Wednesday, 9 December 2009

Telegraph story knocks Guardian's prospects

The Telegraph is running a deeply pessimistic story about the fortunes of Guardian News and Media, owner of the Guardian, Observer and, which is to axe around 80 journalists' posts in the new year and is in the process of cutting up to 100 commercial and advertising jobs.
According to the Telegraph, "Industry analysts have said the company needs a 'root and branch' restructuring programme, with a much bigger reduction in staff numbers, if it is to have any hope of returning to profit."
It claims an analysis of Guardian Media Group's accounts suggests that the biggest concern lies in the parent company's dramatically weakened cash position. "In 2008 GMG had a cash balance of £577m based on cash generation of £542m, but in 2009 cash generation fell by £494m, leaving a cash balance of just £83m, meaning 85pc of the company's cash reserves have been wiped out in just 12 months."
The Telegraph story predicts: "There are signs that 2010 could be even worse than 2009. A change in Government after next year's general election is likely to be disastrous for the Guardian's revenue from public sector job adverts, on which it has long depended, as the Conservatives have strongly hinted they will save money by moving much of the advertising online."
It quotes Lorna Tilbian, a media analyst with Numis Securities, saying that even after GNM has shed a tenth of its 1,700-strong workforce, it will face an uncertain future. "It's almost impossible to generate £30m of extra revenue, so the company needs to have a root and branch approach to restructuring," she said.
"Even if the economy recovers next year it's going to be slow and not enough to maintain all of those jobs, so they are going to have to cut their cloth accordingly. They might have 12m website readers in the US, but they can't monetise that, and unless and until they manage to find a way to do so, they have got to cut costs further."

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