Sport Media struggles on with £30m losses

THE publisher of the Daily Sport and Sunday Sport newspapers racked up losses of close to £30m in the last 18 months, and said today the outlook remains “challenging”.

Manchester-based Sports Media Group reported a turnover of £30.9m for the 17 months to the end of December 2009, compared with the £29.4m it made in the previous 12 month period to the end of July 2008.

However, its pre-tax loss stood at £29.2m (12 months of 2008: £18.2m), with an underlying loss before tax of £400,000 (2008: £6.4m profit).

Despite this group said that the last five months of the period had shown a “much improved performance” at underlying profit level.

In his statement chairman David Bailey admitted the last 18 months had been a “dramatic period” for the group.

He said: “The group has had a turbulent experience, but has survived and is now profitable on a monthly basis at the operating profit level.”

Print revenues, including advertising, for the period were £25.5m and generated an underlying operating profit of £300,000.

Circulation figures have fallen from an average of 79,500 a day and 77,500 for the Sunday back in August 2008; to around 73,700 for the Daily and 66,400 for the Sunday in the period January to Easter 2010.

“Our advertising revenues have been arguably less impacted than most newspapers, as we have little advertising targeted at the residential, automotive or employment  markets.  Nonetheless, advertising  revenues in the period  January  to Easter  2010 are  approximately  14% lower than in the same period  in  2009,” it said.

It said the print business was stable and profitable, after a reduction in costs and staff numbers but admitted that the outlook remains “difficult”.

The group’s digital division should help increase circulation, it said, as the use of mobile phones and the internet, can be used to alert potential readers to news items and to develop web products that can be monetised to increase revenues.

However, the division suffered a “very significant” fall in revenues during the period, to £5.4m (12 months to July 31, 2008: £9.3m). The group said costs had since been reduced within the division.

“Revenues in the entire adult industry have fallen dramatically in the last two years, as a consequence of “free” adult internet content  supported  by  advertising,” it said.

Mr Bailey admitted there was a “significant level of debt” within the group and that debt-servicing was a major cost.

Debt facilities with the Royal Bank of Scotland have been extended to the end of March 2013.

Mr Bailey said these were an “important cornerstone” to the ongoing development of the business. Total net debt at the period end stood at £11.9m (31 July 2008: £10.4m).

The accounts also noted a critical finance loan of £1.6m during the period from Roldvale Limited, a company controlled by the paper’s founder David Sullivan.

“Without this finance it is unlikely that the Group would have been able to continue to trade,” it said.

Mr Bailey added: “The new financial year has carried on much as we finished 2009, albeit the bad winter weather impacted both newspaper distribution and readers working in the building sector. 

“However, we are optimistic that we can trade the business profitably and progressively reduce our debt to deliver enhanced value to our shareholders.”

Mr Bailey is to step down as chairman, with Martin Robinson, who joined the  board in January 2010 as non-executive deputy chairman, taking over the chairmanship.