Price war and rising costs take their toll of Telegraph profits


Sharply higher newsprint prices and a debilitating circulation price war pushed first-half pre-tax profits at Conrad Black's Telegraph group down to pounds 21.5m from pounds 30.3m.

Operating profits at the core Telegraph titles were just pounds 5.6m, compared to pounds 14.7m last time, but the group figures were boosted by a one-off gain of pounds 7.5m on the sale of a stake in Carlton Communications, and another pounds 8.4m from associated companies Southam Inc. of Canada and Fairfax of Australia.

The Telegraph group also booked costs of pounds 600,000 as its share of fees paid on the aborted attempt by Mr Black's Hollinger Inc. to buy out the Telegraph's minority shareholders earlier this year. The company's independent directors rejected Mr Black's indicated offer of about 460-70p, holding out for at least 500p. Shares slumped yesterday by 20p to close at just 393p.

Stephen Grabiner, managing director, said the second half would see improvements, as an abatement in the price war and changes in distribution arrangements kick in. He warned however that the latest 30 per cent newsprint price hike, announced in July, would temper full year prospects .

Analysts said that operating profits from the core titles were lower than expected, while the income from associated company Fairfax in Australia were disappointing.

David Forster, analyst at Smith New Court, said: "The key problems seem to be the results from Fairfax, and the voucher scheme for weekend sales." Under the coupon scheme, readers could buy the Saturday, Sunday and Monday newspapers for as little as 90p, less than the full cover price of the Sunday edition alone. The scheme will be withdrawn in September, Mr Grabiner said, and a new magazine will be introduced with the Sunday title.

Most City analysts chopped pounds 2m off their estimates for the full year, calling for pre-tax profits of about pounds 41m in 1995 and perhaps pounds 50m next year.

But most remained confident that there would be some improvements in the second half, and certainly by next year. "If they can push through further price increases, prospects will improve," Derek Terrington, analyst at Kleinwort Benson, said.

Mr Grabiner blamed lower advertising revenues in Australia for the lower contribution from Fairfax. "This is a very well-run company, and we can learn a lot from them," he said.

Despite the fall in profits, the Telegraph would not make any cuts to editorial spending. "The core of our business is the product," Mr Grabiner said. "We are in the business of selling a brand, and editorial resources are directly related to that brand."

He forecast an end to the newsprint crisis, and expected that, because of long-term supply agreements, newsprint costs at the Telegraph titles would only rise by about 20 per cent in the second half. before starting to drift downward.

He also said the group would attempt two separate price increases of 5p for the Daily Telegraph, to 40p and 45p, within the next 12 to 18 months.

The price war, launched by Rupert Murdoch's News International last year, saw the price of the Times drop to 20p, leading to a sharp increase in circulation. Both the Daily Telegraph and the Independent responded with their own price cuts. Last month, News International raised the price of the Times to 25p, signalling an abatement in the price war.

Start your day with The Independent, sign up for daily news emails
ebooksA special investigation by Andy McSmith
Louis van Gaal
An easy-peel potato; Dave Hax has come up with an ingenious method in food preparation
voicesDave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Arts and Entertainment
Jay Z has placed a bet on streaming being the future for music and videos
Arts and Entertainment
Festival-goers soak up the atmosphere at Glastonbury
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE £45,000: SThree: SThree Group have been well e...

Ashdown Group: IT Manager / Development Manager - NW London - £58k + 15% bonus

£50000 - £667000 per annum + excellent benefits : Ashdown Group: IT Manager / ...

Recruitment Genius: Sales Consultant / Telemarketer - OTE £20,000

£13000 - £20000 per annum: Recruitment Genius: Scotland's leading life insuran...

Ashdown Group: Training Programme Manager - City, London

£40000 - £45000 per annum + benefits : Ashdown Group: Training Programme Manag...

Day In a Page

NHS struggling to monitor the safety and efficacy of its services outsourced to private providers

Who's monitoring the outsourced NHS services?

A report finds that private firms are not being properly assessed for their quality of care
Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

Zac Goldsmith: 'I'll trigger a by-election over Heathrow'

The Tory MP said he did not want to stand again unless his party's manifesto ruled out a third runway. But he's doing so. Watch this space
How do Greek voters feel about Syriza's backtracking on its anti-austerity pledge?

How do Greeks feel about Syriza?

Five voters from different backgrounds tell us what they expect from Syriza's charismatic leader Alexis Tsipras
From Iraq to Libya and Syria: The wars that come back to haunt us

The wars that come back to haunt us

David Cameron should not escape blame for his role in conflicts that are still raging, argues Patrick Cockburn
Sam Baker and Lauren Laverne: Too busy to surf? Head to The Pool

Too busy to surf? Head to The Pool

A new website is trying to declutter the internet to help busy women. Holly Williams meets the founders
Heston Blumenthal to cook up a spice odyssey for British astronaut manning the International Space Station

UK's Major Tum to blast off on a spice odyssey

Nothing but the best for British astronaut as chef Heston Blumenthal cooks up his rations
John Harrison's 'longitude' clock sets new record - 300 years on

‘Longitude’ clock sets new record - 300 years on

Greenwich horologists celebrate as it keeps to within a second of real time over a 100-day test
Fears in the US of being outgunned in the vital propaganda wars by Russia, China - and even Isis - have prompted a rethink on overseas broadcasters

Let the propaganda wars begin - again

'Accurate, objective, comprehensive': that was Voice of America's creed, but now its masters want it to promote US policy, reports Rupert Cornwell
Why Japan's incredible long-distance runners will never win the London Marathon

Japan's incredible long-distance runners

Every year, Japanese long-distance runners post some of the world's fastest times – yet, come next weekend, not a single elite competitor from the country will be at the London Marathon
Why does Tom Drury remain the greatest writer you've never heard of?

Tom Drury: The quiet American

His debut was considered one of the finest novels of the past 50 years, and he is every bit the equal of his contemporaries, Jonathan Franzen, Dave Eggers and David Foster Wallace
You should judge a person by how they peel a potato

You should judge a person by how they peel a potato

Dave Hax's domestic tips are reminiscent of George Orwell's tea routine. The world might need revolution, but we like to sweat the small stuff, says DJ Taylor
Beige is back: The drab car colours of the 1970s are proving popular again

Beige to the future

Flares and flounce are back on catwalks but a revival in ’70s car paintjobs was a stack-heeled step too far – until now
Bill Granger recipes: Our chef's dishes highlight the delicate essence of fresh cheeses

Bill Granger cooks with fresh cheeses

More delicate on the palate, milder, fresh cheeses can also be kinder to the waistline
Aston Villa vs Liverpool: 'This FA Cup run has been wonderful,' says veteran Shay Given

Shay Given: 'This FA Cup run has been wonderful'

The Villa keeper has been overlooked for a long time and has unhappy memories of the national stadium – but he is savouring his chance to play at Wembley
Timeless drama of Championship race in league of its own - Michael Calvin

Michael Calvin's Last Word

Timeless drama of Championship race in league of its own