Chief Executive's Review
Martin Morgan, Chief Executive
Our strategy for future success lies in three key areas.
- Growing our Business to Business divisions
- Supporting our newspapers and investing in digital consumer media
- Turning DMGT into a global growth company
Martin Morgan
Chief Executive
Introduction
This Business Review is addressed to the members of the Company. Its purpose is to help them assess how the Directors have performed in their duty to promote the success of the Company. It is framed by the principles and guidelines for Operating and Financial Reviews published by the U.K. Accounting Standards Board in 2006. It outlines the main operational and financial factors underpinning the development, performance and position of the Group as well as those likely to affect performance over the coming year, illustrating this with key performance indicators.
This Chief Executive's Review will start by setting out the nature, objectives and strategy of the Group. A business review of the development and performance of each of our operating divisions follows in this section. A Financial and Treasury Review concludes this section and the principal risks and uncertainties the Group faces are set out in the Directors' Report.
DMGT's philosophy
DMGT is a multimedia and information company providing essential news, entertainment and information services on both business to business (B2B) and consumer platforms. We operate in many different markets, in many countries, each with their own competitive and regulatory requirements.
As I am sure you all know, it has been DMGT's philosophy for many years to take advantage of its shareholding structure and to invest with a long-term perspective to generate value. Our particular ownership structure, with control maintained by the founding family, has proved itself throughout our long history to be a successful business model in the media and information industry. It is this ownership structure that affords us a longer-term perspective and that is at the heart of our philosophy.
You will appreciate that we are intent on remaining diversified across both our B2B and consumer media sectors in order to give us a breadth of opportunities and to spread risk. At present, our B2B arm is made up of Risk Management Solutions (RMS), dmg information (dmgi), dmg world media and Euromoney Institutional Investor. Our consumer media division consists of A&N Media (which includes Mail Newspapers, Associated Northcliffe Digital (AND), the free newspaper division and Northcliffe Media) and dmg radio australia where we have announced the creation of a 50:50 joint venture with an Australian company called Illyria, the private investment vehicle of Mr Lachlan Murdoch.
Strategy
The overarching strategy for the Group is to remain the owner of high-quality, sustainable, market-leading media and information assets across both the B2B and consumer sectors and to improve DMGT's overall share rating.
Over the last year we have experienced a very challenging economic environment. Our strategic focus was therefore preoccupied with managing the Group through its short-term challenges with the aim of minimising the long-term negative implications. We used this time as an opportunity to reassess our portfolio of businesses and ensure that they still operated within the framework of our investment criteria. We made every effort not to lose sight of our long-term strategic objectives and so continued to invest in new products and services.
My long-term strategic objective remains to turn DMGT into a truly global growth company with sustainable earnings and dividend growth. In order to achieve this goal, we must build on the solid and diversified platform that we have established. We will do this by continuing to invest in organic growth, in internal growth projects that will drive long-term revenue generation, and by ensuring that all our divisions are adopting the investment criteria I laid out at our Investor Day in March, both in the acquisition of new businesses and in the management of currently owned businesses.
It has long been a policy of mine that superior performance can only be achieved by superior people. In order to realise our long-term strategic objectives, it is imperative that we continue to carry out our talent agenda.
I see the three pillars of my leadership being diversification, adaptability and innovation.
Allocation of capital
DMGT has always been a first-mover in the media and information industry. The far-sighted decision, made many years ago, to diversify our portfolio and move away from a dependence on U.K. newspapers, was a critical factor in enabling us to perform as well as we did this year. Today we still hold a very strong market leading position in our national paper division, but can now boast a strong portfolio within the B2B sector as well.
Our national papers have done tremendously well within an admittedly weak marketplace. Indeed, Associated's operating profit* fell only 15% this year, which is an outstanding achievement in this climate. They are faring much better than others and the Daily Mail remains highly profitable. Over the last year we have continued to invest in our consumer sector in order to ensure the realisation of our ambitions both in the traditional media sphere (newspapers and radio) and in their online initiatives.
