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Fairfax nosedives on revenue decrease

Fairfax nosedives on revenue decrease

Fairfax Media Limited (ASX:FXJ) shares dropped more than 8% today, as the market reacted to news that revenues were down 4.5% on prior year but operational costs up 1%.

The revenue decrease is consistent with reports from other local media companies and reflects the weak retail market and poor consumer sentiment. But guidance from the company had been a rather vague range of plus or minus 5%, and the market was clearly unimpressed with Fairfax coming in at the bottom end of that range. Renewed guidance for EBITDA is $600M barring any further deterioration in advertising conditions.

CEO and Managing Director, Greg Hywood described the trading conditions as cyclical and said “we are not alone as a number of businesses dependent on consumer discretionary expenditure are experiencing the same difficulties”.

Hywood said that the decline in advertising levels had become less pronounced in the past month and that the operational changes stemming from the company’s 2010 strategic review would position the company well to take advantage of an upturn in consumer and advertiser sentiment.

As part of the implementation of the company's strategic review, Hywood said the company would focus on building a stronger team of journalists, explaining that doing so would help to create markets for the organisation. But the growth in journalism is expected to come at the expense of the sub-editing team which will be mainly outsourced to media services company, Pagemasters.

At 12:23pm Fairfax shares were trading at $1.19, close to the 52 week low of $1.17

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Tags Fairfax Media LtdASX:FXJmedia

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