Fairfax, the Australian media group, has hired management consultants Bain & Co to find further cost savings.
According to a report in The Australian (owned by rival media group, News Ltd. prop: Rupert Murdoch), the likely cost-cutting is proof that Fairfax's commercial strategy isn't working.
The article states: "Put simply, the company's Fairfax of the Future plan - already targeting annual savings of $251m a year by June 2015 - is not sufficient to stop the momentum of the fall in the company's earnings."
It quotes Greg Fraser, head of research for Kimber Capital, as "wryly" noting that, while Fairfax is no longer in "intensive care" after repairs to its balance sheet, it has a "long rehabilitation road ahead to earnings redemption".
He is further quoted as saying: "It's clear that 'Dr Bain' is about to repeat the dosage of cost cutting that it prescribed for Fairfax in 2011 and 2012. And that can only mean more job losses and the need for a kind of 'accounting for paper clips' cost-cutting mentality."
The article goes on to contend that "Fairfax's one-time rivers of gold [adverts] continue to dry up at an alarming rate."
By contrast, Crikey writer Glenn Dyer offers a very different take on Fairfax, by arguing that "compared to News Ltd and APN, Fairfax is starting to resemble an oasis of strength. Costs and debt are under control and there's cash in the bank, unlike other newspaper businesses."
He continues: "You wouldn't read about it, but as bad as Fairfax's results are… they're not as bad as you might think."
He reminds us that Murdoch's company "continues to slash staff and costs across the country" as it prepares for the News Corp split into two divisions.
Though Fairfax's interim result was "miserable, compared to the glory days of six years or so ago", Dyer points out that "there was a profit and a small dividend will be paid."
He believes Fairfax is "financially the strongest of all Australian analogue (TV and papers) media companies after years of drastic surgery and swingeing cuts." News Ltd, however, has much yet to do to cut its cost base.
Sources: Financial Review/The Australian/Crikey