At Northcliffe Media, which has faced the most difficult of market conditions, we have reappraised our publishing portfolio and carried out a complete overhaul of operations. This has rebased the business on a much lower cost operating model, which will see substantial benefits when the economy recovers.
Simultaneously, we have continued to invest in our B2B operations, particularly at RMS, dmg information and Euromoney, which can be proud of their performance. In addition, we have reorganised and restructured our exhibition division, dmg world media.
The result of this deliberate deployment of capital is that an increased percentage of the Group's revenue is generated from streams other than advertising: principally from subscription-based services and events.
A significant part of our operations are now outside the U.K. and the Group's exposure to regulation has been greatly reduced as a result so that in 2009 more than 70% of its operating profits* were derived outside newspaper publishing, compared to 14% in 1996. Indeed, 73% of this year's operating profit* was generated from the Group's B2B operations, up from 60% last year. U.S. dollar derived operating profit* accounted for approximately 60% of the Group's operating profit*.
As I mentioned before, our ambition to see DMGT become a growth company relies on us continuing to adopt a growth criterion not only for new investments and acquisitions but also for our currently owned businesses. Every new investment and every existing business is reviewed against these criteria and capital will be allocated accordingly. We are focused on having businesses which operate in attractive growth markets. Such businesses should have products or services that are highly innovative and highly valued, brands which people value, ones which customers repeat buy. We have a strong bias towards market leaders. Businesses with these characteristics will not only grow but be high margin, cash generative and produce a high return on capital. We are also focused on capturing and retaining entrepreneurial management, and we give preference to businesses which can benefit from DMGT's long-term perspective.
We have started to narrow the overall breadth of DMGT and to focus hard on businesses which have strong profit and growth potential. As evidence of this policy you can look to our refocusing of the exhibition division away from consumer to B2B, the disposal of the Evening Standard, the pending closure of all but the Freeview holiday and commercial service offerings of Teletext television service, the merger of our Metro Ireland with Herald AM, the recent closure of London Lite and the announcement of the sale of 50% of our interest in dmg radio, which, following our exit from U.K. radio a number of years ago, had become less of a core asset.
During the year we restricted our acquisition programme and only completed on a small number of limited scale deals which could be rolled into our best performance companies.
In future, when we start making acquisitions again, we will continue our policy of not betting the farm on very large individual transactions, but instead on a programme of selective smaller scale deals which we can develop and which can benefit from our longer-term perspective. We will continue to divest on a periodic basis, and our track record over the last few years is generally good on this count.
DMGT operational model
You will hopefully have noticed that DMGT's approach to managing the Group's divisions and divisional strategies has not changed during these turbulent economic times: we continue to adopt a decentralised structure. We take a considerable amount of comfort in the fact that we know all our businesses are run by chief executives with expert knowledge of their companies and the markets in which they operate, and our operational structure has reflected this. Over the last year, we have continued to allow relative divisional autonomy with strong incentives based on performance; yet we continued to retain central control over surplus capital and its reinvestment.
Maintaining this approach is of upmost importance to me. The benefits are numerous and made us highly resilient in withstanding the economic storm. At DMGT we realise that if you want to survive in this sector, you must be able to react quickly and efficiently to the rapidly changing media world in which we exist. If divisional management teams are able to exercise relative autonomy, they are able to keep the decision making as close to their customer as possible. I think you'll agree that real innovation comes from having a customer focus – our decentralised model provides a fertile environment for innovative people and, in turn, a perfect breeding ground for innovative ideas.
Short-term considerations
I have already mentioned how last year, in order to preserve our strategy, we had to focus hard on cost reduction and cash generative initiatives, given the downward pressure on revenues.
I am pleased to say that the decisive action we took to defend profitability in the first half of the year, along with the continued management of our cost base, offset much of the impact of the difficult and unpredictable trading conditions. I am also pleased to say, that having initially targeted revenue and cost initiatives to improve profitability by £100 million, we were able to raise that to £150 million by May.
We took the precaution to model even deeper recessionary scenarios and their implications. From this information we were able to develop a strategy that would have enabled us to achieve an acceptable level of performance to meet our financial commitments. Fortunately, we have not had to implement such a plan.
