DMGT trading update September 2011

September 28, 2011 — Fusion DigiNet


DMGT trading update to September 2011

Year end is October 2, 2011

The trading update covers the eleven month period to the end of August 2011

Summary

Revenue up 1% on last year, up 2% on an underlying basis

B2B businesses revenues up 9%

Consumer businesses revenues down 3% on an underlying basis

Forecast for the year at the lower end of the range of market expectations~

BUSINESS TO BUSINESS

Revenues from the group’s B2B operations for the period were 8% higher than for the corresponding period last year, with an underlying increase of 9%.

At a divisional level, Risk Management Solutions’ revenues grew by 4%, an underlying increase of 11%, reflecting continued growth from RMS’s core modelling business.

At dmg information, reported revenues grew by 1%. The underlying revenue increase was 5% with good growth from our companies in the property, education and energy information markets.

At dmg events, reported revenues grew by 20% including the impact of this year’s additional biennial show. The underlying revenue increase was 14%. This includes dmg event’s largest recent event, the summer New York International Gift Fair in August, part of GLM, the sale of which is expected to complete in late September.

B2B revenues include those of Euromoney Institutional Investor, which released its trading update on 23rd September, reporting that total revenues for the full year are expected to show a headline increase of approximately 10%. Recent trading has shown a slowing in the rate of growth of advertising and event sponsorship sales. In contrast, delegate bookings for events and training courses have held up well, and subscriptions revenues have continued to grow at similar rates to the third quarter.

Euromoney has reported that it may achieve the profit target under its capital appreciation plan (CAP 2010) a year earlier than expected. This would give rise to an additional accelerated long-term incentive expense of £6.6 million under IFRS2 which is not reflected in the current estimates for the full year result.

CONSUMER MEDIA

Underlying revenues from A&N Media were 3% lower than for the corresponding period last year and 4% lower on a reported basis. A&N Media has continued to focus on operational efficiency. However, weaker advertising revenues, combined with the high cost of newsprint, will lead to significantly lower profits for the full year compared to last year.

Planning consent has recently been granted for the construction of Harmsworth Printing’s new printing plant in Thurrock. The group plans to acquire the freehold of the site and for the first press to begin production in autumn 2012 and for all six presses, relocated from the existing Surrey Quays site, to be fully operational by the autumn of 2013.

Associated Newspapers’ underlying revenues for the period were 1% lower than for the corresponding period last year, and 2% lower on a reported basis. Underlying circulation revenues were 3% lower. Both the Daily Mail and The Mail on Sunday have continued to improve their market share in recent months.

Total underlying advertising revenues for the period were down 1%, with those from Associated’s newspaper operations down by 2% with print down 4% and digital up 54%. The two largest advertising categories, retail and travel, were weak in the period, both down 5%. The revenues of Associated’s digital-only businesses grew by 5%.

For the eleven weeks to 18 September 2011, total underlying advertising revenues were 1% below last year, with newspaper operations down 2% and digital-only businesses up 2%. This was a significant improvement on the previous quarter to June, which was down 7%, driven mainly by Metro’s particularly strong performance and improving trends from the Daily Mail. Underlying circulation revenues were 4% lower, due to the recent temporary price discounting at The Mail on Sunday, partly offset by the impact of the increase in the cover price of the Daily Mail weekday editions on 18th July 2011.

Northcliffe Media’s total revenues for the period were 10% lower with advertising revenues down 10% (recruitment down 30%, other categories 6% lower) and circulation revenues down 7% compared to last year. For the eleven weeks to 18 September, advertising revenues are down 11%, broadly in line with the previous quarter (down 10%).

Costs continue to be well below prior year levels, driven by reduced staff and distribution expenditure in particular. Headcount was reduced by 17% over the period from 3,130 to 2,600.

FINANCING

On 1 August, Euromoney announced the completion of its acquisition of an 85% interest in Ned Davis Research group for approximately US$108 million (£66 million). The group also expects to complete the sale of GLM before the year end, for a total consideration of £110 million, including £93 million in cash. It has sold its equity investment in CoStar group, Inc, acquired in exchange for Property & Portfolio Research in July 2009, for US$35 million (£22 million). Combined with the generation of strong cash flows, we expect net debt at the year end to be below £750 million.

In May, the group reported a deficit on its defined benefit pension schemes of £198 million at the half year (calculated in accordance with IAS 19). Should the recent declines in bond yields and falls in the equity market be sustained, the group’s year end accounting pension deficit is likely to rise by in excess of 50%.

Martin Morgan, Chief Executive, said:

“DMGT has delivered a solid revenue performance over the year to date, driven by continued strength in our B2B operations offset by difficult market conditions for our consumer businesses. Despite our continued focus on operational efficiency, the weak consumer advertising environment means that full year group operating profit will be lower than last year. We expect some growth in earnings per share compared to last year, given lower finance and tax costs, but at the lower end of market expectations. Going forward our focus will remain on driving organic growth, operational and financial efficiency and pursuing an active portfolio management approach.”

UK, London

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