The recession and migration to digital media have affected all Irish newspapers

The application yesterday by the company that publishes the Sunday Business Post to enter interim examinership provided a window on the travails of the newspaper industry in Ireland over the past six years.

The High Court was told yesterday Post Publications Ltd is loss-making and insolvent. It has been “critically dependent from day to day on the continued support” of its Cork-based parent Thomas Crosbie Holdings and that company’s banker AIB, according to the petition submitted to Mr Justice Peter Kelly.

On Wednesday evening, TCH was involved in a complex financial restructuring that involved most of its assets being acquired by an entity called Landmark Media Investments Ltd.

Landmark is owned by Tom Crosbie and his father, Ted, who were involved in TCH. Other members of the Crosbie family are not involved in the new business, notably TCH’s chairman Alan Crosbie, a cousin of Tom’s.

The petition submitted yesterday said the new owner was not prepared to fund an “unrestructured, loss-making business”, with the result that the Sunday Business Post no longer had the financial resources to continue publishing in the long term.

In 2007 the newspaper had revenue of €15.6 million. This fell to €7.4 million in 2012, a drop of 52.5 per cent. Advertising revenue has collapsed by 68 per cent over the same period.

In the Irish market generally, press advertising has fallen from €367 million in 2007 to €178 million in 2011 – a fall of 51.5 per cent.

The reduction in circulation revenue, at 25 per cent, was less pronounced but equally stark. Circulation revenue went from €4.9 million in 2007 to €3.69 million last year.

This mirrors the reduction in sales over that period. The Sunday Business Post had an average weekly circulation of 53,860 in the July-December period of 2007.

Fast-forward to the same period of 2012 and the figure was 39,416.

Virtually every other newspaper in Ireland could tell a similar story as a combination of rising unemployment, pay cuts and a move to digital by many consumers has squeezed sales.

Post Publications Ltd last reported a profit in the year to the end of January 1st, 2008, of €1.6 million. Since then the newspaper has racked up net operating losses of €5.9 million. In the year ended January 1st, 2013, the loss was €1.2 million.

The Harcourt Street-based newspaper responded to the revenue declines by attacking its cost base. Savings of €3.27 million, or 28 per cent, were effected over the past four years. The payroll cost has gone from €5.7 million in 2007 to €4.1 million last year.

In spite of this, the percentage of turnover accounted for by payroll has risen to 55 per cent from 37 per cent in 2007. This is because the reduction in costs has not kept pace with the collapse in revenue.

Pay cuts

Staff at the newspaper took pay cuts of 8.5 per cent in 2010. Management sought an additional 7 per cent reduction last year but no agreement was reached with staff.

The company has also been seeking to renegotiate its rental costs with landlord Irish Life Assurance. Post Publications Ltd is paying an annual rent of €440,000 for its Harcourt Street office. The company estimates this to be twice the current market rate and has been paying just 50 per cent of its rent since the second quarter of 2011.

The 25-year lease was signed in May 1990 and includes upward-only reviews every five years. Its rent arrears currently amount to €598,344.

A letter of demand was received from the landlord in August 2011 for the arrears and talks took place on a renegotiation. Those have been in “abeyance” since May 2012.

The potential future viability of the company is mapped out in an independent auditor’s report compiled by David Carson of Deloitte. Management has projected revenue will increase from just over €7 million this year to €7.4 million in 2017. Over that period its costs would reduce from €7.8 million to €6.8 million.

Return to profit

The company is forecast to make a loss of €1.4 million this year before returning to the black in 2014 with a surplus of €201,900. A profit of €517,600 is forecast for 2017. These figures are predicated on there being no increase in circulation revenue out to 2017.

Advertising and other revenue is projected to rise by 2.5 per cent a year over that period, as the Irish economy returns to growth.

“I don’t see much evidence of that in this court, I can tell you,” Mr Justice Kelly told Garvan Corkery SC when that projection was put to him.

Mr Carson’s report estimates an annual saving in rent of €220,000 can be achieved along with a reduction of €367,000 in its printing costs this year. A pay cut of 7 per cent along with 20-25 redundancies among the 76 staff are also likely, the court was told.

Agreeing a new printing deal will be key to the future of the Sunday Business Post.

It was previously tied into a contract, via TCH, with Webprint Concepts in Mahon Point in Cork. This contract is now null and void given the restructuring of TCH.

The court was told a failure to print the newspaper this weekend could be “fatal” for the company. Justice Kelly agreed on this point before appointing Michael McAteer as interim examiner.

Mr McAteer is now charged with seeking an investor for the Sunday Business Post.

The expectation is that Landmark is the most likely purchaser of the paper but other parties are believed to have expressed an interest.

A full hearing on examinership will be held on March 15th.

Mr McAteer has a maximum of 100 days to secure the future of the newspaper.