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AAP

2013-02-18

Analysts expect Fairfax Media to report a fall in revenue of up to 10 per cent in its first half results on Thursday, with declining print advertising income continuing to take a toll.

Fairfax will reveal its first half figures ahead of major changes including a resizing of its flagship broadsheet newspapers to tabloid format next month, and the introduction of a metered online content model, scheduled to start before April.

The embattled media group is in the middle of a four-year, $235 million cost-cutting program and analysts will be watching to see if costs are under control as the tight advertising market challenges sales revenue.

A survey of four analysts by AAP shows an average expected revenue fall of 9.3 per cent to $1.138 billion for the first half of 2012/13, from $1.23 billion for the first half of 2011/12.

Fairfax reported a net profit of $96.7 million in the first half of 2011/12, a 41 per cent decline on the prior corresponding period.

Goldman Sachs analysts Christian Guerra and Jacqueline Thai said the revenue decline was likely to have worsened since Fairfax chief executive Greg Hywood told shareholders at the company's annual general meeting there had been a "slight improvement" in revenues in the first weeks of October 2012.

"FXJ's (Fairfax's) divestments of Fairfax Community Newspapers (transaction completion July 2012), the US agricultural business (November 2012) and Trade Me (December 2012) should result in FXJ's reported 1H13 revenue decline being worse than the underlying decline," a note from Goldman Sachs said.

Goldman Sachs has forecast revenue of $1.112 billion, down 9.4 per cent on the previous corresponding period, and earnings before interest, tax, depreciation and amortisation (EBITDA) of $239.1 million, down 17.3 per cent.

Citi media analyst Justin Diddams expects revenue of $1.165 billion, down 5.5 per cent, EBITDA of $228 million and net profit of $92 million.

Mr Diddams said recent circulation figures showed Fairfax was entering a year-on-year managed decline in circulation while advertising revenue had fallen only in line with the broader market.

"Greg Hywood is making the best of a tough situation," Mr Diddams said.

"We know what they are doing on the cost base - the key is going to be revenue."

Commonwealth Bank analyst Alice Bennett expects revenue of $1.104 billion and a 5.7 per cent drop in operating costs, with the company reducing uneconomic newspaper circulation.

Ms Bennett estimates EBITDA at $220 million and net profit at $82.8 million.

Morningstar's Tim Montague-Jones puts expected revenue at $1.17 billion and EBITDA at $277.1 million.

Peter Trute, AAP Senior Finance Writer