Cost cuts help Trinity Mirror increase profit to £102.3m despite £12m hacking costs and falling revenue

Trinity Mirror’s pre-tax profits grew by 1 per cent to £102.3m in 2014, despite revenue falling 4.1 per cent to £636.3m during the year.

The publisher set aside £12m for legal costs associated with “historic legal issues”, including phone-hacking, last year, and it said today there is “present uncertainty” about how much this could cost in the future.

According to the publisher’s annual results announcement today, it made £15m in structural cost savings during 2014 – £5m ahead of its target. A further £10m of cost savings are targeted this year.

Over the course of the year, it closed eight major regional newspapers – the Fulham and Hammersmith Chronicle, Reading Post, GetReading, Wokingham and Bracknell Times, Surrey Herald, Surrey Times, Woking Informer and Harrow Observer. Around 65 jobs were said to have been lost as a result of these closures, with a number of digital jobs created in their place. In addition, the publisher launched one newspaper, the Sunday Echo in Liverpool, during the year.

Last month, the publisher announced plans to close more regional titles – six free weeklies in the Greater Manchester area, with the loss of nine jobs, and the creation of one larger title.

Today’s statement said: “We continue to challenge the appropriateness of the regional newspaper portfolio and this has led to a rationalisation of our newspaper titles in the South with the closure of seven newspapers at the end of the year.”

Some £554m of Trinity Mirror’s £636.3m revenue came from its publishing division, with print contributing £521.6m, down from £556.4m in 2013, and digital making up £32.4m, up from £22m.

Within the print revenue, £279.8m came from circulation, down from £285.8m in 2013, and £209.2m came from advertising, down from £236.3m.

Digital advertising was up from £19.2m to £28.5m in 2014 as total average monthly unique users rose by 87 per cent year on year to 73.2m and average monthly page views were up 97 per cent to 509.4m.

On the regional side of the business, the statement said: “Whist we have a number of individual titles performing strongly relative to the market our overall trends are disappointing…

“Print advertising fell by 11.5 per cent with display lower by 10.3 per cent, classified lower by 13.2 per cent and other categories down by 11.5 per cent. Whilst the print advertising market remains challenging and volatile we are encouraged by the improved trends in recruitment.”

On Trinity Mirror’s “relentless focus on efficiency and cost management”, the statement said: “Operating costs fell by £25.7m reflecting the benefit of structural cost savings of £15m and ongoing cost mitigation actions which have more than offset increased investment in digital of £8m and inflationary cost increases, in particular newsprint prices which increased by some 5 per cent year on year. Further structural cost savings of £10m are targeted in 2015.”

Specifically in the publishing division, costs fell by £19.4m, 4.2 per cent, during the year to £440.5m. The announcement said: "This includes structural cost savings and the continued tight management of the cost base to help mitigate the impact of a challenging print market. The fall in costs is after the impact of an increase in newsprint prices and increased investment in digital resources and product development."

On legal issues, the announcement said: "The group continues to co-operate with the Metropolitan Police Service in respect of Operation Elveden (the investigation relating to alleged inappropriate payments to public officials) and Operation Golding (the investigation into alleged phone-hacking).

"In July 2014, after our ongoing investigations revealed that phone-hacking had taken place at the group, a provision of £4m was made to cover the cost of dealing with and resolving civil claims from individuals in relation to phone-hacking.

"In the second half of the year a number of claims have been settled and a subsidiary, MGN Limited, has admitted liability to a number of individuals who had sued the company for alleged interception of their voicemails many years ago.

"As we progressed with dealing with the civil claims it has become evident that the cost of resolving these claims will be higher than previously envisaged.

"The provision of £4m made at the half year for dealing with and resolving these claims has increased by a further £8m.

"Inevitably, there remains ongoing uncertainty as to how matters will progress and whether or not new allegations or claims will emerge and their possible financial impact. 

"The intrusion into peoples' lives through the unlawful practice of phone-hacking is unacceptable. We apologise to the victims of phone-hacking and published an open apology in our three national newspapers in February 2015."

It added: "There is potential for further liabilities to arise from the outcome or resolution of the ongoing historical legal issues. Due to the present uncertainty in respect of the nature, timing or measurement of any such liabilities it is too soon to be able to reliably estimate how these matters will proceed and their financial impact."

Chief executive Simon Fox said: "I am pleased with the financial and strategic progress we have made in 2014. We continue to invest across the group in people and technology and this is delivering significant growth in digital audience and revenue. Whilst print has remained challenging, our continued focus on efficiency and cost management has resulted in another year of profit growth and strong cash flow which has enabled us to significantly reduce net debt and propose a final dividend for 2014, the first since 2008. I am grateful to all our colleagues for their contribution to this performance.

“At the end of the year I implemented a new streamlined management structure and I am confident that this will accelerate our focus on delivering sustainable growth in revenue and profit. The Board expects performance for 2015 to be in line with expectations."

Read Trinity Mirror's full annual results announcement here.

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