Fairfax Media shares rocketed yesterday after the company announced it would slash 550 jobs across Australia and New Zealand.
Fairfax said the move was necessary as it cut costs amid tightening economic conditions and a downturn in the newspaper advertising market. The newspaper, radio and internet group, which merged last year with Rural Press, said it would cut 5per cent of its workforce under a new business improvement program.
Fairfax shares closed up 14c, or 4.93 per cent, at $2.98. Chief executive David Kirk said the plan would deliver about $50million in annualised cost savings, with some $25million set to flow through to its 2008-09 year result.
The company also would book a one-off charge of about $50 million for redundancy and associated costs.
''We have to be a leaner, more agile, fundamentally different company if we are going to succeed in the modern media world,'' Mr Kirk said.
''We expect this to hold us in good stead for years to come.''
Of the 550 jobs to go across the company's publishing and printing businesses, 160 will be in New Zealand and 390 in Australia.
About 30 per cent of the jobs to be cut, or 165 staff, will be axed from the editorial division of the company's metropolitan dailies in Australia and New Zealand, including The Sydney Morning Herald and The Age, resulting in about 129 editorial positions being cut on this side of the Tasman. There are no plans for redundancies at The Canberra Times.
''Editorial cuts are mostly in the sub-editing area,'' Mr Kirk said.
''In terms of the front-end journalist area, there might be some, but the main thrust is in the sub-editing.''
The company said it was looking at some outsourcing of sub-editing, which would not ''necessarily be the same as the APN model'' but ''might be a Fairfax version of that process''.
Trans-Tasman publisher APN News & Media began outsourcing some editorial production work in 2007.
Mr Kirk said the reduction in Fairfax's headcount would have ''absolutely no impact'' on the quality of its newspapers.
''We are very comfortable that we are not going to in any sense undermine the quality of the papers.''
Last week, Fairfax booked a 47 per cent lift in net profit to $386.9million for 2007-08 but said toughening economic conditions had slowed the advertising market in the new financial year.
The company's metropolitan newspapers, which include The Age in Melbourne and The Sydney Morning Herald, posted a decline in earnings, caused mainly by a drop in classified advertising.
Fairfax has been acquiring regional publications and radio stations in the past few years in an effort to reduce reliance on advertising dollars from its metro dailies.
''We are in a predominantly advertising-driven business,'' Mr Kirk said.
''There are cycles in that business and it's important to us to manage the quality and competitiveness of our products across that cycle.''
He said the new program, which is the third wave of business improvement initiatives the company has undertaken in the past three years, would be implemented in the first half of 2008-09.
The past two programs achieved $52 million in continuing real cost reductions. Cost synergies associated with the merger of Fairfax Media and Rural Press and the acquisition of Southern Cross Radio will produce a further $53 million in savings, he said. AAP
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