The Age to seize the century
with new
printing plant in Melbourne
John Fairfax
Holdings (ASX:FXJ) announced today that Fairfax
will build a new press plant facility at
Tullamarine in Melbourne. The new plant, which
will cost approximately $220 million, will come
on line in 2001.
Mr Fred Hilmer,
Chief Executive Officer of Fairfax said:
"This
investment is essential to the further growth of The
Age in the new century, and it ensures that The
Age will continue to be the industry leader
in Victoria. The new plant will also add
significantly to Fairfax’s overall printing
capabilities, and will especially benefit the Financial
Review. There is compelling demand in the
market, with our key advertisers, for more
capacity, especially in colour printing, and both
The Age and the Financial Review
will deliver it to them.
"I have
entrusted Peter Graham, Director of Group
Operations for Fairfax, with the responsibility
for ensuring that this plant is built on time and
on budget, and that it is operated as an integral
part of the Fairfax printing network. This is the
most effective way to manage the construction and
operation of the plant so as to ensure that this
project meets all time, cost and operational
parameters set by management as conditions for
the plant's approval.
"For our
readers, we will deliver newspaper products,
inserts and supplements with more colour and
versatility. By raising our publications and our
printing processes to a new level of performance
for readers, we become even more attractive to
advertisers, contributing to our circulation and
revenues.
"The
business case for the plant is quite clear. We
have immense economic benefits, in terms of
constraining long-term generated production
costs, through our new facilities at Chullora and
Newcastle. We expect similar returns from
Tullamarine. This plant will be constructed with
strict adherence to its budget and all cost
controls.
"The Age
is about to record its best ever financial
result. This new press plant facility is an
indicator of The Age’s success in
turning the business around and is a strong vote
of confidence in The Age from the Fairfax
group.
"The Age
will be able to match its competitors in the key
area of colour printing. Colour display
advertising has grown at over 30% per year since
1993. Our current colour capacity is
insufficient. We want to capitalise fully on this
market. And we will secure the lowest sustainable
operating costs for The Age."
Mr Hilmer said
that international experience showed that leading
newspapers were investing and upgrading their
printing facilities to make them even more
competitive.
"This
strengthens the production and presentation of
our content, allowing us to leverage more and
higher-quality content for our online and
interactive businesses in the coming years",
Mr Hilmer said.
Mr Hilmer said
that capital expenditures for the plant would be
met out of free cashflows generated by the
Company, and that interest expense is expected to
increase by $6 million in the financial year
ending June 30, 2000. Mr Hilmer said the existing
Age plant will be written down as an
abnormal item by $36 million ($23 million after
tax) in the financial year ending June 30, 1999
(please see Financial Note to Analysts at the end
of this release).
Mr Steve Harris,
Publisher and Editor-in-Chief of The Age
said:
"The Age
is rebuilding its strength as a newspaper, as an
organisation, and as a business. We are
performing well financially and this has enabled
us to implement and plan a range of important
investments, particularly the new plant."
"Circulation
is growing once again after washing out the
artificial effects of heavy discounting.
Readership is up in key segments and advertising
revenue has never been stronger, and all this
despite very active competition", Mr Harris
said.
"The Age
will now enter the new millennium in a
fundamentally much stronger position with the
prospect of a new printing facility giving it a
stronger competitive advantage."
"The Age
has a proud 144 year history and this investment
will help ensure the paper will continue to be a
key part of the fabric of Victoria for many years
to come. It is a major boost for our staff,
readers, advertisers, industry, and the
state", Mr Harris said.
"We will
not only have more colour capacity, but a greatly
enhanced overall production capacity and quality.
This will make The Age even more dynamic,
responsive, and more versatile as a product in a
multi- media environment."
Mr Harris said
that the print media has a very strong future
despite increased use of the internet and digital
technology.
"The Age
is extremely well positioned. The quality and
influence of the paper is being rejuvenated. We
are building and expanding upon the success of
the masthead both in print and online and our
strengths in editorial and advertising. We are in
a unique position to satisfy the community’s
strong and growing appetite for news and
information specific to their daily lives and our
advertisers demand for targeted markets", Mr
Harris said.
