Preliminary unaudited consolidated results

Thursday 10 December 1998

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 12th February, 1999 of a final dividend of 18.0 pence per share for the year to 27th September, 1998 (1997 16.0 pence per share) making a total for the year of 26.0 pence per share (1997 23.0 pence per share).

For transferees to receive this dividend, transfers must be lodged with the Registrar by 29th December, 1998.

Results

Summary

The Group had another record year with profits before exceptional items and tax up 30% on last year to £188.6 million. Including exceptional items, the increase in profit before tax is 37%. This strong growth is attributable to a range of factors, with all of the Group’s divisions improving profits substantially.

Operating profit

Operating profit rose by 34% over last year to £213.6 million, on turnover up 18% to £1,418 million. Acquisitions contributed a trading profit of £8.1 million, so the increase excluding acquisitions was 29%.

Associated Newspapers saw their two national titles, the Daily Mail and The Mail on Sunday, achieve significant market share increases with average circulations up 5.9% and 3.4% respectively. The Evening Standard also achieved a circulation increase, the first for some years. Advertising revenues on all three titles continued to grow well, up over 10% in total. Combined with newsprint prices on average 5% lower than the previous year, operating profits rose strongly.

Northcliffe Newspapers also had a successful year, producing its seventh consecutive record profit. Advertising revenues were 7% up on last year. Situations vacant advertising rose three times as much. Circulations showed a pleasing increase and Northcliffe also had the benefit of lower newsprint prices.

Euromoney Publications produced operating profits up 19%. The August 1997 acquisition of Institutional Investor has gone well, with operating margins more than doubled. On the other hand, Euromoney has, inevitably, been affected by the economic crises in Asia and the emerging markets. In tough operating conditions, its result is creditable.

Harmsworth Broadcasting's results featured a strong performance from Teletext, assisted by buoyant holiday advertising. The initial costs of developing Digital Teletext were charged, but at a lower level than will be the case in the current year. As has previously been announced, Channel One in London and Bristol closed at the end of September and all the costs of closure have been charged in these results.

DMG Radio has expanded substantially during the year. In Australia, the acquisition of RBA in October 1997 doubled its number of regional stations to become the largest regional operator. The integration of RBA has been a key feature of the year. FiveAA in Adelaide, which was loss making on acquisition in 1996, is now trading profitably. In the UK, Essex Radio has performed satisfactorily since acquisition in February 1998.

DMG Exhibitions had another record year, with the benefit of a number of major biennial and triennial shows coinciding in 1998. In addition the Daily Mail Ideal Home Exhibition was successful, with its highest attendance for a number of years and a record profit.

DMG Information (formerly Harmsworth Publishing) has grown considerably, principally through the acquisition of Risk Management Solutions ('RMS') in February and with Study Group International becoming a subsidiary in June. Hobsons had another good year, although Study Group suffered from the financial problems in Asia, particularly in its Australian businesses. RMS has met expectations since acquisition.

Other Profit and Loss Items

The Group's two principal associated companies, Bristol United Press and GWR, have both recently announced good results. The associates' figure also includes the Group's 45% share of the costs of the successful launch of Radio Danubius in Hungary.

Exceptional credits totalling £18.0 million arose mainly from the disposal of the Group's investment properties.

Higher average net debt was the main reason that net interest payable rose 16% to £43.4 million, The Group’s ratio of earnings before interest, tax and depreciation to interest improved from 5.6 times last year to 6.7 times this year.

Funding

Despite higher average net debt than last year, the Group’s net debt fell during the year from £519 million to £416 million, a reduction of £103 million. Trading activities less interest, tax and dividends generated £189 million. Net capital expenditure contributed an inflow of £47 million due to the disposal of the Group's investment properties for £91 million. Acquisitions and disposals cost a net £141 million.

Year 2000

The Group has been undertaking a major project to try to achieve Year 2000 compliance. All Group companies have completed assessments of the problems and are working to correct these or have already completed that work. All systems are then being tested. Most work will be completed by March 1999, although some isolated systems replacements are not scheduled to be completed until July 1999. The Group expects to spend approximately £7 million specifically on the Year 2000 problem. This excludes funds spent on new systems to replace systems which were not Year 2000 compliant.

Outlook

Since the year end, Associated Newspapers' titles have continued to prosper and look forward to the benefits of increased printing capacity to produce more colour and more pages in Spring 1999. Northcliffe is seeing slower growth in advertising revenue, with situations vacant advertising now broadly flat year on year. However, the picture varies around the UK and from week to week, so that forward trends are difficult to identify. The Group's teletext, radio, exhibition and information businesses are growing satisfactorily, but Euromoney's markets remain difficult.

The economic outlook is uncertain, but the strong market position of most of our titles and products give us confidence in the Group's continued success.

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