Tribune losing millions, propped up by Independent News and Media
The latest accounts from the Sunday Tribune show greater losses than ever before and no indication that things will get better anytime soon. Colin Murphy reports
The Sunday Tribune has lost over €37 million to date and, in the 18 months to the end of 2004, lost nearly €8.5 million, over €100,000 per week. The losses are financed entirely by Independent News and Media, controlled by Tony O'Reilly.
The recently-released figures for the 18-month period from 1 July 2003 to the end of 2004 show by far the worst performance of the newspaper's history and come after repeated claims by the chairman, Gordon Colleary, that the trading performance of the company has been turned around (see panel).
During the 18 month period to the end of 2004, the Independent group gave the Tribune loans totaling €5.8 million on top of an outstanding debt of €2.3 million. The Independent group also owns 70 million preference shares in the Tribune, having converted outstanding debts of more than €20 million into these shares in recent years.
At the time of the first debt conversion in 2001, Gordon Colleary said the move would put the company on "a more sound financial footing and establish its financial independence once and for all". By the following year, the Tribune was back in yet further debt to the Independent group an the position since then has worsened appreciably.
Since first acquiring a 29.99 per cent stake in the Tribune in 1990, Tony O'Reilly's Independent group have consistently put money into the Tribune, through numerous relaunches and cost-cutting exercises. It has been prevented from taking over the paper by a ministerial order issued by Desmond O'Malley, then Minister for Industry and Commerce, in 1992, prohibiting it from increasing its shareholding beyond 30 per cent, which sought to prevent O'Reilly acquiring a monopoly in the Sunday newspaper market. But in reality the Tribune has become the creature of O'Reilly's Independent News and Media.
It was the directors on the Tribune board from Independent News and Media, Liam Healy (still a director) and the late John Meagher, who arranged for the appointment of Peter Murtagh as editor. An executive of Independent News and Media, Cathal O'Caoimh, had already been installed as chief executive. Then when Peter Murtagh was removed two years later, Matt Cooper, who had been business editor of the Irish Independent, was appointed editor.
When he left two years ago, another executive of Independent Newspapers, Jim Farrelly was appointed editor-in-chief – he was already chief executive. And when he was removed some months ago Independent News and Media installed Michael Roche, formerly managing editor at the Independent group, as chief executive, and Noirín Hegarty as editor – she had been deputy editor at the Evening Herald.
Independent News and Media now not alone bankroll the Sunday Tribune through massive subsidies but now appoint its chief executive and editor, the last such appointments being made without even the formal involvement of the Tribune board.
The Tribune board now has just two "independent" directors, Gordon Colleary, the chairman, and Brendan Hynes. Gordon Colleary had been chairman long before the involvement of Independent News and Media. So too had Brendan Hynes but he was instrumental in Independent News and Media taking a shareholding in the Tribune.
The Tribune has not been profitable since the involvement of Independent News and Media. Circulation has fallen from a high of 102,000 in 1990 to just under 80,000 in the second half of 2004 (a fall of eight per cent from the first half of 2004).
With an average weekly circulation for 2004 of just over 83,000, the paper lost something like €1.20 for every paper sold (in the first half of 1984 the circulation had been 87,000 but this fell drastically in the second half even though there had been massive promotion).
Michael Roche said Independent News and Media "have indicated that they will stick with the company". He described the 2004 losses as "an aberration" and attributed them to a failed business plan under which the cost base had "been allowed to run wild".
These losses included the costs of the relaunch and extensive promotional activities, which included issuing monthly free CDs with the paper. These are estimated to have cost €100,000 a time, and produce a temporary "spike" in sales but did not result in reader loyalty.
According to the accounts, administrative expenses at the paper rose from €2.7 million, for the year ending 30 June 2003, to €6.2 million for the 18 months to the end of December 2004.
Roche said he would "cut these losses by two thirds this year, and break even in 2006". The cost-cutting process was underway, he said, following staff cuts from over 80 to just over 60 and a "complete restructuring and refocussing" at the paper since he took over in early February.
According to Gordon Colleary, writing in the chairman's statement in the accounts, a "zero budgeting exercise" is being implemented. "We are satisfied that the target of getting our costs back to the 2003 level is realistic and attainable within 12 months," he wrote.
As well as financing its debts, Independent News and Media also has an extensive day-to-day relationship with the Sunday Tribune. The Tribune purchased €8.5 million in printing and wholesaling services from the Independent group during the 18-month period, more than double what it spent for the year to June 2003.
For a circulation of 83,000, this amounts to a cost of €1.42 per newspaper. The Tribune sold newspapers to the Independent group for distribution to the value of €7.5 million.
Speaking recently at the announcement of the Independent group's preliminary results for 2004, chief operating officer Gavin O'Reilly said the group was "extremely happy with our investment in the Sunday Tribune".
"The Tribune Board have been presented with a very clear and coherent path to profitability", he said. "We look forward to them delivering results as they've indicated."
When asked why the Independent group had subsidised the Sunday Tribune for over ten years, Gordon Colleary said that "some of the years, the support has been very modest" and that the Tribune had "had good years".
"I don't ask the Independent group why they give us the kind of support they have, but they've done it very openly and we get on with running our business", Colleary said. "I don't find anything sinister about it. The issue of the Independent group is very old hat and we're lucky to have them as a shareholder."
