21 September, 2006
Daily Mail and General Trust plc (DMGT')
Trading Update
Summary
This statement updates investors on DMGT's progress in the current year, ahead
of its year end on 1st October, 2006.
Since we last reported in May, the Group's business to business divisions and
its consumer businesses have continued to experience very different trading
conditions. Whilst the business-facing and digital divisions have enjoyed
further good growth in revenues, the consumer operations are still seeing
difficult trading conditions and the modest improvement in the display
advertising market for our national newspaper titles during the spring has
proved patchy. The regional newspaper restructuring continues to progress well.
The strength of our newer businesses means that the Group is on course this
year to generate approximately half of its profits from its non-newspaper
operations, including its fast growing digital activities. Overall, despite the
weakness of consumer advertising markets, the launch costs of our new London
free newspaper and the impact of the weaker US dollar, we still expect to
achieve modest progress for the full financial year compared to last year.
National Newspapers
Associated Newspapers' overall circulation revenues for the eleven months to
August were 1.6% above the same period last year. Total advertising revenues in
the same period have fallen by only 2% (6% excluding acquisitions), despite the
well-reported difficulties within the market. This robust performance is partly
due to strong growth in digital revenues.
The Daily Mail achieved an unchanged level of circulation for the six month ABC
period to August 2006 despite a 5 pence increase in its Monday to Friday cover
price in April, aided by several successful promotions. Both the Daily Mail and
The Mail on Sunday have again outperformed their peers. On 10th September, The
Mail on Sunday raised its cover price to £1.40. The average circulation of the
Evening Standard fell by 7%. In late August it discontinued its free lunchtime
edition and raised its cover price to 50 pence, prior to the 30th August launch
of London Lite, our new free newspaper in Central London, which is aimed at a
different consumer market. Metro's national distribution now averages more than
1.1 million copies.
Associated's newspaper display advertising revenues have fallen by 5% for the
eleven months to the end of August, despite a 5% increase in the retail
category. Classified advertising revenues are down by 9% for the same period.
Although visibility on future advertising performance remains very limited,
there are some signs of an improving display market.
Underlying advertising revenues from Associated's digital operations, excluding
recent acquisitions, have risen by 22% year on year and by 95% overall.
Advertising revenue at Teletext is down 19% year on year. Although advertising
revenue from Teletext's analogue services has fallen by 30%, revenues from its
digital services (television and internet) have risen by 102%. Due to cost
savings, Teletext is still on track to record a profit for the year.
Regional Newspapers
Northcliffe Newspapers, like the rest of the regional newspaper industry, is
continuing to experience tough trading conditions. UK advertising revenues for
the eleven months to August 2006 (excluding Aberdeen Journals which was sold in
April 2006) were 8% lower than the same period last year. Excluding recruitment
revenues, which have declined by nearly 17% (and by 11.5% in the past three
months), advertising revenues are 5% lower. Property (up 6%) has continued to
grow, but motors has fallen by 17% and retail has fallen by 5%. Revenues from
digital publishing are 18% above last year.
UK circulation revenues for the eleven months to August 2006 were 0.9% lower
than the same period last year. Although in the January to June 2006 ABC
period, Northcliffe evening daily titles reported a 5% circulation decline,
this remains a better result than industry average circulation figures.
The extended Aim Higher programme of organisational and structural improvements
continues. Despite increased newsprint and energy costs, operating costs for
the eleven months to August 2006 are 7% lower than last year. Annualised cost
reductions from the programme are currently running at around £33 million.
Northcliffe remains on target to achieve its announced £45 million annual cost
reduction by the end of September 2007. A fourth print site, Hull, has been
closed recently.
Information publishing
DMG Information continues to generate strong growth, with underlying revenues
for the year expected to be up approximately 22% at constant exchange rates and
margins slightly higher than last year. Genscape is performing well since its
acquisition in early May. There continues to be an encouraging range of
development opportunities across the division and the quantum of revenue
expenditure on product development is expected to increase in the coming
financial year. Study Group was sold on 8th September for £75 million.
Financial publishing
Euromoney Institutional Investor plc is in an offer period following its £224m
agreed bid for Metal Bulletin plc, and therefore we are unable to comment on
its current trading.
Exhibitions
Although revenue has grown by around 6% year on year for the eleven months to
August 2006, dmg world media is experiencing a tough year. Consumer shows,
which comprise just over half of the business, have struggled with an overall
decline in revenues. The performance of our retail shows has been varied: Gift
has been difficult while Surf has been more resilient. The Business to Business
shows, including the biennial Global Petroleum Show held in June, have
performed well and have continued to grow.
