11 December 2008
FAIRFAX Media has promised an assault on its $2.5 billion debt after confirming Brian McCarthy as its chief executive at a board meeting yesterday.
As widely predicted, former Rural Press CEO Mr McCarthy has replaced David Kirk, who resigned last week under pressure from a board concerned about the balance sheet."The board has decided to temporarily reduce its dividend payout ratio to approximately 20 per cent for the interim dividend payable in March 2009 to preserve capital to facilitate debt reduction," a statement from the company said.Ron Walker will remain as chairman of the board, despite speculation that his perceived association with Mr Kirk would result in his replacement by the largest shareholder and deputy chairman, John B. Fairfax, or board member Roger Corbett.Investors last night reacted with relief to the announcement, predicting a period of stability after the turbulent last few months of Mr Kirk's reign.Peter Morgan of 452 Capital, which owns a 6 per cent stake in Fairfax, said: "I just want the board to act sensibly and be very supportive of Brian and be at one. That's what the shareholders want, that's what they deserve and that's what they need."Fairfax's first move to tackle its debt will be to cut the dividend from 80 per cent to 20 per cent for the first half of this financial year."The board intends to be able to return to its payout ratio of approximately 80 per cent through the cycle as soon as economic conditions permit," a company statement said.BBY analyst Mark McDonnell said if Fairfax cut its dividend to a predicted 2 a share in the first half of this financial year (down from 10 last year) before ramping it back up to 8 for the second half, the company could clear about $150 million from its balance sheet.However, Mr McDonnell said the uncertainty as to when the dividend payout was increased again was not ideal."I don't mean this as a criticism, because if I was in the same position I'd be equally cautious about what to say about the second half," Mr McDonnell said.Also announced was the completion of the sale of Carnival Film and Television, formerly a part of Southern Star, which Fairfax acquired last year. It was reported in August that Fairfax sold Carnival to NBC Universal for 22.5 million ($A48.3 million).Fairfax shares finished unchanged yesterday on $1.505.