Guardian Group warns of more change to come

The Guardian Media Group today warned of more restructuring ahead to ensure the business remains successful.

The group, which owns the Guardian newspaper and regional titles including the Manchester Evening News, also said its regional papers have made a monthly trading loss for more than six months.

GMG swung to pre-tax losses of £89.8m (€104.9m) in the year to March 29, from a profit of £306.4m (€358m) in 2008.

The firm said the figures were skewed by gains last year on the sale of 49.9% of AutoTrader publisher Trader Media Group (TMG) and non-cash losses this year of £78m (€91m) relating to group investments and impairments at related companies.

Chairman Amelia Fawcett said: “In times such as these it is very difficult, even foolish, to attempt to predict with certainty what lies ahead.

“It is clear, though, that we will need to re-examine and reshape many of our existing business models if we are to continue to be successful.”

The media industry as a whole has suffered a huge decline in advertising revenue in the recession and many firms have been forced to completely reorganise their businesses and cut staff numbers.

GMG – whose ownership by the Scott Trust guarantees “the financial security and editorial independence of the Guardian in perpetuity” – said it has not been immune to the economic upheaval as well as longer-term structural changes.

It said last year was “perhaps the most challenging period yet in the history of the local and regional press”.

Underlying structural problems in regional media had been brewing for at least ten years, it added, but had been masked by a long period of economic growth.

The onset of recession revealed the level of damage done to the business models of the regional and local press by the shift in focus to the internet.

GMG’s regional media business saw its operating profits plummet to £500,000 (€584,000) in the year, from £14.3m (€16.7m) in 2008.

This was driven by a 30% fall in classified advertising revenues. Recruitment ads were down 34%, motoring fell 16% and property declined 46%.

GMG announced nearly 300 redundancies in March and April and a restructuring programme “in order to remain viable as a business”.

In the south of England, the Reading Evening Post moved from a daily to a weekly format, while the Esher News & Mail merged into the Surrey Advertiser and the Aldershot Mail into the Aldershot News.

In the North West the firm reduced its free distribution of the Manchester Evening News early in the week to respond to lower advertising and scaled back on its schedule of the Greater Manchester TV station Channel M.

GMG said the changes were made “with a heavy heart”, but added that the situation in the sector meant they were “no longer a matter of choice, but one of absolute necessity”.

“Since the end of the 2008/09 financial year conditions within the regional press have, if anything, worsened,” the firm said.

“The coming year will therefore be just as challenging for GMG Regional Media, which has now moved into trading loss.

“The company will have to re-examine its model on an ongoing basis in order to bring costs to a more sustainable level, and to protect its journalism for the future.”

At its main business, Guardian News & Media, the company said it had enjoyed a year of “significant achievement”, with expanded multimedia coverage, a head office move and the growth of guardian.co.uk to become the UK’s largest newspaper website and one of the biggest in the world with almost 30 million unique users.

The Guardian and Observer raised their cover price during the year to respond to double-digit increases in paper costs, while a subscription service was also launched.

But GNM “experienced the toughest trading conditions seen for many years” and stretched its operating loss to £36.8m (€42.9m), from £26.4m (€30.8m) last year.

The firm said it aimed to “emerge from the economic downturn a leaner and stronger organisation”, with plans to reappraise its cost base and to continue to invest in journalism.

The group said its joint ventures – with TMG and the Emap magazine, events and information business – had performed well in the period.