Fairfax Up Thanks To Online And Regional

Sydney Morning Herald

Friday February 22, 2008

Miriam Steffens

FAIRFAX MEDIA'S expansion to cut its reliance on metropolitan newspapers appears to be paying dividends, with strong regional and online earnings outweighing a slump in the Sydney market.

The company posted a 38 per cent rise in first-half profit to $196 million yesterday after its $3 billion takeover of the regional publisher Rural Press and the acquisition of Southern Cross Broadcasting's radio stations last year. Revenue jumped 40 per cent.

Underlying earnings per share rose 8.6 per cent to 13.11 cents in the half, and Fairfax said there was "strong EPS growth" ahead.

"I think we have produced the goods for our shareholders," said the chairman, Ronald Walker. "We have been absolutely focused on EPS growth, EPS growth and EPS growth.

"The business is humming along very well ... Rural Press has been a great merger for us."

The chief executive of Fairfax, David Kirk, has spent more than $3.5 billion over the past 15 months to make the publisher less dependent on its metropolitan newspapers, the Herald and the Age, which have been hit by sluggish advertising demand in their markets and a structural move of classifieds from newspapers to online.

"Clearly the Sydney market is the single worst performing market in Australia," he said yesterday, flagging that was unlikely to change in the current half.

But he said Fairfax benefited from "solid gains" at regional and rural publications, a recovery in New Zealand and "explosive" growth online.

The company would not make a profit forecast, saying only that the conditions seen in the first half had continued into the second half.

Fairfax's operating profit including Rural Press, but excluding the acquisition of Southern Cross in November, rose 8.7 per cent, to $409.7 million. Earnings from the internet jumped 41 per cent to $24 million.

Mr Kirk would not commit to saying when the company would narrow the size of the Herald and the Age. Fairfax had announced the plans last May in a move aimed at attracting more readers.

"We're continuing to work through the details of what it would take to implement [the reduction]," he said. "There is nothing we are prepared to announce until there is a final decision."

The company will raise the cover price of the Herald by 10 cents in coming days, and will review its other newspapers individually over the next months to decide about other possible increases.

Fairfax shares closed 16c higher at $4.16, after a 15 per cent loss since the start of the year.

"People had sold down the stock, worrying about nasty surprises, and there weren't any," said Andrew Anagnostellis, a Deutsche Bank analyst.

"Clearly they have achieved their aim of diversifying from metro, and they're doing a good job repositioning the company."

© 2008 Sydney Morning Herald

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