During these times of increased capital constraints, we have focused on nurturing our existing businesses rather than on making new acquisitions, maintaining revenue investment where we have growth opportunities. We have continued our disciplined disposal programme, particularly in the non-core consumer division of dmg world media, but also with the sale by dmgi of Property & Portfolio Research in July.
We have continued to innovate, for example the launch of new hyperlocal news and information services, the development by Environmental Data Resources of a professional social networking site for environmental professionals, and the launch of AR, a print and online offering by Euromoney. Through such entrepreneurially minded initiatives, we are building growth for the future.
Business to Business summary
I am pleased to report that our B2B operations demonstrated their resilience this year, growing their profits*, despite the negative impact of our property businesses, and can boast combined revenues of £859 million and with a healthy operating margin of 24%.
Risk Management Solutions
RMS continued to grow despite challenging market conditions worldwide, which curtailed clients' desire to purchase news products and caused some to reassess their overall range of purchases over the year. There were a number of large industry mergers, which impacted RMS's net bookings figures. Whilst prudent cost controls were taken in response to a slower growth rate in revenues, it managed to maintain its investment programme for future growth. Nevertheless, RMS achieved another record operating profit*. It will continue its programme of worldwide growth, by deepening its involvement in information decision support for risk management in the insurance industry and by launching new models dealing with new categories of risk.
dmg information
Understandably, the overall division was affected by the impact of significant cyclical declines in property transaction volumes. Nevertheless, with two of its companies achieving double digit revenue growth and operating profit* growth of over 20%, dmgi made another record operating profit* in sterling terms and maintained its profits* growth from a standing start in 1998, illustrated on the dmg information operating profit graph.
dmgi's ambition to invest in must-have, high-growth, innovative business information companies remains unchanged, as does its remit to diversify DMGT by sector, by business model and by geography
dmg world media
dmg world media continued its strategy of divesting its non-core B2C businesses, resulting in a streamlined operation with market-leading exhibitions and conferences. As a consequence of this and the actions taken in the year on cost initiatives, it will have significantly lower revenues in 2009/10, but we expect with higher margins. The division now intends to expand its portfolio globally, whilst completing its withdrawal from the less lucrative consumer market and its disposal of non-core B2B exhibitions.
Euromoney Institutional Investor
The benefits of Euromoney's strategy over recent years to build a more resilient and better focused business by increasing the proportion of revenues derived from subscription products, now 47% of total revenues, and transforming a predominantly publishing driven business to one with significant activities in electronic information and database services, were again demonstrated by the results produced.
The Board regards Euromoney as a core business and a major plank in our global growth ambitions. Our objective at DMGT is that our diluted holding should not fall below 60% again, as it did in 2006 after the acquisition of Metal Bulletin plc. DMGT took its share of dividends from Euromoney in the year in the form of a scrip. This enabled us to offset the dilutive effect of the vesting of the second tranche of Euromoney's capital appreciation plan, thereby maintaining our equity interest at just under 67%. It is the Board's current intention also to take Euromoney's forthcoming final dividend in the form of a scrip.
Consumer
As I am sure you are all aware, the consumer media industry is witnessing a time of unprecedented change. Whilst technology is undoubtedly an enabler, allowing us to extend our reach to our chosen audiences over a multitude of platforms, it has had a significant deflationary effect on advertising yields and newspaper copy sales. The environment forces us to remain even more focused and orientated around the needs of our customers and on the strength of our brands.
The availability of online news content in conjunction with the current economic climate has created less than ideal trading conditions for our printed paper businesses. Yet we remain positive in our outlook for both our national and local papers.
We were forced to take decisive action in the first half of the year which had positive repercussions in the second half. At Associated Newspapers, this was driven by the strength of the Daily Mail which maintained its profitability. At Northcliffe, an improving profits* trend since the spring was aided by stabilisation of absolute weekly levels of advertising revenue as well as deep cost cutting and reorganisation measures.
dmg radio australia increased its profits* by cutting costs and performing better than the radio advertising market as a whole.
