Guardian Media Group announces full-year results for 2006/07

“A solid financial performance in a difficult operating environment.”
– Paul Myners, Chairman

Guardian Media Group plc (‘GMG’) today announces its results for the financial year ended 1 April 2007.

Highlights

• Turnover from continuing operations increased to £716.1 million (2006 £700.3 million)
• Profit before taxation from continuing operations increased to £97.7 million (2006 £66.4 million)
• Statutory profit after taxation and exceptional items increased to £64.2 million (2006 £45.9 million)
• Successful sale of 49.9% of Trader Media Group (TMG) announced in March 2007, valuing the whole of TMG at £1.35 billion and rebalancing GMG’s portfolio
• The proceeds will enable the Group to pursue acquisition opportunities in the year ahead
• The Guardian continued its international expansion. Guardian Unlimited (GU) reached record traffic levels and was named Best Newspaper on the Web at the Webby Awards
• The Observer was named Newspaper of the Year at the British Press Awards
• Expansion of GMG Radio through the acquisition of the Saga and Century radio networks and QFM in Scotland, and Ofcom’s award of the new Manchester radio licence

Paul Myners, Chairman of Guardian Media Group, said:

“In a difficult operating environment characterised by increasing evidence of structural change in UK media markets, GMG has been at the forefront in recognising and responding to those changes. The Group has delivered a solid financial performance in line with our expectations for the year.

“These very sound results demonstrate our resilience as a Group in the face of substantial and complex challenges to many of our businesses. It has been a year of significant growth, investment and development across the portfolio.”

Carolyn McCall, Chief Executive of Guardian Media Group, said:

“Over the past year we have made significant changes to all our businesses in order to meet the new demands of our markets. The stability of GMG’s financial performance is testament to the success of our approach.

“The sale of a minority stake in Trader Media Group has rebalanced our portfolio and delivered a substantial return. We will actively pursue acquisition opportunities in the year ahead as we continue to reshape our business.

“The Guardian’s journalism remains at the heart of what we do, and we are committed to investing in the future of that journalism.”

Financial summary
In the year ended 1 April 2007 turnover from continuing operations increased to £716.1 million from £700.3 million in 2006. Profit before taxation from continuing operations increased to £97.7 million (2006 £66.4 million). Operating profit excluding exceptional items was £105.2 million, compared to £116.4 million in 2006. The reduction reflects a charge for amortisation of intangibles primarily relating to acquisitions during the year; a decline in print advertising revenues, particularly classified; and reorganisation costs. Net interest payable reduced to £14.8 million (2006 £17.7 million). Statutory profit after taxation and exceptional items increased from £45.9 million in 2006 to £64.2 million.

Guardian News & Media (GNM)
In a fiercely competitive and fast-changing marketplace GNM reduced its operating loss before exceptional items to £15.9 million (2006 £19.3 million) while continuing to invest in the business. Turnover increased from £237.4 million in 2006 to £245.7 million.

GNM’s challenge has been to continue to invest in the printed versions of the Guardian and the Observer while ensuring new investment and innovation in its online activities. It has succeeded in both. The Guardian and Observer continue to benefit from the successful move to the Berliner format. GNM’s circulation revenue grew by more than 10% year-on-year. Print display revenue also increased, a significant achievement in a depressed market. While print recruitment revenues continued to fall across the newspaper industry, GNM’s digital revenues, from both display and recruitment advertisers, grew rapidly (49% year-on-year).

In January 2007 Guardian Unlimited celebrated record traffic figures (independently audited by the ABC) of more than 15.7 million unique visitors, an increase of 19.7% year-on-year. This confirmed GU’s position as the UK’s leading quality newspaper website.

GU was named Best Newspaper on the Web at the Webby Awards for the second year in succession (and picked up the title for a third time in April 2007). In March 2007 the Observer won Newspaper of the Year at the British Press Awards, following on from the Guardian which won the same accolade in 2006.

GMG Regional Media
During 2006/07 the regional division faced the extremely challenging advertising market conditions seen across the regional press and the issue of digital disruption to its revenue base. In this environment, the division did well to mitigate the impact on its financial performance. Operating profit before exceptional items was £19.4 million (2006 £21.6 million) on turnover of £122.2 million (2006 £126.8 million).

