Internet start-ups pull Guardian profits down 9%

Guardian media, publishers of The Guardian and The Observer newspapers, has reported that fiscal year earnings fell sharply due to high start-up internet losses and continued investment in radio. The company also warned that the profit levels of recent years would not be maintained.

Guardian media, publishers of The Guardian and The Observer newspapers, has reported that fiscal year earnings fell sharply due to high start-up internet losses and continued investment in radio. The company also warned that the profit levels of recent years would not be maintained.

The group, which also publishes the Manchester Evening News, numerous weekly titles and has a half-interest in Auto Trader, said pre-tax profit for the year to 1 April slid 9 per cent to £67.3m. A large portion of earnings came from asset sales, principally the disposal of a stake in GMG Endemol, which generated net profit of £26.1m.

Bob Phyllis, chief executive of the group, said: "Despite the severe downturn in the high-technology marketplace, we are continuing our strategy of investment in websites that build on our strengths in editorial and classified advertising and our presence in particular communities. Given our commitment to maintain investment in new media, operating profit will not be maintained at the level of recent years."

The strategy saw £34m pumped into new media activities ranging from Guardian Unlimited to workthing.com, a digital recruitment web business. Operating profits slumped to £29.4m from £47.4m a year earlier, while the net cash inflow fell to a three-year low of £20m.

Along with Pearson, publishers of the Financial Times and of FT.com, Guardian Media has been among the biggest spenders on new media. Earlier this year, Pearson slashed internet spending and began a painful period of lay-offs after web losses ballooned to £81m.

Turnover for Guardian Media was flat at £440m. The group said advertising rose at its national newspapers, while declining to reveal last year's level.

Group cash reserves rose £18m to £194m at 1 April. Since then, the company has paid £25.5m to acquire Scot FM from Wireless Group, a radio network headed by the former Sun editor Kelvin MacKenzie with backing from Rupert Murdoch.