Group audited preliminary results

Friday 29 November 2002

Highlights

Summary

The Group made an adjusted profit before tax of £182.5 million, an increase of 3% compared with the equivalent figure for last year of £177.5 million, on turnover down 1% to £1,945 million. This was a strong performance, achieved despite difficult trading conditions and in the face of continued weakness in most advertising markets.

The Group's newspaper divisions both reported a modest reduction in profit. For Associated, a sharp fall in advertising revenues was substantially offset by increased circulation revenues, a lower newsprint price and reduced costs. For Northcliffe, both circulation and advertising revenues grew a little, but were more than offset by increased investment in editorial and marketing and lower profits from contract printing.

The Group's strongest performing divisions were dmg world media, our exhibition operator, and the business-to-business section of DMG Information. Both DMG Broadcasting and, particularly, Euromoney Institutional Investor responded rapidly to decreasing revenues by reducing their cost bases and thereby increasing their profits. The Evening Standard and DMG Information's Careers group suffered from declines in the London and graduate recruitment markets respectively.

Associated Newspapers

Associated Newspapers, the Group’s national newspaper division, performed strongly in a very competitive market. Its operating profit fell just 3% despite unprecedented difficulties in its advertising markets and a first year investment in Ireland on Sunday. The circulation of its national titles again increased despite raising cover prices early in the year and despite cover price reductions by other titles. The Daily Mail’s average circulation was up 6,000 to 2,437,000 and that of The Mail on Sunday was up 1,000 to 2,360,000. Both again increased their share of the national newspaper market. The Evening Standard’s circulation revenues rose by 8%, in spite of a fall in average circulation to 417,000, largely due to the elimination of days with a reduced cover price. Recent circulation trends have been more encouraging and the latest Readership Survey figures for the six months to September show substantial increases in readership and particularly in women readers.

Advertising revenues for the year fell by 9.6%. Display advertising remained volatile and unpredictable. Retail and travel advertising were strong, but the financial and information technology categories continued to decline. Both Mail titles raised advertising yields. Classified advertising was depressed by the reduction in the recruitment category where the Evening Standard experienced a 38% fall.

Metro had a very successful year and recorded a small profit for the last quarter of the financial year. Loot, which was acquired in October 2001, was reorganised and reinvigorated, with a resulting 10% growth in advertising revenues. Ireland on Sunday increased its sale from 48,000 to an average 150,000 following its re-launch in May to become the third biggest selling Irish Sunday newspaper. Associated New Media recorded reduced losses.

Northcliffe Newspapers

Northcliffe Newspapers, the Group’s regional newspaper division, produced an operating profit of £90 million, down from last year’s £97 million largely due to lower contract printing profits. Northcliffe's evening titles recorded a decline in circulation of 2.9% in the ABC audited figure for the half year to June 2002, a considerable improvement on the decline in 2001. A number of daily titles showed increases, as did almost all its weekly titles, which were up 1.5% in total. In all categories, Northcliffe's titles outperformed the regional newspaper industry. This improvement in circulation performance, despite selective rises in cover prices, was a direct result of the extra £7 million invested in editorial and marketing. Consequently circulation revenues increased for the first time in many years.

Advertising revenues were volatile, but overall increased by 1%. Recruitment advertising was 3% down with wide variations in performance across its centres, from 18% down to 24% up. The other major categories all showed modest increases. The Midlands, West Country, Humberside and South Wales enjoyed robust advertising revenues, whereas Bristol, Bath and Aberdeen recorded year on year declines. The division's Hungarian operations improved profits by over 50%.

As expected, a decline in contract printing resulted in profits from this activity being £4 million lower than last year. Investment in electronic publishing decreased due to significantly higher revenues and lower staffing, as a result of closer integration with the newspapers.

Euromoney Institutional Investor

Euromoney has already announced its excellent results, which showed a 4% increase in operating profit, despite turnover being down by 12%. Strategic initiatives implemented towards the end of the prior year, involving the closure of loss-making businesses, together with an extensive cost cutting programme, mitigated the impact of the savage downturn in the financial advertising markets. ISI, the online information service on emerging markets, reduced its losses substantially and recorded a small profit in September, as planned.

Broadcasting

Within DMG Broadcasting, Teletext recorded only a small reduction in operating profit, despite enduring a most challenging year. Cost reductions and a lower ITC fee payment almost offset a 6% decline in revenues. General display advertising revenue fell by 5% and holiday advertising, particularly flights, by 6%. Teletext’s new services continued to make good progress, with satellite television and SMS messaging services launched during the year.

