Chief executive's review of operations

GMG Regional Media

MEN media S&B media

The past financial year was perhaps the most challenging period yet in the history of the local and regional press.

The industry faced a much-chronicled series of cyclical and structural issues which merged into a “perfect storm” of trading problems.

The underlying problems of the sector are predominantly structural and can be traced back at least ten years. However, they were masked by a long period of economic growth which underpinned huge consumer confidence and increases in classified and retail revenues in newspaper businesses as a result.

The onset of recession revealed the full impact of online disruption to the traditional business model of local and regional newspapers.

The first signs of distress were detected in GMG Regional Media in the second half of 2005 when the expected autumn recovery did not materialise, and each subsequent quarter showed considerable reductions in classified advertising revenues.The regional media division began to reduce costs significantly from 2005, but this was offset by very rapid revenue declines over the last financial year. By the middle of 2008 much of the sector was in crisis.

GMG Regional Media’s operating profit declined to £0.5 million (2008 £14.3 million) on turnover of £94.5 million (2008 £120.5 million).

This steep decline was driven by a 30% fall in classified advertising revenues. Recruitment fell by 34%, motors by 16% and property by 46%. Display revenues slipped by 7%.

In order to remain viable as a business GMG Regional Media was forced to reduce costs substantially. This led to the announcement in March and April 2009 of nearly 300 redundancies from its two constituent businesses – MEN Media and Surrey & Berkshire Media – and a wider reorganisation across its portfolio.

The most visible changes in the South of England were the move to weekly publishing for the previously daily Reading Post and the merger of the Esher News & Mail into the Surrey Advertiser, and of the Aldershot Mail into the Aldershot News.

In the North West, the company trimmed the early-week free distribution of the Manchester Evening News, reflecting reduced demand for advertising at the beginning of the week as well as the need to reduce cost, and scaled back the schedule of Greater Manchester city TV station Channel M.

As part of the restructure of the business, all of MEN Media’s editorial staff and resources – for weekly titles as well as the Manchester Evening News – were relocated to the company’s headquarters in central Manchester.

It was with a particularly heavy heart that local management was forced to make such large-scale changes. Given the problems of the industry, such changes are no longer a matter of choice, but one of absolute necessity.

The outlook for the regional press will remain difficult. The GMG Regional Media team has shown great commitment and resilience and is implementing its restructuring plan very well. This will put the business in the best position to return to a small profit in the medium-term.

The issues faced by the local and regional press are now firmly on the public policy agenda, and GMG played a leading role in industry engagement with government and regulators during the year. This included work in relation to Ofcom’s Public Service Broadcasting Review, the government’s Digital Britain process and the OFT’s review of the local merger regime.

Furthermore, recent reviews raised the possibility of consortia of organisations – including regional press publishers – bidding to provide regional broadcast news. We will continue to explore the potential of this idea, and remain in a strong position to take advantage of such opportunities as they develop.

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

One of the greatest positives for the business is its talented and determined workforce, which continues to devote itself to facing down the sector’s problems and publishing newspapers and other media that remain the envy of the regional press.

Converged newsroom
Challenging times