25th Sep 2012 07:05
25th September 2012 Daily Mail and General Trust plc (`DMGT') Pre Close Trading Update
Ahead of the year end on 30th September, 2012, this statement provides an update on the Group's progress in the current year. It covers the eleven month period to the end of August 2012 and includes comments on September, where appropriate.
Summary
* Solid Group revenue performance, up 3% underlying# * Good growth from B2B operations, up 8% underlying# * Resilient revenue performance at Associated, up 1% underlying#; circulation and digital revenue growth largely offsetting print advertising weakness * Active portfolio management; targeted acquisitions and disposal of non-core assets * Net debt expected to be less than £700m at year end; net debt/EBITDA ratio less than 2.0 * Outcome for the year in line with market expectations~ 11 months to end August 2012 Revenue growth Revenue growth Reported Change Underlying# Change Year-on-Year Year-on-Year Group revenue -1% +3% B2B (including Euromoney) +2% +8% RMS +4% +7% dmg information1 +10% +12% dmg events -38% +15% Consumer -3% 0% Associated Newspapers -2% +1% Northcliffe Media -10% -6%
1 dmg information reported and underlying revenue growth rates are the same before and after the change in revenue recognition at Hobsons as set out below.
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. The consumer business delivered a resilient performance and also benefited from incremental revenue from the Olympics. We expect our full year results to be in line with market expectations~. Going forward our focus will remain on driving organic growth, operational and financial efficiency and pursuing an active portfolio management approach."
Business to Business (B2B)
* RMS delivering continued growth driven by its core business in catastrophic risk modelling as well as new product areas. * Strong growth at dmg information (dmgi) with growth across all sectors but in particular at its education business, Hobsons. * dmg events performing as expected with an underlying# revenue increase of 15%. The reduction in reported revenues is due to the sale of George Little Management (GLM) in September 2011 and to only one of the three large biennial events having taken place during the year. * Continued solid performance from Euromoney which released its trading update earlier today. Consumer Revenue growth Revenue growth Reported Change Underlying# Change Year-on-Year^ Year-on-Year^ H1 Q3 July & YTD H1 Q3 July & YTD August August Associated -2% +1% -3% -2% 0% +4% +3% +1% Advertising -5% 0% -1% -3% -4% +2% +7% -1% Circulation +4% +4% +2% +4% +4% +4% +2% +4% Northcliffe -10% -9% -9% -10% -7% -4% -5% -6% Advertising -11% -11% -12% -11% -8% -7% -9% -8% Circulation -5% -5% -9% -5% +2% +2% -4% +1% * Associated: circulation revenues up 4%, benefiting from the effect of 2011 cover price increases and continued market share improvement. Underlying# advertising revenues for July and August^ were up 7% reflecting the benefit of the Olympics. Total year to date underlying# advertising revenues were down 1% with newspapers down 7%, newspaper websites (mainly Mail Online) up 72% and other digital advertising (primarily Evenbase and Wowcher) up 11%. For the first three weeks of September, total underlying# advertising revenues were 3% ahead of last year.
Headcount reduced to 3,844, which is 498 (11%) lower than at the start of the financial year.
* Northcliffe: circulation revenues up 1% on an underlying# basis, reflecting the benefit of cover price increases. Total underlying# advertising revenues were down 8% in a difficult market. There is a continued focus on efficiency with costs reduced by 14% over the year. For the first three weeks of September, total underlying# advertising revenues were 10% below last year.
Headcount reduced to 2,233, which is 298 (12%) lower than at the start of the financial year.
Group
* Portfolio management activity: continued during the year with bolt-on acquisitions at dmg information (Intelliworks, PrepMe, SpringRock), Euromoney (Global Grain Geneva and Global Grain Asia) and Associated (Jobrapido). Acquisitions, including purchases of Euromoney shares, have used £83 million of cash so far this year. Disposals have included Top Consultant, motors.co.uk, Teletext and the remaining stake in DMG Radio Australia and disposal proceeds have totalled £81 million. In addition, the recently announced sale of dmg events' Evanta is expected to complete by the end of this week and this would then be the fourth consecutive financial year where disposal proceeds have exceeded acquisition costs. Combined with strong cash flow generation, we expect net debt at the financial year end to be less than £700m, with a net debt to EBITDA ratio of less than 2.0 (assuming the completion of the disposal of Evanta before 30th September 2012). * Exceptional operating costs: expected to be around £90 million for the full year. Cash items, primarily reorganisation, redundancy and consultancy costs and largely within the consumer businesses, are expected to account for approximately two fifths of the total. The remainder, being non-cash items, are accelerated depreciation and impairment of plant and principally relate to the move of printing facilities to Thurrock and the closure of the Derby printing press. * Change in Hobsons' revenue recognition: Hobsons, dmgi's education business, has evolved such that multiple year contracts for software licences are now predominantly delivered in conjunction with a hosting service. These revenues have previously been recognised on delivery of the software licence at the start of the contract, but will now be accounted for on a subscription basis and recognised over the contract period. There will now be a closer alignment of revenue recognition with cash receipts, and this change in approach will result in a restatement of prior years' results, with the deferral of the recognition of revenue into future periods. The change impacts a little less than a fifth of Hobsons' revenues and is expected to reduce both revenue and operating profit by approximately £5 million in a restatement of last year's results. The reduction in current full year revenues and operating profit is expected to be between £1 million and £2 million.
