Estate agencies are already in recession and the economic downturn is taking its toll on regional newspapers, according to Daily Mail and General Trust.
The group's overall revenues rose by 5 per cent to £1,168m in the first half, operating profits were also up 5 per cent to £166m with stable 14 per cent margins, and the dividend is up 8 per cent to 4.08p. But the group's Northcliffe Media local newspaper division saw operating profits fall by 13 per cent, to £13.8m, in the six months to March, and its business-to-business property division also saw declining advertising revenues.
Peter Williams, finance director at DMGT, blamed spiralling classified advertising on the slowing housing market. "Estate agents are on the floor – if you think the sector is not in recession, you've got another think coming," he said.
The prognosis is not good, and the group is predicting that rocky economic conditions will continue for the coming half-year, with an ongoing impact on Northcliffe. "Whenever there is a turn in the property market, whether at the top or the bottom, there tends to be a period where there is a suspension of business and far less transactions go through," Mr Williams said. "Normally it is only for about six months, but this time there is the added complication that people can't get mortgages and that is causing this to be extended."
Northcliffe's advertising revenues were down by 3.8 per cent to £131m for the six-month period, within which residential property ads were down 9 per cent and new home ads were down 4 per cent. And the downwards trend is accelerating, says the company. For the two months to April, overall advertising revenues were down by 6.7 per cent, with property down 12.7 per cent, motors down 9.2 per cent and recruitment down 4.7 per cent.
But the overall picture at DMGT is not all gloom and doom. "A lot more of the business is proving much more resilient in tricky trading conditions than a lot of people were expecting," Mr Williams said.
Associated Newspapers – the group's national division, which includes the Daily Mail, the Evening Standard and London Lite – saw total ad revenues rise 4 per cent to £242m and circulation sales stable at £188m, despite higher pricing. And operating profits were only down by 1 per cent, despite the substantial cost of a new full-colour printing plant. The Mail Online website saw revenues treble to £2m. The Euromoney institutional investor division is also performing strongly, particularly in emerging markets. And, despite the downturn in property-focused products, the business-to-business arm saw overall revenues up by 10 per cent.
DMGT can expect more of the same, from both its strong and weak divisions,
Lorna Tilbian, the head of media research at Numis, said. "The vital thing in a downturn is the ability to pay a decent dividend, and DMGT's combination of businesses will be able to generate enough free cash flow to keep its unbroken 20-year record of rising dividends."
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