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Remarks
of Mr Brian Powers, Chairman Good
morning and welcome to the Annual General Meeting of Fairfax Shareholders. Our
formal agenda for today’s meeting is very straightforward.
First, we will have the presentation and discussion of the
Annual Accounts. Second,
we will have three resolutions for the re-election of Directors to
the Board. I
would like to make a few remarks before moving to those formal agenda
items. We
are pleased to report an excellent result for the 1999/2000 financial
year. The
result reflects our continuing work to strengthen the Company's operating
and financial performance, enabling us to earn returns commensurate
with the leading market positions of our mastheads and brands. Earnings
per share pre-abnormals increased 34% from 17.3 cents per share to
23.2 cents per share. The total improvement over the last 2 years
for this key measure is over 65%, an outstanding performance. During
the year, the Company built on gains made in productivity and quality
to achieve outstanding increases in revenues. All parts of the Company
contributed to this result.
Our
overall revenue growth of 17.5% year-on-year compares extremely favourably
with the results achieved by other media companies, both in print
and broadcasting. Our
intrinsic value and prospects depend on the strength of three core
assets: our brands and mastheads; our people; and the technologies
we use to create, sell and distribute our content. Over
the past year we have been working on improving each of these core
assets. Mastheads
and Brands.
By any measure, Fairfax's portfolio of mastheads and brands
including The Sydney Morning
Herald, The Age, The Australian Financial Review, The Sun-Herald,
Good Weekend and Business
Review Weekly, is outstanding. Each
is a leader in a well-defined, highly valued segment of the media
industry. Over
the past year we have made significant investments in improving a
number of these mastheads. These
include a major redesign of The Sydney
Morning Herald, the redesign and addition of magazine inserts
in The Sydney Morning Herald
and The Age, and improvements
to both The Australian Financial
Review and BRW. Moreover,
the brands are being extended online and their positioning reinforced
by their presence in multiple media. We
are also adding new brands in our online businesses, such as CitySearch
Directories and SOLD.com.au. We
have expanded the authority and reach of Fairfax Business Publications
with a number of business titles including MIS that came with the
acquisition of the Strategic Publishing Group. Our
People.
The quality and reputation of our brands and mastheads depends
on the ongoing efforts of a large number of our people producing editorial
content, arranging advertising, printing and distribution, selling
products and supporting these activities. Over the past year the Company benefited from a strengthened and stable top management team. At the same time, we are increasing the breadth and depth of staff training. We
are improving performance management. We have expanded the numbers
of trainees, thereby renewing our pool of skilled journalists for
the future. We
have also been seeking to align employee and shareholder interests
through staff share ownership plans. These have been well received,
with about 50% of employees participating. Technology.
We are introducing significant improvements in our printing
capabilities, and our systems.
The new plant at Tullamarine (Victoria), and the additional
colour and mailroom capacity to be added to Chullora (NSW) will give
all our newspapers expanded capacity to accommodate improvements in
editorial content and presentation and to meet advertiser demand for
colour. The
revamped sections and colour inserts in The
Sydney Morning Herald, The
Sun-Herald and The Australian
Financial Review have refreshed those products and enabled them
to achieve improved financial performance. In
the coming years we will continue to pursue new platforms for growth:
new outlets for our content, both in new technology or other media,
and new geographical markets. We
will also continue to advocate fundamental changes to media law and
regulations that arbitrarily restrict our ability to compete in new
areas - and therefore limit our ability to grow in Australia. Before moving on to the outlook for this year, I would like to say a few words about f2, our internet network, where we continued to build on our investment and focus its strategy. Most of you would be aware of the relative ease with which start-up internet companies were able to raise capital in 1998 and 1999. While this may have made some new age entrepreneurs rich, at least on paper, it was in fact not helpful for the industry as a whole. It fostered inflated compensation levels, poor business practices and inferior product offerings, and it also made it more difficult for others to build their businesses. As usually happens, the financial markets have realised these excesses. As investors in the area become much more discerning, this will favour the companies, such as ours, which have established leading positions online, are well funded, and bring a natural competitive advantage to the business. We are very well positioned as the markets enter what