Fairfax Media’s improved financial results were overshadowed when it was revealed the top four executives gave themselves a $2.4m increase in remuneration while refusing a pay rise to journalists.

Staff on the company’s newspapers, including the Sydney Morning Herald and The Age, later gave notice of industrial measures including stopwork meetings and a ban on overtime in response to the company’s push for merit-based pay rises only.

The company’s public relations consultant Sue Cato further inflamed the tense situation by mistakenly forwarding to journalists an email with the general counsel’s advice on handling the embarrassing timing of the $2.4m pay rise.

Gail Hambly, group general counsel and company secretary for Fairfax, wrote to Cato: “Of course the aggressive response is that the increases are all incentive based – i.e. the management was prepared to back itself to achieve set targets - something the journalists are refusing to do. There were NO base pay increases”.

News of Hambly’s claim that the journalists refused to back themselves was relayed to a stopwork meeting. The meeting rejected the proposed merit pool and reiterated a claim for a fair pay rise that recognised increased productivity.

“We note that Fairfax Media results released today show a huge 50% pay rise for the chief executive Greg Hywood, whose salary rose to $2.86m,” the resolution said.

“We are surprised and disappointed that management of this company feel it’s appropriate to give themselves such lucrative rewards while at the same time lecturing staff about the need for stringent cuts to our pay and conditions.”

“We also note earnings at Fairfax Media for metro media were up by 41% a strong result which is directly attributable to the hard work and flexibility of editorial and other staff.”

A Fairfax source said the staff response to the Hambly statement was that they were delivering the biggest audiences Fairfax had ever had with significantly less resources and they deserved an across the board pay rise.

The financial statements revealed that remuneration for Hywood, Hambly, the managing director of Australian Publishing Media, Allen Williams, and chief financial officer David Housego had grown from $4.1m in the previous year to a total of $6.5m.

A spokesman for Fairfax Media told Guardian Australia none of the four executives received any increase in take-home pay this year and the remuneration consisted of performance shares.

“They have all earned incentive awards of Fairfax shares and options which may have a value in the future if the company continues to improve in value,” he said.

The Media, Entertainment and Arts Alliance has rejected the company’s move to abolish automatic pay rises for journalists and a proposal new employees should get less generous redundancy terms.

Fairfax Media reported a net profit after tax of $224.4m for the 2014 financial year, a turnaround on the $16.4m loss last year.

The company told the Australian stock exchange that revenue fell 3% to $1.97bn.

The improvement was partly achieved by selling off the holiday rental website Stayz last year for $220m and investment website InvestSMART for $7m.

The company reported underlying earnings before interest, tax, depreciation and amortisation (Ebitda) for continuing businesses of $306.4m, excluding significant items, up 1.8% on the prior year.

Fairfax has shed hundreds of staff and undergone a huge restructuring in recent years as sales of newspapers declines and advertising slumps.

Hywood told investors the result showed that Fairfax had been able to deal with the enormous structural changes impacting the media and had reshaped the business from a purely advertising and subscription business.

“We have stabilised earnings,” he said at Thursday’s analyst briefing. “We have completely remade a legacy-based, vertically- integrated traditional newspaper business into a genuinely multi-platform media company. We are now a leaner, more agile business.

Hywood said the business model was now advertising and marketing services, property services and data services.

According to the latest data, the Sydney Morning Herald and The Age had more than 140,000 paid digital subscribers, and an additional 111,000 eligible print subscribers who have signed up for digital access, he said.