The Independent and Independent on Sunday are likely to rack up annual losses of up to 16m by the year-end because of falling sales and ad revenue, despite the group’s continuing cost-cutting drive.
The financial projections, based on recently filed Newspaper Publishing accounts for last year, form part of an internal management document from a rival publishing house, leaked to Marketing Week.
Despite claims by MGN of an improving trading position for the loss-making group, which could see it break even next year, these forecasts suggest total losses for 1996 could be as high as 15.7m, down slightly from 19.7m last year.
The newspapers have a debt mountain estimated at 30m.
If substantiated, the losses could represent a serious blow to the ambitions of The Independent’s shareholders, led by Mirror Group Newspapers, which had hoped the titles would break even in 1997.
Broadsheet rivals of The Independent are predicting the titles will take further dramatic action to stem losses in the new year, as the group renegotiates 20m of loans.
Rivals are suggesting that despite a further round of cost-cutting in September and the imposition of stringent financial controls, the newspapers have no room for manoeuvre in reducing costs, which went down from 79.1m last year to an estimated 75m.
This pessimistic outlook is being challenged by the City.
Lorna Tilbian at Panmure Gordon says the projected year-end operating losses are only a “smidgen” higher than her own projections.
According to Tilbian, lower newsprint costs and increased advertising demand are lessening commercial pressures on the group. An easing of the cover price war and sustained circulation improvement could radically improve the newspapers’ trading position in 1997.
“Every 5p on the cover price adds 4m to revenues,” she says. “The problem is these newspapers are not driving the cover-price war.”
Jeremy Reed, managing director of Newspaper Publishing, declined to comment on the estimated losses.