Price spikes, but Fairfax sackings won’t change a thing
Glenn Dyer writes:|
Dec 05, 2008 12:00AM |EMAIL|PRINT
What a way to run a listed company, especially in the media, even if it is the struggling and poorly-governed Fairfax Media.
CEO David Kirk was ousted at a board meeting yesterday, along with Sydney Morning Herald editor, Alan Oakley.
Fairfax shares jumped to $1.62 after the news came in an ASX statement at 10.20am, but as the initial enthusiasm faded, they eased to be up just half a a cent at $1.495 at midday. The market knows that changing the captain of the SS Fairfax doesn’t alter the arrangement of the deck chairs when the iceberg is straight ahead.
The naked ambition of John B Fairfax and his chosen CEO, the trusted Brian McCarthy, to take control of the management and the board is now all but assured. Next cab at the rank will be “Melbourne” Ron Walker as chairman and the empire will be back where it belongs, in the safe hands of “people who know best”.
McCarthy is now acting CEO until the next board meeting next Wednesday (nice to see it announced officially this time), but calls are already coming from broking analysts and major shareholders for him to be made full-time CEO of the company. McCarthy was formerly the boss of Rural Press, which was controlled by the Fairfax family. It was picked it up in a fire sale after Warwick Fairfax’s act of filial hubris failed and the company collapsed in the early 1990s.
McCarthy learned all he knows from long time Rural Press CEO, John Parker, who also attempted to teach Ian Law, now running PBL Media. McCarthy was the cleverer apprentice. A possible rival might be Joan Withers, a former director and now head of the NZ operations. But the Fairfax board wouldn’t go for a second Kiwi CEO in a row.
With two mystery board meetings in as many weeks and the editor of the Sydney Morning Herald and the company’s CEO gone, the major shareholder has told business journalists that it will not stand in the way of a cut in dividend, before the holders of the other 86% of its shares are informed.
That arrogance of the Fairfax family showed up in this quote from the above story from Nicholas Fairfax of Marinya Media, the main company of major shareholder, John B Fairfax.
“We would have no problem with the reduction in the dividend,” Nicholas Fairfax told the Herald yesterday. “In principle it will come as no surprise to anyone who followed Rural Press that Marinya has a conservative view on balance sheet structure. We would be supportive therefore of any action to reduce Fairfax’s debt if it was in the best interests of shareholders.”
The company currently pays out 80% of earnings as dividend, or 20 cents a share. Given the slump in revenue and earnings across the sector, that’s obviously unsustainable.
Fairfax isn’t alone in seeing a slump in revenue and earnings since July. The Seven Network, the country’s most successful TV free-to-air TV group, has warned of a drop in earnings of up to 50% this half. News Ltd papers here are suffering earnings slump across the board as classified ads, especially jobs, dry up. Two news editors in Melbourne and Sydney have been replaced at the Herald Sun and the Sydney Daily Telegraph. News is cutting jobs, slowly and quietly (like Macquarie Bank); there’s nothing like the blood and gore which flowed from Fairfax’s 550 person chop in Australia..
Last month, Fairfax’s chairman Ron Walker told shareholders at the publisher’s annual meeting to expect ”tough trading conditions for some time”. A major policy change like a cut in dividend shouldn’t appear to come from the largest shareholder’s statements. It looks as though what the reality is; that the private interests of John B Fairfax are running the business affairs of Fairfax.
Given the poor outlook for the sector and Fairfax, a cut in dividend is actually very sound, but it should have been revealed to the market first by the company, with the major shareholder then supporting it. A board meeting last week ago (which started as an audit committee meeting and turned into a fully fledged meeting) discussed the dividend but the position of David Kirk was raised. Kirk wasn’t at that meeting. He was in Melbourne trying to calm the antsy staff at the Melbourne Age who have been upset by the headstrong management of Victorian boss, Don Churchill.
Then there were rumours yesterday that the Fairfax board was holding another quiet meeting in Sydney and Alan Oakley was “stepping down” (to use the Fairfax euphemism for being “planked”) from the editorship of the SMH.
This week’s sharp downgrading of the entire sector by Goldman Sachs JBWere (with no real recovery now until 2011 and 2009 and 2010 basically tough years with little or no growth), was a message to all media managements here.
Overnight the US cable programming giant Viacom revealed it was sacking hundreds of people because of a slump in revenues for its supposedly near recession-proof businesses which include MTV and Nickelodeon. UK media companies are sacking staff weekly, the Financial Times is cutting working hours and weeks and anyone earning over $US50,000 a year isn’t getting a pay rise. The Daily Mail Group has chopped 400 jobs, The Independent, more than 90, and possibly up to 200.
Fairfax isn’t alone and changing its CEO doesn’t change a thing.