Guardian Media Group plc (GMG) announces full-year results for 2011/12

GMG today announces its results for the financial year ended 1 April 2012.

Summary

• Revenue from continuing businesses £254.4million (2011 £255.1 million)
• Revenue including share of joint venture companies Trader Media Group and Top Right Group (formerly Emap) £466.7m (2011 £466.1 million)
• EBITA, before exceptional items, including share of joint venture companies Trader Media Group and Top Right Group £48.4 million (2011 £49.6 million)
• (Loss)/Profit before taxation (£75.6 million loss) (2011 £9.0 million profit)
• Combined cash and investment fund £225.8 million (2011 £197.4 million)
• For the first time, digital revenue growth largely offset print declines
• Unduplicated combined weekly print and digital readership of Guardian and Observer in Britain reached a record 5.9 million

Amelia Fawcett, chair of GMG, said:

“At Guardian Media Group (GMG), securing a sustainable future for quality journalism has been our number one priority during the last year.

“The Board fully supports the strategy and transformation programme for our core business, Guardian News & Media (GNM), which chief executive officer Andrew Miller and his team are implementing with great skill and determination.

“It is early days but GNM is meeting its targets. Digital revenue growth is as we forecast, and for the first time has largely offset declines in print revenue – a significant milestone. The increase in GNM’s operating loss is in line with our projections and reflects planned investments. These critical investments have been made possible through the headroom provided by large-scale savings.

“This gives us great confidence that GNM will meet its target of reducing losses to a sustainable level across a five year period.”

Andrew Miller, chief executive officer of GMG, said:

“It has, by any standards, been a remarkable year for GMG. The Group’s strategy is to use its portfolio of assets to support the Guardian while we go through the tumultuous period that the media industry is experiencing. This gives us the huge advantage of being able to navigate our core business, Guardian News & Media (GNM) through these challenging times at a pace and within a timeframe that reflects the needs of the business.

“It is to be expected that as we invest in the future of the Guardian, we will see some increase in GNM’s losses. Meanwhile, difficult economic and market conditions notwithstanding, our portfolio of investments continued to fulfil its intended purpose of providing financial support and long-term security for the Guardian and its journalism.

“The combined value of our cash balance and investment fund increased from £197.4 million to £225.8 million, reflecting dividends and preference share redemptions from Trader Media Group (TMG), partially offset by cash outflow to fund GNM’s operating losses. All our major joint venture and wholly owned portfolio companies grew operating profit before exceptional items and amortisation of intangibles and our investment fund proved resilient in a fluctuating market.

“However, given the current economic uncertainty, the Board decided to take a prudent view and impair the carrying value of GMG Radio (sold post-year end to Global Radio) by £54.2 million, and this was the principal factor in the pre-tax loss of £75.6 million. EBITA before exceptional items and including share of joint ventures was £48.4 million (2011 £49.6 million).”

Guardian News & Media (GNM)

The publisher of the Guardian and Observer has rarely, if ever, seen a year like 2011/12. The Company embarked on a radical new strategy, its journalism reached record audiences and the revelations about phone hacking caused global shockwaves and had huge implications for British media, politics and policing.

Rapid technological change and the financial challenges facing all newspaper publishers were the twin spurs for the new commercial and editorial strategy announced in June 2011. At the heart of the strategy is the Guardian’s uniquely open journalism and investment in digital audience and revenue growth on the one hand; and , on the other, a determination to cut our cost base to a level that is sustainable in the long term.

GNM is targeting savings of at least £25 million over the course of the five-year plan announced in 2011. This will be tough and challenging, but it is only by achieving the necessary levels of cost savings that the headroom for the digital future can be provided.

The first fruits of this strategy are evident in the results for 2011/12. In March 2012 the Guardian’s online audience was 67.8 million monthly unique browsers, a 38% growth on March 2011. Digital revenues for the year grew by 16.3% to £45.7 million. The increase in digital revenues largely offset the decline in print revenues, leaving total revenues broadly flat at £196.2 million (2011 £198.2 million). The targeted cost savings were achieved, but planned investment in the transformation programme led to an increased operating loss before exceptional items of £53.5 million (2011 £38.3 million). Operating loss before exceptional items and amortisation was £44.2 million (2011 £31.1 million).

Investments

Widely recognised as one of the world’s most successful examples of transition from print to digital publishing, Trader Media Group (TMG), of which GMG owns 50.1%, enjoyed another strong year. The company continues to see double-digit growth in digital revenues, with 83% of revenues now coming from digital activities. Operating profit before exceptional items grew to £128.7 million (2011 £118.6 million). The strength of GMG allowed the shareholders to release value from the business in the form of dividends and preference share redemptions. GMG received £100 million in cash – a prepayment on our eventual return from this investment.

The second Joint venture with Apax Partners is Top Right Group (formerly Emap), where GMG equity accounts for 32.9%. The business performed well during the year, returning to profit growth. Underlying operating profit was £78.7 million (2011 £76.3 million). Duncan Painter joined Emap as chief executive officer in September 2011. The company was renamed Top Right Group in March 2012 as part of a major restructuring programme aimed at further growth. The sale of its CAP business, shortly after the end of the financial year, was an important step in providing the financial resources to support the restructuring and invest in the future development of the Group.

GMG Radio delivered a strong financial performance, growing operating profit before exceptional items and amortisation to £2.5 million (2011 £0.9 million). GMG Radio was sold to Global Radio after the end of the financial year. GMG Property Services, the UK’s leading provider of software to the property industry, grew operating profit before exceptional items and amortisation to £1.6 million (2011 £1.4 million), in an extremely challenging market.

The externally managed investment fund performed well during a turbulent year for world markets, declining by just £0.7 million and exceeding its benchmarks.

Outlook

Andrew Miller said:

“We will continue to see significant operating losses and cash consumption at GNM in the current year as we invest in future growth and long-term sustainability. The portfolio will provide the necessary financial support and stability during this period. If market conditions deteriorate, we will need to respond quickly and accelerate further our action on costs. However, at present the transformation programme is on track and the Company is meeting its objectives both in terms of costs and revenues.

“Above all, the reach, influence and reputation of our journalism will continue to grow.”

Liz Forgan, Chair of the Scott Trust Limited, said:

“The Guardian’s boldness in embracing the ‘open’ theme has marked us out from every other national daily and it is a strategic vision of how information is exchanged in the 21st century that is informing every part of life including our business model and our brand promotion. There is still much to do to turn vision into a successful and sustainable business model but it goes with the progressive grain that is in the Guardian’s DNA.”

Ends
Further information

Colin Browne
07733 103 800 / 020 3353 2815
Full annual report available at: www.gmgannualreview2012.co.uk

Notes for editors

About GMG

Guardian Media Group is wholly owned by The Scott Trust Ltd, 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, one of the world’s leading news websites, as well guardiannews.com 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.
– Top Right Group (formerly Emap): a leading international business-to-business digital intelligence and events business, also jointly owned by GMG and Apax Partners.
– GMG Property Services: the leading provider of software, technology and design solutions to the property industry.
– An externally managed investment fund.