On the road with Monty: How the former Mirror boss did the Continental

Former Mirror Group boss David Montgomery is now cutting a swathe through Europe, confident that this is where newsprint has a healthy future, even if it means upsetting a few people on the way. Raymond Snoddy caught up with him
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After a hard day's work in Oslo earlier this month, media mogul David Montgomery had a train to catch. Jumping into the back of a taxi, the Ulsterman instructed the driver: "Amsterdam Central".

The former News of the World editor laughs at how he now visits so many European cities on a daily basis that he forgot which one he was in.

He tells the story as he settles down in the back of another taxi, this time actually taking him from the centre of Amsterdam to the southern Dutch city of Limburg, a far-flung outpost of Monty's ever-expanding media empire. After meetings in Limburg it would be off by car to Düsseldorf airport for an onward journey to Warsaw. Then, on Friday, he was in Copenhagen to round off what has become a fairly typical working week in the life of the controversial former chief executive of The Mirror Group.

Seven years after being ousted from that company, David Montgomery has managed to re-invent himself as a pan-European newspaper owner. If all goes according to plan, Mecom, the company he chairs, will this Friday formally add newspapers of the Orkla Media group in Norway, Denmark, Poland, Lithuania and the Ukraine to the titles it already controls in Germany and Holland.

It will mean that, within less than a year - admittedly after more than three years of planning - Montgomery will have put together a company with annual revenues of around £840m and underlying profits of close to £65m.

"I know that The Economist has declared that the last newspaper will be read in 2043," he says as we flash past windmills and across a patchwork quilt of fields. "I have absolutely no doubt that they [newspapers] will be in a very different format in 2043, but the printed word in the form of newspapers will still be available. The challenge has never been greater, but the potential of a pan-European group is just tremendous and ultimately if we can build something which has the scale and the unity it will advance the cause of developing titles, launching new titles."

Perhaps, he adds, there is even the long-term possibility that such a pan-European group of newspapers could become part of someone's global cross-media portfolio.

For the moment, things are more modest and Montgomery will have to provide a lot more proof of his vision to the City, where the Mecom share price is "flat-lining" at around 50p, valuing the enlarged group at around £365m, following the completion of the Orkla group. Montgomery, though he is executive chairman and chief executive, holds less than 1 per cent of Mecom's shares.

As soon as the taxi arrives in Limburg, he wants to know whether Mecom's Dutch papers, Dagblad De Limburger and its sister title, Limburgs Dagblad, are on budget and will inquire how costs can be cut and profit margins improved. When Montgomery turned up last year at Berliner Zeitung - the first Mecom foothold in continental Europe - something akin to pandemonium broke out. The British executive was denounced as an "Anglo-Saxon locust", an editor departed and staff took to the streets carrying placards saying: "You Are Not Welcome Mr Montgomery." Some of his British enemies were less polite.

A former Daily Mirror, editor Richard Stott, wrote an article for a German journalism review accusing Montgomery of having "ethnically cleansed" the Mirror's staff and added: " It is easy to form the impression he doesn't much take to the human race and the human race hasn't taken much to him." The piece ended by telling German journalists they had been warned.

Are such insults, and claims by at least one former editor of The Independent that he was lied to by Montgomery when the paper was run as a joint venture, just water off a duck's back?

"No, of course it isn't," says Montgomery, turning more serious. "Some of the stuff has been hurtful and I react to it but it doesn't last too long and I have too much to do rather than dwell on reaching for lawyers."

He believes, for instance, that if the Mirror had not taken a stake in The Independent this paper might not be around today. As to some of the more lurid allegations, he refuses to comment.

"Why dignify it by responding to it. The Fleet Street culture is not real life," he says as he speeds across Holland. A large red lorry passes in the opposite direction with "Montgomery" emblazoned on the side in huge letters. It catches the newspaper boss's eye. "The Montgomery transport company of County Fermanagh! One of the richest families in Ireland," he notes with satisfaction, although there is no family connection.

He is convinced that he has spotted a clear business opportunity in Europe which could turn out to be very profitable. The regional newspapers he has bought have much larger circulations than regional papers in the UK. The Limburg titles sell 200,000 a day, whileBerliner Zeitung sells 180,000 and the up-market Berlingske Tidende in Copenhagen has sales of around 120,000.

