Group audited preliminary results

Thursday 2 December 2004

Group audited preliminary results for the year ended 3rd October, 2004.

Highlights

Summary

DMGT has had a strong year and is pleased to report an adjusted profit before tax of £234 million, an increase of 26% compared with the equivalent figure for the prior year. This improvement is spread across the Group's businesses. In particular, it reflects excellent growth from our national newspapers, exhibitions and business to business information divisions and from Euromoney Institutional Investor.

For the newspaper divisions, the reporting period includes an additional week's trading, compared with the prior year, the effect of which is to increase profit by approximately £4 million. Statutory profit before tax for the year is £125 million, up 15% on last year's restated figure.

Continued growth by the Group's newer businesses means that 40% of this year's operating profit* has been generated by its non-newspaper divisions.

Outlook

The new financial year has started encouragingly. The circulations of our national titles remain robust in an extremely competitive market. Advertising has been holding up well, particularly the requirement for colour, although recent weeks have shown signs of slowing down in regional markets. There is difficulty in forecasting the trend of advertising, but we move into 2005 with additional colour capacity and pagination available to our national titles. There is some upward pressure on newsprint prices.

The newspaper divisions will have one fewer trading week in the new financial year and no Saturday newspaper on Christmas Day. It will be a down year in the exhibition cycle and there will be an increased level of investment in our Australian radio business and, to a lesser extent, in Teletext. Continuing US dollar weakness will also reduce the sterling value of the Group's growing US profits.

However, the Group's businesses are in good shape, finding opportunities to grow both by launching new products and by making small acquisitions at attractive prices. This leads the Board to look forward to another year of progress, albeit against the backdrop of an uncertain advertising market.

* References to operating profit in the narrative above are to adjusted operating profit (before operating exceptional items and amortisation and impairment of intangible assets); see note 3.

National newspapers

Associated Newspapers achieved its highest ever profits increasing operating profit* by £20.5 million or 29% to £90.3 million on revenues up 9% to £890 million. All businesses produced improved performances.

The Daily Mail and The Mail on Sunday both achieved solid circulation performances, outperforming markets in overall decline, proving once again the value of long term investment in editorial quality together with innovative, targeted and attractive promotions. The Daily Mail circulation of 2,430,000 was down only 0.5% and that of The Mail on Sunday of 2,361,000 was down only 0.25% on the previous year.

The financial performance of the Evening Standard showed substantial improvement as a result of improved advertising revenues and the effects of last year's cost reduction. It has been back in profit for each of the last three months. After a difficult start to the year, classified was by the end of the year showing year on year increases. The Evening Standard average daily net sale of 385,000 was down by 6.6%.

Metro had an excellent year, increasing its national distribution to one million copies daily, following the launch of new editions in the Bristol and East Midlands areas. This makes Metro the fourth highest circulation Monday to Friday daily newspaper.

Associated's total advertising revenues increased by 10.7%, with display up 10.6% and classified up 11.0% (including Jobsite which was acquired in March). On a comparable basis total advertising revenues were up 6.9%. The Daily Mail produced record total advertising revenue, whilst The Mail on Sunday was up 8% year on year. The Evening Standard increased display revenues by 15% but classified was down 6%. Metro increased its display revenue by 27% and classified by 21%.

Since the year end, the press enhancement project at Harmsworth Quays has been completed within budget and on schedule. The decommissioning of old equipment during the year resulted in an exceptional operating charge of £17.8 million.

Regional newspapers

Northcliffe Newspapers increased its operating profit* by 7% to £100.5 million on turnover up 7% to £519 million, helped by the extra week's trading. Most publishing centres reported progress including Aberdeen and Bristol. Their performances were particularly encouraging following difficult market conditions in 2003. Other notable performances were from titles in Nottingham, Derby, Tamworth, Devon and Hungary and from digital publishing.

Circulation revenues grew by 1.5% on a like for like basis. A limited number of titles increased their cover prices during the year, but this was partly offset by continued gentle declines in circulation, particularly for the evening titles.

