Reader's Digest begins insolvency proceedings and cuts 90 jobs

http://www.guardian.co.uk/media/2013/jan/04/readers-digest-staff-redundant-insolvency-proceedings

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Three-quarters of the British staff of Reader's Digest were made redundant on Friday after its private equity tycoon owner pulled the plug on the magazine's direct marketing division.

Jon Moulton's Better Capital private equity firm made 90 of Reader's Digest UK's 120 staff immediately redundant as it began insolvency proceedings of the magazine's CD, DVD and bookselling arm. It comes less than three years after Better rescued the monthly magazine from administration and promised to "return the business to its heyday".

Moulton's purchase of the magazine in April 2010 was controversial because he did not take on responsibility for the company's £125m pension fund deficit. The fund, which has 1,600 members, was placed into the Pension Protection Fund, which meant those that had yet to retire lost 10% of their entitlement.

At the time Moulton said Reader's Digest was a profitable business without the difficulty of the pension fund.

Moulton did not respond to requests for comment. In a statement Better said: "Very substantial early cost-cutting enabled an improvement in profitability.

However, a faster than expected decline in the business's direct marketing sales of CDs, DVDs and books has continued to make trading difficult. No easy route to long-term viability for the direct marketing business exists."

Better said it had injected significant funds into the business "without adequate returns". It declined to state how much it had pumped in.

The direct marketing division has been placed into a company voluntary arrangement, a legal agreement that enables a company to write off some of its debts.

Better said the magazine was still trading profitably and would continue to be published and distributed as normal.

Reader's Digest, founded by DeWitt Wallace while he was recovering from shrapnel wounds sustained during the first world war, had 2 million readers in its 1990s heyday. But its circulation has been dropping by 11.5% a year to less than 400,000, of which nearly 30% are given away free.