Fairfax to Cut 22% of Staff Amid Slumping Revenue
Fairfax Media Ltd. (FXJ), Australia’s second-largest newspaper publisher, plans to cut 22 percent of its workforce, close printing sites and introduce digital subscriptions to halt sliding sales and a stock price slump.
The Sydney Morning Herald, bought by Fairfax in 1841, and its Melbourne sister The Age will shrink to tabloid size by March 2013, the company said in a statement today. Fairfax will start charging the publications’ online readers in the first quarter of next year and may end print editions entirely if revenue declines materially, it said.
Fairfax shares jumped the most in more than four months after Chief Executive Officer Greg Hywood deepened cost cuts and announced 1,900 job losses. The publisher’s biggest shareholder and Australia’s richest woman, Gina Rinehart, is pushing the company to address an 85 percent stock-price decline since 2007 and falling newspaper circulation after a record loss in 2011.
“These are the sorts of things people wanted to see last year,” said Chris Weston, an institutional dealer at IG Markets in Melbourne, “It’s not as if the challenges the business faces have emerged recently.”
Fairfax climbed 7.4 percent to 65 Australian cents at the close in Sydney trading, the biggest advance since Feb. 1. The benchmark S&P/ASX 200 index rose 2 percent.
“No one should be in any doubt that we are operating in very challenging times,” Hywood said in the statement. “Readers’ behaviors have changed and will not change back.”
The migration to the Internet has left the publisher funding a print business at a time when readers are switching to free Web content.
While monthly readership of the Sydney Morning Herald and The Age climbed 25 percent to 7 million in the past five years, about two thirds of that is via computer, phone or tablet, the company said today. The number of print readers has fallen every year since at least 2006, while the number of digital-only viewers increased annually in the same period, Fairfax said.
“The days of the huge printing plants, built for our legacy print classified business, are well and truly over,” Hywood said in a video on the Sydney Morning Herald website.
Hywood raised his annual savings target to A$235 million ($237 million) by 2015 from a previous estimate of A$170 million and said printing plants in Chullora and Tullamarine will close by June 2014.
Fairfax said it’s also reducing its stake in Trade Me Ltd. (TME), the Wellington-based online auction business, to 51 percent from 66 percent to raise about A$160 million and strengthen its balance sheet.
Credit-default swaps on Fairfax’s debt fell 10 basis points to 375 at of 12:46 p.m. in Sydney, according to Westpac Banking Corp. (WBC) prices.
Fairfax is shrinking its flagship titles almost a decade after the company’s closest rival, Rupert Murdoch’s News Corp. (NWSA), cut the size of U.K. broadsheet The Times. Other papers that have trimmed their size to cut costs and appear less cumbersome include The Guardian and the Independent, both in the U.K. Fairfax’s Australian Financial Review is already compact-sized and charges readers for most online content.
Fairfax, which will make the job cuts announced today over the next three years, plans to reduce expenses by sharing content across radio, newspapers and the web, and centralizing advertising sales activities.
The company publishes more than 430 regional and metropolitan newspapers and magazines including the Dungog Chronicle and the Southern Highland News, according to the company’s annual report and website.
Earnings peaked in 2008 before Fairfax last year posted a loss of A$391 million as advertising revenue dwindled. Sales are projected to decline for a fourth consecutive 12-month period in the year to June 2012, according to data compiled by Bloomberg.
Rinehart, the Australian mining magnate worth $18.6 billion according to the Bloomberg Billionaires Index, raised her stake in Fairfax to about 19 percent from about 13 percent, the company said today. She has also sought support from fellow investors for two board seats, according to the Australian newspaper.
To contact the reporter on this story: Angus Whitley in Sydney at email@example.com