Michael Roche said the Independent group "have been financing the Tribune since the (ministerial) order because they couldn't own it". The Independent group were "the only financier" of the Tribune, he said, and "should be congratulated for putting in the money and keeping people in work". The group had continued to subvent the Tribune because Tony and Gavin O'Reilly "believe in the product", he said.
In the Dáil on 24 February, Arthur Morgan of Sinn Féin asked the Minister for Enterprise, Trade and Employment, Micheál Martin:
"Does the Minister agree that in no other area of Irish business is there a situation to match that of the tax exile, Tony O'Reilly, and his almost complete domination of the newspaper market? For example, Independent News and Media plc owns 67 per cent of Irish daily newspapers and almost 87 per cent of Irish Sunday newspapers. Is there a commitment from the Government to deal with abuses of market power in the newspaper industry? Does the Minister agree that the media monopoly operated by Independent News and Media plc involves an abuse of its dominant position and in which it can influence the political process?"
Micheál Martin said he did not accept "the broad thrust" of Arthur Morgan's argument. "If anything has happened since 1995 it has been that a broad proliferation of new companies has emerged on the Irish media scene in both broadcasting and the print media and more publications are now produced." His department had no plans on the matter, he said.
^^The Sunday Tribune according to Gordon Colleary
^^Excerpts from Gordon Colleary's Chairman's statements in the annual Directors' Reports for Tribune Newspapers Plc
1992
The Sunday Tribune was successfully relaunched in a new format designed to improve reader satisfaction and remove constraints on the development of the paper which caused problems in the past... We have also successfully carried out a series of cost-cutting exercises throughout the operation but most significantly in the production areas so as to improve the viability of the group... The trading position of the Tribune companies has begun to improve... The new format of the Sunday Tribune is yielding benefits in terms of increased readership. The rationalisations, refinancing and improved revenues combined with the continuation of tight cost control will provide the group with a viable future.
The Tribune lost £2.8 million that year and borrowed almost £2 million from Independent Newspapers. Its circulation had fallen by over 10,000 in two years to just over 90,000.
1995
The 12 months which ended on the 30 June 1995 was a bad period for the Tribune... Towards the end of the year, we made very substantial cutbacks to bring the costs into line with the lower income figure. A number of permanent, contract and part-time staff left the company. This was painful, and traumatic for those involved... The re-organisation of the workload to maintain the quality of the paper was a difficult task undertaken by a relatively new management. It is only in the past few months that the impact of the re-structuring has begun to show through in better results.. The trend is right but profitability is still sometime away.
The Tribune lost £2.4 million that year. Its debts to Independent Newspapers exceeded £6 million. Its circulation reached a low for the decade of 75,000.
1997
Circulation suffered badly in the first half of the year... Matt Cooper was appointed editor in September 1996. He initiated a number of changes in the product and employed some new staff. Towards the end of the year we began to experience circulation gains as a result of these changes. The future of the company looks brighter. Both the public's and the advertising industry's perception of the newspaper has strengthened.
The Tribune lost almost £2 million that year, and its total debts to Independent Newspapers were almost £10 million. Its circulation climbed back to 84,148.
1999
The trading loss for the year... increased by eight per cent on last year. While this is disappointing, it does reflect to some extent the Board's decisions during the year to invest in the product overall, including the editorial content. Circulation figures were weak in the second half of the year, although advertising income increased by 21 per cent. Since year-end, however, I am pleased to note that circulation trends have been reversed and advertising revenues continue to move upwards.
The Tribune lost £1.9 million that year. Loans from Independent Newspapers totalled almost £0.9 million and circulation was just under 85,000.
2000
The trading loss for the year... increased by 61 per cent on last year. While this is disappointing, it does reflect to some extent the Board's decisions during the year to invest in the product overall, including the editorial content. Circulation figures were weak in the second half of the year and advertising income increased by two per cent. Since year-end, however, I am pleased to note that circulation and advertising revenues continue to move upwards.
The Tribune lost £2.7 million that year, and loans from Independent Newspapers totalled over £1.5 million. Outstanding debts were over £15 million.
2002
The last 12 months were very difficult for newspapers worldwide, the Sunday Tribune being no exception. The company has taken a series of initiatives to offset the economic difficulties and is well placed to benefit from the upturn in the market when it comes.
The Tribune lost €1.6 million that year, and loans totalled over €1 million.
2003
The last 12 months have remained very difficult for newspapers worldwide, the advertising market as a whole has continued to be affected adversely... The company has successfully continued with its cost-cutting initiative... The initiative has left the company very well placed to take full advantage of any upturn in the advertising market.
The Tribune lost just over €2 million that year, and loans totalled €2.3 million. Circulation was just over 80,000.
2004
(It was) a period of intense competition in the Irish Sunday newspaper market. CDs, books, free offers and more were the norm and we followed suit. The cost of doing so hit our bottom line in a very dramatic way... Towards the end of last year, we initiated a zero budgeting exercise. It is now complete and will be implemented over the coming months. We are satisfied that the target of getting our costs back to the 2003 level is realistic and attainable within 12 months. But it will not be easy.
The Tribune lost over €7 million that year, and IN&M loaned it a further €5.8 million, bringing its total debt to €8.4 million.