21st Sep 2006 07:00
21 September, 2006 Daily Mail and General Trust plc (`DMGT') Trading Update SummaryThis statement updates investors on DMGT's progress in the current year, aheadof its year end on 1st October, 2006.Since we last reported in May, the Group's business to business divisions andits consumer businesses have continued to experience very different tradingconditions. Whilst the business-facing and digital divisions have enjoyedfurther good growth in revenues, the consumer operations are still seeingdifficult trading conditions and the modest improvement in the displayadvertising market for our national newspaper titles during the spring hasproved patchy. The regional newspaper restructuring continues to progress well.The strength of our newer businesses means that the Group is on course thisyear to generate approximately half of its profits from its non-newspaperoperations, including its fast growing digital activities. Overall, despite theweakness of consumer advertising markets, the launch costs of our new Londonfree newspaper and the impact of the weaker US dollar, we still expect toachieve modest progress for the full financial year compared to last year.National NewspapersAssociated Newspapers' overall circulation revenues for the eleven months toAugust were 1.6% above the same period last year. Total advertising revenues inthe same period have fallen by only 2% (6% excluding acquisitions), despite thewell-reported difficulties within the market. This robust performance is partlydue to strong growth in digital revenues.The Daily Mail achieved an unchanged level of circulation for the six month ABCperiod to August 2006 despite a 5 pence increase in its Monday to Friday coverprice in April, aided by several successful promotions. Both the Daily Mail andThe Mail on Sunday have again outperformed their peers. On 10th September, TheMail on Sunday raised its cover price to ‚£1.40. The average circulation of theEvening Standard fell by 7%. In late August it discontinued its free lunchtimeedition and raised its cover price to 50 pence, prior to the 30th August launchof London Lite, our new free newspaper in Central London, which is aimed at adifferent consumer market. Metro's national distribution now averages more than1.1 million copies.Associated's newspaper display advertising revenues have fallen by 5% for theeleven months to the end of August, despite a 5% increase in the retailcategory. Classified advertising revenues are down by 9% for the same period.Although visibility on future advertising performance remains very limited,there are some signs of an improving display market.Underlying advertising revenues from Associated's digital operations, excludingrecent acquisitions, have risen by 22% year on year and by 95% overall.Advertising revenue at Teletext is down 19% year on year. Although advertisingrevenue from Teletext's analogue services has fallen by 30%, revenues from itsdigital services (television and internet) have risen by 102%. Due to costsavings, Teletext is still on track to record a profit for the year.Regional NewspapersNorthcliffe Newspapers, like the rest of the regional newspaper industry, iscontinuing to experience tough trading conditions. UK advertising revenues forthe eleven months to August 2006 (excluding Aberdeen Journals which was sold inApril 2006) were 8% lower than the same period last year. Excluding recruitmentrevenues, which have declined by nearly 17% (and by 11.5% in the past threemonths), advertising revenues are 5% lower. Property (up 6%) has continued togrow, but motors has fallen by 17% and retail has fallen by 5%. Revenues fromdigital publishing are 18% above last year.UK circulation revenues for the eleven months to August 2006 were 0.9% lowerthan the same period last year. Although in the January to June 2006 ABCperiod, Northcliffe evening daily titles reported a 5% circulation decline,this remains a better result than industry average circulation figures.The extended Aim Higher programme of organisational and structural improvementscontinues. Despite increased newsprint and energy costs, operating costs forthe eleven months to August 2006 are 7% lower than last year. Annualised costreductions from the programme are currently running at around ‚£33 million.Northcliffe remains on target to achieve its announced ‚£45 million annual costreduction by the end of September 2007. A fourth print site, Hull, has beenclosed recently.Information publishingDMG Information continues to generate strong growth, with underlying revenuesfor the year expected to be up approximately 22% at constant exchange rates andmargins slightly higher than last year. Genscape is performing well since itsacquisition in early May. There continues to be an encouraging range ofdevelopment opportunities across the division and the quantum of revenueexpenditure on product development is expected to increase in the comingfinancial year. Study Group was sold on 8th September for ‚£75 million.Financial publishingEuromoney Institutional Investor plc is in an offer period following its ‚£224magreed bid for Metal Bulletin plc, and therefore we are unable to comment onits current trading.ExhibitionsAlthough revenue has grown by around 6% year on year for the eleven months toAugust 2006, dmg world media is experiencing a tough year. Consumer shows,which comprise just over half of the business, have struggled with an overalldecline in revenues. The performance of our retail shows has been varied: Gifthas been difficult while Surf has been more resilient. The Business to Businessshows, including the biennial Global Petroleum Show held in June, haveperformed well