Associated Newspapers
I can assure you all that the longer-term outlook for Associated remains robust. Quality of content has been at the heart of our success at Associated and we continue to invest in editorial quality. Although the Associated Newspapers circulation graph shows that the circulation of both the Daily Mail and The Mail on Sunday fell marginally more than the market, we have already implemented a number of measures to ensure that we recruit more long-term loyal purchasers through a sustained direct marketing campaign. As a consequence, you will notice that circulation has stabilised in recent months and our market share is rising once again.
In addition to the profit enhancement programme, over the past year we have taken further measures to defend Associated's profitability and to improve on its margins. In February, we took decisive action in selling a 75.1% controlling interest in the Evening Standard. We remain as a minority shareholder but with no involvement in its management. In July, we announced the planned closure of the majority of Teletext's television business by early 2010. The remaining businesses, which are profitable and show good profit growth potential, have been transferred to Associated Northcliffe Digital (AND) and will focus around the company's online travel activities.
London Lite traded in line with last year, but, following the decision of the Evening Standard to go free in October 2009, it was closed on 13th November after consultation with its employees.
Our free morning newspaper, Metro, remains profitable and is well established and traded strongly towards the year end.
Mail Digital continued to make progress this year. Despite the adverse trading conditions, it recorded a 22% improvement in revenue, and traffic to its primary website, MailOnline, increased by 68% to 30 million unique users in September, making it one of the U.K.'s leading newspaper websites. We continue to invest in this area.
Despite a negative long-term outlook for the printed paper industry, I am happy to report that the Daily Mail remains robust in a downward trending market. We continue to work to create a viable strategy to monetise better the Daily Mail's readership through database marketing and Associated is growing its enterprise revenue, selling goods and services to readers and capitalising on each interaction.
Naturally, the cost base of our national newspapers continues to adjust to a lower level of revenue growth due not only to the recession but also to the migration online. Our objective remains to meet the challenges of the digital age without losing the powerful advertising response from an engaged readership.
AND's portfolio of core digital classified portals, in jobs, property and motors, continued to build their brands in difficult economic conditions. During the year Jobsite became the recruitment partner to Johnston Press, sitting behind their extensive range of newspapers and websites. AND remains one of the U.K.'s leading digital media companies and is actively seeking to apply its expertise to expand. Its objective is to be the number one or two business in each chosen market.
Northcliffe Media
Northcliffe Media was badly hit by very weak advertising. All categories suffered but particularly jobs, property and motors. The business anticipated this and moved very fast to reorganise. This included the closure of some print titles, the closure of three print plants, the consolidation of sub-editing and prepress centres, new call centres for recruitment and private advertising, outsourcing of national sales and more efficient distribution channels. Massive costs were taken out of the business, whilst the sales performance, in many areas, was significantly better when compared to others in the sector. Northcliffe remains profitable*. Indeed, with revenues having stabilised, Northcliffe is now seeing its profits* increasing year-on-year.
Northcliffe also extracted additional benefits by working more closely with AND's leading digital businesses in jobs, property and motors
Central and Eastern European operations felt the full force of the economic downturn later than the U.K., with the second half proving considerably weaker than the first. Our Hungarian newspapers, which are sold on subscription, have held up relatively well, but advertising markets in both print and digital fell substantially.
These adverse economic conditions are compounding the underlying structural challenges caused by the migration of readers and advertisers to the internet. We can expect a cyclical bounce back of some of the advertising revenue when the markets recover. The cyclical nature of the downturn in job advertising, in particular, is underlined by a similar impact felt by Jobsite. The strategic objective is to continue to transform Northcliffe into a new multi-platform local media information business. We do not expect to make further significant acquisitions in U.K. local print media.
dmg radio australia
dmg radio's national metropolitan FM broadcasting Nova network traded well in the year, especially in outperforming the radio advertising market which was weak. Profitability improved in the year, as explained in the dmg radio australia.
