BBC Resources sale could be unprofitable

Thursday, November 8, 2007

The sale of the BBC subsidiary BBC Resources Ltd., has hit a hurdle after it emerged that the BBC could be left with a loss of up to £15 million on the deal. The cost of transferring the pensions of BBC Resources staff from the BBC pension scheme to its new owners could be up to £50 million according to a Guardian Newspaper report.

Managers from the division will meet with union representatives from BECTU on Monday to discuss this and related sale issues. BECTU general secretary, Gerry Morrissey is quoted as saying: "If the BBC gets less than £50 million for BBC Resources then how can it fulfil [sic] its duty of care to licence fee payers?"

It is believed that the BBC had hoped that a surplus in its pension fund could be used to bridge the possible £50 million gap — but the trustees of the fund have said "no". A BBC source said: "This is being discussed at the highest level".

Since April 2004 members of the BBC pension scheme have seen their contributions into it increase regularly, the BBC — like many other employers — having reduced its contribution (to 4.5% of payroll) over a ten year period when the stock market was booming in the 1990s.

The Guardian is seen as a reliable source on BBC matters, having reported the proposed sale of BBC Television Centre back in January 2007, with the formal announcement finally being made by BBC Director General Mark Thompson on October 18, 2007.

Background to the Resources sale

The Resources business-to-business unit was formed in 1998 and operates television studios, post-production and outside broadcast facilities for it's parent share-holding company, the BBC. It does not own any studios or premises, its assets being staff and equipment.

Advertised for sale on 16th August in the Financial Times, The Times and Broadcast and last year making profits of £5.2 million with a revenue of £126 million, the disposal — led by Ernst & Young — invited expressions of interest for the whole division or for each of its three operations separately. The BBC has yet to release the names of the short-listed companies.

BBC Resources was the first of the BBC's commercial business-to-business divisions to be set up as a limited company and will be the last to be sold, the BBC having previously divested itself of BBC Technology and BBC BroadcastBBC Worldwide, formerly BBC Enterprises, will remain in-house as it earns revenue from the archive, media and licensing of products — in the year to 31 March 2007 Worldwide had a turnover of £810.4 million, generating profits of £111 million.

The BBC wants to use any money raised to be put into international commercial expansion and content, most probably through Worldwide.

It had been intended to float Resources back in 2005, but this was postponed for two years following strike action and ACAS talks in June 2005 — the BBC giving an undertaking that there would be no preparations made to sell the company until January 2007, and no sale allowed before July of this year. The current time-scale would see its disposal by the end of the current financial year in March 2008.