Daily Mail and General Trust plc Thursday 28th January 2016, 08:00 GMT Q1 Trading Update Stephen Daintith, Finance Director Morning ladies and gentlemen and welcome to the conference call covering our first quarter trading update. I am Stephen Daintith, DMGT’s Finance Director, and I am joined by Adam Webster, Head of Management Information and Investor Relations. So today’s conference call is a chance to pull together the key dynamics behind our trading over the first quarter of our financial year, to the end of December 2015. As usual, there will be an opportunity at the end of the call for you to ask any questions. So, overall trading over the first three months of our financial year has been in line with our expectations. The revenue and profit outlook for the full year, provided as guidance at our Full Year Results in November, remains unchanged. Group revenues for the period were up by 1% on an underlying basis. Reported revenues were up 5%, mainly due to factors influencing our B2B businesses. Overall, our B2B companies generated 2% underlying revenue growth in the quarter. Our reported B2B revenues, which were up 9%, have benefited from the strengthening US dollar, acquisitions and timing of events over the period. More detail on B2B dynamics to follow. In summary for DMG media, underlying revenues were 2% lower in the first quarter, with declines in circulation and print advertising being partly offset by digital advertising growth. Portfolio management activity has continued in the new financial year, with bolt-on acquisitions, primarily for DMGI, totalling around £20m, and further refinements to the consumer media portfolio. In October, ETSOS was acquired; this is a UK provider of conveyancing services and will complement our Landmark and SearchFlow business. In December, Hobsons, our DMGI education business, acquired PAR Framework, which provides models to improve student retention and graduation rates in US higher education institutions. Within the consumer media portfolio, DMG media disposed of its online business, Wowcher, to a newly formed company and DMGT will retain around a 30% stake in the new operation. As highlighted in today’s statement, net proceeds from the disposal of Wowcher and the investment in the new company totalled £29m. In November, DMGT sold its stake in Local World to Trinity Mirror for £73m, and next week Daily Mail Australia will become a wholly owned subsidiary of MailOnline, as a result of acquiring a 50% stake from Nine Entertainment Company. 1 As is usual at this time of the financial year, net debt rose and stood at £723m, £21m higher than at the start of the quarter. As well as the seasonal cash outflows, which you are all familiar with, there were outflows of £31m relating to payments into the Group’s main Pension Scheme. In addition, with our continued balanced approach to capital allocation, we bought back £6m in shares as part of a new rolling share buy-back programme, announced in November 2015, at an average cost of £7.02 per share. Now to give you some more detail on each of our businesses: Within B2B: RMS’s underlying revenues were up 2%, whilst reported revenues increased by 6% due to the strengthening US dollar. The underlying revenue growth is in line with our expectations and has been achieved against a consolidating client environment. In terms of model development, all three of the prioritised HD models for 2016 - European Flood, Japan Typhoon and New Zealand Earthquake – have now been developed and RMS is working closely with a select group of clients that are testing and evaluating the results of these models. RMS remains on track to release applications for exposure analytics and risk modelling, in stages, during 2016, with clients being able to begin migrating from RiskLink to RMS(one) by the end of 2016. DMG information delivered a good level of 6% underlying revenue growth in the first quarter. Reported revenues were up 13%, reflecting both acquisitions and the benefit of the stronger US dollar. In terms of the individual sectors within DMGI, Genscape – our energy business – delivered double digit underlying growth. The property portfolio covering our US, UK and EMEA businesses, delivered underlying mid-single digit revenue growth and revenues were stable, on an underlying basis at Hobsons, our education business. We are anticipating that the growth rates for both our property and education businesses will pick up over the remainder of the year, and hence our reconfirmation of the full year underlying revenue growth guidance which we anticipate to be in the region of 10%. DMG events delivered strong underlying growth of 8%. Three of our four large events occurred in the first quarter, which strongly influenced the reported revenue growth of 34%. In terms of how each of these large events performed, Gastech’s revenues were in line with the previous events, while Big 5 Dubai and ADIPEC increased both attendances and revenues. Euromoney released their Q1 statement earlier today, stating that underlying revenues declined by 6%, with reported revenues down 5%. In November, Euromoney indicated that the challenging market conditions and revenue trends experienced in the second half of the financial year 2015, when revenues declined by an underlying 5%, were expected to continue, and that has indeed been the case. The challenging financial markets, the weakness in the oil price and uncertainty over China, in particular, are expected to continue to have an adverse impact on Euromoney’s activities in the banking and commodities sectors. 