Fairfax Media has blamed a "weak" ad market for a drop in revenue and is not expecting market conditions to improve enough to recover the decline in the next two months.
Grey Hywood, CEO and managing director of Fairfax Media, said that since November 2010, Australian and New Zealand advertising markets had been “weak”, particularly in the retail sector which makes up more than 20% of advertising revenues.
Fairfax said its second half revenue to date has decreased 4.5% from last year, and it is expecting to report EBITDA of around $600 million for the full financial year, which is down from the $647 million previously forecast.
Second half costs are up 1% from last year and Fairfax will have a one-off redundancy cost of $25 million as part of operational changes across the company.
Speaking about the weak advertising markets, Hywood said: “The overall softness is consistent with trading conditions reported by major clients and reflects poor consumer sentiment. Revenues have also been directly affected by the flood conditions experienced in key markets early in the second half and the continuing impact of the Christchurch earthquake. The revenue declines have been experienced in Australian metropolitan and NZ publishing businesses.”
Hywood said regional publishing, Australian and New Zealand online businesses, radio and agricultural publishing have shown revenue growth during the half.
“The relative impact of the Australian currency against the Australian dollar has had a negative impact on the translation of revenues and earnings from our NZ publishing and Trade M businesses,” he said.
“The results anticipated for the 2011 financial year reflect poor cyclical trading conditions. We are not alone as a number of businesses dependent upon consumer discretionary expenditure are experiencing the same difficulties.”
Hywood said Fairfax will be investing in more high calibre reporters and writers, an expanded trainee program and multi-media training and equipment.
“Quality journalism and content will be key to maintaining and developing new markets and audiences – all of who, will have a choice of how and where they access information and services,” he said.
Fairfax also plans to shift its sub-editing work to Pagemasters, which is owned by the Australian Associated Press.
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