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DMGT reports annual losses

The Daily Mail’s publisher is struggling with the spiralling decline in advertising demand in the print publishing industry
December 1, 2017

Daily Mail and General Trust (DMGT) may be best known for its eponymous newspaper and website, but it’s the business-to-business (B2B) titles that contribute the majority of its profits. In the year to September 2017, that dominance effectively left the group exposed. Even with the benefit of acquisitions and positive foreign exchange movements, the division's operating profit contracted by 5 per cent to £152m, while £206m of impairment charges at three specialist titles propelled the group into an operating loss.

IC TIP: Hold at 533p

Management has attempted to conceal these woes in complicated financial reporting: results are presented as adjusted, underlying and pro forma. But investors weren’t fooled. The shares dropped by as much as 28 per cent on the morning of the results announcement to a 12-month low of 500p.

To a certain extent DMGT can be excused for its adjustments. The group has disposed of several assets in the last year – including a slice of its Euromoney Institutional Investor stake – bought new titles, benefited from currency movements, and absorbed charges that will not be repeated next year. But even after stripping out these anomalies, group revenue was flat and operating profit fell 2 per cent to £198m.

What’s worse is the outlook for the B2B division. The “subdued” and “challenging” conditions in the property and energy businesses – which together make up DMG Information – are expected to persist next year. Meanwhile, recent disposals and the proposed sale of US property magazine EDR are likely to hurt the division’s financial performance. Underlying revenue growth is expected in the low-single digits and operating margins in the mid-teens, compared with 16 per cent in these number. As a result, broker Numis has trimmed its pre-tax profit and EPS guidance for the year to September 2018 to £180m and 42p, respectively (from £226m and 55.6p in FY2017).

A glimmer of good news came from the MailOnline, which reported its first operating profit in the final quarter of the 2017 financial year and pushed underlying operating profit in the consumer media business up by 10 per cent. But the performance of the group’s two key print titles is disappointing. Advertising and circulation fell at the Daily Mail, while print and distribution costs rose at the Metro.

DAILY MAIL AND GENERAL TRUST (DMGT) 
ORD PRICE:594pMARKET VALUE:£2bn
TOUCH:594-594.5p12-MONTH HIGH:836pLOW: 500p
DIVIDEND YIELD:3.8%PE RATIO:na
NET ASSET VALUE:269p*NET DEBT50%
Year to 30 SepTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20131.6717932.119.2
20141.8126761.420.4
20151.8421646.221.4
20161.5120248.622.0
20171.56-112-49.322.7
% change+3--+3
Ex-div:7 Dec   
Payment:9 Feb   
*Includes intangible assets of £576m, or 171p a share