The Age‘s publisher and chief executive Don Churchill had sobering news for an off-site gathering of the paper’s entire middle management fleet early last week.

The location was a reception room at the head offices of company lawyers Minter Ellison on the 23rd floor of Melbourne’s Rialto tower. At the 9am kick-off, Churchill was at pains to warn that nothing said that morning should be leaked, least of all to Crikey, he urged, an organisation clearly seen among The Age management group as quite possibly hostile and almost certainly curious. He repeated this warning … then repeated it once more for good measure.

Times, said Churchill were testing, and would continue to be so. He displayed a graph of the predicted classified advertising revenue trend over a three-year period. The graphs suggested that The Age would suffer a revenue decline of some $20 million over that period. Churchill offered no solution to what would clearly be a significant financial issue for the company, other than to suggest that every manager present look closely at their reporting staff. “If anyone in your area is underperforming,” Churchill said, “move them on.”

Senior Age sources have since suggested that if anyone in the company is underperforming it is Churchill. Since he joined the business in June 2005, it has shrunk, with declines over the three years in both revenue and profit beginning with a $10m revenue slough in his first year. His most notable achievement, according to one senior cynic, has been to trim the $400,000 annual subsidy given to the in-house canteen by insisting on a 12.5% price hike. Staff increasingly take their coffee breaks outside the building.

Last week’s good news on circulation has been greeted by complete silence from Churchill. Despite the fact that the audit marked an 11-year high for Monday to Friday sales, there has been no internal note of congratulation, no Friday night celebratory drinks, a sleight that sources say has deepened a growing division between Churchill and his editor-in-Chief Andrew Jaspan, a man justifiably proud of the circulation result.

But the paper’s real and persistent issue is not in paper sales, but in revenue. The financial year has only just begun, but already ad sales are lagging. Last week’s classified result missed budget by $500,000. So far for the current financial year advertising revenue is lagging budget by some $3 million, a shortfall that would equate to some $600,000 in profit according to sources in the paper’s commercial arm.

The Age‘s advertising director, British import David Hoath, has been nothing if not phlegmatic in the face of these sagging results.

Hoath is just back in the Spencer Street HQ tanned, if exhausted, after hosting a freebie for 70 Melbourne real estate agents over 10 days in Rio de Janeiro and Buenos Aires. Next week he is off to a Vietnam resort with a brace of display advertising clients. Then it’s Mauritius with car dealers. Senior staff estimate the accumulated costs of these loyalty reward freebies in the vicinity of $2.5 million.

And never mind the sagging performance, ad sales staff still lined up last month to receive a brace of monthly $500 performance bonuses.

Best not mention that to the journalists currently locked in a bitter standoff over stalled negotiations on their enterprise agreement.