we believe will be a period of industry consolidation. While it is customary to provide an update on how the current year has begun, and an outlook for the remainder of the year, it is unusually difficult to do so succinctly or with a high degree of certainty this year. The year began well, with solid revenue growth. However, that momentum was interrupted by the Sydney Olympics, which we, like many other companies, found had an even larger negative impact on our results than we had anticipated. The strike at The Age, where we lost a Saturday paper, was also costly. The combined impact of the Olympics and the strike was approximately $25 million at the EBITDA line. Revenues have recovered post-Olympics, but are not showing strong growth over last year’s levels as they were pre-Olympics. The combination of the above factors make it unlikely that we will equal last year’s first half result this year. With respect to the second half, our results will, as always, be influenced by the performance of the Australian economy. If the economy continues to grow solidly, we would expect our profits also to grow solidly in that period, and to show a satisfactory increase for the year as a whole. On behalf of the Board, I want to thank management and staff for their dedication and commitment, and the hard work and sacrifices that inevitably accompany a result such as that achieved by Fairfax this year. We
also very much appreciate the great interest and attention given by
our shareholders to the Company and its continued growth and development. am
pleased now to introduce Fred
Hilmer, our CEO. Remarks
of Mr Frederick Hilmer AO, Chief Executive Officer Thank
you, Brian. I
welcome this opportunity to discuss the Company, its performance,
and our outlook with our shareholders today. Two
years ago, a number of pundits were forecasting a bleak or at least
uncertain future for newspapers.
The Internet and a decline in reading among the young were
seen as major threats to an “old medium". The
prospects, we were told, were poor.
It
was either / or. Newspapers
or the net. In
fact, there were three possible outcomes: The
Internet wins. Newspapers
win. Or
they coexist. Beginning
two years ago, we bet on the third way, coexistence. The
history of media supports coexistence between the old and the new. TV
supplements radio, and movies.
Cable TV coexists with free to air TV.
Newspapers work with the net and other media. This
approach, often called “clicks and mortar", when people talk
about the Internet today, is being increasingly adopted in a number
of industries. That’s
why we are hearing different stories about the future of the newspaper
industry. Major forecasters
are now predicting steady underlying growth through 2004. The
results that we are reporting, and that the Chairman has outlined,
are consistent with these views. There
are three important messages for shareholders in these results. First,
we have an outstanding quality publishing business. Second,
we have a leading online business. Third,
we have an emerging growth strategy: First,
an outstanding quality publishing business. The
mainstay of our papers and magazines, and therefore our business,
is quality journalism. It
is a handcrafted product, not a commodity.
It is defined, and valued, by its quality. Many
people think that newspapers give you the news. But
in a world where you can access news 24 hours a day via TV, radio
or the net, it is not enough just to give you the news. We
need to tell you much more than what happened. We
need to tell you why it happened. We
need to tell you what it means to you, your community, and our country. And
we need to provide additional content and sections relevant to the
key decisions and choices we all make, whether about work, buying
a home or car, or with respect to entertainment. And
we need to do this in a way that is highly readable, authoritative
and trustworthy. When
we do this, we have great journalism, compelling journalism, and journalism
that makes a difference. Our
success in doing this is reflected in many ways – by the Walkleys
we have won, by the scoops and feature articles that appear, and by
the photographs (such as during the Olympics) that make you want to
pick up the paper or click onto other pages of our websites. The
2000 fiscal year for publishing was marked by strong profitability,
the highlight of which was outstanding growth in advertising and circulation
revenues and in advertising volumes for both metropolitan and regional
and business publications. This
growth reflects our dedication to continuous product improvement.
Over
the past 2 years almost every section of The Sydney Morning Herald
and its overall format have been significantly upgraded. New sections
have been added to The Sun-Herald and The Age. Additional
magazines, most recently e)mag and Uncorked, have
been introduced from The Age to The Sydney Morning Herald
and further fundamental redesign for The Age is being examined
as part of the Tullamarine project which will provide state-of-the-art
printing capacity in Melbourne in 2002. Circulation
and readership levels for The Australian Financial Review
reached record levels, with particularly strong sales of the Weekend
Edition. Boss magazine broke new ground in the area of management.
