Carolyn McCall runs the Guardian Media Group, the company behind the liberal newspaper and more, and after a year in the job has the luxury of being one of the few media chief executives with money to spend. After the sale of half of Auto Trader to Apax – one of Ms McCall’s first moves in the job – GMG has £675 million in the bank to play with.

GMG is owned by the Scott Trust, whose mission is “to secure the financial and editorial independence of The Guardian in perpetuity”. It exists in the belief that investing in media can safeguard the daily, which with The Observerlost £14.3 million last year when GMG made £97.7 million pretax.

Ms McCall says that the primary goal is to “diversify the portfolio at a high level”, which means acquisitions and investment in new areas. “We have a lot of business in print on paper, in classified advertising, and a lot of exposure to the UK economy,” says the 45-year-old, who has been at The Guardian in various roles almost continuously since 1986.

It turns out that GMG will put a chunk of money, maybe £100 million, into an investment fund as a hedge. “The money is not a cash bonus,” she says. “This has to last us in perpetuity, that’s a hell of a long time.” Why not put it all into low-risk investments? “We’ve looked at it, but we make better returns from business assets.”

This week GMG was linked to a possible bid with Apax for Emap. Ms McCall, though, is clear that “we have no interest in a joint bid for Emap” or the bulk of its assets. “We might be interested in some of its radio stations and business-to-business properties, but we’re not even close to an approach,” she says. “I don’t know how anybody could write that we were bidding, we just had a preliminary conversation.”

Ms McCall believes that GMG’s obvious gap is that “we’ve not got much business-to-business to speak of,” and adds: “We are also looking at e-commerce and web development.”

Radio is a target too. In eight years, GMG has built up a radio business, earning £800,000 last year. “We’ll look at radio, it’s consolidating. Are we a buyer or a seller? At the moment, we are not a seller, but we want to be stealthy with radio.” Small deals only.

There are regional newspapers, principally the Manchester Evening News. Profit margins are low because the business lacks scale. Yet, don’t expect deals: nothing is for sale, and a one-off bid for Trinity Mirror’s local titles in Reading was rejected. Offering the Manchester Evening News free in the city centre is felt to have saved the title.

That leaves the Guardian and Observer. Shouldn’t they make a profit, and not just take from the group? “I agree,” she says, before emphasising the newspapers’ digital investment. “There is no target for breakeven,” she says. “It will happen over the next few years”. She also insists that The Observer, thought of as a perennial lossmaker on Fleet Street “makes a net contribution of about £2 million” internally.

Asked if the move to the three-quarters size Berliner format, costing more than £80 million, was worth it, she says that, although circulation has not risen, “circulation revenues are up 10 per cent”. That stems from price rises, though she sees it differently: “Readers love it, and they don’t leave when the price rises.” But efficiencies are needed too.

The continuing “24/7 publishing” project – producing news all the time – is about “how do you use your journalistic resources across The Guardian, Observer and Guardian Unlimited [the websites] more efficiently?”. There will be no redundancies, remarkably, just redeployment, but press for details and it is still “too nascent”. It will be introduced by the end of 2008, and it seems clear that Observer journalists will be writing more than once a week.

Without the pressure of a share price to defend, GMG can evade some market disciplines. She says that pressure from the chairman, Paul Myners, “who never really takes a holiday” keeps her focused, but the test is whether Ms McCall can make something of her windfall.

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