoyant real estate market, healthy local and classified advertising and increased circulation in a majority of Rural’s paid publications underscored the increase revenues.

Fairfax identified the company’s ability to offer full colour to advertisers and readers as a key element in the success and vowed to continue the extensive programme of press upgrades. “The ongoing expansion of our press facilities is vital to our continuing success. During the year, a number of press projects were completed, including the new printing plant at Wendouree, Ballarat, and we implemented press capacity upgrades at Ormiston, Queensland, and Dubbo, New South Wales. Computer to plate technology at Wendouree enhanced our production efficiencies.

“The pace of press investment is proceeding unabated in the current year with further press upgrade commitments for Ballarat, only a year after the original press was commissioned. Press upgrades are also taking place here at North Richmond, in Canberra and Port Macquarie, New South Wales.

“We are establishing a greenfield printing site at Mandurah in Western Australia. Our anticipated capital investment of $60 million this year includes $50 million for those printing projects together with approximately $10 million on technology maintenance in the group. This ongoing investment in technology is vital to satisfy effectively the needs of our internal and external publishing customers.”

The company’s New Zealand agricultural publications maintained previous profit levels in a more cautious agricultural market, impacted by the increased value of the New Zealand dollar.

Fairfax reported that the integration of Harris and Company in Tasmania, publisher of The Advocate, Burnie and several smaller circulating free publications in North West Tasmania and scene of a bitter takeover battle in which Rural gained 85.3 per cent of the company, was going according to plan. The purchase included a modern MAN Uniset Printing press, an automated publishing room and computer to plate technology, as well as a sheet fed printing business.

“Since January 2004, with new management focus, we have recorded improved advertising revenues and have expanded circulation of The Advocate. We anticipate that in 2004/2005 Harris & Co. will post a solid contribution in its first full year within the Rural Press stable,” he said.

“Our emphasis on localism has ensured that The Advocate now strives even further to serve the community by producing quality information and entertainment, as does every other individual newspaper in the Rural Press group. The spare print capacity on the Harris and Company press is being utilised by transferring to it a number of external client contracts, thereby releasing capacity in other Rural Press plants on the mainland.”