KEY POINTS:
SYDNEY - Fairfax Media has reported a bottom line loss for the first half, and says it is battening down the hatches to ride out a downturn in the economy that is hurting the advertising market.
The company's New Zealand publishing operations were among the loss-making entries on
the balance sheet.
Fairfax said trading conditions in the first two months of the second half of fiscal 2009 had been weak.
While it anticipated some improvement in display advertising in March, classified advertising was expected to remain soft for at least the rest of the year.
Fairfax's net loss for the six months ended December 28 was $A365.27m (NZ$468m) compared to a profit of $195.97 million in the previous corresponding period.
The result was impacted by impairment charges and significant items booked.
Its first half underlying net profit was $157.61 million, down 23 per cent from $204.61 million.
"As a company, in each business, we are focused on continuous operational improvement," chief executive and managing director Brian McCarthy said in a statement on Monday.
"For now, we have battened down the hatches and we will ride this storm out.
"Our management and staff have produced a creditable trading result under difficult circumstances."
Fairfax's first half earning before interest, tax, depreciation and amortisation (EBITDA) was $370 million, down 11.6 per cent.
During the half year, Fairfax booked restructuring and redundancy charges of $62.4 million related to its business improvement program announced last August.
It also had an impairment charge of $1.4 million for plant, equipment and software and another of $30.1 million related to goodwill on the sale of the Southern Star television production and distribution businesses.
Following a review by the board of carrying values, based on the present value of future cash flows, it also included a non-cash impairment of the value of mastheads, licenses and goodwill across all publishing and broadcast media properties of $447.5 million.
First half revenue fell 0.5 per cent to $1.45 billion.
Revenue at the Sydney and Melbourne metropolitan publications fell 5.2 per cent to $388.6 million, and declined by 14.5 per cent to $223.9 million at its New Zealand publishing arm.
However, online revenue rose 13.7 per cent to $135.1 million.
"Trading conditions in January were weaker and this has continued into February," Fairfax said in a statement,
"While we anticipate some improvement in display advertising in March, classified advertising is generally expected to remain weak for at least the remainder of this financial year in both Australia and New Zealand.
"Our online businesses continue to generate growth, with trading in those sectors relatively steady.
"Further cost benefits from efficiency initiatives will flow through in the second half, and will provide some buffer to the weak market conditions."
McCarthy said the group's overall trading performance had benefited strongly from its diversification across print, radio and online and across an expanded geographic base.
"The diversification strategy was designed to deliver greater revenue stability in an economic downturn and this has been successful," he added.
"Fairfax Media has outstanding brands and is better positioned than most other media companies in Australasia to withstand the present economic conditions and benefit from the upturn when it comes"
He also said the group was continuing to benefit from synergy gains from its merger with Rural Press and the acquisition of the Fairfax Radio Network.
Chairman Ron Walker said Fairfax was delivering the very best possible results in an exceptionally difficult economy.
"The board remains fully focused on operational performance, prudent management of the balance sheet, and support for management in challenging times," he said in a statement.
"Currently the board and management will focus on extracting the best possible performance from our existing portfolio of assets."
Fairfax declared an interim dividend of two cents, down from 10 cents in the first half of fiscal 2008.
"Given the reduction in dividend, directors have resolved to suspend the dividend reinvestment plan for this interim dividend," it said.
All of Fairfax's main media arms reported EBITDA declines for the first half, with the exception of online.
Online EBITDA rose 13.3 per cent to $56.4 million.
Australian regional and community publications EBITDA fell nine per cent to $102.4 million.
Sydney and Melbourne metro publications EBITDA fell 23.2 per cent to $70 million.
"The metro results were particularly affected by weak economic conditions in Sydney and a weakening market in Melbourne," Fairfax said.
"Classified employment advertising volumes were down significantly, with sharper falls in Sydney.
"Display advertising volumes were down slightly in Sydney and up strongly in Melbourne.
"Costs in our metropolitan newspapers were flat."
New Zealand publishing EBITDA was down 28.6 per cent to $58.7 million.
Specialist publications, which comprises Fairfax Business Media and agricultural publications in Australia, New Zealand and the US, posted an EBITDA fall of 13.9 per cent to $41.4 million, as revenue slipped 0.7 per cent to $167.8 million.
But the company said Fairfax Business Media had strong circulation revenue gains that helped offset employment and property advertising declines.
"Costs increases were experienced as investments in growth areas such as Education and the AFR.com continued," it said.
- AAP
