Group Interim Results

Thursday 24 May 2007

Contents

• At a glance
• Chairman’s Statement
• Consolidated Income Statement
• Consolidated Statement of Changes in Equity
• Consolidated Balance Sheet
• Consolidated Cash Flow Statement
• Notes

At a glance

Group interim results for the half year ended 1st April, 2007.

 

• First half performance reflects continued good growth from our business to business operations, supplemented by acquisitions.
• More than 50% of operating profits* derived other than from our newspapers despite them continuing to outperform their markets.
• Full year should see satisfactory, but lower, earnings* growth with a continued high level of revenue investment.

A webcast of the Interim Results presentation to City analysts will be available for viewing from 9.30 a.m. on 24th May, 2007 at www.dmgt.co.uk.

Enquiries
Peter Williams
Tel: 020 7938 6631

Nicholas Jennings
Tel: 020 7938 6625

Andrew Honnor, Tulchan Communications
Tel: 020 7353 4200

Chairman’s Statement

Summary
The Group made an adjusted profit before tax* of £135 million for the six months to 1st April, 2007, an increase of 24% compared with the equivalent figure for the previous year. This result reflects a good trading performance particularly from our business to business operations, with successful integration of acquisitions.

52% of this half year’s operating profit* was generated other than by the Group’s print newspaper titles, up from 44% last year.

Statutory profit before tax for the period is £133 million. The equivalent figure in 2006 was boosted by the profit of £122 million on the disposal of Aberdeen Journals.

Outlook
We have enjoyed a strong first half. Our newspaper divisions are experiencing modest growth in advertising revenues and our business to business divisions are continuing to see good trading conditions, tempered in sterling terms by the weakness of the US dollar. However, we are wary of the impact of higher interest rates on consumer advertising and see no imminent reduction in competitive activity in London. We are also continuing to invest heavily in our business information and online activities, which will restrain profit, but not revenue, growth in those companies. As a result, we expect to achieve satisfactory growth for the full year over last year, but not at the same level as has been achieved in the first half.

National newspapers and related activities
Associated Newspapers’ operating profit*, compared to the first half of 2006, was up by £1.3 million to £45.8 million on revenues up £28 million to £499 million.

Circulation revenues from Associated’s newspaper operations increased by 5% to £188 million, primarily due to the effect of increasing the Daily Mail’s Monday to Friday cover price in April 2006. The circulation of the Daily Mail for the six-month ABC period to March 2007 fell by 1.7%, whilst that of The Mail on Sunday rose by 0.5%. Both titles continued to outperform the national newspaper market. The circulation of the Evening Standard fell by 18%, but London Lite achieved an average ABC distribution during the period of 395,000. Metro's distribution increased by 11% to 1.1 million copies.

Print advertising revenues were up 2% to £231 million. Excluding the London evening market, the revenue increase was nearly 5%. Total display advertising was up by 5% to £183 million. By sector, retail, the largest category, increased by 17% and information technology by 11%; travel was unchanged, but both motors and financial declined by around 5%. Classified advertising fell by 8% to £48 million. The advertising market remains volatile and short term. Combining March and April (chosen to eliminate the effect of Easter being in March this year and April last year), newspaper display revenue was up 3% year on year with the Daily Mail up nearly 10%.

The construction of a new print site at Didcot and enhancements at Surrey Quays to provide Associated’s titles with increased pagination and full colour by early 2008 is still on schedule and within the original budget.

The Associated Northcliffe Digital group strengthened its position in jobs and property during the period. Its operating profit* rose by £1.3 million (29%) to £5.8 million due mainly to the strength of the jobs division. AND’s advertising revenues increased by 83%; excluding the effect of acquisitions made in the prior year, growth was 33%, but growth in profitability was restrained by significant investment in developing the businesses.

*References to operating profit or profit before tax in the narrative above are to adjusted operating profit or adjusted profit before tax (before amortisation and impairment of intangible assets and exceptional items); see notes 3 and 12.

