Ex­press and Star hit by profit fall ahead of buy­out talks with Trin­ity

The Sunday Telegraph - Money & Business - - Business - By Christo­pher Wil­liams

THE Ex­press and Daily Star news­pa­pers have suf­fered a plunge in prof­its as bil­lion­aire owner Richard Des­mond at­tempts to off­load the ti­tles to ri­val pub­lisher Trin­ity Mir­ror.

Ac­counts for Ex­press News­pa­pers, which pub­lishes both news­pa­pers, show a pre-tax profit of £13m, down by more than half on the prior year.

The sharp de­te­ri­o­ra­tion re­flected a 10pc de­cline in turnover to £157m, af­ter the news­pa­pers both slashed their cover price in an at­tempt to prop up sales and put pres­sure on news-stand ri­vals, in­clud­ing Trin­ity Mir­ror.

Over the course of 2016 the cir­cu­la­tion of the Daily Star de­clined by only 2.5pc af­ter it cut its price from 40p to 20p. By con­trast the Daily Mir­ror sold 11.7pc fewer copies.

The en­tire news­pa­per in­dus­try suf­fered from a tough print ad­ver­tis­ing cli­mate as brands ac­cel­er­ated the shift of spend­ing on­line and be­came more cau­tious about their bud­gets in the wake of the EU ref­er­en­dum re­sult.

Mr Des­mond aban­doned his at­tempt to trig­ger a tabloid price war in July last year, spark­ing spec­u­la­tion he had per­suaded Si­mon Fox, the Trin­ity Mir­ror chief, to con­sider buy­ing him out.

The on-off talks were con­firmed ear­lier this year, and last month Trin­ity Mir­ror con­firmed it had en­tered ex­clu­sive talks to ac­quire the Ex­press and

Daily Star. The Daily Mir­ror pub­lisher aims to cut costs by merg­ing back of­fice func­tions and print­ing.

If the two sides can agree a deal it would rep­re­sent a fur­ther move away from me­dia for Mr Des­mond. In re­cent years he has also sold Chan­nel 5 to Vi­a­com. His col­lec­tion of porno­graphic tele­vi­sion chan­nels were dis­posed of last year in a man­age­ment buy-out.

Mr Des­mond ac­quired the Ex­press and Daily Star in 2000 and has ruth­lessly squeezed costs to main­tain prof­itabil­ity in a de­clin­ing tabloid mar­ket.

Losses were recorded in the ad­ver­tis­ing slump caused by the fi­nan­cial cri­sis and in 2003 and 2004, when the 65-year-old ex­tracted pay and pen­sion con­tri­bu­tions of £33.7m and £37.3m re­spec­tively.

Turnover peaked then at nearly £309m. Last year it was lit­tle more than half that fig­ure.

Mr Des­mond’s at­tempt to off­load the

Ex­press and Daily Star is com­pli­cated by en­tan­gle­ments with his other ven­tures. Trin­ity Mir­ror share­hold­ers are wary about ties such as a 20-year deal to rent of­fice space from his hold­ing com­pany North­ern & Shell Me­dia Group, on a £6.9m a year lease.

When the en­tre­pre­neur sold Chan­nel 5 to Vi­a­com for £463m it emerged the price in­cluded an of­fice lease and com­mit­ments to buy ad­ver­tis­ing for the Health Lottery, his ri­val to the Na­tional Lottery.

The lat­est North­ern & Shell ac­counts show the Health Lottery is com­mit­ted to spend­ing at least £21.8m on ad­ver­tis­ing with Vi­a­com un­til the end of next year. How­ever, the obli­ga­tions are “ir­re­vo­ca­bly and un­con­di­tion­ally” guar­an­teed by Ex­press News­pa­pers.

The Health Lottery has yet to prove a win­ner for Mr Des­mond and has ac­cu­mu­lated pre-tax losses of more than £133m. His hold­ing com­pany ac­counts warns it is “vi­tal” that the busi­ness “starts to self-fi­nance its op­er­a­tions” in the medium term.

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