Despite pre-tax profits of €154 million, Independent Newspapers is implementing 205 redundancies at its Irish operations, writes Emmet Oliver
The newspaper industry in Ireland and Britain has long been castigated by other sectors for its high cost base, inefficient work practices and slow pace of technological change.
Since the Wapping revolution at Rupert Murdoch's News International, newspapers in Britain have been relentlessly cutting costs. Competition for advertising revenue from TV, radio, and more recently the Internet, has made this necessary,
The pace of cost-cutting has picked up in Britain in recent years because almost every newspaper group has seen its circulation plunge.
Independent News & Media (IN&M), while always frugal, was for many years insulated from this type of pressure, but as its operations have grown in South Africa, Australia and New Zealand, things have changed.
For obvious reasons costs at its various international operations vary widely. South Africa has the lowest cost base, while Ireland is believed to have some of the highest costs.
Since late last year the company, under executive chairman Sir Anthony O'Reilly, has been trying to balance out costs across its international operations.
The company claims that it needs to become a "low-cost operator". According to media analysts, it is trying to position itself as a low-cost, high-growth company ready to reap the maximum benefit from the recovery under way in the advertising market.
However, the company is under severe pressure in Dublin with powerful newspaper groups such as Associated Newspapers and News International stealing circulation from flagships titles such as the Sunday Independent and Sunday World. The launch of a tabloid Irish Independent is partly a response to these competitive pressures.
The decision to tackle the drop in circulation and the drive to cut costs appear to have played well with the markets. As recently as two years ago, these were not supportive of the company, mainly because of its failure to reduce debt and also because of concerns about the €90 million loss from its investment in cable company Chorus.
But since then debt has been reduced, the company has exited Chorus and the tough new cost-cutting programme has been initiated. These decisions have been welcomed in Dublin financial circles at least.
In a weekly commentary released yesterday, Davy Research commented: "Results over the next few years should benefit from the €54 million restructuring plan, unveiled in December 2003, which will reduce staff numbers worldwide by 5 per cent and result in annual savings of €18.4 million by the end of 2006."
This plan has been championed by Sir Anthony who said back in December that Independent wanted "to be the low-cost operator in all our markets".
Gavin O'Reilly, chief operating officer, said a few months ago that 2004 would be about stripping the "fat" out of Independent.
While this drive, which involves outsourcing telesales, copytaking, wages and even security, is likely to benefit the company's share price, staff do not appear so keen on the cost-cutting medicine.
The company's attempts to get 205 redundancies has run into major opposition from unions in Dublin. The opposition to the plan was originally confined to SIPTU, GPMU, TEEU, but since then the National Union of Journalists has decided to ballot its members.
Some journalists and other staff at the paper have expressed private unease about the implications of the outsourcing, with reports of local Irish events being phoned through to a Press Association centre in the UK. Unions have also accused the company of putting a gun to the heads of workers to get them to accept a redundancy package.
However, significant restructurings at the Australian and South African operations have already taken place and the success of these contributed to a rebound in profits at IN&M in 2003.
Independent posted pre-tax profits before exceptionals of €154.6 million, up almost 20 per cent on the previous year. Many staff claim the strength of these results removes the need for such cost cutting, but Sir Anthony commented late last year that "cost anomalies" and "historical legacy issues" from its Irish operations must be removed.