Jobsite.com continued to trade ahead of expectations and, as part of its strategy to develop its niche website offering, launched four new niche websites. Investment in Primelocation was accelerated through TV advertising and business infrastructure. At Findaproperty.com, the geographic expansion outside its heartland of London and the South East is going well. Motors.co.uk was launched in January which is being developed as a new online motors portal.

Teletext made an operating loss* of £3 million on revenues which fell by 18% to £20 million. Teletext’s digital audience has continued to build as the analogue television market migrates to digital and digital revenues rose by 55%. Partly as a result of seasonal factors and partly due to actions taken, we expect the business to break even in the full year.

Local media
Northcliffe Media recorded an operating profit* of £42.5 million. This was an increase of £5.4 million or 15% on the prior period when adjusted to exclude the results of Aberdeen Journals, which was sold last year. On a similar basis, revenues were unchanged at £219 million.

On a like for like basis, UK advertising revenues fell by 2.6% or nearly £4 million. By category, property revenues grew by 8% and the decline in recruitment revenues was reduced to below 3%, but motors revenue fell by 12%. Revenues from digital publishing increased by 58%, largely in the recruitment category. March saw advertising revenues 1% ahead of last year, the first monthly increase since May 2005. Recruitment revenues were up 2% on last year in March, and by 5% for the first eight weeks of the second half of the year (when adjusted to eliminate the effects of Easter and bank holidays) with total advertising revenues flat.

UK circulation revenues of £37 million fell by 2%. In the July to December 2006 ABC period, Northcliffe’s titles continued to outperform the regional newspaper industry in the key evening title market, although sales were 5% lower.

UK publishing costs in the period were 6% lower than in the previous period, with a headcount reduction of 534 (10%). The programme of organisational and structural improvements is largely complete and the targeted annual cost reduction of £45 million will be achieved by the end of June.

Operating profit* from Northcliffe’s international activities increased 71% to £3.3 million on revenues up 40% to £19 million, through a mixture of acquisitions in Slovakia and revenue growth from existing businesses.

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

Business information
DMG Information (DMGI) recorded an operating profit* of £30.5 million. This was an increase of £6.4 million or 27% on the prior period on revenues down 13% to £135 million.

On a like for like basis, adjusting to exclude the results of Study Group which was sold last year, and Genscape which was acquired in May 2006, and using constant exchange rates, revenues increased by 22% to £129 million and operating profit* by 24%.

Operating profit* from the financial and insurance division rose by £3.1 million (21%) to £18.1 million on revenue up 22% to £54 million. Risk Management Solutions achieved an outstanding first half in new bookings across its product range with strong traction being felt for some of its newer products. Trepp also performed strongly in a buoyant commercial mortgage-backed securities market and suffered no direct impact from the fall-out in the US sub-prime mortgage market.

Operating profit* from DMGI’s property division rose by £2.2 million (19%) to £14.0 million on revenue up 20% to £51 million. Landmark benefited from a UK housing market which, though softening a little towards the end of the period, remained at a healthy level of transactions. Environmental Data Resources also increased its operating profits* through new product development despite the volume of transactions again remaining flat year on year.

Operating profit* from DMGI’s other business to business companies was £0.7 million, compared to a loss of £1.9 million last year. The major contributors to the year-on-year improvement were Genscape and a reduced first half seasonal operating loss* at Hobsons. Genscape continues to grow sales satisfactorily in the US power market, to expand geographically in Europe and it is in the early launch phases of a gas monitoring service in the USA.

DMGI is performing well against its stepped up internal investment programme, which bodes well for sustaining future growth and for the further strengthening of its competitive position.

Financial information
Euromoney Institutional Investor plc increased its operating profit* by £16.6 million to £31.6 million on revenues up 40% to £144 million. This result includes a first contribution from the Metal Bulletin businesses which were acquired in October 2006, as a consequence of which the Group’s interest in Euromoney was reduced to 61%.

Amid a continued positive trading background, Euromoney achieved strong organic growth, based on: advertising revenues increasing at the highest rate for some time; subscription revenues for both print and electronic products continuing to show double digit growth; and the benefit of past investment in marketing and new products. Metal Bulletin traded in line with expectations at the time of acquisition and has been successfully integrated into the group ahead of plan.

