When news of the collapse into administration of Newsfax International and Newsfax (Bow) began to filter through at the end of September, it provoked two simultaneous reactions.

On the one hand, it was argued that the longstanding contract newspaper printer was too big to fail – how could a business with titles such as Metro, Financial Times and City A.M. on its books turn out to be so vulnerable to the struggling economy? However, other commentators pointed out that there is no part of today’s industry more prone to causalities through consolidation than the newspaper sector.

Richard Hall, director at DC Thomson, which was the largest shareholder in Newsfax, explains the actions his firm took to help save the "lean and mean" business.

"We were working towards a solution, in the form of a CVA, to help save the business, something that would have involved DC Thomson injecting further capital into the business. However, a CVA is a complex arrangement to get all parties to agree to and we couldn’t quite get there.

"Newsfax was always a lean and mean business in a market full of consolidation and was never over-capitalised. It had some good contracts and some really good clients, but these were hard-fought and even harder-negotiated deals," he adds.

Consolidation is a common theme in the sector: in the past six months Johnston Press has announced that it is to close both its Sunderland and Peterborough plants, placing more than 120 jobs on the line. And last year it emerged that Guardian Media Group is looking to restructure its print plants at Manchester and London, a move that could eventually result in the publisher ceasing to print its own titles.

While this kind of news may be depressing, it’s hardly surprising when you consider the ABC figures for newspapers for the year to July 2012. All types of newspaper reported falls in circulation, with dailies dropping 8.9% on the previous year. Sunday papers fared better, however, with circulations falling just 1.5% since last July.

Closing time
Newsfax International’s Rainham site has now ceased trading and the majority of its 70 employees have been made redundant, according to administrator KPMG.

One of Rainham’s major contracts, Metro, is now printed at Harmsworth Quays and Newsprinters, and KPMG is seeking offers for Newsfax International’s assets.

According to Hall, former News International operations director Ian McDonald, who had been enlisted to revamp operations at Newsfax, has been a "pro" at all times.

"I’m sure Metro would have liked to stay with Newsfax rather than shifting that contract elsewhere. Ian and his team had done a great deal to restore quality levels. Previously, mismanagement had perhaps neglected them and allowed them to slip. Cost-cutting had got to a stage where it was impacting quality to an unacceptable degree. It just needed to be realised sooner," says Hall.

Elsewhere in the fallout from the administration, the Financial Times was quick to secure its London print capability by reviving its previously dormant subsidiary, St Clement’s Press, and in doing so, took over as third-party operator of the Newsfax (Bow) plant in Stratford.

BDO, which is handling the administration of the Bow facility which formerly employed 30 staff, told PrintWeek in a statement that the FT would remain in control of the Bow site.

It said: "BDO anticipates that the third-party agreement with St Clement’s Press, put in place to ensure continuity of newspaper production at the Newsfax (Bow) site in Stratford, will continue for the foreseeable future. There are no plans for this arrangement to change."

In its most recently filed results for the year to 31 March 2011, Newsfax made a bottom-line profit of £1.2m for the year on turnover of £24.8m; gross profit was £6.9m and operating profit was £3.6m. However, the board was in discussion with its principal banks about finance arrangements following the breach of certain banking covenants, although it was "optimistic" about reaching an agreement.

Hall adds: "There are a whole series of issues that led to this situation and I think it could have been saved had it been dealt with sooner. I just don’t think it was strong enough to withstand these past few months. What I can say though is that Newsfax wasn’t the first and I’m sure it won’t be the last."

30-SECOND BRIEFING

• Newsfax International and Newsfax (Bow) placed into administration on 25 September
• KPMG appointed administrator at Newsfax International in Rainham and BDO appointed to Newsfax (Bow) in Stratford
• Shareholders fail to agree on CVA proposed by largest shareholder DC Thomson
• "Majority" of the 70 employees at Rainham made redundant with KMPG exploring the opportunities for a sale of business assets
• Major contracts now fulfilled elsewhere with Metro being printed by Newsprinters Broxbourne and Harmsworth Quays
• Financial Times secured London print capability by reviving its previously dormant subsidiary, St Clement’s Press
• Production of the newspaper now taking place at Bow "for the foreseeable future" but no commitment given for duration
• Further closures expected as consolidation and contraction continue in the newspaper print and publishing sector

READER REACTION

Is the collapse of Newsfax symptomatic of the sector’s ills?

Steve Brown
Director, Stroma
"In going into administration, Newsfax was the latest casualty of contraction within the newsprint sector. Newspaper groups, especially when you look at regional titles, are continuing to look at ways they can streamline capacity and pool resources together. As a result, we are seeing more and more consolidation within the sector and with that there are bound to be casualties such as this. It’s a diminishing marketplace and while I can’t comment on the situation at Newsfax in particular, I imagine they may have come under cost pressure from clients."

Ian Fisher
Managing director, Mortons of Horncastle
"Unfortunately the administration of Newsfax didn’t come as a surprise – it is yet another casualty of the prevailing winds in the market. I was reading recently that the amount of newsprint we consume has halved over the past seven years. When you are looking at those sort of reductions, it is no surprise that the sector is suffering. I can see increased cost pressures and further drops in demand leading to further contraction and consolidation. It is a tough sector at the moment."

Maryanne Jemide
Managing director/publisher, Green World Media
"We started printing our newspaper Nigerian Watch at Newsfax earlier this year so when we were told that they were going into administration, I was shocked. I was actually informed on the day I was due to submit files for the latest issue, so the whole situation ended up being horrible, to be honest. We used a printer in Portsmouth for emergency cover, but have now moved to Trinity Mirror in Watford, which is local when considering the London-wide distribution of our paper."