Much emphasis continues to be placed on a drive to stabilise the circulation of the evening titles. During the January to June 2004 ABC period, Northcliffe's morning and evening titles again out performed the industry. Its weekly titles fell below the industry average, although 14 of the group's 24 weekly titles showed increases.

Advertising revenues recorded growth of 5.9% with recruitment up by 10% and property improving by 11% on the back of a buoyant housing market. However, motors' advertising reflected the overall marketplace and, despite a number of initiatives, declined by 1%.

* References to operating profit in the narrative above are to adjusted operating profit (before operating exceptional items and amortisation and impairment of intangible assets); see note 3.

Margins on publishing continue to improve gradually, but this is masked by margins declining on contract printing in another year of press refurbishments and expansions.

Information publishing

DMG Information increased its operating profit* by a further 50% from £23.8 million to £36.7 million on turnover up 15% to £257 million.

Its business to business companies had another excellent year, increasing their operating profit* by nearly 50% despite the effect of a weakening US dollar. Risk Management Solutions continued the strong growth of previous years and margins improved further. The new US hurricane and earthquake models introduced in 2003 have been widely adopted by customers. Sales of newer models, in particular those dealing with terrorism and workers compensation saw increasing rates of take up.

All the property information businesses produced favourable results. Environmental Data Resources posted solid growth in an improving commercial real estate market. Landmark successfully integrated the Sitescope business, acquired in September 2003. The market for home environmental reports grew rapidly, benefiting the combined business. Property & Portfolio Research performed well in its second year of ownership and the performance of Trepp, which was acquired in April, exceeded expectations.

Within the careers division, Hobsons had its most encouraging year for some time. The US business again grew strongly and profits improved in the UK after a number of tough years. Study Group made further encouraging progress in its recovery, with the UK and Australia operations again performing well.

Financial publishing

Euromoney Institutional Investor increased its operating profit* by 29% to £30.6 million on turnover up 10% to £175 million. This improvement was driven by a mix of organic growth, new business investment and acquisitions, while maintaining tight control of costs and focusing on high margin products. The acquisitions of Hedge Fund Intelligence and Information Management Network (IMN) made a significant contribution to Euromoney's increase in profits.

The profits of many of Euromoney's magazine publishing businesses fell due to a combination of weak advertising revenues and the decline in the US dollar. However, advertising revenues showed signs of recovery in the second half of the year and there was a continued strong performance from the events and training businesses. In general, Euromoney's traditional financial advertisers have been slow to increase their advertising spend in spite of better market conditions.

Exhibitions

Dmg world media increased its operating profit* from £20.4 million to £25.8 million on turnover up 11% to £145 million. This was due in part to a number of large non-annual events taking place, including the Global Petroleum Show in Calgary, to the reporting of two Index shows in Dubai and to a number of acquisitions and despite the effect of a weakening US dollar. Underlying operating profit grew year-on-year by 12% on a turnover up by 6%.

2004 was a much better year for the exhibition business overall, when compared with 2003. Despite the conflict in Iraq, dmg world media's business performed well in the Middle East. However, the four hurricanes in Florida this September did affect a number of shows. Dmg world media has recorded some of its largest events ever this year, including both Index shows and The Big 5 in Dubai, Surf Expo in Orlando and the Daily Mail Ideal Home Show in London.

* References to operating profit in the narrative above are to adjusted operating profit (before operating exceptional items and amortisation and impairment of intangible assets); see note 3.

Broadcasting

Operating profit* of DMG Broadcasting fell by £0.8 million to £19.4 million on turnover up 6% to £122 million.

In its key market of package holidays, Teletext's revenues were broadly flat despite difficult trading conditions where the industry was down by 8%. Operating profit* was held back as the business continued to invest in its future, launching Teletext Holidays TV and Teletext on 4, together with further investment in teletextholidays.co.uk. Excluding these investments, operating profit was up by over 10%. As digital switchover approaches, Teletext is building a strong position to continue to grow audiences and revenues via the web and digital TV.

