Signs of 'green shoots' at Fairfax

FAIRFAX MEDIA tripled its first-half earnings to more than $386 million on significant asset sales, but the media group warned the advertising outlook continued to be challenging and flagged further cost cutting.

Excluding one-off profits, including the sale of the remaining stake in New Zealand online auction house Trade Me, the company reported a profit after tax of $83 million, down from $135.7 million in the previous corresponding period.

Group revenues were down 7.8 per cent to $1.1 billion for the half year while expenses declined 3 per cent to $908 million.

The Fairfax chief executive, Greg Hywood, said the print editions of The Sydney Morning Herald and The Age newspapers - which are about to move to a new compact format - continued to be profitable, with circulation revenue rising from recent price increases.

While underlying earnings met market consensus estimates Fairfax declined to give guidance for the full year saying there was still "significant volatility in the market".

The company reported December revenues down 5 per cent on a like-for-like basis, while the first six weeks of this year were down 9 per cent to 10 per cent.

Mr Hywood cautioned about reading too much into the latter figures, but was cagey about signs of an improvement in the outlook for the media sector.

He said six months ago he could not see anything that would cause a cyclical lift.

"The only thing that's occurred in the meantime is the fact [there] has been a strong lift in the equity market," Mr Hywood said.

The silver lining is whether a sustained run in the equity markets helps consumer sentiment.

"That [consumer sentiment] traditionally, in our business, flows through into the property market which is 30 per cent of our advertising" Mr Hywood said.

Simon Marais, the managing director of major Fairfax shareholder Allan Gray, said the results were good, with costs under control and very little debt following the Trade Me sale.

"The big question is whether they can turn revenues around," Mr Marais told BusinessDay.

He was not overly concerned about the slow start to the half year, saying signs of an advertising turnaround were evident, but it could take time to trickle through to property and job ads at Fairfax. "The green shoots are there and they haven't been there for ages," he said.

Fairfax said cost savings from its transformation plan were ahead of schedule and were now expected to produce annual savings of $251 million by 2014-15, compared to previous forecasts of $235 million.

Fairfax cut its fully franked interim dividend to 1¢ a share, from 2¢ a share.

The company's shares dropped 1.5¢ to close at 53¢ on Thursday.