Daily Mail group 'cautiously optimistic' as profits rise

The parent company of the Daily Mail posted a leap in full-year profits yesterday, hailing a rise in advertising at its national newspapers and an aggressive cost-cutting strategy.

The Daily Mail and General Trust (DMGT) saw pre-tax profits rise 23 per cent to £247m in the year to 3 October. Martin Morgan, the group's chief executive, said the "sharp rebound" at its consumer media arm "reflects the actions taken to reduce costs and to eliminate loss-making activities, and growth in our national advertising."

Analysts lined up to back the full-year results, but the shares fell nearly 4 per cent to 544.5p as revenues came in 6 per cent lower at £1.9bn.

Advertising at the Daily Mail and its sister paper, The Mail on Sunday, as well as its freesheet, Metro, rose 7 per cent to £347m. The strong performance has continued into the new financial year. In the first seven weeks, ad revenues were 9 per cent higher than a year earlier.

Lorna Tilbian, a senior analyst at Numis Securities, said DMGT may raise the cover price of the Daily Mail to offset the increase in newsprint costs. Lifting it 5p to 55p would bring in an additional £20m in revenues. She added: "Due to its demographic, we see the title benefiting from the royal wedding."

The newspapers' digital operations continued to grow. Mail Online traffic increased by more than two-thirds in September to 47 million users over a year earlier, helping digital revenues from newspaper companion sites double to £12m.

The results were not all rosy, as problems continued at its regional newspaper business, Northcliffe Media. Advertising revenues have continued to fall and the regional titles have also suffered from the rise in the cost of newsprint. DMGT refused to commit fresh capital to the division and Numis believes it could be merged or sold once the revenues have stabilised.

The events arm saw profits plunge 37 per cent to £110m down to it selling off parts of the business "and, to a lesser extent, the late-cycle nature of exhibitions". The company said it was "cautiously optimistic" of another year of underlying growth in 2011.

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