Plunge in papers’ ad revenues hurts DMGT

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Daily Mail & General Trust warned its full-year performance would be at the lower end of market expectations as the deteriorating economy precipitated sharp falls in advertising revenues from its national and regional newspapers.

Viscount Rothermere, the UK publisher’s chairman, said that “inevitably the worsening economic conditions are having an impact on our newspaper and property businesses”.

The publisher of the Daily Mail and Mail on Sunday said advertising revenues had fallen 22 per cent in July and August at its regional newspapers, which includes London’s Evening Standard.

Analysts were forecasting adjusted full-year profits of between £257m ($471.5m) and £279m compared with £288m in the previous year.

Its shares closed down 3p at 331½p on Thursday.

Simon Lapthorne, an analyst at Blue Oar Securities, said: “This is a disappointing outcome as they have a great track record of delivering on expectations. But it is a well-managed business and they are sanguine about cycles.”

Peter Williams, finance director, said there was “no question” that we were in a cyclical downturn in property and recruitment advertising but said there would be no ‘knee-jerk reactions’ such as closing titles, although they were cutting back on capital spending and on hiring staff.

Advertising trends deteriorated in the final quarter of the financial year, with September the worst of the three months. Mr Williams said there was little visibility in trends beyond the next few months, and “your guess is as good as mine” as to the outlook for advertising.

The group’s business-to-business activities, such as trade shows and information publishing, including its 66 per cent stake in Euromoney, make up half of group profits and were performing well, DMGT said.

Credit analysts at RBC Capital Markets said that while “funding is not an issue after recent bank refinancing . . . the underlying credit is clearly weakening. Bond spreads already reflect a lot of pain trading between 400 and 500 basis points”.

They said the group’s credit rating would inevitably come under pressure, and a downgrade by Fitch rating agency from BBB to BBB- looked likely.

The group has no long-term debt to repay before 2013. In regional papers, revenue from property ads fell 45 per cent in July and August, while job ads were down 28 per cent.

In the national papers, revenues were up 1 per cent in total over the 11 months to August. Within that, advertising revenues were up 0.4 per cent.

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