Revenues from Financial Publishing increased by 20% reflecting strong growth in both advertising and subscription revenues. The contribution from the Business Publishing division increased sharply following the acquisition of Metal Bulletin and revenues nearly doubled. The strong growth achieved in the Conferences and Seminars division over the past few years continued with revenues up 20%. The growth in this division continues to reflect the group's strategy of building existing events as well as launching new ones.

The Institutional Investor conference business, which has been a significant driver of growth with its attractive subscription-based membership model, increased the number of members by 11%. The performance of the Training division extended the excellent results achieved in the second half of 2006 with revenues increased by 23%. Total revenues for the Database and Information Services division, including BCA, the largest and fastest growing division of Metal Bulletin, increased sharply.

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

Exhibitions
DMG World Media's operating profit* rose by £3.6 million (21%) to £20.6 million on revenue up 1% to £101 million. The increase in profits was due to the strength of the business to business divisions which more than offset falls within consumer events and gift shows.

Operating profit* from business to business more than doubled. This increase was driven particularly by the success of two shows, Gastech and Adipec, which were not held and not owned respectively last year and by growth from Ad:Tech and Evanta in the technology sector.

Consumer events experienced a sharp fall in operating profit*. The major shortfall arose at the London Ideal Home Show where both stand sales and attendances were well below those of last year despite increased investment in both features and promotion. The gift sector in North America also had a tough period.

The art and antiques sector reported in line with the prior period with its publications and French fairs performing better than the UK lower end fairs.

Within the regions, dmg world media’s business in Dubai, including the Big 5 construction show and the Index interior design show, again grew strongly.

Radio
DMG Radio Australia made an operating loss* of £2.3 million, a fall of £0.4 million on revenue which was down 6% to £19 million. The Nova network has experienced a tough radio advertising market and very competitive trading conditions in its key Sydney market which, due to its size, has more than offset strong performances particularly in Brisbane and Adelaide. The network continues to maintain its position as the leading national radio network in its target market of listeners under 40.

The survey also showed the Vega stations improving their performance, albeit more slowly than hoped. Ratings for both stations have broadly doubled since September, but need to improve further to generate the expected level of revenues. The most recent survey results have been encouraging.

Joint ventures and associates
The Group’s share of the results** of its joint ventures and associates rose by £0.6 million to £2.8 million due mainly to a higher share of earnings from George Little Management, the North American gift exhibition organiser, following the increase in the Group's stake to 49% in January.

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

**References to share of the results of joint ventures and associates in the narrative above are to adjusted share of the results of joint ventures and associates (before amortisation and impairment of intangible assets); see note 5.

Net financing costs
Net interest payable (excluding dividend income and deemed finance charges but including interest receivable) rose by £2.9 million to £26.8 million. Increased interest payable on higher net debt was offset by interest income from swap premia.

Other income statement items
The Group has charged £6.5 million as exceptional operating costs. This charge comprised reorganisation costs within Euromoney and Northcliffe. The charge for amortisation of intangible assets rose by £21.2 million to £43.1 million, primarily following the acquisition of Metal Bulletin.

The Group recorded other gains and losses of £46 million, compared to £122 million in the prior period. This comprised mainly an exceptional profit of £42 million which we are deemed to have made on Euromoney’s issue of shares as part of its funding of the acquisition of Metal Bulletin. The Group generated £3.1 million of foreign exchange gains on tax hedging transactions, with an equal and opposite tax liability. Under IAS 12 we are required to show these gross as a credit in net finance costs and a charge in taxation. Both have been excluded from adjusted earnings.

Taxation
After allowing for the effect of exceptional and other items that are not expected to recur, the underlying tax rate for the interim period is 28.8% (2006: 28.9%).

Exceptional tax amounted to a net credit of £1.1 million, including the £3.1 million tax charge on exchange differences on financings referred to above.

Net debt
Net debt at the end of the period was £999 million, an increase of £261 million since the year end. This increase was due mainly to the acquisition of Metal Bulletin, £165 million of which was funded by debt. Total acquisition spend of £237 million, capital expenditure of £40 million, taxation and interest of £75 million and dividends and share repurchases totalling £64 million were offset partly by operating cash flows of £158 million and disposals of investments and businesses of £5 million.