Classified revenues came under pressure during the year, declining by 11% year-on-year. This was driven by recruitment, which fell by 16.3%, and motors, which was down 20.2%. Display revenue out-performed the market, increasing by 1.4%, while digital revenue showed strong growth of 18.3% year-on-year.

During the year the Manchester Evening News adopted a ‘hybrid’ distribution model – part paid, part free – which has reversed decades of circulation decline and restored the MEN to its position as the UK’s biggest regional newspaper in terms of circulation and readership. There was also a wholesale redesign of the paper, and a £21.2 million investment in new press equipment.

Trader Media Group (TMG)
It has been another good year for Trader Media Group, which continued to deliver high levels of profitability for GMG. Operating profit was £104.6 million (2006 £119.5 million) on turnover up 3% at £312.5 million (2006 £303.3 million). The decline in profit reflects the costs related to new acquisitions, start-ups and business restructuring.

The flagship Auto Trader magazine and website – the division’s core profit drivers – remain by far the leading automotive classified brands in the UK and Ireland, with up to 375,000 vehicles, 8 million unique users per month and 1.68 million readers every week. Auto Trader also reached a major milestone as its digital business contributed more profit than the magazine for the first time.

These outstanding results have been achieved against the backdrop of changing market conditions as readers and revenues continue to migrate from print to online. The partnership arising from the sale of 49.9% of the division to Apax Partners, announced in March 2007, will be the platform for continued development and growth in the business. This transaction valued 100% of TMG at £1.35 billion.

GMG Radio
This has been a landmark year for GMG’s radio division. Following the acquisitions of QFM, Century FM and Saga Radio, GMG Radio is now one of the leading commercial radio groups in the UK. Its stated objective of becoming the third largest radio group by listening hours is expected to be reached by the end of 2007.

Conditions have been difficult for many competitors in the sector, but on a like-for-like basis the radio division has significantly out-performed the market, with growth well ahead of the industry. Operating profit for the division excluding amortisation of acquired intangibles was £3.5 million (2006 £2.7 million). The statutory operating profit for the division was £1.9 million (2006 £2.7 million), on turnover up from £27.9 million in 2006 to £35.7 million. The reduction in statutory operating profit reflects the amortisation of intangible assets acquired during the year.

GMG Radio’s audience has also continued to grow on a like-for-like basis, delivering some 29 million listening hours per week. Taking into account acquisitions, total hours for the division at the beginning of April 2007 were 46 million per week.

Group outlook
To ensure that the Guardian is able to realise its vision of becoming the world’s leading liberal voice, GMG’s financial performance will be underpinned by a more diverse set of revenue streams than in the past. We will achieve this both through careful investment in acquisitions and by continuing to transform our existing businesses.

At the same time, we will constantly seek to develop our capabilities, improve our relationships with our customers and deepen our understanding of the markets in which we operate. Increasingly we will work across divisions, using our scale to drive new revenues, share knowledge and cross-promote our brands.

We are confident in our ability to fulfil the remit given to us by our owner, the Scott Trust: to secure the ongoing independence of the Guardian’s journalism.

Full annual report and accounts 2006/07

Further information:
Colin Browne, Maitland 020 7379 5151
Chris Wade, Head of Communications, Guardian Media Group 020 7713 4041
Carolyn McCall, Chief Executive, Guardian Media Group 020 7278 2332

Notes for editors:

Guardian Media Group plc (‘GMG’) is one of the UK’s leading multimedia companies. Its diverse portfolio includes:

• Guardian News & Media: the Guardian and Observer newspapers and the Guardian Unlimited network of websites.
• GMG Regional Media: the Manchester Evening News, a number of other regional newspapers in the North West and South of England, the Channel M city TV station and the Manchester Online website.
• GMG Radio: 13 regional radio stations by the end of 2007 under the Real Radio, Smooth Radio, Century FM and Rock Radio brands.
• Trader Media Group: one of Europe’s largest specialist print and online media companies, and publisher of the Auto Trader magazine and website. Trader Media Group is jointly owned by GMG and Apax Partners, with GMG as the majority shareholder.
• GMG Property Services Group: Vebra, the UK’s leading provider of software to independent estate agents and thinkproperty.com, the consumer-facing portal.

GMG is wholly owned by the Scott Trust, which was created in 1936 to secure the financial and editorial independence of the Guardian in perpetuity.