Leaked details from the information memorandum issued as part of the Business Spectator and Eureka Report sale process reveals profitability for the group as a whole has gone backwards over the last year, with the Business Spectator Group on its own making a loss of $1.67 million.

The Eureka Report is revealed as a tidily profitable business, making $1.91 million EBITDA  in the 2011 financial year. Both businesses show strong revenue growth in a challenging market, but the raw profit figures in isolation are less than overwhelming.

Last Friday afternoon news that Australian Independent Business Media, led by business brain Alan Kohler, was officially being touted for sale was broken by The Australian. Today Crikey publishes the figures from the information memorandum released to those who are kicking the tires.

Kohler said to Crikey this morning: “Everyone who got this memorandum signed a confidentiality agreement. Obviously someone has broken that.” Meanwhile, he denied suggestions News Limited is included in the process merely as a stalking horse for Fairfax.

Insiders claimed this morning that when the prospect of a sale to News Ltd was last raised a few years ago, Kohler told colleagues he had an aversion to working with then News CEO John Hartigan and editor-in-chief of The Australian, Chris Mitchell. Asked about these claims this morning Kohler said: “I don’t think I would, or that I did, put it that bluntly.” He said it had then been the wrong time for a sale, with a new management recently installed and a time of transition underway.

He acknowledged he had “also had a few concerns about News Limited” and that Kim Williams’ appointment as the new CEO had “changed things”.

AIBM owns both the subscription-based Eureka Report, which gives independent advice to superannuation investors, and online business daily Business Spectator and its recently launched siblings Climate Spectator and Technology Spectator.

The information memorandum shows that for the group as a whole, EBITDA in 2011 was just $237,000, compared to $541,000 in the 2010 financial year. It says this should be assessed in light of continued investment in the business, including the hiring of James Leplaw to be general manager and publisher of Eureka Report, and Nicholas Gray as GM and publisher of Business Spectator, along with a major IT software upgrade.

The information memorandum claims that when these costs are “normalised” EBITDA in 2012 will be $1.27 million for the group as a whole.

This morning Kohler said the publications had not been run with a view to sale: “We made investments in the business and allowed profitability to go down. We are not desperate sellers.” Some shareholders were keener than others to sell, he said, but: “No-one’s stupid enough to turn down a fantastic offer.”

So what are we to make of it, and how desperate might News Ltdand Fairfax be to buy?

Business Spectator on its own might make a loss, but there is no doubt it has stolen Fairfax’s lunch when it comes to business news delivered online. With The Australian Financial Review’s online price point set high, Business Spectator stole eyeballs. A year ago it might well have been regarded as a must-have for the big media rivals if a pay wall strategy online was to work for business news.

Perhaps the hunt is a tad less urgent now, at least for Fairfax, given staff at the AFR have been told their new lower priced paywall is working, with online traffic to the site up 50% over the last six weeks.

The AIBM information memorandum informs potential buyers that revenue for AIBM as a whole was $8.84 million in the 2011 financial year. This represents strong growth from just $424,000 for the Eureka Report alone in 2006, and $3.68 million in 2008 financial year after Business Spectator was launched.

The figures are evidence of the strength of recognised media commentators — the group’s stable of Kohler, Robert Gottliebsen and Steve Bartholomeusz — behind a start-up new media venture. Editorial quality wins.

But they also show the high costs involved. The information might well be of interest to the current federal government media inquiry, which among other things is looking at the barriers to entry to the journalism business for new media outlets.

Revenue for AIBM has continued increasing — more than doubling from $3.7 million in 2008 — despite the difficult environment being experienced by all media due to advertising downturns. In 2011, $3.64 million in revenue came from the Spectator Group, and $5.19 million from Eureka Report.

It is costs weighing the business down — but not primarily those involved in paying the journalists, according to the information memorandum. Non-editorial costs for the Spectator Group represent 53% of total costs; for the Eureka Report they represent 82% of the total. This, the information memorandum suggests, means that both businesses would be more profitable as part of a larger group where administrative costs could be rationalised.

Both businesses have potential for growth, the memo says, with advantages being that they are “free from legacy printing business” and have a strong management team.

Business Spectator is claimed to have the most monthly unique browsers of Australian business websites — 347,000 unique browsers, and increasing sharply up to the point where, in recent months, the site ceased accepting traffic from Google because those viewers were casual viewers and held little value for advertisers. This caused a dip.

The Business Spectator figures are compared in the memorandum to the AFR with 277,000 browsers. “Business sections of other news providers such as The Australian, The Sydney Morning Herald and The Age are not comparable as their audiences tend to be more casual viewers and they channel traffic from their non business content,” the memorandum states.

Is it possible that Fairfax or News might buy the businesses in order stop Business Spectator from providing its content on a free-to-air model?

Kohler said this morning he would not be interested in selling to someone who wanted to close the brand down: “We are all having fun doing this and we think we are doing something worthwhile.” Any buyer, he said, would be paying top dollar for the brand. Closure would be an unusual business decision.