Net impact on Fairfax's earnings

Fairfax Media reported flat earnings and a fall in net profit yesterday as weak advertising markets continued to harm its bottom line.

Fairfax's net profit fell 7 per cent to $227.45 million in the year to June 30 while its underlying net profit before one-off items was down 4 per cent to $228.48 million.

Fairfax chief executive David Kirk said advertising markets in Australia weakened further in the second half compared with the first six months.

"As expected, trading conditions remain constrained in our core publishing markets," Fairfax said.

Growth in publishing would be achieved by continued diversification into regional, business and magazine publishing, Mr Kirk said, along with cost management.

Fairfax reported earnings before interest and tax of $425.5 million, in line with its June forecast and steady with the previous year's result, while revenue rose 2 per cent to $1.91 billion.

Fairfax's metropolitan papers, including The Age, The Sydney Morning Herald and The Australian Financial Review reported growth in circulation and readership.

However, metropolitan advertising fell 1.6 per cent to $1.04 billion which caused EBIT to fall 10 per cent to $231.1 million.

Mr Kirk said the impact was a mix of cyclical and structural factors particularly in employment and real estate advertising in New South Wales and Victoria.

"There is no doubt that we are seeing some structural movement of that online and some of it won't come back, but a good deal of it also has to be cyclical," he said.

The main bright spot for Fairfax was the continuing improvement in the profitability of its digital arm.

Fairfax Digital's revenue rose 75.6 per cent to $96.4 million while earnings before interest, tax, depreciation and amortisation leapt from $6.6 million in 2004-05 to $24.3 million last financial year.

Source news.com.au