DMG Radio Australia recorded a small and reduced loss. The recently launched Nova station in Melbourne and 5AA in Adelaide are performing particularly well and the regional stations experienced some recovery in difficult trading conditions. The business became wholly owned again in late September when DMGT repurchased the 25% it did not already own from GWR Group plc.

The divisions' other businesses showed improved profitability due to a return to profit for British Pathe and the elimination of loss making activities.

dmg world media

dmg world media, the Group’s exhibition division, had an excellent year and improved its operating profit by 44% on turnover up 5%. Its home interest exhibition sector grew strongly in the year, with attendance at North American shows enjoying a strong recovery, benefiting from increased investment in the shows as well as consumers' reluctance to travel. Both the gift and antique sectors had a difficult first quarter, but both have recovered well.

The year has seen the successful integration of a number of acquisitions made in the previous year. It has also seen an increase in the number of launches as the division moves from acquisition led to organic growth. The year also included some non-annual shows, notably the biennial Global Petroleum Show held in Calgary in June.

DMG Information

The fortunes of DMG Information were mixed. Overall its operating profit fell by 4% on turnover up 4%.

The Careers group, made up of Hobsons and Study Group, had a difficult year. Weak demand for graduate recruitment in the UK and Germany had a significant adverse impact on Hobsons' results, as did the aftermath of September 11 on Study Group's US business. Substantial cost reduction and restructuring has taken place in both businesses.

The business-to-business companies overall increased profits by almost 100%. RMS enjoyed an increase in revenues from its insurance company clients. EDR acquired and successfully integrated one of its competitors during the year, and EDR Landmark continued to grow strongly in the UK.

Joint ventures and associates

The Group’s share of net operating profits of its investments in joint ventures and associates rose due to reduced losses in new media ventures, particularly Zoom, Fish4 and Whereoware, offset by a lower contribution from GWR Group plc. GWR's earnings fell significantly due to the effects of the continued weak radio advertising market. GLM, the North American gift exhibition organiser, did well to maintain profits.

Other Profit and Loss Items

Income from fixed asset investments fell due to a reduction in the dividends received from Reuters Group plc. The profit on sale of fixed assets arose mainly from the sale of surplus properties. Profits on disposal of businesses comprise that on sale of Eastern Counties Radio, a further profit-related payment for the earlier sale of an exhibition by Euromoney and the Group's share of GWR's profit on disposal of businesses, net of its loss on sale of its 25% interest in DMG Radio Australia to DMGT. These profits were offset by a loss on sale of some of dmg world media’s South American operations.

Net interest was slightly higher than last year due to a higher average level of debt, partly offset by lower interest rates. Other financing charges fell due to lower deferred consideration outstanding, offset by a premium on redemption of debt. Interest cover, calculated as the ratio of adjusted profits before interest and depreciation to net interest payable, remained very comfortable at 4.7 times.

The tax charge is stated after releasing prior year provisions of £30 million relating primarily to agreement of open issues with the UK Inland Revenue. This beneficial treatment reduces the underlying tax charge by 3.8% by comparison to 2001. It is expected that much of this reduction will remain in place in future years.

Net debt

Net debt at the end of the financial year was £922 million, an increase of £47 million over last year. However, £34 million of this increase was due to the year end falling on 29th September, as against 30th September last year, with significant advertising revenues being receivable on the last day of the month. The main factors offsetting the Group’s trading cash inflows were the net cost of acquisitions and investments of £119 million, the largest being the £45 million purchase of Loot, and the continuing high level of capital expenditure due to the UK press expansion programme.

Outlook

The Group is having an encouraging first quarter, with the newspaper divisions particularly taking advantage of improved advertising markets. We estimate that October / November advertising revenues for Associated will be up 5%, albeit against weak comparative figures, and for Northcliffe up 6%. However, it is very difficult to predict advertising performance beyond Christmas. We remain confident in the largely market leading positions of our titles and businesses.

Dividend

The Board is recommending payment on the issued Ordinary and 'A' Ordinary Non-Voting shares of the Company of a final dividend of 6.25 pence per share for the year ended 29th September, 2002 (2001 5.85 pence). This will make a total for the year of 9.2 pence (2001 8.6 pence per share). For transferees to receive this dividend, which will be paid on 14th February 2003, transfers must be lodged with the Registrar by 6th December 2002.