But that is only the beginning of the story for Montgomery. Not only do the papers have high circulation in their local markets, they also have high subscription levels - which means cash up front for Mecom. The Limburg subscription level is no less than 98 per cent while in Norway the figure is 90 per cent.

The newspapers, being sold by the Orkla conglomerate for £647m, have an overall profit margin of around 7 per cent. Compare that to Johnston Press, the large UK local and regional newspaper publisher, which has a profit margin of 35 per cent.

Montgomery accepts that he will never be able to do a Johnston in Europe - mainly because salaries are much higher and job losses usually have to be achieved by consensus. But he has already set a group target of 15 per cent with the hope that 20 per cent will one day be possible.

To achieve such targets, jobs will clearly have to go, although Montgomery insists that they will come from re-organisation of "the back office" and service side of the business. "We have absolutely no plans for journalists or printers to be made redundant," he says.

One City analyst, who asks not to be named, acknowledges that Montgomery knows how to cut costs but says he has to prove he knows how to build a business.

The executive chairman and chief executive of Mecom, which has a head office staff of 10 including secretaries, hands The Independent a copy of a four-page statement of budgetary principles - in effect a template for the future of the group. Cutting costs figure prominently. All consultants are to be replaced by internal executives. Severe restrictions are to be imposed on travel and a single executive will be in charge of all purchasing to "operate draconian control."

Budget presentations must include detailed organisational charts and staff numbers for each product in publishing.

On the other side of the equation, the managers have been told the guiding principle will be revenue creation and that they will be responsible for coming up with ideas for new sections and launches. A Sunday newspaper launch in Germany is under consideration as are new life-style sections and glossy colour magazines for the weekends. Power, the document makes clear, will be devolved to high profile chief executives in each country.

"What we are introducing to this bigger group is a publishing culture. It has a conglomerate, business-management culture at the moment. I have total respect for the editorial side, but clearly there is an old-fashioned way to operate and a modern way," says Montgomery, who insists that editorial interference in a different language and culture would be simply "hugely damaging" to the newspapers.

Around the lunch table at the Dagblad De Limburger, the Mecom executives are polite but firm. Montgomery's smiles have a slightly wintery feel to them.

He wants to know exactly what the forecast profit figure is for the year and whether it is ahead of target? After an interval, the consolidated number is found. Limburg, which already has a profit margin of 15 per cent, is ahead of budget.

Why do there seem to be so few advertisements in the paper and why no ad in a prominent position on page three? A copy of The Daily Telegraph is proffered by way of example.

The Dutch paper's impressive chief executive, Johan Boermann, suggests that ads on page three would be akin to a revolution in Limburg. Without saying much, the Mecom executives suggest the revolution should get under way as soon as possible, together with a rapid exploration of new publishing opportunities.

Montgomery, an opera fan, reveals he is negotiating with an arts company for discounted CDs of top classical performers to offer to readers across the group - complete with priority booking for one of Europe's leading music festivals.

After the budget meeting, Boerman says: "the image of David Montgomery is of a butcher. I have found he is a professional." The Limburg executive even concedes: "they are right to squeeze me a little bit."

Elsewhere in the modern, spacious offices, the editor-in-chief, Huub Paulissen, is noticeably more wary. He watched events at Berliner Zeitung closely and has researched all the unsolicited testimonials from the UK. Yet, he notes, the company has had four owners in recent years, not all committed to the future of newspapers. "We are not too unhappy about Mecom because perhaps it gives us a longer and better future than with previous owners."

As Montgomery and his team descend in the lift before heading for Warsaw, his finance director, Keith Allen - another Ulsterman - looks around at the spacious offices and observes that you could put "all of News International in here."

A Limburger journalist who happens to be sharing the lift notes dryly "and it's getting more spacious by the day".

For David Montgomery, the journey since he left The Mirror Group has been a long and tortuous one. With the backing of 3i, the venture capital group which took a 25 per cent stake in his tiny company, Montgomery bid for just about every media asset that came on the market. He went for the Express group and believes he could have had it except that the money-men decided it was only worth £80m. The £125m that Richard Desmond paid turned out to be a knockdown price. Montgomery was runner-up in the auction for the Telegraph Group and believes he could have beaten the Barclay brothers to the prize.

"It was one of those occasions where 50 people sat round a table on the last day of the auction and nobody could make a decision. It was quite clear if we had put an extra £20m on the table we would have got it," he says.