2 Euromoney are hosting a Capital Markets Day on the 9th March, where a strategy update will be provided by Andrew Rashbass, the new Chief Executive. Moving on to our Consumer business: DMG media’s underlying revenues were down 2% in the period compared to last year, with declines in circulation and print advertising revenues being partly offset by the growth in digital advertising revenues. The 4% decline in circulation revenues reflects declining sales volumes, a dynamic you are familiar with given the continued weak market conditions. Importantly, however, the Daily Mail and The Mail on Sunday continued to increase their market shares. Looking at advertising, total underlying advertising revenues at DMG Media were down 2% in the quarter, with a 12% decline in print advertising being largely offset by the 32% growth in digital advertising. Reported revenues across DMG Media declined by 1%. The impact of the disposals of Wowcher in November 2015 and Jobsite in October 2014 were more than offset by the benefit of the increased reselling of newsprint. In terms of measuring the progress of the DMG Media business, I would highlight several metrics: Print advertising continues to be relatively variable. After a fairly weak October and a strong November, print advertising was quite weak in December. Across the Mail businesses, advertising revenues were down 3%. MailOnline’s digital advertising revenue growth of 27% to £23m partly offset the 14% decline in print advertising revenues at the Daily Mail and the Mail on Sunday over the first quarter. At MailOnline, the average number of global monthly unique browsers during the first quarter was 220 million, up 12% on last year, and the average number of global daily unique browsers were 13.7 million, up 11% on last year. In terms of revenue performances across MailOnline, the UK revenues were up 17% and US revenues were up 66%, reflecting their strong growth trajectory. In terms of current trading, for the four weeks since 27th December, total underlying advertising revenues for DMG Media are down 12% on last year. In the relatively short time period, there has been volatility, especially within print advertising, which has been partly offset by the continued strength of MailOnline’s advertising revenue growth performance. We have also announced this morning that there will be a rise in the cover price of the Monday to Friday issues of the Daily Mail from 60 pence to 65 pence with effect from next Monday, the 1st February. Overall, for the full year, DMG Media still expects to deliver stable underlying revenues, in the -2% to +2% range. So, in conclusion, trading in the first quarter has been in line with our expectations and Full Year revenue and profit guidance remains unchanged. I would now like to hand over to you for any questions that you may have. 3 Thank you. Question and Answer session Question 1 Nick Dempsey, Barclays Good morning Stephen, I’ve got three questions. So, first of all, in terms of the -12% for the four weeks, I wonder if you could give us the split between print and online? And then also on advertising, was Wowcher’s organic growth included in your Q1 number, because obviously that was growing pretty well and now it’s not going to be part of your revenue growth? And then in terms of cover price increase, how do you think about the drop through of that? Are you going to have to put a bunch of promotion through, put more content into the product? That’s never quite dropped through in the way that some people hoped in the past. And my last question just on the Hobsons. Why is that flat at the start of the year? We’ve seen this pattern before. Is it that some parts of the business turn up mostly in the second half and they are growing more, or is there an overall slowdown that’s different? Stephen Daintith Okay, fine. So the print digital split in the first four weeks print was down 20%, which is, one might argue, the most scary number, but on the other hand, I’ll just reinforce it’s a very short period of four weeks, and also there are one or two weeks, particularly the first week of January, which is a very light week.