Fairfax Media, the new $10 billion giant of the Australasia media world, has today delivered an impressive 16% lift in annual net profit to a record $263.5 million as its diversification into the digital world shows more signs of working.

Metropolitan newspapers are now down from 85% of earnings in 2000 to just 27% and Fairfax Digital delivered a 54% increase in operating earnings to $37 million on revenues of $137 million, with growth coming equally from banner and classified advertising.

Trade Me, which is the ebay of New Zealand, continued to power ahead with operating earnings of $NZ50.4 million, suggesting last year’s $NZ700 million purchase is shaping up to be the best Fairfax deal in many years.

Overall revenue was up 6% to $2 billion, but this will be pushing $3 billion in 2007-08 given that Rural Press only came into the fold on 9 May and the $480 million purchase of Southern Cross Broadcasting’s radio and production business won’t happen until later this year.

CEO David Kirk and his new Rural Press deputy Brian McCarthy painted a rosy picture of the future this morning and Fairfax shares rose 8c to $4.90 in a stronger market.

Fairfax chairman Ron Walker is a big one for flashy edifices, but his push to “revitalise our operations in Sydney and Melbourne” doesn’t come cheap. Whilst a $42 million profit was booked on the sale of The Age’s Spencer St building, this was offset by a $41 million hit from breaking the Darling Tower lease and moving the Sydney operation to One Darling Island.

Whilst Seek.com’s surging profits make Fred Hilmer’s missed opportunity look more expensive every day, Fairfax did manage to book a $13.2 million profit on the sale of its minority stake in carsales.com.au to PBL last year.

The Australian newspaper business continue to tread water with underlying advertising revenue dropping by $600,000. Car advertising revenue suffered a crunching 7.2% hit, whilst job ads were up 1.2% as the economy booms and real estate fought the tide with an impressive 5.2% lift in revenue.

Then again, Fairfax Digital is performing better in the online space and gained good momentum and market share from Ninemsn and News Ltd in the second half as monthly unique browsers visiting its websites averaged 14.3 million over the period.

Whilst Michael Gill’s Fairfax Business Media was declared to be “up strongly” courtesy of booming advertising in The AFR, it was the only division where no breakdown was provided and there was no mention of the lamentable AFR.com.