Fairfax Media shares have lifted to their highest level in more than two years after the company's half-year results showed its strategy to cut costs and make money in online news and services is starting to deliver benefits.
Underlying net profit for the six months to December 2013, rose 48.5 per cent to $86.4 million, while earnings lifted 2.3 per cent to $178 million.
Fairfax Media chief executive Greg Hywood said the result was the first year-on-year increase in earnings since June 2010.
"We can't say that we have turned the corner but let me say we are certainly accelerating through it," he said.
The key metropolitan media publishing division, which includes print and online operations of the Sydney Morning Herald, The Age and Australian Financial Review mastheads as well as classifieds businesses such as Domain, increased earnings by 52 per cent to $81.5 million.
Savings on staff salaries after large-scale redundancies and other cost-cutting on production and promotions contributed to the improved earnings, despite a decline in total revenue.
While advertising revenue for the metropolitan print businesses fell 25 per cent, online ad revenue rose six per cent, bolstered in particular by a 33 per cent rise in revenue for the online Domain real estate business.
Circulation revenue from the news publishing businesses also rose by 10 per cent.
Morningstar analyst Tim Montague-Jones said it was a sign that Fairfax's focus on its digital businesses was building momentum.
"They are definitely doing the right thing," he said.
The wind-down of print operations is continuing as Fairfax shuts its major printing presses in Melbourne and Sydney and moves printing to regional sites.
Mr Hywood said an announcement about the sale of the Tullamarine printing press site should be made by mid-year, while the larger Chullora site was likely to be sold in 2014/15.
Fairfax's statutory net profit after tax was down by 50 per cent to $193.8 million, despite a gain of $100 million from the sale of its Stayz holiday booking business, after the previous half-year profit was boosted by $303 million from the sale of assets including the company's remaining half-stake in New Zealand online business Trade Me.
Revenue for the half was down 1.2 per cent to $1.08 billion.
Mr Hywood said Fairfax was pursuing profitability through its restructuring and would forego revenue if doing so meant better profits.
Across Fairfax's other businesses, the suburban, regional and agricultural mastheads suffered a 19 per cent fall in revenue due to the impact of the drought and a slowdown in mining activity.
Mr Montague-Jones said the better-than-expected earnings and signs of traction in digital subscriptions and ad revenue were positive signs for Fairfax but there was still uncertainty around the digital future.
"The revenue side on the digital business is very difficult to predict how sustainable it's going to be - that adds a lot of uncertainty around the business," he said.
Fairfax shares rose as high as 92.5 cents - a level last seen in November, 2011 - on the results before settling at 88 cents, up 16.5 cents, or 23 per cent, with Fairfax the day's most heavily traded stock.
