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Daily Mail and General Trust Plc Nine Month Trading Update 2018

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Daily Mail and General Trust Plc Nine Month Trading Update 2018 Daily Mail and General Trust plc Nine Month Trading Update 2018 Thursday, 26 July 2018 Paul Zwillenberg, Chief Executive Officer Good morning, and welcome to the conference call for DMGT's nine month trading update. I am Paul Zwillenberg, Chief Executive, and I am joined by Tim Collier, CFO, and Adam Webster, Head of Management Information and Investor Relations. I am pleased to be speaking to you again today, not that long after our half year results presentation at the end of May. This morning, I would like to cover the highlights of our nine month trading period. I will then hand over to Tim, who will take you through more of the financial detail. We will then be pleased to take any questions you may have. So, overall DMGT has delivered nine month revenues in line with last year on an underlying basis. Performance has been in line with our expectations, and the trading outlook for the full year remains unchanged and is consistent with current market expectations. On an underlying basis, our B2B business companies delivered 4% revenue growth in the period. We saw good levels of growth across all our businesses, other than Property Information, where conditions in the UK remain challenging. Consumer media's underlying revenues were down 4% over the nine months, with the decline in circulation and print advertising revenues being partially offset by growth from MailOnline. It is very pleasing to report that DMGT is now in a net cash position as a result of the disposal of our stake in ZPG, which generated £642m of proceeds. This marks a significant step- change in our balance sheet strength and provides us with significant financial flexibility, one of our three key strategic priorities. We will continue to implement the performance improvement programme across the portfolio, and are encouraged by the progress made in the first nine months of the year. And now I would like to hand over to Tim who will give you some more detail on each of our businesses. Tim Collier, Chief Financial Officer Thank you Paul. Good morning everyone. As Paul said, I'll now run through a few of the key figures and the dynamics within each of our businesses during the nine month trading period. 1 You will have noticed that the trading update is for nine months to June 2018 and does not include any figures specifically on Q3. As you'll appreciate, this reflects our move away from providing more granular short-term disclosures and towards a more market norm for reporting. Similarly, we won't be providing detailed figures to specific questions, during the Q&A, on the quarter. So moving onto financial performance and starting with B2B. As a whole, B2B's underlying revenues were up 4% in the nine months, maintaining a good overall performance from the first half. Good levels of revenue growth were delivered from Insurance Risk, EdTech, Energy Information and our Events and Exhibitions sectors, with Property Information's revenues slightly down compared to last year. Pro-forma revenues for B2B were down 14%, and that reflects disposals and the weaker US dollar. As for the full year outlook, we are maintaining our guidance of low single digit underlying revenue growth, with an operating margin in the mid-teens. I'll now explain some of the dynamics within the B2B Group for the nine months, and I'll start with Insurance Risk. RMS reported revenues decreased by 2%, and that was due to the weaker US dollar. On an underlying basis however, revenues were up 7%. Within this, subscription revenues were up 4%, and that reflects the ongoing strength of our core modelling business. RMS has continued to enhance its software and to pursue a modular approach to delivery of the RMS(one) software platform. In Property Information, reported revenues were down 13%, but that was mainly due to the disposal of EDR, the partial disposal of SiteCompli, and the closure of Xceligent. On an underlying basis revenues were down 1% compared to the prior year, with growth from the US businesses being offset by the continued challenging market conditions in the UK, where property transaction volumes remain weak. In EdTech, Hobsons' reported revenues were significantly impacted by the disposal of the Admissions and Solutions businesses in the autumn of last year. However, underlying revenue growth in the nine months was strong at 10%, and that reflects continued good performances from each of the Naviance, Intersect and Starfish businesses. Now to Genscape, our Energy Information business, which delivered underlying revenue growth of 6%, and down 1% on a reported basis, again due to currency. Although Genscape continued to experience difficult trading conditions in the solar business, good growth was delivered by the oil, power and gas businesses. Now let me turn to our Events and Exhibitions business, dmg events, where revenues were up an underlying 2% in the nine months. As previously communicated, there were no major events held in the third quarter. Reported revenues were down 23%, and they were affected by the absence of Gastech, which last year occurred in April 2017 and will be held again in September 2018. Now moving onto our Consumer Media businesses. In the nine month period, dmg media's underlying revenues were down 4%, with the expected declines in circulation and print advertising revenues being partly offset by the growth in digital revenues. Whilst the performance is slightly weaker than at the six month stage, it is in line with our guidance of a mid-single digit underlying decline in revenues for the full year. Reported revenues were down 5%, and that was due to the disposal of Elite Daily and the closure of 7 Days. Looking at circulation first, the 10p cover price increase on The Mail on 2 Sunday in October 2017 only partly offset the continued volume decline of the Mail newspaper titles. And turning to advertising, total advertising revenues at dmg media were down an underlying 2%. The 5% decline in print advertising was partially offset by the 4% growth in digital advertising, as MailOnline's growth picked up following a slower second quarter. The Mail newspaper titles have maintained a strong market share in the period, and that's despite our decision to cease making multiple copy sales of the Daily Mail and The Mail on Sunday, which accounted for approximately 5% of circulation volumes. MailOnline continues to improve overall engagement, and that's despite the current challenging industry dynamics of reduced indirect traffic coming from search and social platforms, and we remain confident in its long- term growth opportunities. Now just a word on JVs and associates and how the ZPG disposal will impact our full year share of operating profits. DMGT ceased to recognise its share of ZPG profits from 18 June, that was when the disposal was approved. Thus, the full share of operating profits from JVs and associates is now expected to be around £70m, rather than the previous guidance of £75m, and that's all around the timing of the ZPG disposal. Now to debt. Our net debt position at 30 June this year was £447m, compared to £534m at 31 March. This figure includes the £146m of disposal proceeds from EDR. However, as Paul noted earlier, following the receipt of the disposal proceeds from our stake in ZPG, yesterday actually, the Group is now in a net cash position. Our increased financial flexibility will enable balanced capital allocation through our clear framework to support the long-term growth potential of DMGT. So, in conclusion, underlying revenues in the nine month period were in line with our expectations. As a result, the guidance for the full year is unchanged, and the overall Group outlook is consistent with current market expectations, other than, as I say, that small adjustment for ZPG. With that, we're now very happy to take some questions. Q&A session Question 1 Ian Whittaker, Liberum Two questions, one on the consumer media side. If you could just give us a view of sort of where it stands at the moment just in terms of current advertising trends, both for MailOnline and indeed in the print part. Second of all, if you could just give us perhaps an update. RMS or insurance risk was a very good performance, if you could just give us your updated thoughts on how we should think of this business over the next 12 months. Thanks Tim Collier Let me take the RMS question first. You're right, RMS did deliver good numbers in the nine months. I guess my view is that was slightly flattered by a fairly large amount of one-time revenue, so the underlying recurring revenue stream grew 4%. And really that's what I would push you to think about in terms of the longer-term performance of RMS, that's what we're focused on. If I had to make a trade-off, I would always take subscription recurring revenue 3 versus one-time. So, whilst we're very pleased with the underlying ACV growth of 4%, as I say we were flattered in the nine months by that one-time revenue. Your question was then about advertising. Paul Zwillenberg Yes, advertising did slow during Q3 relative to the first half. You may recall that we had a slower Q2 than Q1 this year, with advertising plus 2% in Q1 and then flat for six months. So, you can see that we were down about 2% Q2. We then had a slightly weaker Q3 to bring the average down 2% for the nine months, and that was largely print driven.
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