Daily Mail signals that the worst may be over

March 24, 2009

Daily Mail signals that the worst may be over
Dan Sabbagh, Media Editor

Daily Mail and General Trust (DMGT) said that its recession-hit local newspapers were showing the first signs of recovery, even as the company announced that it would shed another 500 staff across its regional titles.

The publisher behind the Hull Daily Mail and Bristol Evening Post is closing printworks, rationalising sub-editing across regions and shutting a handful of titles, in cuts that will reduce the staff on its local papers to 3,500.

Despite the redundancies, Peter Williams, the finance director, struck a note of cautious optimism. “For the past six or seven weeks, revenues have been flat in absolute terms, which means that rates of year-on-year decline will start to improve significantly as the year continues,” he said.

DMGT has made 1,000 employees at its regional titles redundant this year, including the latest cutbacks, but Mr Williams forecast that the most recent round of dismissals would be the last needed if revenues continued to hold at their depressed levels.

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The company is closing “some of the smaller titles we launched when times were good”, Mr Williams said. He added that, despite the cuts, the company was “taking on even more reporters overall”.

DMGT believes that the real area of trading uncertainty is now for national newspapers. Display advertising in the Daily Mail and The Mail on Sunday - about 40 per cent of turnover - was down 24per cent in January and February. “Five months into our financial year, and it's the one area we can't predict, because it is so volatile. We've had weeks when we are up year-on-year, before another sharp decline,” Mr Williams said.

The 24 per cent figure would have been “a couple of percentage points better” had the London Evening Standard been excluded. The paper was sold last month to Alexander Lebedev, a Russian oligarch, who has pledged to fund its losses, estimated at £15 million a year, for about the next three years.

At the Northcliffe Newspapers regional division, advertising revenues fell 40 per cent in January, but that decline slowed in February. The overall decline in January and February was 37 per cent and what the publishing group described as “stabilisation” has continued into March. “The fact that we are talking about stabilisation is about the most encouraging thing anybody has said about the regional newspaper business in the last 18 months,” Mr Williams said.

Northcliffe Newspapers is on course to make a profit for the financial year to the end of September, but the figure is expected to be well below last year's £68 million in operating income.

Numis, the brokerage, wrote in a note: “Although we recognise the market's concern over B2C [consumer business], we believe Associated is a robust business, while the more challenged [regional newspaper unit] Northcliffe now represents just 15 per cent of Ebitda.”

DMGT also sells business information, owns Euromoney, the business-to-business group, and runs international exhibitions and an Australian radio group. These other businesses accounted for 61 per cent of sales last year and should bring in 70 per cent of operating profit this year.

DMGT shares closed up 8p, or 3.4 per cent, at 241p.

http://business.timesonline.co.uk/tol/business/industry_sectors/media/article5962710.ece