On the web, teletextholidays.co.uk is routinely attracting over two million unique users and continues to maintain its position within the UK's top three travel web sites. It has recently added a new flights channel which will significantly increase its addressable market in the independent travel sector.

DMG Radio Australia returned strong performances in all aspects of its business. Revenues from its metropolitan stations continued to increase, this year by more than 30%, which drove an increase in operating profit* from metropolitan stations of more than 200%. The Nova stations in Sydney, Melbourne and Perth are all now number 1 for their target demographics and all recorded strong increases in advertising revenues. The Group's regional stations were sold in September 2004 for an excellent price.

Joint ventures and associates

The Group's share of net operating profits* of its joint ventures and associates increased by £3.4 million due mainly to an increased contribution from GWR Group plc, its 29.9% associate. There were also improved performances from nearly all of the Group's other interests including GLM, the North American gift exhibition organiser.

Other Profit and Loss Items

The charge for amortisation of intangible assets increased to £87.0 million and an impairment charge was made of £12.9 million due to a more conservative approach being taken to asset lives and to the carrying value of subsidiaries and associates. Profits on sale of fixed assets arose mainly from the sale of shares in Reuters Group plc in the first half of the year. Profit on disposal of businesses came primarily from the sale of DMG Regional Radio. Income from fixed asset investments fell by £1.6 million to £3.4 million, mainly due to a lower distribution from the Press Association.

The slight fall in net interest payable was due to a lower average level of debt, offset by a higher average interest rate, caused by the impact of a bond issue in the prior year. Interest cover, calculated as the ratio of adjusted profits before interest and depreciation to net interest payable, rose above six times and the ratio of net debt to these profits fell to 2.1.

After allowing for the effect of exceptional and other items that are not expected to recur, the underlying tax rate rose to 26.6% from 25.3% due to a different mix of profits.

* References to operating profit in the narrative above are to adjusted operating profit (before amortisation and impairment and impairment of intangible assets); see notes 3 and 4.

Net debt

Net debt at the end of the financial year was £780 million, a decrease of £93 million. The fall in debt was due to strong trading cash flows, offset by the net cost of acquisitions of £129 million and capital expenditure of £86 million. Gross capital expenditure amounted to £103 million, continuing at a high level due to the UK press expansion programme that was completed in November 2004. Acquisitions totalled £212 million, including the purchase of Australian radio licences of £106 million, Jobsite, IMN and Trepp. Proceeds from the disposal of businesses amounted to £84 million, mainly from the sale of DMG Regional Radio.

Dividend

The Board is recommending payment on the issued Ordinary and 'A' Ordinary Non-Voting shares of the Company of a final dividend of 7.55 pence per share for the year ended 3rd October, 2004 (2003 6.85 pence). This will make a total for the year of 11.0 pence (2003 10.0 pence per share). For transferees to receive this dividend, which will be paid on 11th February 2005, transfers must be lodged with the Registrar by 10th December 2004.

Board Changes

At its meeting yesterday, the Board appointed a new executive Director of the Company. Kevin Beatty, 47, has been managing director of Associated Newspapers since August. He was previously managing director of Northcliffe Newspapers, Associated New Media, the Evening Standard and of The Mail on Sunday.

Klaus Schwab, a non-executive Director of the Company since 1998, has retired from the Board after six years' service. He has a busy schedule as President of the World Economic Forum and I am grateful for his advice and guidance during his time as a Director.

*The Viscount Rothermere
Chairman*

Group Profit and Loss Account for the year ended 3rd October, 2004

Group Cash Flow Statement for the year ended 3rd October, 2004

Group Balance Sheet as at 3rd October, 2004

Approved by the Board of Directors on 1st December, 2004. Daily Mail and General Trust plc

Statement of Group Total Recognised Gains and Losses for the year ended 3rd October, 2004

