Simon Fox left HMV on Friday after six years at the struggling high-street music retailer. His tenure was a tricky one. Mr Fox had presided over a debt-ridden company, whose core revenue streams were being eroded as consumers shifted online.
But rather than take some time off, Mr Fox has opted to clean up another Augean mess – this time at the newspaper group Trinity Mirror. So, from September 10, Mr Fox will once more preside over a debt-ridden company, whose revenue streams are being eroded as consumers shift online.
Circulation at Trinity’s flagship newspaper, the Daily Mirror, has more than halved in the past decade. In 2002, the paper comfortably sold over 2m copies a day. Today, it barely creeps past 1m. The group’s regional papers are faring little better, with circulation falling across the board.
“The big challenge at Trinity is: how do you maintain the value – the income and revenue – in the printed products for as long as possible, when consumption is going online,” says Doug Mccabe, media analyst at Enders Analysis. “There isn’t a silver bullet.”
Profits at the group have collapsed. In 2005, Trinity Mirror reported pre-tax profits of £220.9m. In 2011, the group limped to a pre-tax profit of £74.4m. Mr Fox must also contend with a ballooning pension deficit, which leapt to £230.1m from £161m last year. Trinity’s £180.9m net debt position, although much improved, dwarfs its £102.4m market capitalisation.
Luckily, Mr Fox does not have the reputation of shirking a challenge. He had the chance to put HMV’s troubles behind him in 2009 when he emerged as the leading candidate for the vacant chief executive position at ITV.
“The fact that he didn’t go to ITV and stuck at it tells you have a man of honour and tenacity,” says Lorna Tilbian, head of media at Numis.
Mr Fox’s tough experience at HMV is what attracted David Grigson, the chairman of Trinity Mirror, to the 51-year-old executive. In an email to Trinity staff on Friday, Mr Grigson highlighted Mr Fox’s “extensive experience of digital and knowledge of the structural challenges that this can bring to a business”.
Critics point to HMV’s abject share price performance during his tenure. Shares at the group fell 98 per cent in value while he was chief executive, as the bottom fell out of the market for CDs. At HMV, however, the focus was more on keeping the ailing retailer afloat, than achieving shareholder returns.
Investors at Trinity, however, will not be happy with mere survival – they want growth. “The business has been focused on debt reduction, rather than generating returns for shareholders,” says Jonathan Barrett, an analyst at Singer Capital Markets.
Cuts at the group so far have been made with an axe rather than a scalpel. The editorial operations of the Daily and Sunday Mirror were combined earlier this year, while there have been heavy job losses across the group.
They have, however, started to have an effect. While revenues of £356m in the first half of 2012 were down 4 per cent year-on-year, profit before tax jumped 21 per cent as cost-cutting measures fed through.
“There are serious revenues [at Trinity],” says Ms Tilbian. “They just need someone with a strategy and a vision.”