Local news “does not have to be in decline”, according to UK regional press giant Newsquest as its 2023 accounts show revenue flat over two years.
The post-pandemic revenue growth of 2022 was followed by only a slight decline in 2023 (not including the impact of the acquisition of Archant in March 2022) and an increase in profitability.
Newsquest publishes some 250 brands across the UK and is second only to Reach in terms of the size of its local media news business.
Excluding Archant, Newsquest reported revenue down 1.6% to £155.5m and profit before tax, interest, deductibles and amortisation (EBIDTA) of £32.4m (up 2.6%).
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When the former Archant titles are included, Newsquest reported revenue of £192m and profit (EBITDA) of £41.3m.
Newsquest has achieved a turnaround in the financial performance of formerly loss-making Archant after dramatically cutting staff costs.
Newsquest showed ‘resilience’ in face of weak UK economy
Newsquest, which is ultimately owned by US media giant Gannett, comprises three separate limited companies: Newsquest Media Group (150 news brands, 70 magazines), Newsquest Clyde and Forth Press (the publisher’s Scottish weekly newspaper business, not including the likes of the daily Glasgow Herald and Times) and Newsquest Community Media (which includes the four daily and 50 weekly local newspaper titles that formerly comprised Archant).
Writing in the main Newsquest Media Group accounts, finance director Paul Hunter said the improved profitability in 2023, against a backdrop of weak economic growth in the UK, showed "considerable resilience".
He added: "We are particularly pleased with the ongoing stability in Newsquest’s revenues, which excluding acquisitions (so on a like for like basis) have been broadly flat for the last two years, a period where the wider news publishing industry has generally been experiencing significant revenue declines.
"This revenue stability helps support our view that local news publishing does not have to be in decline – indeed our view is that, although the industry employs many fewer people than it used to in the print dominated era, and there are still risks and challenges, the local news sector is very much alive and kicking."
Getting to this stable position has required "a lot of innovation", said Hunter, particularly in digital which he said now accounts for 50% of advertising revenue.
Speaking at a Press Gazette event in November, Newsquest chief executive Henry Faure Walker said much of the company's success was down to the focus on having local sales people who offer to help local businesses with advertising on Facebook and Google as well as on Newsquest's own print and digital brands.
He said: “We’ve tried to diversify away from being a pure publisher to being a digital marketing agency and that’s been pretty successful.”
Deep local engagement (rather than scale) is focus
Newsquest claims to reach more than 40 million digital users per month via its websites. But finance director Hunter said the company's core focus is on reaching an audience in the areas each title services - citing the examples of York, Worcester and Wrexham where Newsquest websites reach three-quarters of the local population every month online.
Hunter also said that the best way for the government to help the local news industry is by spending money with it. He said local newsbrands reach 77% of the UK population and only account for 2.2% of government ad spend.
Archant goes from loss to huge profit (but with far fewer staff)
The accounts reveal the extent of the challenge at Archant, previously the UK's fourth largest regional newspaper group, which was bought by Newsquest in March 2022.
The Eastern Daily Press publisher struggled during the Covid-19 pandemic and was bought by private equity firm Rcapital Partners in August 2020 in a Company Voluntary Arrangement deal which left shareholders with nothing.
Archant went from turnover of £43m in 2022 to £36.4m in its first full year of Newsquest ownership. But it went from a pre-tax loss of £8m to a pre-tax profit of £5.6m. Archant's EBITDA profit figure increased nine-fold to nearly £9m.
This was mainly achieved by slashing wages and salary costs from £21.7m to £11m. The average number of employees fell from 670 to 290.
Part of the reduction in staff and turnover is due to the fact the 2022 accounts include a number of specialist magazine titles which were sold off early in the year. Press Gazette understands that a number of loss-making sections of the former Archant business were also closed by Newsquest in the year.
The accounts for the Archant business state that its decline in revenue was "reflective of the disruption required to refocus" the business, its technology and its working practices.
"These changes have transformed the profitability and viability of the company going forward," they stated.
NUJ says staff should be rewarded, not just top directors
Total remuneration for the best-paid director at Newsquest Media Group increased to £976,695 in 2023 versus £640,390 in 2022. This pay will have included a performance-related element.
Following publication of the Newsquest accounts, NUJ national coordinator Chris Morley said: "For the two UK executive directors to between them enjoy not only a bankable 14.5% total increase in their salaries – an injection last year of £89,000 to their base pay – but a whopping 74% boost in ‘performance related payments’ to almost £700,000.
“If their performance was that good, we believe that journalists, who are key to generating the group revenue, should be far better rewarded. Instead this year, where offers have been made to our members, they have often been months after the annual pay anniversary and typically only around 3%. In the case of Local Democracy Reporters, Newsquest only passed on the 1.5% uplift in funding from the BBC, although it did at least establish a better minimum salary which additionally benefitted a few...
"The business’s finances are even more positive following the payment in January of a £5m scheduled final deficit payment into the old final salary pension scheme. The accounts make clear that a further payment in 2025 will not be necessary as the old scheme is now fully funded. This gives the company much more financial flexibility which we say should lead to long overdue investments in the staff.”
The Newsquest NUJ Group Chapel said in a statement: "We know from comparisons with colleagues in other news publishers that Newsquest pay is not competitive, and we are calling on senior management to reverse this trend and instead make the company a magnet for top journalistic talent.”
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