Transparency Directive
DMGT will be required by the EU Transparency Directive, recently enacted into UK law, to produce two interim management commentaries from next year onwards in addition to the Annual and Half-Yearly Reports. We envisage releasing these additional statements to a regulatory information service from 2008 around the time of the Company’s Annual General Meeting in early February and around the middle of July.

Share buy back programme
Since August 2004, the Company has acquired shares to cover DMGT’s commitments to satisfy share options and share awards under various Group incentive schemes. In March 2006, the Board announced its decision to return approximately £50 million to shareholders and, to date, the Company has spent £40 million on buying 5,985,000 ‘A’ Ordinary Non-Voting shares.

The Company has today cancelled 6,907,444 ‘A’ treasury shares, being those shares acquired in the buy back programme, together with treasury shares bought to match new shares, issued on the exercise of executive share options since August 2004. As a result it currently holds 5,183,906 shares in treasury in order to match share options and share awards.

Dividend
The Board has declared an interim dividend of 4.45 pence per Ordinary ‘A’ Ordinary Non-Voting share (2006 4.05 pence) which will be paid on 6th July, 2007 to shareholders on the register at the close of business on 8th June, 2007.

The Viscount Rothermere
Chairman

Consolidated income statement

For the period ended 1st April, 2007

*see note 2

Consolidated statement of recognised income and expense

For the period ended 1st April, 2007

Reconciliation of movements in equity

For the period ended 1st April, 2007

*see note 2

Consolidated balance sheet

As at 1st April, 2007

*see note 2

Approved by the Board of Directors on 23rd May, 2007

Consolidated cash flow statement

For the period ended 1st April, 2007

Notes

1 Basis of preparation

The information for the six months ended 1st April, 2007 and 2nd April, 2006 and for the twelve months ended 1st October, 2006 do not constitute statutory accounts for the purposes of section 240 of the Companies Act 1985.

The results for the year ended 1st October, 2006 and the balance sheet as at that date are abridged from the Group's Annual Report and Accounts 2006 which have been delivered to the Registrar of Companies. The auditors' report on those accounts was unqualified and did not contain a
statement under section 237(2) or (3) of the Companies Act 1985.

The Interim Financial Information has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRS) and with the requirements of the Listing Rules issued by the Financial Services Authority.

The Group has chosen not to adopt IAS 34 Interim Financial Statements in preparing this Interim Financial Information. IAS 34 will be adopted by the Group in preparing its condensed interim consolidated financial statements for the period ending 30th March 2008 when adoption of that standard becomes mandatory.

2 Accounting policies and presentation

Changes in accounting policies
The same accounting policies, presentation and methods of computation are followed for this Interim Financial Information as applied in the Group's latest annual audited financial statements. In addition the following new standards, amendments to standards and interpretation are mandatory for the year ending 30th September, 2007 and have been adopted in this Interim Financial Information.

Amendment to IAS 39 Financial Instruments : Recognition and Measurement in respect of financial guarantee contracts. This has had no impact on this Interim Financial Information.

The following IFRICS are effective for periods beginning either on or after 1st January, 2006, 1st March, 2006, 1st May, 2006 or 1st June, 2006 as detailed below and hence are applicable for the Group for the period ending 30th September, 2007. The adoption of these interpretations for the period ended 1st April, 2007 has not required any changes to be made to the Group's accounting policies as set out in the 2006 Annual Report and Accounts.

IFRIC 4 Determining Whether an Arrangement Contains a Lease (1st January, 2006)
IFRIC 7 Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies (1st March, 2006)
IFRIC 8 Scope of IFRS 2 (1st May, 2006)
IFRIC 9 Reassessment of Embedded Derivatives (1st June, 2006)

Restatement of prior period information
The following changes in presentation which were adopted in the Group's 2006 Annual Report, have been made to the prior period Interim Financial Information:

In the prior period to 2nd April, 2006 the Group disclosed finance income from its defined benefit pension schemes within other gains and losses. This treatment has been amended and the Group now discloses its defined benefit pension scheme finance income/(charge) within operating profit since the Directors believe this better discloses the cash cost of divisional defined benefit pension schemes. The effect in the period to 2nd April, 2006 is to increase operating profit by £10.0 million and to reduce other gains and losses by £10.0 million.

