Guardian News & Media: Not that far out of line with the market, after all

Did 25% of Guardian News & Media’s revenue base really disappear into thin air between April and September?

Last week, the Guardian itself left the door open to this interpretation. The Times appeared to confirm it, suggesting that revenues at the Guardian and the Observer had declined by £33m since April.

The contextual maths are unpleasant. In its last financial year, which finished in March, GNM generated revenues of £253m. For April-September 2008, it’s reasonable to assume that it generated half as much: say around £126m. A revenue decline of £33m during the same period in 2009 would have represented a fall of 26%.

Worse than anticipated? This would have been stunningly bad. Consider the following comparatives for total revenues (not just advertising revenues):

Trinity Mirror

– January-June: -17%
– 1st July-25th October: -12%

Independent News & Media

– January-June: -15% (in constant currency)

Associated Press

– March-June: -12% (underlying YOY figure, excluding Evening Standard)

Comparisons like these suggest that GNM’s revenue declines for April-September should be running at around the mid-teens in percentage terms.

As it turns out, that’s exactly what’s happening. A spokesperson for GMG tells me that the £33m YOY decline was a projection for GNM’s financial year as a whole — not for the six months between April and September.

On that basis, GNM should find itself 13% down on last year when its financial year comes to an end next March.

Worse than anticipated? Perhaps. But only slightly. Declines of this scale are not far off what the company was predicting last summer.

That said, GNM’s results for 2009-2010 — due to be unveiled next summer — could be the ugliest of the down cycle.

So far, GNM has cut £25m out of its cost base against 2008-2009. More cuts are on the way. But continuing revenue declines will punch another big hole in cashflow. On top of that, there’s the prospective impact of redundancy costs (these might be exceptional costs, but they represent real cash payments, unlike the notional write-downs in asset values that have become endemic among media companies).

Earlier this year, GMG’s chief executive Carolyn McCall outlined her timetable for turning around the group’s losses. ‘Can we afford it this year?’she asked. ‘Yes, but can we afford it for the next three years? No.”

The evidence suggests that McCall is on schedule. 2009-2010 won’t be a pleasant experience for GNM, but it won’t be anywhere near as bad as last week’s stories implied. By contrast, 2010-2011 should be a whole lot better.

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