Sport Media Group, the company that last year took over ownership of the Daily Sport, Sunday Sport and their online and mobile counterparts, today announced it has breached one of its banking covenants. SMG says its bank has provided a two month extension on its current lending facility to see it through and the company is talking to other lenders to secure more cash. In extremis, the lending bank can demand the full repayment of the loan when a covenant is breached or even petition for the company to go in receivership to get its hands on the debt. SMG’s shares were down from 7.5p to 5.25p this morning following the announcement.
Manchester-based SMG was formed in 2007 when porn company Interactive World bought the titles from long-standing proprietor and Birmingham City FC owner David Sullivan and at first things went well: for H207 the company made a pre-tax profit of £2.3 million and turnover of £14.4 million, helped by the purchase of adult film site StrictlyBroadband.com (which we’d rather not link to). For its full year to July 31 the company made more than £6 million in profit and said it was optimistic for 2009. We’ll find out more when the company releases its preliminary results for the year to 31 July 2008 tomorrow. More after the jump…
With a great deal of the kind of content that, shall we say, does very well online, SMG has a potentially sound business model and already supplies content to other sites and mobile services. The company’s website says it sells mobile content to “major UK network operators” and “users of leading UK internet key search engines”. But like every other newspaper publisher, it’s still heavily reliant on a dwindling print product for the majority of its revenue, and with circulation dipping to a daily average of 85,000 last year — well below the company’s target of 100,000 to 110,000 — it’s simply doesn’t seem enough in the long-term unless the company can ramp up the content distribution side of the business. Maybe tomorrow’s results will show whether the appointment of News International sales director Chris Lomas as circulation director last month (via NMA) will have had any effect on the newspapers’ fortunes.
Founder of lads’ mag Zoo Barry McIlheney and Loaded founder James Brown were appointed early last year to steer a £1 million newspaper and online re-design and the purchase of ailing lads’ mag Front for £260,000. It was all designed to re-align the cheeky, sex-led titles into the mainstream, as was moving the papers’ hardcore adult ads to a specialised mid-section. But McIlheney has now been replaced as editor-in-chief by former Cambridge Evening News editor Murray Morse and the company has admitted its “news-zine”, lads’ mag styled approach was unpopular with readers.