Summary
We may have experienced the worst recession in 70 years, but it's not all negative. During 2009, our strategy of creating a diversified international portfolio of market-leading businesses in both business and consumer markets protected our profitability*. I feel positive that we are well positioned to deliver long-term growth and to capitalise on markets when they return. We have performed well in a turbulent market. Our B2B group is already substantial in scale and produces healthy margins. The combination of our investment approach, focus on entrepreneurial talent and ability to be nimble and sure-footed will enable us to enter new niche areas by investing in market-leading companies with high quality earnings potential. Furthermore, there continue to be opportunities for organic growth right across the group.
Within our consumer operations, we will continue to generate value from the Mail brand, becoming closer to its readers in Modern Mid Britain, capitalising on a broader range of consumer interactions and taking full advantage of its growing strength relative to its competitors.
AND will continue to exploit the leading positions of its existing portfolio whilst it seeks out new investment opportunities in the consumer digital market place.
At Northcliffe, we will continue to transform the business with the three building blocks at the core of this vision being a closer relationship with its audiences, better local relationships with and solutions for its advertising customers and a sustainable operating model.
dmg radio remains devoted to exploiting its highly successful national Nova network in Australia and bringing its two Vega stations into profitability*, and will now benefit from the involvement of our new Australian partner.
Share price performance
Our share performance remains important to us as it is an indicator as to whether our strategy is being understood and approved of by investors.
The value of our share price has been somewhat turbulent this year, reflecting the movements of the markets at large. The price of our widely traded ‘A' shares started the financial year at £3.24 and fell as low as £2.11 in mid-March. The shares rallied at the start of May, along with the wider market, reaching £3.60, before falling back to £2.67 in June. In August, DMGT's ‘A' shares were caught up in a sharp rise of cyclical stocks, increasing back above £4.60, before closing the year at £4.39. The share price increased 65% from the middle of June to our year end.
The market's appreciation of our diversified portfolio of assets, the decisive actions we took this year, our high quality consumer national media franchises and the operationally geared nature of much of our revenues has led to us out-performing our peers again this year. Volatility in our share price has been increased by stock lending of DMGT's shares continuing at unprecedented levels, rising from 16% to 23% at the end of the year, compared to the previous normal level of below 5%.
Capital structure
The Company has not made a capital call on its shareholders since 1933. Capital growth is funded by long-term debt and by retained earnings. Since the late 1980s, our strategy has been to seek to raise the dividend in real terms. Since 2002, the Board's policy has been to target a real rate of growth in the dividend in the region of 5% to 7% on the basis of the Directors' confidence in the Group's long-term financial health.
Last November, the Board met following the onset of the full blown global financial crisis, with the U.K. economy having deteriorated significantly and DMGT looking to conserve cash in order to reduce its net debt. As a consequence, the Board declared an unchanged final dividend. This year, it decided to keep the total dividend unchanged, pending greater visibility on the economic outlook, whilst maintaining its policy of seeking to increase the dividend in real terms over the economic cycle. As shown on the DMGT dividend history graph, the compound dividend growth over the last twenty one years is 10% in nominal terms, which is an increase of 7% in real terms.
The Company utilised 10,184,237 ‘A' Ordinary Non-Voting shares out of treasury in order to meet obligations to provide shares under various incentive plans valued at £29 million. It also acquired 1,626,058 such shares in treasury for £5.6 million.
We underwrote our future through renegotiating our bank facilities in September 2008 and by having long-term debt already in place. We have no refinancing to contemplate until 2013. Furthermore, it is our intent to reduce our debt via improved trading performance and disposals.
Resources
The Group's main resources are its brands, reputation, the market-leading position of its major businesses and above all its people. It is my strong belief that it is the obligation of a Chief Executive to leave a company in a better shape than he found it in and I realise that the skills required of leaders in our industry ten years ago are not the same today. We cannot capitalise on the future unless we invest in the talent of today, in the leaders of tomorrow. We understand that superior business performance starts with superior people, and it is my overriding priority to ensure that we continue to attract and promote the very best talent and reward talent suitably in line with shareholders' interests. During the year, Joe McCollum, our Human Resources Director, rolled out our new talent review and development programme. We also held our first ever Group-wide leadership course.