Additionally the Group has reclassified tax equalisation swap income from hedges of tax on intra-group financing. The foreign exchange element is equal to tax payable on the gains on the intra-group financing. The effect of this reclassification is to decrease net finance costs by £7.7 million and to increase the tax charge by £7.7 million.

The Group has revised the adjusted tax charge for the period ended 2nd April, 2006 to take account of the reduction in current tax arising from US tax deductible amortisation under IFRS for the purposes of calculating adjusted earnings.

The Group has reclassified swap interest income for the period ended 2nd April, 2006 from investment income to finance costs.

The Group has revised the presentation of initial recognition of put options granted to minority interests in subsidiaries for the period ended 2nd April, 2006 from the consolidated statement of recognised income and expense to the reconciliation of movements in equity.

3 Segment analysis

For management purposes, the Group's business activities are split into six operating divisions - National newspapers, Local media, Business information, Euromoney Institutional Investor, Exhibitions and Radio. These divisions are the basis on which the Group reports its primary segment information.

Analysis of revenue by geographic origin

In the prior half year revenue of Business information comprised £118.2 million from business to business information and £36.2 million from Study Group.

Analysis of operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets by business segment

Analysis of operating profit after exceptional operating costs and amortisation and impairment of goodwill and intangible assets by business segment

In the prior period operating profit before exceptional operating costs and amortisation and impairment of goodwill and intangible assets within the Business information division comprised £25.2 million from business to business information offset by a loss of £1.1 million from Study Group.

*In the prior half year, revenues of local media included £15.8 million from Aberdeen Journals Limited and adjusted operating profit of £4.5 million. Following the merger in the prior year of Associated's printing arm with the Northcliffe Press to form Harmsworth Printing and their digital operations to form Associated New Digital, the prior period revenues and operating profits of The Northcliffe Press and the local media digital operations have been restated to include them all within National newspapers.

4 Exceptional operating costs

The Group's exceptional operating costs comprised restructuring and in the prior period strategic review costs within Local media, together with the reorganisation costs within Local media and Euromoney Institutional Investor, the later arising from the acquisition of Metal Bulletin plc.

5 Share of results of joint ventures and associates

6 Investment revenue

7 Other gains and losses

The profit on sale of businesses mainly comprises the profit on sale of Raven Fox by Euromoney.

The profit on the deemed disposal of subsidiaries arose following Euromoney's issue of £65.0 million new share capital to the shareholders of Metal Bulletin, thereby reducing the Group's interest in Euromoney (note 14).

In the prior period the profit on sale of businesses was mainly represented by the sale of Aberdeen Journals Limited by Local media.

8 Finance costs

Tax equalisation swap income comprises £9.5 million (2006 £4.6 million) of income from hedges on intra group financing and £3.1 million (2006 £7.7 million) of foreign exchange gains on these instruments plus exchange losses on related intra group financing of £4.7 million (2006 £nil). The £3.1 million gain (2006 £7.7 million) on hedges of intra group financing is excluded from adjusted profit as it is equal to an additional tax charge (see note 9). Exchange losses on intra group financing are excluded from adjusted profit.

The finance charge on the discounting of deferred consideration arose from the requirement under IFRS 3 Business Combinations to discount deferred consideration back to current values.

9 Tax

Adjusted tax on profits before amortisation and impairment of intangible assets, restructuring costs and non-recurring items (adjusted tax charge) amounted to £39.0 million (2006 £31.4 million) and the resulting rate is 28.8% (2006 28.9%). The differences between the tax charge and the adjusted tax charge is mainly the tax on exceptional items and £3.1 million (2006 £7.7 million) of tax relating to exchange gains (see note 8). It should be noted that in calculating the underlying tax rate, the Group excludes the potential future deferred tax effects of goodwill and intangibles as it prefers to give the readers of its accounts a view of the tax charge based on the current status of such items.