and have continued to grow.RadioDMG Radio Australia's revenues are expected to show a rise of about 10% on lastyear, although this is disappointing in the context of its growth plan. The newVega station launches were not successful and are now being relaunched. The keyNova Sydney station has also had a difficult period, not helped by weakness inthe Sydney advertising market. The most recent ratings issued last week wereencouraging for Nova Sydney, but this is too late to affect this year's result.Exceptional items and impairment chargesIn its full year 2006 results, the Group will report exceptional gains ofaround ‚£180 million arising on the disposal of businesses, principally AberdeenJournals and Study Group. It will also report other exceptional gains of around‚£20 million, mainly from the recent sale of its remaining shares in ReutersGroup plc for ‚£27 million.The Group also expects to take a charge of approximately ‚£40 million asexceptional operating costs. This charge will comprise the costs for the secondphase of Northcliffe's reorganisation programme, together with the professionalcosts of its strategic review, reorganisation costs within Associated and arestructuring charge within dmg world media. The Group is also likely to make afurther goodwill impairment charge, particularly in respect of some of itsconsumer exhibitions, following a downturn in those markets.Accounting changesIn May, the Group first reported under International Financial ReportingStandards (IFRS). Since that time it has decided to make two allocationchanges, as described in the attached appendix, in order to align publishedfigures more closely to the way we manage our businesses, and in the light ofdeveloping reporting practice.These changes, which are subject to audit, do not affect statutory reportedearnings, but one does reduce the number we quote for our adjusted tax rate andhence increases adjusted earnings per share.Preliminary announcementDMGT intends to announce its preliminary results for the current year on themorning of Thursday 23 November, 2006.Enquiries: Peter Williams, Finance Director, DMGT, 020 7938 6631 Nicholas Jennings, Company Secretary, DMGT, 020 7938 6625 Andrew Honnor, Tulchan Communications, 020 7353 4200 Daily Mail and General Trust plc Northcliffe House, 2 Derry Street, London, W8 5TT Tel 020 7938 6000 Fax 020 7938 4626 www.dmgt.co.uk Registered in England and Wales No. 184594 Appendix Accounting changesAt the time of the announcement of its interim results in May, the Groupreported under IFRS for the first time and adopted a number of new accountingpolicies.IAS 19, Employee benefits: change of accounting policyIn May, the Group split its pension charge between: the current service cost,included under operating profit; and a finance credit, being the differencebetween the return on the assets and the interest charge on the liabilities,that appeared under `other gains and losses'.We have decided to change our disclosure of the pension charge and to move thefinance component into the operating profits of the divisions operating definedbenefit schemes (principally the newspaper divisions). These divisions will becharged the cash funding rate, with the difference between this and the totalIAS19 charge included in unallocated central costs.This change of policy should aid comparison of trading results with othercompanies operating final salary schemes. It will have no impact on adjustedprofit (before exceptional items and amortisation and impairment of intangibleassets), nor on statutory profit before tax. It does, however, increaseoperating profit by ‚£9.9 million in the restated IFRS 2005 full year results(interim results for the six months to 2 April 2006 by ‚£10.0 million) andreduces other net gains and losses by the same amounts.Adjusted tax rateAlso in May, the Group reported a higher interim 2006 adjusted tax charge as aconsequence of the adoption of IFRS, than would have arisen under UK GAAP. Therestated 2005 full year IFRS adjusted tax rate on adjusted profit also rosefrom 22.6% under UK GAAP to 24.1%. These increases arose principally becausethe Group did not take credit in the adjusted tax rate under IFRS for thereduction in current tax arising from US tax deductible amortisation. Thecurrent tax benefit of this amortisation has been taken in prior years under UKGAAP to the extent that it was not dependent on or driven by the accountingamortisation charge.The adjusted rate of tax on the 2006 interim profits under IFRS was 31.9%, upfrom 28.5% in interim 2005 (restated under IFRS), as 2005 marked the finalperiod when prior year US tax losses were recognised in the income statement.The Group has reassessed its full year 2005 and interim 2006 adjusted taxcharge under IFRS so as to include the current tax benefit of the US taxdeductible amortisation as described above. This has had the effect of reducingthe full year 2005 restated IFRS rate from 24.1% to 22.1% and the interim 2006rate from 31.9% to 28.8%. The actual amount of tax paid is not affected bythese changes.Adjusted earnings per share (eps)As a consequence of the changes in the adjusted tax charge, figures, adjustedeps for the full year 2005 has increased from 42.0 pence to 43.2 pence and theinterim 2006 adjusted eps from 17.8 pence to 18.7 pence.An analysis of the unaudited restated segmental 2006 interim and 2005 year endoperating profits, adjusted tax charges and adjusted earnings per share isavailable on the Group's website at http://www.dmgt.co.uk/investorrelations/presentations/index.html#002150.ENDDAILY MAIL & GENERAL TRUST PLCRelated Shares:
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