Earlier attempts to buy the broadcasting company SMG and then the Herald newspaper in Glasgow both failed.

Montgomery did manage to buy the Newsletter in Belfast and the Derry Journal with the backing of 3i but then advertising revenues turned down and the venture capital group, he says, "took the money and ran" with a sale to Johnston Press.

"I took a decision then that we really had to get our independence and not be dependent on private equity," says Montgomery, who believes most venture capital firms are not prepared to make the long-term commitments necessary for newspapers to "evolve" in the internet age.

He exempts Veronis Schuler, the American media specialist firm which holds the majority stakes in the Berliner Zeitung and Mecom's other German newspaper, the Hamburger Morgenpost.

Now his battlefield is continental Europe and he says he has no intention of turning his acquisitive instincts back to the UK. "There is no question of going back [to the Mirror]. You can never say never, but clearly it is not on our agenda. We have far too much to do and there is far too much opportunity here and Trinity Mirror is overvalued for what it is. There is no doubt there is a solution to Trinity Mirror - but no one has come up with it yet," he says, breaking into laughter.

Before heading for Warsaw to see what Mecom is getting with its 51 per cent stake in Rzeczpospolita, a leading quality daily, Montgomery insists that his beliefs about newspapers have hardly changed since he was a down-table sub on the Daily Mirror - despite the unprecedented challenges and competition that they now face.

"I have a fresh belief that newspapers are a unique medium and that they do a job that goes way beyond relaying news stories. They do a job which supports communities, supports cultures and whatever people say, they do it in an extremely independent manner. I have seen the quality of newspapers improve by leaps and bounds in my time."

Downtable sub to career wheeler-dealer

1948: Born in Northern Ireland and educated at Down High School in Downpatrick, south of Belfast, before studying politics and history at Queen's University, Belfast

1971: Marries first wife Susan Buchanan. Divorces in 1987

1973: Joins the Daily Mirror as a sub-editor

1980: Moves to The Sun, then the Sunday People as assistant editor and the News of the World in 1984, becoming editor in 1985

1987: Appointed editor of Today, recently acquired by Rupert Murdoch, and doubles circulation to 600,000. Also managing director, then chief executive of Murdoch's News UK

1989: Marries second wife Heidi Kingstone. Divorces in 1997

1992: Takes control of the debt-ridden Mirror Group after Robert Maxwell's death. Titles include The Mirror, Sunday Mirror, The People, The Independent, The Independent on Sunday, and the Daily Record and Sunday Mail in Scotland. On arrival at The Mirror, announces that there are "definitely no plans for job cuts in editorial departments" and "editors of all titles remain in their positions", before embarking on the toughest period of restructuring and cost-cutting Fleet Street has ever known. 100 casual staff and editor Richard Stott are fired, while The Independent endures three waves of redundancies

1995: Launches L!ve TV channel with former Sun editor Kelvin MacKenzie and Janet Street-Porter at the helm. The cable channel is best remembered for its Topless Darts and News Bunny slots, and it won just 1 per cent of the cable television audience, which, at the time, numbered around four million homes in the UK. The L!ve TV channel closes in 1998

1997: Marries third wife, Sophie, Countess of Woolton. They now live in London with their four children - five-year-old William and three daughters from Sophie's previous marriage

1998: Sells a 46 per cent stake in The Independent and The Independent on Sunday to Dr Tony O'Reilly's Independent News & Media

1999: Montgomery is bought out of his reign at the Mirror Group by a merger with Trinity International. In seven years, he has overhauled Robert Maxwell's sinking ship into an empire valued at £1.2bn

2000: Sets up Mecom to raise investment for new media ventures and takeovers

2004: Attempts to take over the Telegraph Group with venture-capital firm 3i, but eventually loses out to the Barclay brothers, who buy the group for £665m

2005: Takes over, with Mecom, the German titles Berliner Zeitung and Berliner Kurier for £150m, and later the tabloid Hamburger Morgenpost. First foreign takeover of German newspapers, and staff are aware of Montgomery's reputation. Editor of the Berliner Zeitung resigns, and staff have T-shirts printed saying, "You are not welcome, Mr Montgomery", and produce a special protest edition of the paper

2006: Extends his European empire, spending £200m on Dutch media group Limburg in June, and then a reported £647m on Orkla Media, a huge Norwegian group with businesses in Poland, Sweden, Lithuania and Ukraine. Sophie Morris