Fairfax shares slide on weak profit

SYDNEY, Australia (CNN) -- Shares of John Fairfax Holdings have hit a 12-month low after the Australian publisher said difficult trading conditions would hurt profits.

The second largest Australian newspaper company behind News Corporation's local unit posted a first-half profit before abnormals of $A72.1 million ($38.2 million), which was lower than most expectations.

The result was 18 percent down on the previous year's pre-abnormal profit, and well below the median analyst forecast of $A171.2 million. Revenues were $673 million for the half, down 36 percent on the corresponding 1999 period.

Fairfax's newspaper stable includes The Sydney Morning Herald and The Age in Melbourne, as well as the national business newspaper The Australian Financial Review.

Profits to be down

"We expect profits for the full-year to be below that of last year," said chief executive Fred Hilmer, citing a downturn in economic conditions.

However, he said it was difficult to predict with any certainty the likely outcome for the full year because of fluctuations in the market.

"We expect continued volatility in trading conditions, making it difficult to forecast earnings with any degree of confidence," Hilmer said.

Shares of Fairfax closed 3 percent down at $3.72, marking a new low for the past 12 months.

Online division burning cash

Contributing to the poor result was a pre-abnormals first-half loss of $A21.9 million booked by f2, the company's Internet division.

f2 was beset by declining interim revenues of $A24.3 million -- 11.6 percent lower than the previous corresponding period -- and costs of $A46.2 million. The division has been heavily restructured as it pushes to make a profit.

This week f2 sold its online auctions business to Yahoo! Australia & New Zealand in a deal worth $A30 million. However, Hilmer has ruled out any further asset sales from f2 in the near-term.

Stiff competition

"We are developing our business," he told reporters in Sydney.

Stiff competition in the Australian newspaper market this year has seen News Corp's local unit News Limited launch an afternoon tabloid newspaper, distributed free to commuters in Melbourne.

Fairfax countered by launching its own morning hand-out tabloid, causing speculation the battle would spread to Sydney. "We have a lot of options," Hilmer said of the war.

Reuters contributed to this report.

f2.com.au

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