At 2.38 pm today Fairfax Media joined the corporate spinner’s club. While the majority of the nation’s serious media was detained studying the federal budget, Fairfax slipped out an update to the market containing the unwelcome news of a 26.6% drop in profit for the year to June.
Unfortunately the “‘green shoot’s” being seen in retail sales, building approvals, housing finance and in the rise in newspaper job ads last month — 3.1% in the latest ANZ survey — have failed to take root at Fairfax Media.
It took Fairfax websites the best part of an hour to hoist a story on their owner’s profit predicament, but with no comment about using the attention focused on the Federal Budget, to try and hide the bad news delivered by CEO Brian McCarthy. No sign of chairman, Ron Walker.
Fairfax shares traded flat at $1.12, down a cent just before the close of trading. Investors were obviously stunned, but not surprised.
“Mr Brian McCarthy, Chief Executive Officer and Managing Director of Fairfax Media Limited, today issued the following statement on the Company’s outlook for the 2009 financial year and further developments within the Company.
“In the weeks since Easter, a clearer picture has emerged in relation to trading conditions in advertising markets in both Australia and New Zealand. It is apparent the markets have continued to deteriorate and although the rate of deterioration has abated, advertising levels are not expected to show any marked improvement at least for the rest of this financial year.
“Assuming no further major deterioration in trading conditions, the Company expects to report underlying earnings before depreciation, interest and tax (EBITDA) of circa $600 million.
“Demonstrating the benefits of the Company’s diversification programme, a more resilient performance from regional publishing, broadcasting and digital businesses has reduced the impact of more significant advertising declines in the metropolitan publishing business.
“Notwithstanding the advertising revenue declines, market shares have improved in key advertising categories. Also, circulation revenues have improved over the prior corresponding periods.
“Fairfax Media has undertaken wide ranging cost reduction initiatives. For the second half to date, total costs are approximately 10% lower than for the prior corresponding period. Management remains focused on achieving further cost reductions.
“Consistent with these reductions the CEO, Directors and generally direct reports to the CEO have accepted fee and salary freezes.”
Fairfax joins the other major listed print media groups, West Australian newspapers and APN news and media in downgrading earnings forecasts for the 2009 financial year (APN is to December 31, Fairfax and WAN to June 30).