Daily Mail Profit Rises on Business-to-Business Unit

Daily Mail & General Trust Plc, publisher of Britain's Daily Mail, said first-half profit rose as revenue advanced at its business-to-business division, offsetting declines in consumer advertising sales.

Net income for the six months ended April 2 advanced to 150.9 million pounds ($282 million), or 38.1 pence a share, from 67.5 million pounds, or 17 pence, London-based Daily Mail said today. Revenue climbed to 1.08 billion pounds from 1.06 billion pounds a year earlier, beating the 1.07 billion-pound median estimate of six analysts in a Bloomberg News survey.

Daily Mail said half its profit may come from non-newspaper operations this year. The company, which bought Allegran Ltd. and control of Data Media and Retail this month, is investing in online businesses as newspaper ad revenue drops.

``The consumer businesses, not just in the U.K., but the U.S., Australia, are all under quite a lot of pressure and advertising revenue is still pretty soft,'' Finance Director Peter Williams said in an interview. ``The business-facing divisions, like our information publishing division, Euromoney, trade exhibitions are all performing very strongly.''

The shares rose 11.5 pence, or 1.8 percent, to 638.5 pence in London. The shares have dropped 19 percent this year.

Revenue rose 33 percent at the company's business-to- business unit to 104 million pounds, boosted by Risk Management Solutions, Environmental Data Resources, Trepp and Landmark, the company said. ``Each business is seeing strong demand for broadening product portfolios and was able to improve margins, despite continued investment in new initiatives.''

Completes Acquisition

Daily Mail completed the $130 million acquisition of U.S. media company Genscape Inc., which it agreed to buy last month, the company said. Louisville, Kentucky-based Genscape started offering services in 2001 and currently provides real-time energy information to more than 130 customers, including utilities, investment banks, energy traders and hedge funds.

``We don't like the economics of major transactions,'' Williams said in an interview. ``We will carry on buying small businesses.''

The ad market is ``volatile'' and very short term, Daily Mail said. Display ad revenue slid 9 percent to 175 million pounds because of lower volumes and classified advertising dropped 9 percent to 53 million pounds, the company said.

The company has seen signs of a ``slight recovery'' in display ads, with display revenue up 0.4 percent year-on-year in March and April, Daily Mail said.

Reorganization

Daily Mail, which decided to keep its Northcliffe division in February after receiving offers it deemed too low, said it recorded a 14.8 million-pound reorganization charge, which includes the costs for the second phase of Northcliffe's reorganization.

``We tested the market and decided not to sell it,'' Williams said. ``We still seem to be outperforming our peers in the market place. We have taken a lot of costs out and now we are looking to try and grow the business.''

Northcliffe will collaborate more with the Associated Newspapers unit in ``some areas'', Daily Mail said. In March it said it would reorganize Northcliffe on a regional basis.

``We are encouraged by the progress being made on the further restructuring of Northcliffe, but there is little sign of an advertising recovery in regional newspaper titles,'' Daily Mail said. ``Nevertheless, we still hope to achieve modest progress for the full financial year compared to last year.''

Regional Advertising

Advertising doesn't seem to have got worse at regional newspapers, Andrew Walsh, an analyst a Bridgewell Securities, wrote in an e-mailed research note.

``This might come as a surprise to those who feel the regional newspapers are subject to a structural challenge posed by the Internet,'' Walsh wrote in the note. ``It is not quite as binary as that, and we see these numbers as helping to prepare the ground for a better newspaper reporting period on the run-up to trading updates at the end of June.''

Daily Mail told U.K. competition authorities in March that it will give up its exclusive distribution rights at London subway and train stations. That could lead to a free afternoon newspaper to compete against Daily Mail's Metro, a free morning newspaper aimed at commuters.

``We have given up the rights after lunch time,'' Williams said. ``We still have exclusive rights in the morning to distribute Metro and there is a tender process going on for an afternoon newspaper which we will obviously have a look at closely.''

The free City AM newspaper is different to Metro because it is available in the City, whereas people read Metro on the way to work, Williams said.

To contact the reporter on this story: Aisha Phoenix in London at aphoenix@bloomberg.net.

To contact the editor responsible for this story: Zimri Smith at zsmith@bloomberg.net.

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