Preliminary unaudited consolidated results

Thursday 11 December 1997

Highlights

Dividend

At a meeting of the Directors of the Company held yesterday, it was resolved to recommend payment on the issued Ordinary and 'A' Ordinary Non-Voting shares of the Company on 13th February, 1998 of a final dividend of 16.0 pence per share for the year to 28th September, 1997 (1996 14.1 pence per share) making a total for the year of 23.0 pence per share (1996 19.4 pence per share).

For transferees to receive this dividend, transfers must be lodged with the Registrar by 30th December, 1997.
Results

Summary

The Group has had a successful year with profits before tax up 68% on last year to £143.7 million. Excluding exceptional items, the increase is 67%. This strong growth is attributable to a range of factors with all of the Group's divisions improving profits substantially, with the Group's newspaper operations greatly helped by rising advertising revenues and lower newsprint prices.

Operating profit

Operating profit rose by 82% over last year, to £159.6 million on turnover up 19% to £1,200.2 million. Acquisitions contributed a trading profit of £20.4 million, so the increase excluding acquisitions was 59%.

Associated Newspapers increased its trading profit substantially. The circulations of the Daily Mail and The Mail on Sunday again showed remarkable growth, and that of the Evening Standard has seen growth in recent months. Advertising, up 12% overall, was strong, particularly in the second half of the year, although pagination restrictions meant that yield was the primary source of revenue growth. The average price of newsprint was 18% lower, although higher paginations and volumes resulted in higher usage.

Northcliffe Newspapers produced another record trading profit. Circulation performance has improved, with eight of its daily and all its weekly titles showing an increase in the January to June 1997 period. Advertising revenues overall were up 13%, but situations vacant advertising was much stronger.

Euromoney Publications has already announced record results with trading profits up 38%. Nearly all its businesses had a good year, with training, specialist magazines and Latin Finance performing particularly well. The result includes a one month contribution from Institutional Investor, which was bought in August.

All three of the divisions of Harmsworth Media have shown substantial growth due to acquisitions. DMG Business Media now includes Southex, the North American exhibition business bought in October 1996, which has performed in line with expectations. Its UK business had a good year, although results were reduced by relocation and property-related costs.

It has been a formative year for DMG Radio, with its first Australian acquisitions having been made at the end of last year. The regional radio group generally performed quite well, but suffered from weak national advertising. The Adelaide speech station, 5AA, remained in loss as expected, but is progressing well.

For the broadcasting division, the acquisition of a further 30% of Teletext in February 1997, taking it to 75%, has transformed its reported trading profits, since Teletext is treated as a subsidiary from that time. Teletext again showed good growth, but the rapid growth of previous years is inevitably slowing. Channel One continued to suffer from lack of audience and hence revenues, and was relaunched in August with a substantially reduced cost base. Its losses for the year, including the costs of this exercise, were in line with last year.

Harmsworth Publishing has moved into overall profit with continued growth at Hobsons, particularly in its graduate and international publications, allied to a further reduction in losses at CollegeView.

Associates

As described above, Teletext was treated as an associate only until February 1997. The Group's other principal associates are Bristol United Press, which has had a good year including the benefit of its new contract to print the Mail titles, GWR, ITN and Study Group International, which has expanded into the US and Australia.

Net Interest Payable and Funding

The Group's net debt rose during the year from £423 million to £519 million. This £96 million rise included net expenditure on acquisitions less disposals of £152 million and capital expenditure of £74 million. Trading activities less interest, tax and dividends generated £130 million.

As a result of the higher debt level, net interest payable rose 38% to £37.6 million. The Group's ratio of earnings before interest, tax and depreciation to interest improved from 5.3 times last year to 5.6 times this year.

Exceptional Items

Exceptional credits totalling £20.9 million arose mainly from the sale of a surplus property and of the Group's interests in Westcountry Television and Classic FM. The repurchase of Exchangeable Eurobonds at a premium has given rise to a £15.5 million exceptional cost.

Post Balance Sheet Events

Since the year end, DMG Radio has acquired a further 25 regional radio stations in Australia from Rural Press for A$88 million (£40 million).

Outlook

The new financial year has started well with continuing strong advertising revenues in the UK and the prospect of a stable newsprint price for the year. Much will depend on the well- being of the UK economy and especially of recruitment advertising which, while currently buoyant, has been known to turn down very quickly. The other key factor will be the performance of the acquisitions which the Group has made over the last two years.

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