Reconciliation of Movement in Group Shareholders' Funds

NOTES

1. Accounting policies
The financial information for the year has been prepared in accordance with the accounting policies adopted in the Group's 2003 Annual Report, as amended to reclassify the Group's investment in its own shares within shareholders' funds in accordance with UITF Abstract 38. As a consequence, provision is no longer made for the cost in excess of the option exercise price of shares purchased to match options, granted under the Company's 1997 Executive Share Option Scheme. As a result of these changes, the prior year primary statements and shareholders' funds have been restated to show the Company's own shares of £27.5 million as a negative reserve, offset by a prior year adjustment to release the provision held and hence to increase revenue reserves by £2.5 million at 28th September, 2003. Group operating profit for the prior year has also been restated, being increased by £0.4 million. The sale of these shares in August resulted in a loss of £3.8 million being taken through shareholders' funds, of which £2.5 million had been charged against operating profits under the previous policy.

Furthermore, the Group's policy in respect of revenue recognition has been amended to reflect the requirements of Application Note G to FRS 5 so that the earnings of exhibitions straddling the year end are recognised on a percentage to completion basis, where appropriate, and advertising revenues from the business to business careers division's web sites are spread over the term of contract. This change is one of timing only and has no impact on the results of the prior year.

2. Turnover

Turnover of regional newspapers is stated after deducting intra-Group turnover of £17.1 million (2003 £12.8 million).

Turnover of broadcasting comprised £74.9 million (2003 £77.2 million) from television and £47.5 million (2003 £38.8 million) from radio.

Turnover of business to business information and careers comprised £143.3 million (2003 £119.9 million) from business to business information and £113.8 million (2003 £104.1 million) from careers.

+ See note 1.

3. Operating profit

Operating profits of broadcasting comprised £15.6 million (2003 £18.4 million) from television and £3.8 million (2003 £2.0 million) from radio.

Operating profits of business to business information and careers comprised £34.8 million (2003 £23.3 million) from business to business information and £4.9 million (2003 £3.5 million) from careers, offset by unallocated central costs of £3.0 million (2003 £3.0 million).

As a consequence of the issue of UITF Abstract 38, unallocated central costs for 2003 have been reduced by £0.4 million from those previously reported.

Exceptional operating costs comprised the write off of press equipment within national newspapers.

The impairment charge of £12.9 million consisted of £3.8 million at national newspapers, £2.0 million at regional newspapers, £1.2 million at Euromoney, £2.4 million at exhibitions and £3.5 million at business to business information and careers.

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

5. Taxation charge
The tax charge for the year amounted to £57.2 million (2003 £45.5 million) which included a charge of £2.1 million (2003 £8.1 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, exceptional items and significant non-recurring or prior year items, amounted to £62.2 million (2003 £47.0 million), and the resulting rate is 26.6% (2003 25.3%). There was a tax credit of £3.4 million (2003 £1.5 million) relating to exceptional items.
+ See note 1.

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 £165.3 million (2003 £132.3 million as restated), 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 397.5 million (2003 397.8 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

9. Creditors due within one year
Included within creditors due within one year are short term borrowings of £93.2 million (2003 £20.9 million). On 4th October, 2004, the Group renewed its committed bank facilities for a five year period.
+ See note 1.

10. This preliminary announcement was approved by the Board on 1st December, 2004. 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 28th September, 2003, have been delivered to the Registrar of Companies. The Company's auditors have reported on the accounts for the year end 28th September, 2003; their report was unqualified and did not contain a statement under section 237 (2) or (3). The Company's auditors have reported on the statutory accounts for the year ended 3rd October, 2004 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) or (3).

Highlights of this announcement will be advertised on 2nd December, 2004 in the Evening Standard, on the 3rd December in the Daily Mail, Metro, Aberdeen Press & Journal, Western Morning News and the Western Daily Press and on the 5th December in The Mail on Sunday and Ireland on Sunday. It is expected that the Annual Report and Accounts will be posted to shareholders on or before 12th January, 2005.

A webcast of the Preliminary Results presentation to City analysts will be available for viewing from 9.30 am on 2nd December, 2004.

Peter Williams Tel: 020 7938 6631
Nicholas Jennings Tel: 020 7938 6625
Andrew Honnor, Tulchan Communications Tel: 020 7353 4200

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