Radio
DMG Radio Australia's revenues are expected to show a rise of about 10% on last
year, although this is disappointing in the context of its growth plan. The new
Vega station launches were not successful and are now being relaunched. The key
Nova Sydney station has also had a difficult period, not helped by weakness in
the Sydney advertising market. The most recent ratings issued last week were
encouraging for Nova Sydney, but this is too late to affect this year's result.
Exceptional items and impairment charges
In its full year 2006 results, the Group will report exceptional gains of
around £180 million arising on the disposal of businesses, principally Aberdeen
Journals and Study Group. It will also report other exceptional gains of around
£20 million, mainly from the recent sale of its remaining shares in Reuters
Group plc for £27 million.
The Group also expects to take a charge of approximately £40 million as
exceptional operating costs. This charge will comprise the costs for the second
phase of Northcliffe's reorganisation programme, together with the professional
costs of its strategic review, reorganisation costs within Associated and a
restructuring charge within dmg world media. The Group is also likely to make a
further goodwill impairment charge, particularly in respect of some of its
consumer exhibitions, following a downturn in those markets.
Accounting changes
In May, the Group first reported under International Financial Reporting
Standards (IFRS). Since that time it has decided to make two allocation
changes, as described in the attached appendix, in order to align published
figures more closely to the way we manage our businesses, and in the light of
developing reporting practice.
These changes, which are subject to audit, do not affect statutory reported
earnings, but one does reduce the number we quote for our adjusted tax rate and
hence increases adjusted earnings per share.
Preliminary announcement
DMGT intends to announce its preliminary results for the current year on the
morning of Thursday 23 November, 2006.
Enquiries: Peter Williams, Finance Director, DMGT, 020 7938 6631
Nicholas Jennings, Company Secretary, DMGT, 020 7938 6625
Andrew Honnor, Tulchan Communications, 020 7353 4200
Daily Mail and General Trust plc
Northcliffe House, 2 Derry Street,
London, W8 5TT
Tel 020 7938 6000
Fax 020 7938 4626
www.dmgt.co.uk
Registered in England and Wales No. 184594
Appendix
Accounting changes
At the time of the announcement of its interim results in May, the Group
reported under IFRS for the first time and adopted a number of new accounting
policies.
IAS 19, Employee benefits: change of accounting policy
In May, the Group split its pension charge between: the current service cost,
included under operating profit; and a finance credit, being the difference
between the return on the assets and the interest charge on the liabilities,
that appeared under other gains and losses'.
We have decided to change our disclosure of the pension charge and to move the
finance component into the operating profits of the divisions operating defined
benefit schemes (principally the newspaper divisions). These divisions will be
charged the cash funding rate, with the difference between this and the total
IAS19 charge included in unallocated central costs.
This change of policy should aid comparison of trading results with other
companies operating final salary schemes. It will have no impact on adjusted
profit (before exceptional items and amortisation and impairment of intangible
assets), nor on statutory profit before tax. It does, however, increase
operating profit by £9.9 million in the restated IFRS 2005 full year results
(interim results for the six months to 2 April 2006 by £10.0 million) and
reduces other net gains and losses by the same amounts.
Adjusted tax rate
Also in May, the Group reported a higher interim 2006 adjusted tax charge as a
consequence of the adoption of IFRS, than would have arisen under UK GAAP. The
restated 2005 full year IFRS adjusted tax rate on adjusted profit also rose
from 22.6% under UK GAAP to 24.1%. These increases arose principally because
the Group did not take credit in the adjusted tax rate under IFRS for the
reduction in current tax arising from US tax deductible amortisation. The
current tax benefit of this amortisation has been taken in prior years under UK
GAAP to the extent that it was not dependent on or driven by the accounting
amortisation charge.
The adjusted rate of tax on the 2006 interim profits under IFRS was 31.9%, up
from 28.5% in interim 2005 (restated under IFRS), as 2005 marked the final
period when prior year US tax losses were recognised in the income statement.
The Group has reassessed its full year 2005 and interim 2006 adjusted tax
charge under IFRS so as to include the current tax benefit of the US tax
deductible amortisation as described above. This has had the effect of reducing
the full year 2005 restated IFRS rate from 24.1% to 22.1% and the interim 2006
rate from 31.9% to 28.8%. The actual amount of tax paid is not affected by
these changes.
Adjusted earnings per share (eps)
As a consequence of the changes in the adjusted tax charge, figures, adjusted
eps for the full year 2005 has increased from 42.0 pence to 43.2 pence and the
interim 2006 adjusted eps from 17.8 pence to 18.7 pence.
An analysis of the unaudited restated segmental 2006 interim and 2005 year end
operating profits, adjusted tax charges and adjusted earnings per share is
available on the Group's website at http://www.dmgt.co.uk/investorrelations/
presentations/index.html#002150.
END
