Monty's back – but is he a saviour or an axeman?
The Ulsterman has returned to print with a vision for Britain's regional newspapers
Wednesday 21 November 2012
David Montgomery is back in business yet again. The veteran former editor of the News of the World and Today, former boss of the Mirror Group and ex-chief executive of European group Mecom, is the self-appointed saviour of Britain's regional newspapers – or so he hopes.
Monty, as the Ulsterman is universally known in the newspaper world, yesterday launched Local World – a joint venture which will include more than 100 regional papers and 60 websites belonging to Daily Mail & General Trust (DMGT) and Yattendon Group. Among the stable is the Cambridge Evening News, Leicester Mercury and Hull Daily Mail.
Trinity Mirror is also investing, although it will not be selling its papers to Local World. There are some other eye-catching private investors in the form of hedge-fund magnate Crispin Odey and Tory donor Lord Ashcroft.
Mr Montgomery, 64, who has a reputation as a cost-cutter, said he wanted to "restore the pride and restore the growth" in regionals after years of circulation and advertising falls.
"I have had a vision for some time that the regional newspapers of Britain needed to be resuscitated," said Monty. "We haven't lost faith in print – anything but that."
He insisted that regional newspapers can have a bright future because people will always want local news, views and information about their neighbourhood.
"The interest in local is never going to go," he explained. "It will never be replaced by Google or Yahoo or America Online."
The big idea behind Local World is that it will focus on content and sales across all platforms – print, online and mobile – but it won't be burdened by what Monty called the "baggage of print". That means the joint venture will not own printing presses and won't have the legacy of big pension deficits, which are effectively being borne by the relevant shareholders which previously owned the papers.
"We are starting with a clean sheet," he said, referring to the fact Local World has an enterprise value of £100m, combined operating profits of £21m and sales of £273m in the year to September 2011.
DMGT has received £52.5m in cash for its Northcliffe papers and gets a 38.7 per cent stake – so less than £100m in all, a far cry from the £1bn price tag mooted five years ago.
But the owner of The Daily Mail looks to be in the driving seat, as Northcliffe's boss, Steve Auckland, becomes chief executive of Local World and Rachel Addison, group finance director at Northcliffe, steps up to the same role. Mr Montgomery is non-executive chairman.
The Iliffe family, owners of small regionals group Yattendon, has also put its papers into Local World and takes a 21.3 per cent stake.
The other significant investor is Trinity but it is having to pay £14.2m for a 20 per cent stake because it is keeping control of its papers. Trinity wants to be involved as it already provides contract printing and ad sales to Northcliffe. It also means it can keep its options open, if it wants to offload the regionals in future, while avoiding any awkward decisions over pension deficit for now.
"We would expect Trinity to inject assets in the future in exchange for equity in Local World," said Gareth Davies, analyst at Numis Securities.
City analysts like the idea of DMGT getting rid of the regionals, which have performed woefully, with ad revenue falling by double-digit percentages on an annual basis during most of the last five years. Mr Davies called the sale a "significant positive", although the shares ticked up only 1p to 474p.
Arguably, it also makes sense for Local World to be in the calm of the private sector, away from the glare of the City.
Rather less certain is whether Mr Montgomery is the man to oversee the revival of the regionals – not only because of the huge structural challenges but also his own mixed record. He clashed with his boss Rupert Murdoch in the 1990s; he was a highly divisive figure at the Mirror, particularly for journalists; and he fell out with shareholders at Mecom where he ran up huge debts building an empire that covered Holland, Poland, Norway and Denmark.
Speaking yesterday, Mr Montgomery maintained that Mecom's experience in Norway, where the group has now got as many daily readers online as in print, is proof that Local World's model could work.
"The credibility of this idea has been tested," he said, noting that it attracted younger readers.
Doubters will say that his abrupt exit from Mecom in January 2011 – when he walked away with £1.3m – and a series of asset sales, is not such a great legacy. What's more, despite all his talk of how Local World is now going to restore growth in local papers in Britain, it doesn't yet have that much market share. A huge swathe of titles aren't involved – notably those belonging to US giant Gannett, Johnston Press and, for now, Trinity.
On the plus side, Monty is as tough as teak and appears to have a good working relationship with Mr Auckland.
"David and I are the kind of people who like to prove people wrong," said Mr Auckland, who previously worked at the Yorkshire Post before running DMGT's successful freesheet Metro and relishes a challenge. "When I left the Yorkshire Post for Metro, everyone said I was mad to go to a freesheet."
Mr Auckland promised that their strategy at Local World of delivering local content, local sales and local management will work. "We'll execute it brilliantly," he declared.
Regionals are an industry that has seen deep cuts over the last decade as their classifed ad revenue from recruitment, jobs and motors dried up, so more cuts would seem all but inevitable. However, Mr Auckland was anxious to stress that these papers had been "cherished and loved for a long time" by their family owners, the Rothermeres of DMGT and the Iliffes of Yattendon, and it was an "honour" to take over their running. Local World said it will also invest £10m.
The more relaxed, modern atmosphere at Metro may have rubbed off on Mr Auckland as he vowed that he and Mr Montgomery would "keep it fun and lighthearted — we don't do stuffy".
Journalists and ad sales people on the front line – Local World will employ 2,700 people – will be waiting anxiously to see if it turns out as promised.
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