Media group Fairfax sees profits plunge

Geoff Hiscock
CNN Asia Business Editor

SYDNEY, Australia (CNN) -- Australia's second-largest newspaper publisher, John Fairfax Holdings, has blamed the "worst advertising market" in more than a decade for a sharp profit slump.

Fairfax publishes the Sydney Morning Herald, the Melbourne Age, the Australian Financial Review business daily and a string of regional and community newspapers.

It reported Monday that net profit before significant items was A$90.2 million ($49.3 million) for the year to June 2002 -- a drop of 28.5 percent on the previous year.

Net profit after significant items of A$36.5 million was down 58 percent to A$53.7 million, reflecting the restructure of the company's Internet business, f2.

"Our results reflect the worst advertising markets faced by the media industry in over ten years," Fairfax chief executive Fred Hilmer said in a statement to the Australian Stock Exchange.

Costs being cut

But he said costs were being cut and investments in new printing equipment in Sydney and Melbourne would start to pay off in 2003.

The Herald and the Age have been the group's traditional profit centers through their display and classified advertising columns, known as the "rivers of gold."

But the advertising recession, plus competition from the Internet, has hit sectors such as real estate, automotive and employment advertising.

Fairfax said that while there were "some signs" of improvement, an end to the overall advertising recession was not yet evident.

That is borne out by the latest data from the ANZ Bank, which tracks newspaper job advertising volumes on a monthly basis.

Job advertising up

It said Monday the number of job advertisements in major metropolitan rose by 0.2 percent seasonally adjusted in August, after three straight months of declines.

Fairfax expressed more confidence about next year.

"Barring a further downturn in advertising markets, we expect to resume earnings growth in 2003," the company said.

Fairfax shares closed 0.65 percent higher at A$3.10 on a day the benchmark S&P/ASX200 put on 0.97 percent.

Fairfax was controlled by the wealthy Fairfax family for 150 years, but it slipped into receivership in late 1990 when an aggressive expansion plan by then-chief executive Warwick Fairfax Jr failed.

The newspaper group then became the focus of a bitter bidding war that saw it end up in December 1991 as part of the empire of Canadian media tycoon Conrad Black.

Black sold out five years later. Australia's richest man, Kerry Packer, also held a strategic 14.9 percent stake through his Consolidated Press Holdings, but sold that last year.