Australia's Fairfax Media will close the plants of its flagship metro dailies the ‘Sydney Morning Herald’ and ‘The Age’ and print the restyled tabloids elsewhere within the group, under a radical plan announced today.

The company says both the Chullora (Sydney) and Tullamarine (Melbourne) print sites will close in  June 2014, with production of the metro dailies “reallocated to the Fairfax printing network”.

The two metro dailies will go tabloid – the same size as the ‘Australian Financial Review’ and News Limited tabloids including the ‘Daily Telegraph’ and top-selling Melbourne daily the ‘Herald-Sun’ – from March 4 next year.

Changes bring to 1900, the total of staff cuts; the ABC has reported that 20 per cent of these will come from editorial and 20 per cent from production, with ten per cent of 'Australian Financial Review' editorial cut. The announcement has brought an eight per cent increase in the company's share price.

Unlike the abandoned plan to reduce the page width of the papers, announced by then chief executive David Kirk, the move to tabloid does not require major engineering work.

Additional print capacity will however, be needed and Fairfax has set itself a two-year timeline to provide this. Currently Fairfax has the following printing capacity near the metropolitan centres:

Sydney (with distances from centre)

North Richmond (67 km) – single-width manroland Uniset pressline, with heatset and currently commissioning UV;

Beresfield, Newcastle (156 km) – single-width manroland Uniset pressline;

Fyshwick, ACT (290 km) – double-width manroland Geoman pressline, currently commissioning UV.

Other plants in NSW include Tamworth and Dubbo, both smaller single-width presses.

Melbourne (with distances from centre)

Ballarat (115 km) – single-width manroland Uniset pressline;

Wodonga (320 km) – double-width Goss Uniliner S pressline.

Earlier discussion of plans to shut the Chullora plant included provision for a new smaller plant to print the metro titles. Provision has been made for the progressive closure of the five manroland Colorman double-width presses there, including the possibility of moving one or more to New Zealand, where Fairfax plants are generally in need of modernisation.

Fairfax is also understood to have studied plans to print parts of its daily print requirement on inkjet digital presses at ‘satellite’ plants, with the combination of Océ print technology with newly-announced manroland finishing systems among options under consideration.

The Fairfax statement says the plan positions the company to stop printing the metro titles altogether “if that is what is required in the future”. Other objectives are reduced group-wide costs and a strengthened balance sheet.

It says that “while Fairfax Media’s print circulation remains meaningful” and efforts have been made to boost metro revenue and implement major cost cutting initiatives over the past 12 months, profitability “will come under further pressure with its current legacy cost base”.

Fairfax says it will also start charging for its digital content from next year. Digital subscriptions will be implemented across the ‘Sydney Morning Herald’ and ‘The Age’ during the first quarter of 2013.

A ‘metered’ model will be adopted with a base level of free access to the websites retained. Fairfax last week launched new Newsstand-compatible versions of its apps for Apple’s iPhone and iPad which could easily be converted to a subscription model. The company says it will announce pricing and plans by the end of this year.

Editorial will be restructured to ensure full integration across digital, print and mobile platforms, with a “digital first” prerogative.

The company says savings from the ‘Fairfax of the Future’ programme announced in February are ahead of schedule and expected to save $170 million a year by the 2015 financial year. “Current progress is ahead of schedule, and we will now move to further accelerate implementation of the cost savings previously identified together with a number of additional cost-saving initiatives,” the statement says. “In aggregate, this will result in a reduction in staff of 1,900 over the next three years.”

With the closure of Chullora and Tullamarine print centres, the company expects savings to total $235 million a year by June 2015, with $215 million to be saved by June 2014. Associated one-off costs are put at $248 million, net of proceeds from land sales.

Fairfax is also selling 59.4 million Trade Me shares at $2.70 each, to reduce its interest from 66 per cent to 51 per cent. Proceeds of the fully-underwritten placement are about $160 million.

The sale will bring Fairfax’s net debt – excluding the consolidation of Trade Me’s net debt – to about $800 million. The statement says Fairfax remains “highly supportive” of the Trade Me business and intends to retain a majority shareholding.

Chief executive and managing director Greg Hywood says there is no doubt the company is operating in very challenging times. “Readers’ behaviours have changed and will not change back. As a result, we are taking decisive actions to fundamentally change the way we do business.

“The changes announced today have been selected after considering the merits of a full range of structural alternatives, including a demerger. The package of strategic initiatives is bold, and several are difficult, particularly as they will impact on some of our people. However, we believe that they are in the best interests of Fairfax, our shareholders, and ultimately the majority of our people. They are necessary to ensure Fairfax retains its position as a leading independent media company and a key voice in our markets.

“The evolution of The Sydney Morning Herald and The Age to compact formats and the

implementation of digital subscriptions for these mastheads are landmark events for Fairfax. Our investment in quality journalism and our editorial standards will not be compromised and will continue to underpin our success.”

Peter Coleman

Pictured: The ‘Sydney Morning Herald’ as a tabloid – Fairfax trials the format for its Budget issue in May