A&N Media: Associated Newspapers
KEY DEVELOPMENTS
- Colour investment programme completed
- Continued increase in market share for Mail titles
- Further investment in associated northcliffe digital
Despite the challenging economic conditions in the second half of the financial year and the continued competitive activity in the London evening newspaper market, Associated Newspapers achieved a commendable result. Total revenues were flat year on year, underlining the strength of its core brands. Display advertising revenues grew slightly and circulation revenue was maintained. As expected, Associated’s profits* were lower, due to the additional costs of full colour printing, after the new Didcot plant came on stream, and promotional investment in the property and motors digital companies. An exceptional operating charge of £19 million was made for reorganisation, restructuring and closure costs.
KEY FIGURES††
Newspaper operations
Circulation revenue grew by 1% to £382 million. Both the Daily Mail and The Mail on Sunday’s circulation again performed ahead of the market. Costs, benefiting from a fall in the price of newsprint from 1st January, were up by only 2% year on year. Print advertising was down 1.6%; display advertising was up 1.1% but classified advertising was down 11.6%. Digital revenue from the newspaper titles’ companion websites nearly trebled year on year. Our largest display advertising category, retail, grew by 3.0% and all other categories were up, except for travel (down 9.4%) and motors (down 1.6%).
The Daily Mail’s average daily circulation for the year was 2,294,000 copies, which was only 1.7% down year on year, in an overall market which contracted by 2.5%. Once again the Daily Mail increased its market share to a new record of 20.1%, despite a 5 pence Monday to Friday cover price increase in April. Total advertising revenue fell 1.5% year on year.
The Mail on Sunday once again increased its share of the Sunday market to a new high of 18.6%, up 0.4%. The average circulation for the year at 2,250,000 was 2.6% down year on year, outperforming the overall market, which fell by 4.7%. In January the newspaper’s format was changed to incorporate a new part two newspaper supplement, bringing together all the lifestyle sections contained in the previous format. It has been well received by readers. The title’s magazine supplements, You and Live, jointly achieved the accolade of ‘Supplement of the year’ at the British Press Awards. Total advertising revenue fell 4.8% year on year.
Following years of circulation decline, the average circulation of the Evening Standard for the year rose by 6% to 290,000. The Eros cashless loyalty card scheme was rolled out throughout central London and delivered improving sales performance as the year progressed. Standard.co.uk enjoyed substantial growth in digital revenues. Advertising revenue was, however, 17% behind last year in a fiercely contested market. A continuing focus on costs ensured that further substantial cost savings were made in the year.
The free newspaper division had a good year with the financial performance of all three titles improving. Metro averaged 1,358,857 copies per issue, up 20% year on year, achieving a readership of over three million. Metro has the largest distribution and is the most profitable free newspaper in the world. London Lite maintained its distribution of around 400,000 per issue, reaching one million readers, which is now consistently ahead of the rival free newspaper in the afternoon despite the latter distributing 100,000 more copies. Metro and London Lite delivered strong advertising performances, achieving 18% and 39% growth respectively. 7Days in Dubai overcame the difficulties of last year and returned an improved profit.*
Loot had a good year, turning last year’s loss into a profit,* despite advertising revenue falling 18%.
Editorial and commercial management of the newspapers’ companion sites was transferred back to the newspaper divisions from AND. As well as increasing advertising revenues, investment in the titles’ companion websites resulted in a 33% increase in traffic.
Printing
Harmsworth Printing successfully completed its press enhancement programme on schedule in January. The final stage of the colour investment programme culminated with the commissioning of full colour capability at Surrey Quays. All Associated Newspapers’ titles can now run with full colour on every page. Further restructuring of the Group’s printing operations resulted in the Staverton site being closed in February, after the majority of the work had been transferred to other Group owned printing sites. A consultation process has been undertaken with the printing staff at Grimsby, which is likely to lead to the closure of this plant.
Associated Northcliffe Digital
AND’s portfolio of premium websites had another good year. The AND network now extends to over 150 sites, reaching 24% of UK internet users, making it one of the largest players in the UK digital media industry. AND continued to acquire 'bolt-on' value-enhancing assets. In conjunction with this product development strategy, we invested heavily in building brand awareness. This will continue in the coming year and will be supplemented by a multimedia advertising campaign at Jobsite, including a TV commercial starring Max Beesley, in October 2008.
Revenue grew by 3% across AND’s jobs, property, motors and dating businesses, an underlying† increase of 12%. Operating profit* fell by £5 million as a result of promotional investment in the property and motors digital companies.
Jobs
The recruitment division demonstrated again its strong growth trajectory with revenues up 17%, whilst maintaining its margin of over 30%. The growth comes despite a slowing market with some sectors seeing declining vacancy levels in accordance with the wider economy.
OilCareers.com was acquired in December and has exceeded expectations. The most recently built niche job-board, Onlineaviationjobs.com, was launched by Jobsite in July. Its portfolio of niche sites continues to deliver strong financial performance.
Property
The Digital Property Group was created in May, with the Primelocation.com, FindaProperty.com, Homesandproperty.co.uk and Findanewhome.com brands now operating within a single management structure. The combination provides estate agents and new home developers with exposure to a larger and more differentiated audience.
Despite the current dire conditions in the UK property market combined revenues grew by 21% over the past year. The Digital Property Group now has over 11,000 estate agent branches as customers and a leading presence across London and the South East. Its monthly audience of 3.7 million users makes it the second largest portfolio of property sites in the UK.
Motors
Continued investment in Motors.co.uk boosted audiences and dealer acquisition, translating into revenue growth of 35%. It has become the third largest motors’ classified site network in the UK only 20 months after its launch.
The Digital Automotive division also provides technology services to dealers via its Autoexposure and Complete Automotive Solutions subsidiaries. These continue to grow market share and profits*.
Other areas of operation
AND’s dating business, Allegran, is operating in an increasingly competitive sector, which has led to higher customer acquisition costs, leading to lower than expected levels of profitability. The business is currently reshaping its cost structure and business plan.
AND’s online-led generation business, Data Media & Research, has continued to grow revenues strongly as online businesses continue to seek cost effective alternatives to search advertising, and this growth is expected to carry through into next year.
AND’s Utility Switching business, Simply Switch, was closed during the year.
Teletext
In the face of further upheaval in the holiday market – Teletext’s major source of advertising revenue - and the high costs of maintaining both a digital and analogue service, operating losses* were reduced by £1 million to £3 million. On digital television, Teletext remains the leading text service on Freeview, with its new Extra service accessible to around five million homes at the end of the financial year. Revenues from its television activities fell by 13%.
Teletext’s online services have now moved into profit, and it extended its ThisisTravel brand in April to become a retail operation selling holidays directly to consumers through its own branded website and its television services. Villarenters, offering self-catering villa holiday accommodation also performed well.
Outlook
The first month of the new year has seen total advertising revenue down on last year. It is difficult to predict the trading performance for the rest of the first quarter of the new financial year, with even less visibility thereafter. Associated, although well positioned with its strong brands and extensive portfolio, must implement even stronger cost discipline in the difficult times ahead. A strict profit preserving programme has been implemented which will not only help next year’s profits, but will leave Associated better positioned when the economy finally improves.
* Adjusted operating profit (before exceptional items and amortisation and impairment of tangible assets).
† Underlying revenue or profit* is revenue or profit* on a like-for-like basis, adjusted for acquisitions and disposals made in the current and prior year and at constant exchange rates.
†† Percentages are calculated on actual numbers to one decimal place.