The stockmarket gave Fairfax Media a gentle kicking this morning after it did what everyone expected it to do and ground out a profit for the June 30 year that hardly set the world afire.

In fact if it hadn’t been for another big effort from the company’s two standout new media businesses: Fairfax Digital in Australia and Trade Me in NZ, Fairfax would have seen earnings slide, thanks to lower returns from its Sydney and Melbourne papers, and from its New Zealand newspapers.

The shares fell to a day’s low of $2.61, four cents above the recent low of $2.57, before rising to $2.67 just before 11.30 am. That was off 2.6%, or 11 cents, hardly a ringing endorsement for what was a boring result.

Fairfax lifted profit 47% following the 2007 merger with Rural Press, to $387 million, but on an underlying basis to try and get a meaningful comparison, earnings before interest tax, depreciation and amortisation rose less 6.9% to $831 million.

“Consistent with conditions in the broader economy, advertising markets have slowed in the new financial year,” the company said in commentary with the result.

“We have limited visibility on how well advertising markets will perform this half.”

They aren’t alone; company after company are saying they can’t tell how 2009 will pan out and have told the market and shareholders they won’t update earnings and overall performance until the annual meetings in October and November.

So tell us again, why are these executives are being paid so much?

The dividend is steady at 10 cents a share for the final and 20 cents for the year, which will please the Fairfax family, which control 14% of the company and ran into margin loan problems a few months ago which have now been resolved.

CEO David Kirk said “these are a very satisfactory set of results in the face of declining earnings for our Sydney and Melbourne metropolitan newspapers in Australia and tough trading conditions, particularly in New Zealand.”

The Metro papers in Sydney and Melbourne, plus magazines saw revenue decline 2.8%, costs drop just 0.9% and EBITDA fell 8.9% to $174.1 million. (Excluding the effect of an additional weekend trading in the 2007 financial year, EBITDA declined 7.3%). Said Kirk:

“Metro publishing revenues were weaker, with total revenues reflecting continued advertising weakness, particularly in Sydney. Melbourne market conditions were stronger but did weaken in the second half of the year. Circulation was strong with The Age a particular highlight. Fairfax Magazines performed very well, with strong revenue and profit growth.”

The online businesses, Fairfax Digital in Australia and Trade Me in New Zealand, were the standout businesses and the big difference in the group’s performance (allowing the impact of the Rural business contribution).

Fairfax said the Online business lifted revenue 33.0%, wile costs rose 26.8% and EBITDA increased 41.1% to $114.4 million

Fairfax Digital’s revenue increased over 30%, with a profit at the EBITDA level of $54.3 million, up 46.8% over the 2007 financial year. For the year Trade Me contributed NZ$70.1 million in EBITDA to the group result, up 39%. These strong results triggered the payout to the principals of the earn-out on the acquisition of Trade Me of NZ$45.2 million.

While “Specialist Publications” (Fairfax Business, which is mostly the Australian Financial Review, BRW and agricultural papers and other publications) lifted EBITDA 16% to $80 million. (The performance of Fairfax Business Media wasn’t broken out).

While the earnings and revenues from Rural press provided the bulk of the increase, that was to be expected. The sustainable, rapid growth in earnings continues to come from the Fairfax online businesses and the Trade Me operation in NZ, which was one of Mr Kirk’s early deals.

The Online business was the clear star for another year: imagine how much more it could earn if the AFR‘s online offering was smartened up and brought up to, say, the level of the business offerings from The SMH or Melbourne Age?

Fairfax’s online efforts are clearly better and more profitable than those at News Ltd, Ninemsn, Yahoo!7 and any other operator in this area in this country.

Peter Fray

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