Daily Mail warns Internet outlay may curb profits

DAILY MAIL and General Trust, the media company, warned yesterday that Internet-related expansion would dent future profits. Despite the warning, investors warmed to the announcement and pushed its shares higher.

DMGT said: "The Group expects again to increase significantly its expenditure on start-up and early stage businesses, notably Internet-related, but also on Metro and Digital Teletext.

"This expenditure will restrict profit growth."

The company, which unveiled full-year profits in line with forecasts, also announced a four-for-one share split, aimed at boosting liquidity in the thinly traded and volatile stock.

The company's A shares yesterday added 71p to 4290p, within 5 per cent of their year-high of 4525p. Peter Williams, finance director, said: "The only part of the Internet we're making money from right now is display advertising from dot coms in our newspapers. That's accelerated very rapidly in the last three months to around 5 per cent of advertising revenues. "

For the year ended 3 October, the company wrote-off pounds 15m in Internet investment and got pounds 5m in revenues.

Mr Williams said he could not say how much the company would invest on the Internet in the current year. "As they say, with the Internet, you need to review your strategy every 10 minutes," he said.

James Holder, analyst at HSBC, said that the company would increasingly be seen as a "safe" way to play the Internet, because of the security of the core newspaper interests.

Circulation revenue from the company's main newspapers, the Daily Mail and the Mail on Sunday and London's Evening Standard, was up 11 per cent on the previous year, and advertising revenues jumped 15 per cent.

DMGT said that, because of expansion, Metro would not be in profit by the end of next year, as originally forecast. The free daily newspaper for London commuters was launched in March. In the past few weeks, Metro has been rolled out in Manchester, Birmingham and Central Scotland.

Pre-tax profits for the period rose by 7 per cent to pounds 232.0m, on turnover of pounds 1.62bn (pounds 1.42bn). The dividend of 29.0p (26.0p) is payable from earnings per share of 134.8p (120.3p).