Australia's Fairfax in internet push

SYDNEY - David Kirk, the new chief executive of Fairfax Holdings Ltd, strives to emphasise that he expects the internet, not newspapers, to drive future growth at Australia's second-biggest newspaper publisher.

Kirk, a former All Blacks captain, has purchased three online businesses since he was appointed head of Sydney-based Fairfax in August last year.

He is confident they will help drive the internet's contribution to group earnings from around 4 per cent at present to 20 per cent over the next 18 months to two years.

"This is what analysts have calculated. It's a number that's out there and we're not arguing with it," Kirk told Reuters in an interview today.

Kirk said about 50 per cent of that projected growth would come from Trade Me, New Zealand's largest auction website which the publisher purchased for $700 million last month.

"If we could find another business of that scale and quality I would only be too happy to make the acquisition," he said.

Revenues at Fairfax Digital, the publisher's online arm, jumped 66.6 per cent to A$42.6 million ($51.7 million) in the first-half ended December 31, 2005.

Advertising revenue at its cornerstone Australian publishing business -- which comprised 82 per cent of the business' total revenue for the half -- rose only 1 per cent to A$541.7 million.

The remainder of group revenues came from its New Zealand publishing unit.

Kirk's appointment ended a 15-month search for a new chief executive at Fairfax and was a quantum leap for the 45-year-old, father of three.

He most recently headed PMP Ltd, Australia's biggest commercial printing company but only about an eighth of the size of Fairfax.

While his credentials are impressive -- regional president, Australasia, for Norwegian papermaker Norske Skog, chief policy adviser to former New Zealand Prime Minister Jim Bolger, a degree in medicine and a Rhodes scholar -- he came to the role with no newspaper experience.

He also arrived during a time when advertising revenue growth for the industry slowed to single from double digits.

Fairfax said last month that trading conditions in Australia for January and February were mixed. Looking ahead, Kirk said: "There is no obvious deterioration from February/March conditions, but no clear trend of improvement."

The group would aim to keep underlying cost growth at its Australian publishing division at around 2 per cent but that would be more difficult after July when newsprint prices are scheduled to rise around 7 per cent, he said.

Fairfax, whose main rival is the local arm of Rupert Murdoch's News Corp Ltd, has ruled out buying a free-to-air television network in the event of any changes to media ownership laws which may be introduced as early as next year.

Kirk also said there were few opportunities in radio that interested the publisher, but it would be "very interested" in buying a smaller, regional newspaper.

Analysts, however, expect Fairfax, because of its open share register, to be a takeover target once proposed changes take affect.

"It doesn't occupy one minute of my day thinking about that sort of activity. It's completely out of my control," he said.

"What is within my control is the financial performance of the business and if we deliver strong financial results then our share price will be fairly valued and anyone who would then want to buy the company would have to pay a premium."

Fairfax shares closed 0.76 per cent lower on Wednesday at A$3.92 in a firmer overall market. The stock has risen 2.24 per cent so far this year, underperforming the benchmark index's 9.3 per cent rise.

- REUTERS