Daily Mail group cuts ease fall in profits
Newspaper publisher beats expectation, sparking predictions of 'green shoots'
Friday 27 November 2009
The fall in profits at the Daily Mail's publisher were not as bad as the market had feared after its hefty cost-cutting plan began to pay off. The Daily Mail & General Trust (DMGT), which cut £150m in costs, was also helped by a strong performance at its flagship title as well as currency gains, as pre-tax profits fell 23 per cent to £201m. Analysts had expected profits to sink to £184.1m.
DMGT has "taken action on various underperforming assets across the group", including cutting headcount by 1,600, closing regional printing plants and selling 75 per cent of the London Evening Standard.
Martin Morgan, the chief executive of DMGT, was buoyed by the results for the 12 months to 4 October. "We have actively managed the business to defend profitability during unprecedented trading conditions with a clear focus on fundamentals," he said.
The drive to slash costs helped improve the profitability of its consumer operations – among the worst hit during the downturn – since March. Mr Morgan added it also reflected "more stable conditions". The Daily Mail returned its second highest profits in history and the group has seen an improvement in advertising revenue since October. Yet advertising is still down over the previous year "and with little forward visibility". Lorna Tilbian, a senior analyst at Numis, said DMGT had reported a "strong set of results. There are encouraging, if early-stage, signs of green shoots across the business".
Much focus on the industry has been on companies charging for their online activities. The drive is being spearheaded by Rupert Murdoch's News International, whose titles, including The Sun and The Times, are set to bring in pay walls next spring. The regional newspaper group Johnston Press is also experimenting with the strategy.
DMGT said yesterday that the advertising markets had undergone a structural change as ads have moved online. Lord Rothermere, DMGT's chairman, added that the group encouraged an "entrepreneurial approach to the development of new opportunities in response to these threats".
There was also growth from its business-to-business arm, which includes Euromoney and Risk Management Solutions, increased its overall profit by 7 per cent, helped hugely by a 21 per cent fall in sterling against the dollar.
Mr Morgan said the group's diversification strategy left it "well positioned for 2010 and beyond".
The real drag on the group has been its regional newspaper publisher Northcliffe Media, where profits fell 65 per cent to £24m. The division "suffered from substantial falls in core revenue categories" leading to a "complete re-engineering of the business". Debt rose from £1.01bn last year to £1.04bn, while the deficit in its pension fund has increased more than tenfold to £430m.
Separately, DMGT has sold a 50 per cent stake in its Australian radio business to the private investment vehicle of Lachlan Murdoch, Rupert's son. He will become the division's chairman.
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