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Daily Mail raises price as advertising slumps

Readers of the Daily Mail will be hit in the pocket when the newspaper raises its price for the first time in three years to cover falling advertising revenues and the rising cost of newsprint.

The Daily Mail's cover price will rise from 50p to 55p from Monday and will cover all the editions published during the week. The surprise news sent the parent company's share price tumbling to an 18-month low as the company also outlined a further deterioration in ad revenues.

Analysts described the 10 per cent price increase by the paper's parent company, Daily Mail and General Trust (DMGT), as a "defensive" move, with Numis Securities estimating it would add £15m in profits in a full year. The rise in cover price is the first for the weekly editions of the newspaper since April 2008.

In a statement released to the market yesterday morning, DMGT said that while the Mail's circulation had "significantly outperformed the market throughout the last year, the continuing high cost of newsprint means it is necessary to increase the cover price of the newspaper". It added that the increase would also "mitigate some of the impact of the recent decline in advertising revenue".

DMGT's share price fell more than 4 per cent to 421.3p yesterday as investors reacted badly to further falls in advertising revenue since the company's previous update two months ago. At the interim results, it revealed that advertising had declined 5 per cent during April and the first three weeks of May. The decline shocked the market and management, who had hoped for a boost from the Royal wedding and Easter, both of which fell during the period.

Yesterday it emerged that advertising revenues for the 13 weeks to the beginning of July had sunk further, and were now 7 per cent lower than a year earlier. The worst performance came during June, when revenues were down by almost a tenth. The company blamed "the backdrop of the fragile consumer economy, which has meant continued uncertainty for the retail sector". It pointed to the fall in marketing from retailers, which makes up almost a third of ad revenues in the Mail titles.

Yet the company believes there are reasons for cheer despite the uncertain outlook for the consumer market, as the "July to September comparatives are less demanding".

DMGT is preparing to announce its third-quarter interim management statement later this month. Yesterday's release said the other parts of the business continued to perform in line with its May update.

Lorna Tilbian, an analyst at Numis Securities, reduced her profit forecasts for the full year yesterday from £255m to £241m. She is now more cautious on the next full year, cutting expectations from £280m to £267.7m.

She said: "The extent of the weakness in the UK consumer and retail environment has had a far greater impact on DMGT than we anticipated at the beginning of the year, and the group has not been helped by the timing of its year end in September."