A cost cutting programme at Local World, the regional media group formed in late 2012 from titles formerly controlled by DMGT and Trinity Mirror, has helped the group turn a pretty healthy profit in its first year. But with digital still accounting for less than a tenth of revenue, questions remain about the group’s vision for the future of local news in the UK.
First, the numbers:
Local World generated £38.9 million profit during 2013, with revenues of £230.6 million.
Print advertising generated £143.32 million or 62.15 percent of total revenue, while circulation revenue was £60.30 million – 26.15 percent.
Digital revenue was significantly smaller, making up £20.24 million, or 8.78 percent of total revenue, according to the company’s first set of full accounts, made available on Companies House today.
Daily Mail & General Trust and Trinity Mirror, two major Local World shareholders, received over £22 million in payouts.
Trinity Mirror’s 19.98 percent stake in the company equals a £7.76 million payout, while DMGT’s 38.73 percent stake means it will receive £15 million.
Operating profit was £18.54 million, while pre-tax profit was £12.75 million, and EBITDA was £38.9 million.
Accelerating digital presence, but is it enough?
Local World said the company had “successfully rationalised the business” and that:
“Economies of scale have enabled a significant reduction in the cost base of the business across the year and staff numbers have reduced.”
“Local World is pursuing a strategy to transform the business operating model, migrating Local World towards digitised transactional business with delivery of content to a wider audience and customer base, exploiting self-served advertising.”
Local World also says it is investing in new content and commercial systems to support its new operating model, alongside continued investment in digital media, which has resulted in the re-design and re-launch of Local World websites and year-on-year digital audience growth (which exceeded 14 million in December last year) and “is providing a strong base from which to accelerate the growth of our digital revenues.”
Primary destination for lost classifieds revenue
Ex-Local World CEO, Steve Auckland, told TheMediaBriefing at the end of 2012 following the merger of Northcliffe’s titles with smaller group Iliffe News & Media, that the plan was in part to become the primary destination for all local content and therefore to reclaim the classifieds and directory revenue lost to the web.
The company is still making the majority of its revenue from print advertising, but without successfully porting that revenue generation across to digital things will become ever more difficult for Local World, which can’t continue to cut staff in order to retain profitability.