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