Daily Mail group hit by classified ads slowdown

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The Independent Online

The media group Daily Mail & General Trust suffered another sharp fall in advertising sales over the past three months, as the UK's economic slowdown continued to hit its newspaper groups.

Viscount Rothermere, DMGT's chairman, said: "Inevitably, the well-publicised deterioration in the UK economy since we last reported in May is having an impact on our newspaper businesses."

DMGT's regional newspapers group Northcliffe Media was hit particularly hard, with advertising sales down 11 per cent over the three months to the end of June compared with the same period last year. Northcliffe's sales are heavily dependent on classified sectors, where there has been a dramatic decline in spending by advertisers. Revenues from property ads were down 25 per cent on last year, with recruitment and retail advertising down by 10 per cent and 9 per cent respectively.

DMGT also warned that the pace of deterioration at Northcliffe had quickened during May and June and that the first few weeks of July had offered little respite. In June, revenues from property advertising fell 36 per cent compared with the same month in 2007.

DMGT's national newspaper division, Associated Newspapers, is also being affected by the advertising slowdown, though a 4 per cent increase in circulation sales enabled the division to increase its total revenues marginally over the quarter. Advertising sales were down 3 per cent.

The latter figure, however, was buoyed by a good performance from the division's online and digital operations. Sales of display advertising at Associated's print newspapers, which include the Daily Mail, fell by 5 per cent over the last quarter, while classified revenues were down 9 per cent.

Nevertheless, a strong performance from DMGT's business-to-business operations enabled the group as a whole to post a 5 per cent increase in total revenues compared with the same quarter last year. Its Euromoney Institutional Investor business performed particularly well, with sales up by 13 per cent, while revenues from DMG Information rose 6 per cent.

Gareth Thomas, a media analyst at investment bank Collins Stewart, said DMGT's market update confirmed worrying trends seen at other media groups, with regional newspapers hit hardest by the slowdown.

"Newspapers are, predictably, having a rough ride," Mr Thomas said. "We are already forecasting Northcliffe revenues to fall 11 per cent in 2009... though nationals are faring a little better."

Analysts from stockbroker Killik & Co added: "[This is] a mix of good and bad news. On a positive note, trading in the group's information and events businesses remain fairly buoyant. However, on the downside, the deterioration in advertising trends seen in May and June has continued into July. We would highlight the slide in recruitment advertising in particular and caution that this is the group's highest margin category."

Northcliffe's problems follow similar slowdowns reported by Trinity Mirror, while specialist regional publishers such as Newsquest and Johnston Press have also warned of a sharp fall in advertising sales.

But DMGT said it believed its diversified portfolio of businesses would leave it less exposed to a consumer slowdown than other media groups. It has also taken steps to reduce borrowing levels over the past three months, with net debt now down £134m to £1bn. The group made £96m of disposals during the quarter.