We made several further key appointments in order to populate the Group with new superior talent, talent of a new era, of a digital age, coming from within and from outside the Group. At A&N Media, these included the appointment of Richard Titus, who joined us from the BBC, as chief executive of AND; from EMAP, Marcus Rich, as deputy managing director of Mail Newspapers; from News International, Roland Agambar as chief marketing officer; and from Alliance & Leicester, Jo Hart as director of shared services. RMS appointed Philippe Stephan as chief technology officer and Paul Bianchi as senior vice president of human resources. DMGT will always invest in its people in order to grow.
Relationships with stakeholders, other than shareholders
Across the Group we take our corporate responsibility (CR) seriously. This vision permeates our approach to everything and influences our outlook on the environment, our employees and on local community issues where we operate.
As one significant example of how our CR agenda can have a very beneficial implication for a community, RMS has developed an earthquake risk model which, in the event of an earthquake, assesses the likely number of injuries and displaced households, the potential fatalities, and the total economic loss. The humanitarian implications of this are immeasurable and while RMS's models are a source of considerable revenue generation for its core business, RMS is committed to our CR agenda, and to this end they are providing, at no cost, advice on mitigation programmes in six South American and Latin American cities regarding engineering and housing construction in an attempt to minimise the damage (human and property) caused by earthquakes in these poorer communities.
This is just one example of how DMGT companies are combining innovation and their business knowledge to drive their commitment to corporate responsibility. It is an attitude that I hope will permeate the Group at large over the next few years.
For more detailed information on our CR agenda, please see the CR Report which makes reference to the policies the Board has adopted in this area, including the Code of Conduct, which was introduced in July this year.
DMGT and the environment
The environment is a topical issue. We recognise that our businesses have an impact on the environment, be that through our printing operations, offices, transport or other activities. We are truly committed to ensuring that, where possible, our impact on the environment is minimised.
The greatest impact we make arises from our printing operations. Here, I am pleased to say that we have been diligent in measuring and reducing waste in our usage of materials, and, through our analysis of our carbon footprint, monitoring and improving our efficiency in the use of energy.
We started to measure our footprint in 2006 and the graph shown opposite illustrates that the Group's emissions have fallen steadily since then.
We recently embarked on an energy management and abatement programme, commissioning specialist consultants to conduct an energy efficiency exercise at DMGT's head office and an audit of energy consumption in our five U.K. print plants. The objective of the audit was to identify potential opportunities for saving energy, thereby reducing the Group's environmental impact. As a result of this audit, Head Office carbon emissions have been reduced by 18% annually. In addition, energy saving measures and further investment at our print plants, in conjunction with the closure of older more inefficient production units, will, when the project is complete, provide a 40% saving against our original carbon output. If this initiative proves successful, we hope, where financially viable, to implement similar projects across the Group.
DMGT and our employees
Whilst continuing to invest in talent, the necessary focus on cost reduction meant that, regrettably, the number of employees fell by 2,760 from 17,524 at the beginning of the year to 14,764 at the year end, a reduction of 16%. This is not something we undertook lightly. The largest components of this arose within A&N Media's U.K. operations (excluding the Evening Standard) which fell by over 1,600 (16%) in the year, including the job losses from the closure of the three regional printing plants.
DMGT has been operating defined benefit pension schemes, primarily in its newspaper businesses, for a long time and has a reputation for the quality of pension provision for its employees. However, the cost of providing this benefit continues to rise as people are expected to live longer and, more recently, as turmoil in financial markets has reduced returns expected from investments.
Given the size of the Company's pension commitments compared to the size of the Group itself, this cost needs to be controlled to ensure the financial health both of the Company and of the pension scheme. Accordingly, the Board decided this year to keep its defined benefit (final salary) scheme open for current employees, but to close it to new employees with effect from 30th September. The Company also plans to introduce a series of measures designed to help secure the financial health of this scheme into the future. From 1st October, 2009, new employees of A&N Media have been offered a defined contribution plan. This is consistent with our other newer and more international divisions where we have long believed defined contribution pension plans to be more appropriate.
