DMGT: newsprint increases at levels 'not seen since 1996'
Friday, November 5, 2021
The owner of the Daily Mail is likely to implement redundancies – rather than put up the price of its newspapers again – as it looks to cut costs as it battles the biggest increase in newsprint costs for 25 years.
The Mail titles, owned by the Daily Mail & General Trust (DMGT), are the biggest-selling newspapers in the country. In March DMGT’s Consumer Media division put up the price of the Monday-Friday Daily Mail editions by 14.3%, from 70p to 80p.
In a statement earlier this week regarding the proposed major reorganisation of the group, whereby it will be de-listed from the stock market if shareholders approve an offer from the group’s majority shareholder the Rothermere family, DMGT also provided an update on current trading.
It said circulation revenues across the Mail and 'i' newspapers continued to reflect the “adverse impact of declining volumes as well as the benefit of the increase in the cover price”.
However, the group said it was dealing with substantial increases in distribution and energy costs, “as well as increases in the cost of newsprint in supplier contracts at levels not seen since 1996”, and in recent months these impacts had started to affect the profitability of the newspaper businesses.
“Newsprint is the second largest cost item for the Consumer Media business and DMGT is currently exploring a number of options to mitigate the impact of these cost increases, including a review of employee numbers,” the group stated.
DMGT’s Associated Newspapers wing has already cut production costs on the Mail by moving supplement printing for its weekend editions from gravure at Prinovis to a lower-cost web offset deal at YM Group.
It’s understood that printing of Saturday’s tabloid Weekend supplement will also be moved in-house onto the group’s own presses within six months, which will also help to trim costs. The Daily Mail on Saturday sells more than 1.5m copies.
DMGT also said the advertising market remained “volatile” and it was particularly difficult to predict how Metro, which was loss-making in the last financial year, would perform due to its dependence on a “very substantial recovery” in commuter traffic.
The New Scientist, acquired for £70m in March, is performing in line with expectations.
Online juggernaut MailOnline grew sales in FY 2021 “despite reduced readership following the exceptionally high levels in the prior year”.
“The future performance is dependent on a number of factors including audience size, sustained engagement, changes to cookie and privacy settings, and advertising and marketing revenues.”
The complex multi-part deal to take the group private via Viscount Rothermere’s offshore company Rothermere Continuation Ltd (RCL) is nearing completion.
The £1.4bn sale of insurance intelligence wing RMS completed in August. Online car retailer Cazoo, in which DMGT had a 20% stake, has now floated in New York.
A potential sticking point over the DMGT pension liabilities was fixed earlier this week when DMGT agreed to pump £412m into the scheme.
The circa £3bn takeover deal, which is opposed by at least one minority shareholder, will be put to investors in a vote.
Viscount Rothermere commented: “We believe the terms of our offer to be fair, particularly bearing in mind not only the existing level of debt within DMGT at a time of increasingly difficult market conditions, but also the restrictions imposed on the operation of the business as part of the settlement with the pension trustees."
Kevin Parry, DMGT independent non-executive director, and non-conflicted director in terms of the proposed offer, said DMGT had delivered “very significant value for all shareholders through the execution of its strategy”.
“So whilst we believe in the future of a standalone DMGT, we believe there are risks associated with continuing as a smaller listed group whereas the offer from RCL together with the special dividend allows DMGT ‘A’ Shareholders to realise an aggregate value in the near term that we believe to be fair and reasonable,” he stated.