Fairfax Media was in good company yesterday as it tried to hide a sharp profit downgrade under the cloak of publicity for the 2009-10 Federal Budget.

It joined Iraq sanctions buster AWB and near-terminal poker machine maker Ainsworth Gaming with the dubious distinction of being sprung revealing bad news on Budget eve. Oil Search held its AGM in Port Moresby and warned that profit would be lower this year, but that could be excused as a long planned clash of dates.

And then there were those paragons of transparency and disclosure, the NSW and Victorian Labor State Governments which slipped out deals with James Packer’s business empire: Crown Casino got a good deal in Melbourne and in NSW and Packer did a quiet 40 year deal on his holdings in the Snowy Mountains. The deal will be revealed today, but it was leaked last night as publicity focused on the Budget.

Fairfax, AWB and Ainsworth managements took conscious decisions to slip out profit downgrades yesterday as speculation rose about the contents of the Budget.

Not that reading the column by Fairfax journalist Elizabeth Knight in this morning’s Sydney Morning Herald would have told you about Fairfax’s attempted media management. She berated Fortescue Metals for a ham fisted attempt to boost the share price by suggesting it could list in China and then revealing it couldn’t in an answer delivered to an ASX query on budget day; and gave AWB a touch-up for revealing $4 million in extra losses in its Brazil business. But not Fairfax. Perhaps the column had to be filed early, before Fairfax’s announcement at 2.38pm.

Knight wrote:

The federal budget is always eagerly awaited as one of the biggest news days on the calendar. But it is not just about the nation’s balance sheet. It’s the day when those with bad news attempt to minimise the impact when much of the country’s journalistic attention is focused elsewhere.

So it was that in the business world announcements were made by two companies famed at various times for their less than favourable publicity.

Two? It was three, including Fairfax.

If the column had to be filed early, then Fairfax owes Knight an apology.

Over at The Australian, the report didn’t mention the budget day timing of the announcement, which is an odd decision by a News Ltd paper to decline a free kick at Fairfax.

But unlike the Sydney Morning Herald news report of the downgrade, the Australian story didn’t mention News Ltd’s fall in third quarter revenues and profits reported last week by News Corp in its quarterly announcement. That’s almost as big an omission as that of Fairfax’s two reports on its announcement which failed to report the timing on budget day.

Of the unlikely trio, Fairfax is the one company that deserves the biggest bagging. Its papers have long campaigned for greater disclosure, better accountability and an end to PR spinning and attempts to hide bad news by companies, sporting groups, politicians of all types and colours, and anyone else who comes into view. It’s a laudable campaign.

That is what Fairfax did yesterday afternoon, without any shame.

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).

After pointing out yesterday the fall in April’s page count in Fairfax metro papers, Goldman Sachs JBWere media analysts today wrote on the earnings downgrade:

The trading environment remains very difficult for all Australia’s newspaper publishers, as evidenced over the past week by: (1) three profit warnings (FXJ, APN, WAN); and (2) the pessimistic trading commentary from all participants (incl. NWS).

While sentiment across the broader economy appears to be lifting, we believe it will be some time before this is reflected in newspaper advertising spend and earnings. With newspapers representing approximately 84% of FXJ’s FY10 revenue base, we recommend investors continue to limit their exposure in the near term.

Peter Fray

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