SPMG was forced to write down the value of Sport Newspapers, which it acquired for £50m in autumn 2007, by around one third - £18.4m. This and other write-downs led to the posting of the £20.7m impairment charge.
The company said it considered the write-downs to be "an appropriate reflection" of Sport Newspapers’ current trading position.
Justifying the write-down of Sport Newspapers, SPMG said that while its classified ad revenues had shown a small increase year on year, it warned that the achievement of significant turn around in the business is likely to take longer than planned at the time of the acquisition.
The Daily Sport was relaunched in April last year, but circulation actually fell from above 100,000 before the acquisition, to around 75,000 last month.
However, excluding these write-downs, the company said its underlying performance was solid. It posted an underlying pre-tax profit of £6m on revenues of £29.4m. SPMG noted that the write-downs had "a distorting effect" on the financial statements.
Its accounts reveal that most group revenue comes from copy sales of its newspapers – £10.95m during the period – and newspaper ad revenues – £9.1m. It also continues to generate a significant portion of revenue from its mobile (£6.9m) and internet (£2.4m) activities.
Sport Newspapers itself posted a profit of £386,000 during the year to 31 July. Flip, the publisher of the Front and DVD World magazine titles, acquired by SPMG last April, posted a loss of £32,000 in the same period.
SPMG is also looking to secure a new financing source before its current loan facility expires on March 6.