Sly Bailey: £15m for 10 years of managed decline

The year 2005 is seen by many as the high water mark of print newspaper profitability in the UK.

For Trinity Mirror it was the year the share-price peaked at a record £7. The company had returned operating profit in 2004 of £253.1m on turnover of £1.14bn – a profit margin of 22.2 per cent.

The regional press division returned operating profit that year of £150.6m (a margin of 29.9 per cent) on turnover of £522.1m.

Chief executive Sly Bailey’s response in late 2005 was to announce a new wave of cost-cutting across the group with widespread job losses, marketing spend slashed and even Christmas parties for all staff cancelled. This followed a strategic review in 2003 which saw 550 jobs axed.

No wonder news of Bailey’s exit has been greeted with glee in some quarters of the company.

Today Trinity Mirror’s share price stands at 32p (see share price graph plotted over a decade here via Yahoo). Last year the group made an operating profit of £74.4m on turnover of £746.6m.

Based on all these figures it is difficult not to conclude that Bailey’s policy has been one of managed decline. Cost-cutting has maintained profits to shareholders but accelerated the decline of titles.

In 2004, Bailey was paid a total of £1.237m in cash and pension contributions. Last year she was allocated £1.257m.

So she was rewarded with more money for providing shareholders with a company that was worth less than one twentieth of what it was eight years earlier and which was delivering less than a third the profits.

No wonder it is been reported that a dispute over the size of that pay package has contributed to Bailey’s departure. That said, the fact that Bailey is working until the end of the year would suggest that her departure is not an overly acrimonious one.

According to The Independent, Bailey will receive a final £1m pay-off in addition to the £14m in pay and bonuses she has been allocated over a decade at the helm of the national and regional press giant.

In that decade circulation of flagship national title the Daily Mirror has halved from just over 2m to just over 1m copies.

Compare that to the performance of the Daily Mail, also owned by a PLC – Daily Mail and General Trust – albeit one that is privately controlled by Lord Rothermere.

The Mail has only been required to return a profit margin of around 10 per cent (half that expected of the Mirror) and – perhaps because more of those profits were reinvested in the product– has seen print sales slip from 2.4m to 1.9m, while at the same time it has heavily invested in a market-leading website.

Trinity Mirror has closed more newspapers than any other publisher in recent years – leaving some communities without professional journalistic coverage for the first time in a century.

Given the short-term demands of shareholders keen to maximise return perhaps the fault is not Bailey’s but a system of shareholder capitalism which can seem to be very short-term in the pursuit of profits.

And Bailey cannot be blamed for the collapse of classified advertising, due to both the recession and technological change.

It should also be noted that Trinity Mirror’s share price collapse has been nowhere near that of the next biggest regional newspaper publisher – Johnston Press – whose unsustainable expansion has left it with huge debts and a share price which has dropped from a high point of £5.70 in 2005 to little more than one hundredth that today.

Enders Analysis predicted in 2009 that over half of the UK’s 1,300 local newspapers would close over the following five years.

Nothing like that doom-laden scenario has happened in part because of cost-cutting led by chief executives like Bailey which has helped keep these businesses alive in the face of an unprecedented collapse in revenue.

But even so, £15m does seem like an extraordinary amount of money to have paid someone who leaves Trinity Mirror a smaller, less profitable company with a more uncertain future than when she joined it 10 years ago.


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