In March 2007, the UK government announced an intention to amend UK tax legislation to reduce the UK corporation tax rate from 30% to 28%. As at April 1st, 2007 this change in legislation had not been substantively enacted and therefore the UK tax rate applied for the purposes of the measurement of the Group's current and deferred tax in this Interim Financial Information continues to be 30%. It is currently anticipated that the change in rate will be substantively enacted by September 30th, 2007 and that being the case, the Group's UK deferred tax position will need to be assessed at the revised rate in the Group's Annual Report for the full year.

10 Dividends paid

The Board has declared an interim dividend of 4.45p per 'A' Ordinary Non-Voting share (2006 4.05p) which will absorb an estimated £17.4 million of shareholders' funds which has not been recognised in these financial statements. It will be paid on 6th July, 2007 to shareholders on the register at the close of business on 8th June, 2007. This dividend was approved by the Board on 23rd May, 2007 and has not been included as a liability as at 1st April, 2007.

11 Earnings per share

Basic earnings per share of 22.4p (2006 38.1p) are calculated, in accordance with IAS 33 Earnings per Share, on Group profit for the financial period of £87.1 million (2006 £150.9 million) and on the weighted average number of ordinary shares in issue during the period, of 391.3 million (2006 395.4 million) as set out below. Diluted earnings per share of 22.2p (2006 38.2p) are calculated using the weighted average number of ordinary shares during the period of 391.6 million (2006 396.1 million) as set out below.

As in previous periods, adjusted earnings per share have also been disclosed since the Directors consider that this alternative measure gives a more comparable indication of the Group's underlying trading performance. Adjusted earnings per share of 21.9p (2006 18.7p) are calculated on profit before exceptional operating costs, amortisation and impairment of goodwill and intangible assets, after charging the taxation and minority interests associated with those profits, of £85.6 million (2006 £73.8 million), as set out in note 12 below, and on the basic weighted average number of ordinary shares in issue during the period.

12 Adjusted profit

(before exceptional operating costs and amortisation and impairment of goodwill and intangible assets)

13 Analysis of Net Debt

14 Acquisition of subsidiaries and businesses

On October 5th, 2006 the Group acquired 100% of the issued share capital of Metal Bulletin plc (Metal Bulletin) for a consideration of £239.6 million. Metal Bulletin is the parent company of a group of companies operating as a leading global information provider of must have market sensitive data in niche, business to business markets. Its revenues are derived from a range of publications, electronic products and services, conferences, research and ancillary functions provided to customers. This acquisition has been accounted for using the purchase method of accounting.

The Directors have adjusted the consolidated balance sheet of Metal Bulletin at October 6th, 2006 for adjustments which they believe more accurately represent the fair value of the assets at acquisition. At April 1st, 2007 these adjustments are provisional and will be finalised during the second half of the year.

The intangibles acquired represent trade marks, subscriber relationships, advertiser relationships and databases. Goodwill attributable to the deemed value of the workforce and anticipated future operating synergies. Non-current liabilities includes primarily a deferred tax liability arising on the intangible assets.

The impact of the acquisition on businesses net assets was:

Other major acquisitions completed during the period, the percentage of voting rights acquired and the dates of acquisition were as follows:

If all acquisitions had been completed on the first day of the financial year, contribution to Group revenues for the year would have been £33.3 million and contribution to Group profit attributable to equity holders of the parent would have been £1.8 million. This information takes into account the amortisation of acquired intangible assets for a full year, together with related income tax effects but excludes any pre-acquisition finance costs and should not be viewed as indicative of the results of operations that would have occurred if the acquisitions had actually been completed on the first day of the financial year.

Copies of the interim report are being posted to shareholders on or around 15th June, 2007 and will be available for inspection thereafter from the Secretary, Daily Mail and General Trust plc, Northcliffe House, 2 Derry Street, London, W8 5TT, or electronically from the Company's web site at www.dmgt.co.uk.

Highlights of this announcement will be advertised on 24th May, 2007 in the Evening Standard and London Lite, on 25th May, 2007 in the Daily Mail, Metro, Western Morning News and the Western Daily Press and on 27th May, 2007 in The Mail on Sunday.

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