Social and community issues
Whilst the Group does not have formal policies in this area, community involvement is integral to our business, as well as to the personal motivation of our employees. We donate money, time and in-kind donations such as radio airtime and advertising space, and staff actively give time in their communities to a huge range of activities, including fundraising, organising events and acting as trustees to charitable initiatives.
Information about persons with whom the Company has contractual or other arrangements essential to the Company's business
Group companies undertake business with a range of customers and suppliers. There is no dependence on any particular contractual arrangement, other than those disclosed in Note 38 to the Accounts as regards ink and printing, where arrangements are in place until 2015 and 2022 respectively to obtain competitive prices and to secure supplies.
As regards the Group's principal commodity, newsprint, arrangements are made annually with a range of suppliers to ensure the security of supply at the best available prices, having regard to the need for the necessary quality. Particularly in the light of its strategy to create a diversified international portfolio of media businesses, the Group is not dependent on any suppliers of other commodities, nor for its revenue on any particular customer. Distribution arrangements are in place to ensure the delivery of newspapers to retail outlets.
Trends and factors likely to affect the outlook
Given the signs of stabilisation in our markets, I remain positive about the year ahead. The new financial year has started with trading conditions remaining generally challenging. However, we are encouraged by the levels of growth and opportunities within our B2B operations together with continued signs of stabilisation within A&N Media.
RMS has already booked a number of contracts in the insurance-linked securities market which is a sign of improving health of capital markets. It is looking to resume the achievement of low double digit growth this year.
At dmgi, there is some cautious optimism of the early signs of a gradual recovery in U.K. property markets. We expect our education, energy and financial information businesses to continue to grow strongly.
At dmg world media, in general we expect exhibitor demand to be weak with a recovery more likely to be later in 2010 and into 2011. Our streamlined operating structure and remaining portfolio of market-leading exhibitions and conferences will allow the business to maximise its profit* and to capitalise quickly on any recovery.
Euromoney's current trading is in line with its expectations. The first quarter of the new financial year is expected to be the toughest: it expects a decline in year-on-year revenues to continue and profits* to fall despite the benefit of cost savings implemented in 2009 and favourable exchange rates. From the second quarter, the year-on-year revenue comparatives should become easier, but the point at which revenues start to grow again is dependent entirely on the timing and scale of any recovery. The focus on maintaining margins will therefore be continued, although Euromoney has also stepped up its investment in new products and electronic publishing to take advantage of the recovery when it comes.
Within A&N Media, national advertising revenue at Associated in the first eight weeks was down 8% on last year, a much better picture than seen in 2008/09. It is still difficult to predict future revenue trends, but we will benefit from the full year effect of the cost and efficiency improvements made during 2008/09 and elimination of loss-making entities. These leave Associated well placed to capitalise on the eventual recovery in the economy.
At Northcliffe, advertising revenues seem to have stabilised with a much more consistent weekly run rate. Cost reduction will continue to be a focus and further savings will be made in 2010 as the programme of transformation continues. As with Associated, Northcliffe will benefit from the full year impact of the cost and efficiency improvements made in 2008/09. Our newspaper businesses will also benefit from lower newsprint costs.
At dmg radio australia, the radio market in Australia is expected to improve marginally over the next six months with a return to growth mid 2010. Given the robust performance of Nova and the restructuring of the Vega stations, dmgra expects to capitalise on this improved outlook.
I firmly believe that we have weathered the storm of this recession in the most effective way possible with more of our businesses being more geared towards the upturn than ever before.
Our focus will remain on cash generation and debt reduction, based on an assumption of no meaningful short-term improvement in the U.K. economy. At the same time, we will continue to drive organic growth through new product development and investments to increase market share.
We are a leaner and more focused company that is well positioned to benefit from any upturn in the economy and to deliver long-term growth.
Martin Morgan
Chief Executive
* Adjusted operating profit (before exceptional items and amortisation and impairment of intangible assets).