By: Mark Fitzgerald
Hollinger International said Thursday it expected 2005 operating income for its Sun-Times Newspaper Group (STNG) — virtually its only operating unit after the recent sale of its Canadian newspapers — to be about 15% lower than the $96 million operating income it realized in 2004.
At the same time, Hollinger announced a reorganization of its Chicago cluster that it said would eventually shrink the workforce by 10%, or about 300 jobs, largely through voluntary separations.
The reorganization will add $16 million to $20 million to annual operating income after 2006, Hollinger said.
STNG includes the publishing company’s flagship Chicago Sun-Times and about 100 other daily and community papers in the Chicago area.
Hollinger noted that its financial results for the tumultuous 2004 year included $3 million in charges and restitution related to its circulation fraud scandal, plus $45 million in gains as it sold off its prestige newspapers such as the Daily Telegraph in London, U.K. and the Jerusalem Post in Israel.
In 2005, the company said, the Chicago cluster was affected by common industry problems such as newsprint prices that were 12% higher than 2004; a soft advertising environment; and soaring fuel costs.
“In addition, STNG’s ad volumes and rates were negatively impacted by the lingering effects of the circulation overstatement,” the company said.
Hollinger said STNG also was stung by bad debt and workers’ compensation costs that increased costs by $3 million over the 2004 level.
Also Thursday, Hollinger said it was reorganizing STNG into two units, one for market development and the other for operations.
The Market Development Unit — charged with expanding the cluster’s product line and other strategic marketing tasks — will be led by Sun-Times Publisher John Cruickshank, who is also STNG’s chief operating officer.
The Operations Unit, Hollinger said, “will consolidate infrastructure and support functions and streamline internal processes to improve customer service and product quality and maximize productivity.” Cruickshank in the past has mentioned the possibility of consolidating or outsourcing the cluster’s far-flung network of printing operations.
News, advertising and marketing departments will reporting to Cruickshank, Hollinger said.
The Operations Unit will be led by Greg Stoklosa, Chief Financial Officer of both Hollinger International and STNG. Departments reporting to Stoklosa will include production, distribution, finance, technology, labor Relations, and human resources, Hollinger said.
The reorganization “anticipates further profit improvement from efforts to eliminate or restructure currently unprofitable advertising and circulation arrangements,” Hollinger said.