Naturally the News Ltd paper, The Australian, gave a good run to news that the Fairfax Media board met in Sydney yesterday without CEO David Kirk, who was in Melbourne holding a series of briefings for staff at The Age.
The timing of the meeting was interesting. It was scheduled for the afternoon to allow former Woolworths CEO, Roger Corbett to attend. His main interest is still Woolies where he’s on a $300,000-a-year consultancy until 2011. He is also a Reserve Bank board member.
Woolies AGM was yesterday morning and didn’t finish until late morning because of some shareholder protest at the way the retailer runs its poker machine palaces. Corbett is influential on the Fairfax board; he’s backed the restructuring plans of Kirk and his deputy, Brian McCarthy, the man some board members want to see take over from Kirk.
The Fairfax meeting was timed to allow Corbett to attend after the Woolies meeting. It was supposed to have been a meeting of a board sub-committee, but became something more.
There’s a belief John B. Fairfax — and perhaps two other board members — want McCarthy installed as CEO because they remain impressed at his cost-cutting efforts at Rural Press.
But there’s also a suggestion that the board was discussing a dividend cut. Some analysts and shareholders want the company to cut its payout to conserve cash. John B Fairfax wants to keep the dividend high to service his debt and meet the holding costs of the 14% stake his interests own in Fairfax. It pay’s 20 cents a year, which is a high proportion of earnings per share of 24.6 cents in 2008.
With profits under pressure, it is hard seeing that 20 cent payment being maintained.
Removing Kirk would be it’s own cost saving of course. McCarthy is already on the payroll so making him CEO would produce a saving of the $3million cost of employing the exisiting one. Looked at in terms of journalist salaries, removing Kirk would be a way of finding jobs for maybe 30-40 journalists. Enough to staff an entire regional newsroom.
Someone tried to spin the fact that yesterday’s Board meeting wasn’t odd because boards like to meet in private without the executives present. That’s true, but someone doesn’t go and leak the fact that the meeting was held without trying to make a point.
That point is simple: David Kirk’s position as CEO under pressure at board level and there is some agitation for a change.
Fairfax’s chairman, Ron Walker will be replaced in the next year by John B. Fairfax, but before that happens, he and the board need to fully disclose the situation regarding the financing of the Fairfax family’s 14% of Fairfax Media.
Are there any loans, margin callable, over the shares?
Fairfax shares hit a low of $1.115 this week and after a query from the stock exchange produced an answer and denial of a fund raising rumoured to be in the works, the shares rebounded to $1.315 last night. But the market had them down at $1.24 at the open today. Fairfax is valued at $2 billion, down from the $7.3 billion a year ago.
John B. Fairfax’s fortune has slumped sharply as the Fairfax share price has fallen this year, helped by the shorts who are exploiting fears about both the media sector’s profitability and about the stability of Fairfax’s management and finances. His stake is down by around $570 million, based on his original holding picked up from selling Rural Press, and the shares he bought from the rest of the family earlier in the year.
News Corp is under similar pressure, its share price has fallen from a 52-week high of $25.06 to a low recently of $9.51. It closed at $11.56 on Thursday, a fall of more than 50%.
Meanwhile at The Age, Kirk told staff that the current stock price signifcantly undervalued the company, and that management was working to the same plan for the publisher that it had pursued for the past three years. “We have a strategy,” he said, and this would not change..