Advert drop hits APN and Fairfax earnings

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Transtasman companies Fairfax Media and APN News & Media are facing up to tough times in the advertising market with both announcing falls in earnings yesterday.

Fairfax has announced a restructuring with outsourcing of its editorial sub-editing in Australia.

APN, publisher of the Herald, is also looking closely at cost savings, but chief executive Brett Chenoweth said its requirements would not be as substantial as Fairfax's.

The rivals recently parted company with Fairfax's exit from the co-operative New Zealand Press Association, leading to its closure by the end of the year. Fairfax is developing its own national news network and APN is leading the development of a rival agency to be called APNZ.

The two firms have also been considering sharing printing facilities in New Zealand to save costs. But they are fighting their own battles in a difficult ad climate on both sides of the Tasman.

Fairfax Media issued a statement to the ASX yesterday announcing a 4.5 per cent fall in revenue for the second half. Chief executive Greg Hywood said the softness of the ad market was consistent with trading conditions reported by clients and reflected poor consumer sentiment.

Fairfax yesterday announced the outsourcing of key Australian sub-editing operations to Pagemasters, with the loss of an unspecified number of staff. In New Zealand Fairfax changed the structure of its publishing business to create "hubs" of content.

Fairfax expects its operating profit to be A$600 million ($814 million) for the year to June 30 compared with A$639 million ($867 million) last year.

Hywood said "streamlined production processes" in the company's Australian and New Zealand publishing, printing and distribution businesses were aimed at reducing costs and "allowing reinvestment in quality journalism".

Meanwhile, APN News & Media, whose Australian newspaper assets are concentrated in Queensland, said first half-earnings could be down by between A$15 million ($20.3 million) and A$20 million ($27.1 million) on the same period last year.

But it expected trading to improve in the second half of the year.

Chairman Gavin O'Reilly said at APN's annual meeting yesterday the company was looking at "a round of restructuring initiatives in response to a fall in earnings".

"Despite some improvement in Queensland, earnings are still being impacted by the repercussions of the [Christchurch] earthquake on an already weak New Zealand economy coupled with an extremely strong Australian dollar," he said.

It was expected trading would improve though the full-year result would not match APN's 2010 earnings.

APN shares closed down 5.7 per cent at A$1.49 on the ASX200 yesterday and down 5 per cent to $2.08 on the NZX. Fairfax closed down 8 per cent to A$1.205 on the ASX200.

- Additional reporting: Agencies