Guardian Media Group plc (GMG) announces full-year results for 2010/11

GMG today announces its results for the financial year ended 3 April 2011.

Summary

• Profit before taxation £9.0 million (2010 £171.0 million loss)
• Revenue from continuing businesses £255.1 million (2010 £280.0 milion)
• Revenue including share of joint venture companies Trader Media Group and Emap £466.1
  million (2010 £476.2 million)
• EBITA, before exceptionals, including share of Trader Media Group and Emap £49.6 million (2010
  £37.7 million)
• Group operating loss before exceptional items £54.5 million (2010 £53.9 million) – see note 1
• Continued strong performance from GMG’s investment fund
• Combined cash and investment fund £197.4 million (2010 £260.8 million) – see note 2
• Strong operating profit performance from joint ventures Trader Media Group and Emap

Note 1: The increase of £0.6m in operating loss largely reflects the reduction in overall revenues of £24.9m offset by cost savings of £24.3m
Note 2: The reduction in cash and investment fund of £63.4 million includes non-operating cash outflows in respect of provisions of £22.6 million and settlement of a loan to a joint venture of £10.8 million

Amelia Fawcett, chair of GMG, said:

“Our portfolio of investments provided the backdrop against which the Guardian continued to produce courageous independent journalism, precisely as envisaged by the Scott Trust. Nevertheless, while the Guardian is supported by GMG, it does not operate in a vacuum. The forces of change continue to sweep through the industry.

“The Guardian, like other parts of the group, has demonstrated great ingenuity and vision in adapting to the digital age. The challenge facing us, and news organisations across the world, is how to translate digital audience growth into commercial success.

“Led by our new CEO Andrew Miller and editor-in-chief Alan Rusbridger, our core business GNM has embarked upon a new digital-first strategy with the aim of ensuring the Guardian’s long-term financial sustainability.

“The months and years ahead will be as challenging as anything we have experienced so far. Nonetheless, the decisive action being taken by management, the talent and dedication of our people, our strong core values and the assets in our portfolio mean we can be confident about the future of the Guardian.”

Andrew Miller, chief executive officer of GMG, said:

“The year under review was one of huge journalistic success. The Guardian achieved record audiences, it was named Newspaper of the Year at the British Press Awards, the partnership with Wikileaks produced one of the greatest scoops in living memory, and the shockwaves triggered by the dogged pursuit of the phone-hacking scandal will be felt for generations to come.

“However, the entire media industry faces serious challenges. The Guardian has been at the forefront of innovation in our sector, but the task of reflecting editorial and brand success in a sustainable financial model for the digital age is a demanding one.

“In this context we have begun to implement a new strategy, including a restructuring of senior management, a new approach to managing our portfolio of investments and the transformation of our core business GNM into a digital-first organisation.

“At GNM we are building a culture, organisational structure and business model that will support our journalistic ambitions and responsibilities for many years to come. While reshaping the cost base will be a critical element of the strategy, we will also invest further and draw upon our resources in order to achieve this transformation. This will have an impact on GNM’s profit performance and on our cash position in the short term, including in the current financial year.

“We are only at the beginning of our new strategy, but I am determined that we will carry through the changes necessary to fulfil our primary function: securing the financial and editorial independence of the Guardian.”

Guardian News & Media (GNM)

Financially, GNM had another challenging year. A firm grip was maintained on costs following savings of £26.8 million from restructuring in the previous year, but revenue declined from £221.0 million to £198.2 million. While display advertising revenues were resilient, the Guardian saw a sharp decline in recruitment advertising as a result of the difficult economic environment and unprecedented cuts to public sector spending.

Digital revenues were robust, but did not offset the decline in print revenues – reflecting the challenge facing our industry as a whole. Thanks to its programme of cost savings and efficiency improvements, GNM was able to limit its operating loss before exceptional items to £38.3 million (2010 £37.8 million), despite the decline in revenues.

Investments

There was strong performance from the assets within GMG’s portfolio. Trader Media Group (TMG) performed extremely well, producing an operating profit before exceptional items of £120.1 million (2010 £111.7 million), of which 85% was generated by its digital operations (2010 75%). TMG remains one of the most successful and profitable examples of print-to-online transition in the world.

In challenging economic conditions, Emap grew both revenue and profit in its two major divisions: Emap Insight, which delivers online intelligence; and Emap Connect, which focuses on exhibitions and festivals. These gains were offset by reductions elsewhere relating to public sector spending cuts in the UK, especially in health and local government. However, growth in the rest of the business brought total revenues to £243.0 million (2010 £238.8 million). Continuing investment in new products across Emap’s divisions, mainly in digital development, led to a marginal decline in underlying operating profit to £76.3 million (2010 £78.3 million). This was a solid performance given market conditions, and the business is forecasting a return to profit growth in 2011/12.

Despite economic uncertainty and a 90% reduction in spending by the Central Office of Information – the radio sector’s largest advertiser – GMG Radio increased its operating profit before exceptional items and amortisation to £0.9 million (2010 £0.6 million). Revenue fell to £47.1 million (2010 £50.1 million). During the year Smooth Radio’s five regional stations were transformed into a national service, making it the UK’s third largest national commercial music station.

GMG Property Services continued to operate in one of the UK’s most difficult markets. However, both the residential and property management divisions traded strongly. Revenue increased to £9.6 million (2010 £8.9 million) and operating profit before exceptional items and amortisation was £1.4 million (2010 £0.5 million loss).

Further information
020 3353 2427 / 07733 103 800

Full annual report available at: www.gmgannualreview2011.co.uk

Notes for editors
Guardian Media Group is wholly owned by the Scott Trust, which exists to secure the financial and editorial independence of the Guardian in perpetuity. GMG’s core business is Guardian News & Media, publisher of guardian.co.uk and the Guardian and Observer newspapers.

The group’s portfolio of investments includes:

· Trader Media Group: one of Europe’s largest specialist media companies, and publisher of the Auto Trader website and magazine. Trader Media Group is jointly owned by GMG and Apax Partners
· Emap: the multiplatform business-to-business media group, also jointly owned by GMG and Apax Partners
· GMG Radio: radio stations across the UK under the Real Radio, Smooth Radio and Rock Radio brands
· GMG Property Services: the leading provider of software, technology and design solutions to the property industry
· An externally managed investment fund

For further information visit www.gmgplc.co.uk