Budget day, Melbourne Cup afternoon and Christmas and New Year eves are well known for being times when companies, politicians and others drop unwanted or bad news. Easter Thursday and late Friday afternoon also come to mind.
Usually it’s a politician or their public relations person doing it, so that made it even more astonishing to learn at 2.38 pm yesterday that Fairfax Media joined the spinning club, slipping out an update containing the unwelcome news of a 28% drop in profit for the year to June.
Unfortunately those ‘green shoots’ being seen in retail sales, building approvals, housing finance and in the rise in newspaper job ads last month of 3.1% in the latest ANZ survey, have failed to take root at Fairfax Media.
But that a media company would do something as blatantly cynical as drop a major earnings downgrade while attention was diverted by the budget, shows how far Fairfax has strayed from its original media roots.
Fairfax’s publications have been the first to point fingers and complain about other companies and politicians doing something like this, so it comes as a major surprise that the company would do it.
It took the Fairfax website the best part of an hour top hoist a story on its owner’s profit predicament, but with no comment about using the attention focused on the Federal Budget, to try and hide the bad news.
The imparter of the bad news was newish CEO, Brian McCarthy. No sign of chairman, Ron Walker.
Fairfax shares traded flat at $1.12, down a cent just before the close of trading. Investors were obviously stunned, but not surprised.
Fairfax raised more than $600 million in new capital earlier this year: just as well because the fall in revenue and cashflows would have pushed into a breach of loan covenants. Debt is now a more manageable $1.8 billion.
Shareholders can forget any talk of dividends from Fairfax for a while yet.
"Mr Brian McCarthy, Chief Executive Officer and Managing Director of Fairfax Media Limited, today issued the following statement on the Company’s outlook for the 2009 financial year and further developments within the Company," the statement read.
"In the weeks since Easter, a clearer picture has emerged in relation to trading conditions in advertising markets in both Australia and New Zealand.
"It is apparent the markets have continued to deteriorate and although the rate of deterioration has abated, advertising levels are not expected to show any marked improvement at least for the rest of this financial year.
"Assuming no further major deterioration in trading conditions, the Company expects to report underlying earnings before depreciation, interest and tax (EBITDA) of circa $600 million.
"Demonstrating the benefits of the Company’s diversification programme, a more resilient performance from regional publishing, broadcasting and digital businesses has reduced the impact of more significant advertising declines in the metropolitan publishing business.
"Notwithstanding the advertising revenue declines, market shares have improved in key advertising categories. Also, circulation revenues have improved over the prior corresponding periods.
"Fairfax Media has undertaken wide ranging cost reduction initiatives.
"For the second half to date, total costs are approximately 10% lower than for the prior corresponding period. Management remains focused on achieving further cost reductions.
"Consistent with these reductions the CEO, Directors and generally direct reports to the CEO have accepted fee and salary freezes."
No apology for slipping it out on budget eve, nor any comparison in percentage terms.
The drivers for the fall has been a downturn in advertising, especially classified since the start of April of some 20% to 25%, much like the News Ltd third quarter revenue and earnings fall reported by News Corp last week.
Fairfax joins the other major listed print media groups, West Australian Newspapers and APN News and Media in downgrading earnings forecasts for the 2009 financial year (APN is to December 31, Fairfax and WAN to June 30).
