Could the Guardian have made better use of its £1bn inheritance?

Upmarket political monthly Prospect casts an eye over Guardian Media Group’s finances this month and asks whether it could have made better use of its £1bn ‘inheritance’.

That’s the 2006 value placed on what was then the Guardian’s wholly-owned nest egg Trader Media Group.

Peter Morris notes that Guardian Media Group’s 2007 deal selling 49.9 per cent of Trader to private equity firm Apax reaped it £700m in cash (after also lumping Trader with extra debt).

Morris notes that GMG spent £300m of that cash on a 30 per cent stake in the B2B division of Emap, spent £208m on buying smaller companies and £170m on expanding its radio interests and creating a property services division.

He estimates that the £1bn from 2006 is now worth about £940m following those investments, even after a £96m write-down on the value of its investment in Emap and a £99m write-down on the radio and property services division.

But Morris asks whether a safer bet for the Scott Trust, which owns GMG, would have been to used the £1bn to create an endowment like the Wellcome Trust. He reckons that would have generated around £45m a year for The Guardian, or more than enough to cover the £38m a year the Guardian, Observer and website have cost GMG since 2005.

Reassuringly for Guardian journalists, Morris thinks the Guardian’s future is secure – noting that GMG has £260m in the piggybank, with big windfalls ahead from Emap and Trader Media.

The full version of the Prospect article is only available to subscribers.