Bottom Line: Mail plays into Rothermere's hands

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THE SCRIP issue announced by Daily Mail and General Trust yesterday may, as the board claims, be in the long-term interests of all shareholders. But it certainly is of particular benefit, in theory, to Rothermere Investments.

By restricting the scrip issue to non- voting 'A' shares, Rothermere - which controls 53.3 per cent of DMGT through its 75 per cent holding of voting shares - would be able to realise substantial cash sums in future without relaxing its grip on the company.

Although DMGT seems poised to be the last bastion of unenfranchised shareholderdom on the Stock Exchange, the market took the scrip news well, marking the 'A' shares up from pounds 109 to pounds 115.75. Rothermere has given a commitment to maintain its aggregate shareholding in DMGT - without this the scrip would have been completely unacceptable - and marketability of the 'A' shares will be improved.

But what is really keeping the voteless shareholders in compliant mood is DMGT's continuing success, illustrated by last year's 14 per cent dividend increase and a 25 per cent rise in normalised earnings, albeit largely due to a drop in the tax charge.

Substantial but undisclosed promotional spending pushed circulation and profits higher at the Daily Mail and Mail on Sunday, offsetting declines at the Evening Standard, while moves to colour and improved yields boosted Daily Mail advertising revenues 15 per cent.

Promotional spending will be lower this year but the revenue costs of launching three new supplements and spending on cable television and US educational software will be pounds 7m to pounds 7.5m higher. A rise in pre-tax profits to more than pounds 80m promises another solid dividend rise but a p/e of 22 - a 50 per cent premium to the market - is beginning to look too expensive.