Much as I looked in The Australian’s first media section of the year this morning, there was nary a mention of the job cutting going on at News Ltd, or any sort of examination of what this Friday morning’s interim profit announcement from News Corp might tell us.
After Friday’s meeting of News Ltd barons from across the country ahead of Rupert Murdoch’s local visit this week for Mum’s 100th (co-Australian of the year according to The Australian), rumours emerged in the Sydney media scene that News Ltd has and will end up culling around 800 jobs across Australia, compared to the 550 or so cut by Fairfax Media from its local operations.
News Ltd papers have had the hide to highlight job cuts at companies like Fairfax, Qantas, the ANZ Bank, BHP Billiton and David Jones, without disclosing their own assault on employment.
When the economy fell off the cliff last September, led by Lehman Brothers, News Corp Chief Executive Rupert Murdoch got round to telling investors by November that the empire would feel the pain. He tipped us off that earnings would not be up by 4% to 6%, but would down by an amount in the “mid teens”. Since then Deutsche Bank’s New York media analyst reckons earnings per share will fall from $US1.80 a share in 2008 to around 89 US cents this year.
Now, with days to go to the second quarter and first half results, investors are wondering if News and Murdoch will reveal lower-than-expected profits, asset write-downs and more severe job cuts.
So far News Corp has cut several hundred jobs at Fox Interactive Media, (home of the MySpace social network). Media reports in the US claim more are on the way at The Wall Street Journal and New York Post newspapers, while Australian newspapers are also trimming staff numbers. Jobs have also gone at Fox TV and at local stations, but there has been no announcement about numbers.
CBS, Time Warner and last week Media General Inc, another US newspaper publisher, have revealed huge write-downs in goodwill or other intangible assets. At June 30, 2008, Murdoch had intangibles and goodwill totalling around $US33 billion out of total assets of $US62 billion. CBS has lopped $US14 billion from the value of its cable TV assets. Time Warner has chopped around $US20 billion from the value of its US cable TV assets.
It’s called an assets impairment test and involves directors looking at and working out whether the assets will be able to earn the same sort of returns that they did in the past. It’s a non-cash item (it doesn’t involve a profit and loss account loss), but it can’t be restored if things improve.
Gannett Co. which is America’s biggest newspaper group, put further pressure on News Corp on Friday when it slashed billions from its intangibles and raised the prospect of cutting its dividend.
Gannett said says its board will consider a dividend cut next month as the company tries to conserve cash.
Gannett also revealed asset impairment charges that could end up totalling from $US5.1 billion to $5.9 billion for 2008. The final figures haven’t been completed. The company had intangible assets at the end of 2007 of around $US10.8 billion, so the cut is substantial.
On that basis Murdoch and News would have to cut over $US18 billion from the $US33 billion of intangibles and goodwill on the balance sheet at June 30 last year.
Gannett has already sacked thousands of employees and imposed a one-week unpaid holiday on all staff this quarter.
Gannett spends about $US365 million annually on dividends. It will have debt of $US3.7 billion by the end of next month.
And, last week also saw the smaller Media General newspaper group, report a quarterly loss because of a write-down related to its broadcast division and reported a 20% slump in newspaper advertising revenue.
The results mirror the performance of other U.S. newspaper publishers. The New York Times Company reported an 18.4% 4th quarter ad revenue fall.
Media General, which publishes the Richmond Times-Dispatch in Virginia and The Tampa Tribune in Florida said classified ad revenue fell almost 37%. Real estate classified ad revenue fell by almost half.
Media General posted a fourth-quarter net loss of $US85.5 million, compared with a profit of $US9.6 million.
Media General wrote down the value of network affiliate agreements and broadcast licenses by $US130.4 million pre-tax.
Media General is suspending dividend payments to conserve cash as is McClatchy Co after making an April 1 payment of 9 cents per share. That was after the company halved dividends to 18 cents share in October, so the cut so far is 75% and could go to 100%.
US analysts will watch to see if Murdoch writes down the value of the Wall Street Journal parent Dow Jones, which News Corp bought in 2007 for $US5.6 billion ($A8.8 billion), or a 65% premium to its then market value. A cut of around 50% to 60% would put a hole in the balance sheet.