Board Changes

At its meeting on 27th November, 2002, the Board appointed Mr Francisco Pinto Balsemao a non-executive director of the Company. He is Chairman and chief executive of IMPRESA, S.G.P.S, Chairman of the European Publishers Council and a former Prime Minister of Portugal.

Sir Patrick Sergeant, a non-executive director of the Company since 1993, will stand down at the conclusion of the Annual General Meeting in February 2004, after 50 years of outstanding service within the DMGT Group.

Daily Mail and General Trust plc Group Profit and Loss Account for the year ended 29th September, 2002

Daily Mail and General Trust plc Group Summary Cash Flow Statement for the year ended 29th September, 2002

Daily Mail and General Trust plc Group Balance Sheet as at 29th September, 2002

Daily Mail and General Trust plc Statement of Group Total Recognised Gains and Losses for the year ended 29th September, 2002

Reconciliation of Movement in shareholders’ funds for the year ended 29th September, 2002

NOTES

1. Accounting policies

The financial information for the year has been prepared in accordance with the accounting policies adopted in the Group’s 2001 Annual Report, as amended in order to discount deferred taxation. No adjustment has been made to the prior year primary statements since the effect of this change is not material.

2. Turnover

Turnover of £31.9 million from acquisitions arose from acquisitions mainly within national newspapers and related activities.

3. Operating profit

Operating profit of £3.8 million, before amortisation and impairment of intangible assets, arose from acquisitions.

The charge for amortisation and impairment of intangible assets wholly comprised amortisation; in the prior year, it included an impairment charge of £16.9 million. Exceptional operating costs comprised reorganisation and redundancy costs of £8.8 million (2001 £8.3 million) and in 2001 a provision of £1.9 million in respect of the fine by the Office of Fair Trading against Aberdeen Journals. These costs arose as follows:

Operating profit continued

4. Share of operating profits and losses of joint ventures and associates

5. Taxation charge

The tax charge for the year amounted to £17.8 million (2001 £37.2 million) which included a charge of £9.0 million (2001 £0.6 million) in respect of overseas tax. The charge for taxation has been computed at a rate of 30.0% on UK taxable profits. The underlying tax on profits before amortisation and impairment of intangible assets and exceptional items amounted to £49.5 million (2001 £54.1 million), of which £8.2 million (2001 £0.6 million) related to overseas tax, and the resulting rate is 27.1% (2001 30.5%). There was a tax credit of £31.7 million (2001 £16.9 million) relating to exceptional items in the current and prior years which mainly comprised release of prior year provisions of £30 million.

6. Adjusted earnings per share

Adjusted earnings per share are calculated on profit before amortisation and impairment of intangible assets and exceptional items, after charging the taxation and minority interests associated with those profits, of £123.4 million (2001 £117.3 million), as set out in note 7 below, and on the weighted average number of ordinary shares in issue during the period in accordance with FRS 14. The weighted average number of shares amounted to 397.9 million (2001 398.3 million). As in previous years, adjusted earnings per share have been disclosed since the Directors consider that this alternative measure gives a more comparable indication of the Group’s underlying trading performance.

7. Adjusted profit (before amortisation and impairment of intangible assets and exceptional items)

8. Net cash inflow from operating activities

This preliminary announcement was approved by the Board on 27th November, 2002. The financial information set out above does not constitute the statutory accounts of the Company within the meaning of section 240 of the Companies Act 1985. Statutory accounts for the year ended 30th September, 2001, have been delivered to the Registrar of Companies. The Company’s auditors have reported on the accounts for the year end 30th September, 2001; their report was unqualified and did not contain a statement under section 237 (2). The Company’s auditors have reported on the statutory accounts for the year ended 29th September, 2002 and these will be delivered to the Registrar of Companies in due course. Their report was unqualified and did not contain a statement under section 237 (2).

Highlights of this announcement will be advertised on 28th November, 2002 in the Evening Standard, on the 29th November in the Daily Mail, Metro, Aberdeen Press & Journal, Western Morning News and the Western Daily Press and on the 1st December in The Mail on Sunday. It is expected that the Annual Report and Accounts will be posted to shareholders on or before 15th January, 2003.

Peter Williams Tel: 020 7938 6631
Nicholas Jennings Tel: 020 7938 6625

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