"As screen
based content becomes multichannel, diverse, and
specialised, print media is likely to be
strengthened as the medium most suited for mass
communication."
"I welcome
the opportunity to direct the construction of
this major facility and bringing it online for
Fairfax's publications", said Mr Peter
Graham, Director of Group Operations for Fairfax.
"Our project team will ensure that the plant
is delivered on time and within budget and
produces a high quality product for The Age
and other Fairfax publications in Victoria."
Mr Michael Gill,
Publisher and Editor-in-Chief of The
Australian Financial Review, said,
"Fairfax’s investment in a new plant in
Melbourne will provide wider opportunities,
especially in colour advertising, for advertisers
to reach their business audience. This will
enhance our leadership positioning in the market
as Australia’s authoritative business
publication."
The new press
plant will mark the first separation of editorial
and press facilities in the 144-year old history
of The Age The editorial staff will
continue to be housed at the Company’s
headquarters at 250 Spencer Street, Melbourne.
Mr Harris said
that there were important employee relations
issues to be addressed, and that he looked
forward to resolving them co-operatively with
unions and staff.
"Our staff
have known for some time that we have been
working to obtain Board approval for the project.
Our production staff are to be applauded for
their efforts in working under difficult
circumstances with outdated equipment. They know,
more than anyone, about the need for The Age
to have a modern printing and production facility
with the best technology available in
Australia", Mr Harris said.
"We will
work constructively through any issues together
with all our staff."
The new presses
will be of a modern shaftless design capable of
very high colour printing not produced before in
Australia. Individual press units in the new
plant will be powered by direct drive motors that
are independently controlled and synchronised by
computers. The new presses will also employ
advanced cold-set technology that makes redundant
the use of dryers to set colour inks.
The new plant
has been designed by Ken Sowerby from the
architectural firm Eurografica of Germany. The
design incorporates elements from its setting and
its function as a newspaper printing plant.
"For
Melbourne, the structure’s proximity to the
freeway and Tullamarine Airport provides a visual
element that imparts a celebration of technology
— a corporate commitment to Melbourne in the
new millennium. The Age should be
applauded for positively contributing to the
visual environment of an urban industrial area
with a land art form that generates a new spirit
within its local environment", Mr Sowerby
said.
Mr Harris said
that the building would be constructed with
environmental quality as a key factor in the
exterior and interior facilities. The building
would be highly energy efficient, and designed to
contain noise pollution.
Financial note to analysts
Total capital
expenditure for the Tullamarine plant will be
approximately $220 million. Expenditure will
occur over a three-year period with payments
being met out of free cashflow generated over the
specified period. Contractual cashflows for the
period are estimated as follows: Fiscal
1999/2000, $88.6 million; Fiscal 2000/01, $82.6
million; Fiscal 2001/02, $47 million.
Incremental interest expense for this project is
forecast to increase as follows: Fiscal
1999/2000, $6.2 million; Fiscal 2000/01, $5.8
million; Fiscal 2001/02, $3.3 million.
Average
incremental depreciation on completion for the
period Fiscal 2002/03 to Fiscal 2012/13 is
approximately $8.4 million per annum. The
existing Age press will be written down, in the
financial year ending June 30, 1999, by $36
million ($23 million after tax) to $15 million
(which comprises three years of depreciation) as
an abnormal item.
Mark
Bayliss
Chief Financial Officer, Fairfax
Telephone: (02) 9282 3555
28
June 1999
****************
Media
inquiries
Nigel Henham
Director of Communications, The Age
Telephone: (03) 9601 2997
Mobile: 0407 873149
Bruce Wolpe
Manager, Corporate Affairs, Fairfax
Telephone: (02) 9282 3640
Note
to editors
John Fairfax
Holdings Limited [ASX:FXJ] is Australia’s
leading publishing group. Its mastheads include The Sydney
Morning Herald, The Australian Financial Review,
The Age, The Sun Herald and BRW. In
addition, the Company publishes financial and
consumer magazines and provides online services.
In 1998, the Company had revenues of over $1.1
billion. Fairfax is Australia’s leading
content provider on the Internet, with nearly
1 million page views, and 140,000 site
visits, per day.
