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Transcript of Interview With Fred Hilmer, Sunday Sunrise, Seven Network,
September 22, 2002
Interview: Fred Hilmer
Finance Editor David Koch asked Fairfax Chief Executive Officer Fred Hilmer if he was happy with circulation figures for flagship
papers, The Sydney Morning Herald and The Age, after the company's half-year profit was well down.
David Koch, Finance Editor: Media group John Fairfax has rejected claims it is in merger talks with rural press. A report in The
Australian earlier this week - a paper owned by Fairfax rival News Corp - cited unnamed sources in suggesting a share swap was
under way, which would deliver power back to the Fairfax family.
It came hot on the heels of a halving in half-year profit for Fairfax, delivered last week. After those results I spoke with CEO Fred
Hilmer and asked if he was happy with circulation figures for flagship papers, the Sydney Morning Herald and The Age.
Fred Hilmer, Fairfax CEO: Yes, we've been, in general, pretty happy with that. It has been a very big news year. We have been
able to hold those circulations while holding our own marketing spending down quite significantly. It is a particularly good
result when you look at what it costs us to get the result.
David Koch: It has been a really tough year, but Fairfax still has an incredibly strong balance sheet. Any thoughts of, say, a
special dividend or a buyback?
Fred Hilmer: We keep that under review. You can act on short notice, but it's not really on our short-term agenda. Our agenda
is to get the plants finished. We still have in the order of $70 million of spending this year. We need to digest that. Once that's
finished, we will become very strongly cash-flow positive.
At that point, we will address what are the best uses of that cash, what opportunities are there for us to invest and what are the
opportunities and the value to the shareholders of some sort of return. It is really not an immediate issue for us. We've got to get
over the hump and see the cash coming in.
David Koch: Does that put acquisitions on the backburner as well?
Fred Hilmer: We have a capacity to make acquisitions if they meet our criteria.
David Koch: What criteria are they?
Fred Hilmer: The criteria that we've got to be in a business that makes sense to us. They've got to meet our financial criteria.
They have to meet strategic criteria and have to meet the financial criteria that anyone would normally apply to any kind of
acquisition or investment.
David Koch: You have been pretty subdued in that area for the last couple of years, haven't you?
Fred Hilmer: My priority and the company's priority has been to get our business operating strongly. The business has always
been a great business, great franchises, but we had a lot of potential for internal improvement. We really needed to do it.
I would hate to think what our profit would have been this year if we hadn't made the cost reductions that we've done over the
last three or four years and hadn't streamlined the business and hadn't made the capital expenditures that we needed to make,
not just on plant, but on IT infrastructure, on our ability to take ads, to account for our business, to just get on with it. The
company was severely run-down. That's a result of - you know, it's history that is now well and truly behind us.
David Koch: The changes you are after in terms of cross-media ownership laws, you were a less optimistic there for a while. Are
you still a bit gloomy?
Fred Hilmer: I'm a little more optimistic. I think we see potential combinations in the Senate that might deliver the four votes that
are needed to pass that legislation. It's not in any sense a sure thing. I wouldn't say it's more likely to happen than not happen. If
I compare where we are now in terms of discussions we're having with where we were, say, three months ago, I guess the worm
has turned to a little more optimism.
David Koch: Alright, dream for me. Say you got what you wanted in terms of cross-media ownership. Paint a picture for me what
Fairfax would be like in, say, five years?
Fred Hilmer: Well, I think we would see a company that was involved in broadcast media asell as print media. How that occurs,
could follow a number of paths, and it's really not appropriate to speculate on them. You know, there's no particular mix that is
perfect and dominant, so there are a lot of possibilities. It will be a question of what is in the best interests of our shareholders
and what's doable.
You know, the big areas of media in this country are print and broadcast. There are some quite good synergies in promotion,
cross-promotion, managing the content that I think make it sensible to pursue that direction that give us the means to keep up
the quality. That's what I keep reminding the politicians. This is all about keeping strong local media companies that can keep up
the quality.
David Koch: Really, that is back to the old Fairfax model of 10, 15 years ago.
Fred Hilmer: The old Fairfax model was a great model. It's a sad thing that circumstances caused it to be dismembered. If all we
did was put it together again, we would have done something very good.
David Koch: Back to the future. Chief executive Fred Hilmer there.
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