DMGT Annual Report 2008

Chairman's Statement

THE VISCOUNT ROTHERMERE, CHAIRMAN

  • Q: Economic conditions around the world are very tough at the moment. How is the Group faring?

  • A: It has been a challenging year for the Group and the next 12 months look likely to be even more challenging. The world has been hit by a financial crisis, unprecedented in the last 50 years, and DMGT cannot be immune to that. However, our policy of investing in market leading businesses will mean that we should be able to grow our market share and emerge stronger.

    Set against this background, I am pleased to be able to report results showing revenues slightly up on last year, and profits* only 9% lower. This has been achieved due to the strong performance of our business to business operations, while our UK consumer businesses had to cope with extremely difficult conditions. The fact that the Group has grown its revenues in such circumstances is an affirmation of our continued diversification into business to business products.

  • Q: How are you going to react to these conditions?

  • A: Given the likely economic picture for the next year or more, we have had no choice but to reduce our costs where appropriate. I am afraid that this will inevitably mean a loss of some jobs, but we hope, in large part, to achieve this by not filling vacancies and not replacing those who choose to leave.

    It is important to remember that whilst we must find ways of improving efficiency we must not cut into the heart of our business for short-term benefits. DMGT prides itself on taking a 'long view' and ideally wants to see its businesses streamline their operations whilst investing in growing market share.

    DMGT has always performed strongly as we have emerged from tough times and, however difficult the circumstances seem now, I firmly believe that we will look back on this time as one of opportunity.

  • Q: We keep reading about the 'credit crunch' and companies being unable to raise funds. Are DMGT's finances in good shape?

  • A: Most importantly in the current markets, our financing arrangements are long term and secure. We undertook a £200 million sterling bond issue in June 2007, shortly before the bond markets effectively closed down. In September 2008, we extended our banking facilities, which were due to expire in October 2009, partly for three years and partly for five years. In the short term, given the uncertainty of our markets, our focus is on cash generation and increasing our financial flexibility.

    These funding arrangements enable us to move forwards with confidence and to make the investments in our businesses of which I spoke earlier.

  • Q: You spoke in your statement last year of the spirit of innovation in the Group. Will this survive these tough trading conditions?

  • A: I believe it is vital for our future prosperity that it does and, from what I have seen, it is very much alive and thriving.

    Northcliffe, our regional media business, is going through a torrid time in terms of advertising revenue trends and profitability. Yet, even during such tough times, it was able to launch the Messenger series of free titles in the East Midlands. Aimed at affluent, small town populations, the series has captured an attractive market, been profitable from the day of launch, and now extends to 14 editions, with plenty more planned. Northcliffe has also launched an online, self-service advertising platform, called the Bubble, which has the capacity to revolutionise local media advertising.

    Euromoney has created the Euromoney Business Library, an online searchable receptacle of all the content from their many publications. Genscape has launched a platform to measure natural gas production from refineries, using advanced wave technology.

    Associated has developed a thriving business, direct marketing chosen products and services to the readers of the Mail titles.

    Further details of these and other innovations are given in this Annual Report. I am determined that we continue to encourage such developments.

  • Q: We have recently seen the retirement of Charles Sinclair as Chief Executive, with Martin Morgan taking over at a 'most interesting' time. How do you feel the transition has gone?

  • A: I referred last year to Charles' retirement after 21 years as Chief Executive. It was the strategic decision of Charles and my father in the early 1990s to diversify the Group's activities and particularly to invest in business to business information companies. That decision is being shown now to be very prescient. We send him all our best wishes for the next stage in his career. Martin Morgan duly took over as Chief Executive on 1st October, and has certainly 'hit the ground running'. Given that his ascension coincided with the worst of the financial crisis, he has had little choice! I think the transition has been painless, for which Charles deserves great credit.

  • Q: Has Martin made any changes to the executive team?

  • A: We have strengthened our team with the appointment of Joe McCollum as Head of Human Resources or, as we like to describe him, our Talent Director. Also, we recruited Suresh Kavan from Thomson Reuters, to replace Martin as head of DMG Information. They are both making a great contribution already.

  • Q: Will there be any other changes to the Board this year?

  • A: Ian Park has indicated that he will not stand for re-election to the Board at the AGM in February. Following a distinguished career in journalism and regional press management, latterly as Managing Director of Northcliffe, Ian has served on the DMGT Board for 14 years. He has provided me with excellent advice since I first came into the Group and particularly since I became Chairman. I shall miss him and wish him well for his retirement.

    Marius Gray has informed me of his intention to retire from the Board in July 2009 after 24 years service. He has been a great source of advice both to my father and to me, and will be a tough act to follow. I shall miss him also and wish him a long and happy retirement.

  • Q: You have always emphasised the importance of people within DMGT. In these tough times, what do you have to say to the Group's employees?

  • A: I do indeed believe that talented people are at the heart of DMGT and we must nurture and develop that talent if we want to drive the Company forward. This current recession will test our resolve on this issue but I'm confident that we will remain true to our beliefs. We should remember that, at the moment, the resilient performance of some of our businesses is as noteworthy as the growth achieved by others. The Board and I are very grateful for the dedication and hard work of all the Company's staff.

  • Q: How do you see the coming year?

  • A: It is going to be another tough year ahead, but I firmly believe that DMGT will be stronger at the end of it. We have strong businesses with 'media brands that people love' and dedicated, talented employees. Difficult times are a wonderful opportunity to improve market shares - we intend to take that opportunity.

Rothermere
Chairman

* Adjusted profits before tax, amortisation and impairment of intangible assets and exceptional items.