It is encouraging to note that Hobsons has successfully transformed itself over the last few years from a predominantly print advertising based business into the subscription-based digital business that it is today.
* Full year guidance remains unchanged: we expect our adjusted results to be
in line with market expectations~, inclusive of the adverse impact of the
change in revenue recognition at Hobsons.
Notes
* References to profits or earnings are to adjusted profits or earnings, which are stated before exceptional items, impairment of goodwill and intangible assets, and amortisation of intangible assets arising on business combinations.
# Underlying revenue is revenue on a like-for-like basis, adjusted for acquisitions, disposals, closures and non-annual events in the current and prior year and at constant exchange rates. For RMS, underlying percentage movements exclude RMSI. For dmg information, movements exclude Sanborn and the effects of acquisitions made last year and this year. For dmg events, the comparison is between events held in the period and the same events held the previous time and excludes GLM. For Euromoney the comparisons exclude Ned Davis Research. For Associated underlying advertising excludes the effects of the sale of Teletext Retail last year and Teletext Holidays and motors.co.uk this year, the acquisition of Jobrapido in April 2012 and the merger of the Digital Property Group and Zoopla at the end of May 2012 and total underlying revenue excludes low margin contract publishing revenue. Northcliffe's underlying advertising and circulation revenue exclude the effects of the sale and closure of titles last year, and adjust for the move of several titles from daily to weekly publishing frequency and the move to a wholesale circulation model last year.
~ Current City analyst expectations of profit before tax* for 2012 range from £ 240 million to £257 million and earnings* per share from 45.9 pence to 49.3 pence with a consensus of £248 million and 47.9 pence. Source: DMGT website.
^ References to H1 and Q3 relate to the 26 weeks to 1st April, 2012 and the 13 weeks to 1st July, 2012 respectively. References to July and August are to the 8 weeks to 26th August, 2012. A detailed analysis of H1 revenue trends was set out in the Group's third quarter Interim Management Statement, released on 25th July, 2012.
The average £:$ exchange rate for the eleven months was £1: $1.57 (against £1: $1.61 in the same period last year). The rate as at 21st September, 2012 was $1.62, compared to the 2nd October, 2011 year end rate of $1.56.
DMGT's estimated weighted average number of shares in issue for the full year is 382.8 million (2011: 382.8 million). The total number of shares in issue (after deducting shares held in treasury) is currently 382.8 million.
For further information
For analyst and institutional enquiries:
Stephen Daintith, Finance Director, DMGT +44 20 3615 2902Adam Webster, Head of Management Informationand Investor Relations, DMGT +44 20 3615 2903
For media enquiries:
Kim Fletcher / Will Carnwath, Brunswick Group LLP +44 20 7404 5959
Conference Call
A conference call will be held with City analysts at 8.00 a.m. on 25th September. The dial-in number is 0800 694 0257 or +44 (0) 1452 555 566; conference code: 32258213. A replay of the call will be available on DMGT's website at www.dmgt.com.
Next Trading Update
The Group's next scheduled announcement of trading will be its preliminary results for the year ended 30th September which will be released on the morning of Thursday 22nd November, 2012.
About DMGT
DMGT is an international group quoted on the London Stock Exchange, operating a portfolio of businesses in the information, digital and media markets serving both corporate and consumer audiences around the globe.
DMGT's strategy is to retain and develop a group of high quality,entrepreneurial, market-leading information and media assets across both theB2B and consumer sectors. It aims to make these resources available to greateraudiences in more places around the world, building on its track record ofearnings and dividend growth. Daily Mail and General Trust plc Northcliffe House, 2 Derry Street, London, W8 5TT www.dmgt.com Registered in England and Wales No. 184594 Not for public release until 7.05 am on 25th September, 2012
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