Stephen Glover questions GMG finances following £463m Auto Trader write-down

Stephen Glover today questions the long-term financial situation of Guardian Media Group following news last week that Trader Media Group has written £463m off the value of Auto Trader Magazine. GMG owns a 50.1 per cent stake in TMG.

The write-down gave TMG a £503.3m pre-tax loss for the year. But it should be noted, as the Telegraph reports, that TMG has been massively successful in migrating print revenues to digital. The TMG annual report states: “The large majority of TMG’s value now lies with Trader Digital. The impairment does not, therefore, reflect a fall in the actual or inherent value of TMG, but rather the transfer of value from publishing to digital.”

According to a GMG spokesman the write-down “has zero impact on the overall value of Trader Media Group”.

They told Press Gazette the accountancy rules stipulate that the value of the print business had to be written down, but they do not allow TMG to “write-up” the corresponding increase in value for the digital business.

Glover writes today in his media column for The Independent:

“Though GMG is very far from the edge, it may not have sufficient resources to prop up its heavily loss-making national newspaper operation ad-infinitum. The Guardian, Observer and guardian.co.uk are probably still losing around £30m a year, and it is difficult to see how even with the slight uplift in advertising revenue (up 13 per cent in the last three months year-on-year at the Mail titles) these losses can be much reduced without further cutbacks.

“Some 200 posts were got rid of in the year to last March. But the newspapers still employ more than 600 journalists, roughly the same as The Times (heavily loss-making) and the Daily Telegraph (nicely profitable), both of which have significantly bigger circulations. With the outlook for the newspaper publishing industry remaining bleak, it would be foolhardy to continue to behave as though GMG’s resources can absorb losses on this scale for ever.”

Guardian News and Media made a pre-tax loss of £37.8m in the year to the end of March.

In August, a long feature about GMG’s finances in Prospect magazine suggested that its estimated £1bn nest-egg of 2006 had depreciated to £940m which, considering the global economic meltdown, does not seem like a terrible result. And it also suggests that GMG’s subsidies for Guardian Media Group – enshrined in the rules of the Scott Trust which owns it – are not going to dry up any time soon.