Mr. Fred Hilmer, Chief Executive Officer of Fairfax, said:

"This is a gratifying result underpinned by the vigorous and disciplined performance of our people. However, an additional important factor is the increasing value of our strong brands in both print and online as the media market continues to fragment while growing strongly. The best evidence for this is our outstanding growth in advertising revenues, with display up over 15%, classifieds up over 12%, and internet revenue up over 100% on a like for like basis, growth rates significantly higher than those reported by our television and print competitors.

All key parts of our business contributed to the good result. Our metropolitan newspapers, financial publications, regional and local newspapers and magazines produced significant increases in volumes, revenues and profits. The Fairfax newspapers and publications are successful, growing and contemporary products.

We have also invested in significant but measured terms to continue to build f2, the Fairfax Interactive Network, and are achieving substantial revenue growth in selected online and e-commerce markets. f2 is, in its own right, a leading internet company.

Our strategy of strengthening our publishing businesses and building new platforms for growth continues as we develop an increasingly diversified media company. Our objective is, firstly, to attract valuable audiences, on a cost-effective basis, through our high quality content, our well recognised and trusted brands, and diversified distribution, from print to digital broadband. Secondly, we aim to realise value by efficiently linking buyers and sellers by charging for content, whether in print, on the internet, or on other platforms.

Revenues for the company as a whole have increased by $88.3 million (15.5%) which together with continued cost control has seen total company EBIT rise by 20.1% to $164.4 million. The increase in earnings per share pre abnormal items has been even higher at 35.4% to 12.1 cents per share as a result of the buy back of 10% of Fairfax’s share capital last year.

The underlying performance of the publishing business is stronger than the overall figures-which incorporate new costs associated with building f2-suggest. The strong operating leverage in the publishing business, in which revenue increases translate more directly into EBIT, reflects the management and restructuring reforms that have been implemented, and our ability to take advantage of them. Costs continue to be controlled, with cost increases largely due to sharply increased volumes and the launch of a number of new products and initiatives essential to driving our EBIT performance.

Publishing Businesses

The economic performance of our publications is underscored by their continued excellence in journalism. Fairfax journalists won 10 Walkley awards in 1999, including a first for online reporting, with more of our mastheads enjoying rewards than in previous years.

Revenues were up 12.3% over last year on a like for like basis. Advertising revenues increased 13.1% with approximately half of the increase due to growth in volumes. For our metropolitan mastheads, display volumes rose 8%, and we are winning increasing volumes for classifieds, which were up 3.6%. For our regional and suburban mastheads, the rise in volumes was 19.5%. We are leading the market in "dot com" advertising, reflecting the appeal of Fairfax demographics and readership to this growing sector of our economy. Fairfax magazines continued their strong improvement, with revenues up 9.6%. Circulation revenues increased 5.3%.

Operating costs increased by 6.7% to $414.7 million on a like-for-like basis, largely due to a key variable factor: increased volumes from demand for advertising space flowing from the strong economy and new print sections to improve our papers, including Domain and MyCareer. The extremely strong growth in display advertising in particular drives up not only newsprint and production costs, but also requires greater editorial content. Core staff numbers are largely unchanged.

Our newspapers are changing to meet the evolving needs of our readers and advertisers. New sections in vertical markets, with more colour, are targeted to meet increasingly refined market segments. We are also matching new print sections with new online counterparts, such as Drive and drive.com.au for automobiles, and Domain and domain.com.au for real estate. These efforts, which have been well received, plus new initiatives in marketing, are designed to keep growing numbers of readers and users within the overall Fairfax environment, no matter how our content is accessed.

The Australian Financial Review, and its Weekend Edition, continues to enjoy substantial circulation gains. Other circulation levels were consistent with this stage of the economic cycle. The Age has stabilised circulation during weekdays, and has introduced home delivery of its national edition to a new city, Adelaide, bringing new competition to that market. Readership numbers are steady, particularly in the AB demographic.

Our Business Publications, of which The Australian Financial Review is the flagship, have recently grown with Fairfax’s acquisition of SPG, a Singapore and Australia based magazine and online publisher of specialist niche titles, and the joint programming venture with CNBC to produce The Australian Financial Review Market Wrap, broadcast nightly on pay television across Asia in prime time.

Fairfax’s regional and community newspapers are trading strongly. The construction of the new printing plant for The Age and other Fairfax publications at Tullamarine, outside Melbourne, is on budget and on schedule.

Building f2

Building f2 is a major priority and is proceeding aggressively. We are focusing on developing leading positions in selected areas of content and commerce through branding, selling, product, technology and relationships. This can create significant, valuable new businesses.

f2 is building a strong position in e-commerce and is Australia’s leading provider of online content. The company has an extensive network of over 30 sites and the largest Internet directory in Australia, CitySearch (underpinned by the Big Colour Pages directories).

We are intent on building the business around key vertical markets. f2 is well positioned in each of these categories, including auctions (SOLD.com.au), autos (drive.com.au), jobs (mycareer.com.au), finance and investing (tradingroom.com.au; moneymanager.com.au) and real estate (domain.com.au). Page views increased by over 40% in the last six months of 1999, to over 1.4 million per day at December and are now over 1.8 million per day.

Taken as a whole, f2 is Australia’s Internet leader in e-commerce and online services-and we will build on our leadership position in the months ahead. We have the highest revenue per page view in the online industry in Australia.

During the period there were several major commercial developments. In October, f2 launched its real estate supersite (domain.com.au). In November, f2 initiated shoptoday.com. au, a gateway to online shopping with leading retailers including Collins Books, Compaq, and Telstra Big Pond Travel. In December, the portal, sydneytoday.com.au was launched as the NSW capital’s local internet gateway, joining melbournetoday.com.au. f2 also took a stake in theSpot, which operates the leading online toy site, toyspot.com.au. In January, 2000, Amazon.com joined f2 in its investment in theSpot. f2 also has in place Wireless Application Protocol (WAP) trial agreements with Vodafone and Cable & Wireless Optus.

Whilst the funding commitments from Fairfax to f2 are in accordance with anticipated expenditure rates, we are also prepared to exploit significant strategic opportunities that may arise.

With respect to datacasting and digital television, we are cautiously optimistic regarding the regulatory decisions announced by the Government in December. We will fully assess the prospects for Fairfax to obtain a datacasting licence and offer services based on our f2 websites. The costs for the development of digital television and datacasting are being borne within f2. We will proceed with datacasting only if it is clear that our plans can be conducted on a commercially viable basis. In any event, we will continue to invest in the broadband enhancement of our websites."