BRW and Shares magazines performed well, reflecting
the growing interest in comprehensive business and personal investment
topics. The
acquisition of Strategic Publishing Group was a significant development
that has added to our regional reach, and yielded immediate gains
in revenues. In
addition to product development and design, we are paying particular
attention to operations and cost effectiveness. It
is the job of Peter Graham and his team to make the presses run on
time; help manage and train our people; crystal ball production capacity
for the future; and make our new magazines, like Asset and Uncorked, look
great.
Cost
reductions have been achieved through materials and service procurement
savings. More effective use of existing capacity has reduced cost
per printed page. A rationalisation of printing capacity has provided
increased colour and quality to products such as The Illawarra
Mercury and The Sun-Herald. We
also have significant upgrades underway at Tullamarine and Chullora,
and they are proceeding to plan. f2.
f2
continues to pursue its strategic focus in four principal business
areas: Directories; Financial
Services; Classified Supersites; and Auctions and Shopping.
While these are each discussed in the annual report, there
are some general comments I want to make on f2. In
the 2000 financial year, f2 continued its development as a leading
online company. f2
enjoyed strong revenue growth, up 122% to $55.4 million, and incurred
a loss before interest and tax of $40.7 million, at the mid-point
of indicated levels. Online
revenues increased by 159% while offline revenues (print directory)
grew by 18% on a like for like basis. Transaction revenues (the majority
of which were generated by SOLD.com.au)
grew by 100%, exceeding $1million for the first time. This
very strong revenue growth was supported by significant increases
in traffic and visitors to the f2 network of sites. Total page views
to the network increased by over 136% to 75.2 million in June 2000,
while the number of site visits increased by 100%. We
are continuing to seek ways to increase revenues to build our leading
position in terms of revenues per unique user.
To this end, during November we will unveil afr.com, the first major subscription-based web product in our market.
The site will roll out initially to subscribers to The
Australian Financial Review, adding a significant depth of content
and functionality to our established daily audience. Later in the year, we will make this site available for a monthly
fee to non-subscribers. There
will continue to be a free component to the site similar to that available
today. Other
Developments.
Beyond online, we are systematically examining other ways
to improve and generate value from our content – by expanding our
geographic reach and the platforms over which our content is distributed.
We are, for example, trialling our content in other forms of
media. One example is The Australian Financial Review Market Wrap,
seen on weeknights on pay-TV throughout Australia and Asia. As
I have mentioned, our f2 websites increasingly feature video and audio
material. The
acquisition of Strategic Publishing Group and our joint venture with
NewsAlert LLC, NewsAlert Asia Pacific takes our content into new geographies. We
continue to strengthen our senior management team. New developments
during the year have seen overall responsibility for Herald publications,
including The Sydney Morning Herald and The Sun-Herald,
assigned to Greg Hywood. Peter
Graham is now responsible for all Group Operations, including those
at Spencer Street in Melbourne. Alan
Revell, who has done a superb job as Publisher and Editor-in-Chief
of The Sun-Herald, has become Managing Director for Content
and Commerce at f2, while Bob Copp has joined us to run CitySearch
Directories after a number of years as Chief Operating Officer for
Yellow Pages. Recently,
Robert Whitehead was appointed editor of The Sydney Morning Herald,
and Mark Scott became Director, Organisation Development. The
Chairman has outlined the current trends and outlook, as we see them,
for this year. Against
this background, management is continuing its focus on costs, productivity
and operational improvements, and on ensuring that discretionary spending
is appropriate to the revenues being generated. I
want to close by thanking all of our staff – about half of whom are
shareholders! – who have
not only done an outstanding job in a very busy year, but have also
helped us make significant changes and improvements. Thank
you. - ENDS -
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Fairfax > Corporate Affairs & Media Releases > Announcements > AGM
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