MORE THAN YOU D EXPECT...

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1 MORE THAN YOU D EXPECT... Daily Mail and General Trust plc Annual Report and Accounts 3rd October, 2004 Daily Mail and General Trust plc Annual Report and Accounts 3rd October, 2004

2 DMGT'S ORIGINS DATE BACK TO THE LAUNCH IN 1896 OF THE DAILY MAIL. BUILDING ON OUR LONG-STANDING COMMITMENT TO QUALITY AND OUR UNRIVALLED EDITORIAL EXCELLENCE AND EXPERIENCE, NEWSPAPERS REMAIN AT THE HEART OF OUR BUSINESS. BUT AS THE FOLLOWING PAGES WILL CONFIRM, WE NOW PROVIDE MANY MORE MEDIA PRODUCTS THAN PEOPLE MIGHT EXPECT. FINANCIAL HIGHLIGHTS Turnover 2,109m +9% ,109m ,933m Adjusted profit before tax* 234m +26% m m Adjusted earnings per share 41.6p +25% p p Adjusted operating profit* 284m +19% m m Statutory profit before tax 125m +15% m m Dividend per share 11.0p +10% p p CONTENTS 01 Operating Highlights 08 Chairman s Statement Operating and Financial Review 10 Chief Executive s Introduction 12 Associated Newspapers 14 Northcliffe Newspapers 16 Euromoney Institutional Investor 17 DMG Broadcasting: Television 18 DMG Broadcasting: Radio 19 dmg world media 20 DMG Information 21 Financial and Treasury Review 25 DMGT and Corporate Responsibility 28 Board of Directors and Secretary Financial Statements 29 Directors Report 30 Corporate Governance 32 Statement of Directors' Responsibility for the Preparation of Accounts 33 Remuneration Report 45 Report of the Independent Auditors 46 Group Profit and Loss Account 47 Group Cash Flow Statement 48 Group Balance Sheet 49 Statement of Group Total Recognised Gains and Losses 50 Company Balance Sheet 51 Accounting Policies 53 Notes to the Profit and Loss Account 60 Notes to the Cash Flow Statement 62 Notes to the Balance Sheets 86 Principal Subsidiaries 89 Five Year Financial Summary 91 Shareholder Information * (before amortisation and impairment of intangible assets and exceptional items; see Group Profit and Loss Account on page 46 and reconciliation in Note 14 to the Accounts).

3 GROUP AT A GLANCE A STRONG NEWSPAPER BUSINESS IS NOW COMPLEMENTED BY THE DIVERSITY AND STABILITY PROVIDED BY NEW AND EXCITING NON-NEWSPAPER MEDIA BUSINESSES AROUND THE WORLD. Divisional activities Associated Newspapers Page 12 Northcliffe Newspapers Page 14 Euromoney Institutional Investor Page 16 Overview Associated is the publisher of the Daily Mail, The Mail on Sunday, the Evening Standard, Metro, Ireland on Sunday and Loot. It is also responsible for overseeing and developing the Group s consumer internet properties, the online Mail, This is Money, This is London, This is Travel, Homes & Property, London Jobs, plus Jobsite and Find a Property which were acquired during and after the year end respectively. Northcliffe is one of the largest regional newspaper publishers in the UK. Operating from 18 publishing centres, Northcliffe publishes over 100 publications in the UK including 20 daily titles, 27 paid weekly titles and over 50 free weekly newspapers. The portfolio has a weekly combined circulation of over 10 million copies. Further, its network of 22 thisis local websites have 1.3 million unique users. Revenue is also derived from the contract printing of other titles and from the ownership of 66 retail outlets. Northcliffe also has publishing operations in Hungary and Slovakia. Euromoney is a leading business to business publisher, focused primarily on international finance. It publishes magazines, newsletters, journals, research directories, books and maps. It runs business conferences, seminars and training courses, and is a leading provider of electronic business information. Principal brands Daily Mail The Mail on Sunday Evening Standard Metro Ireland on Sunday Loot Jobsite Find a Property This is Money This is London Press & Journal (North Scotland) Evening Post (Bristol) Derby Telegraph Essex Chronicle Hull Daily Mail Leicester Mercury Nottingham Evening Post The Sentinel (Stoke-on-Trent) South Wales Evening Post West Briton (Cornwall) Euromoney Institutional Investor ISI Emerging Markets Petroleum Economist Euroweek Asiamoney Latin Finance Employees 3,485 8,128 1,552 Head office Northcliffe House 2 Derry Street, London W8 5TT England Tel /32 John Street London WC1N 2QB England Tel Nestor House, Playhouse Yard London EC4V 5EX England Tel

4 Percentage of Group turnover DMGT Worldwide DMGT now employs over 18,000 people around the world. DMG Broadcasting: Radio 2% DMG Broadcasting: Television 4% dmg world media 7% Euromoney Institutional Investor 8% DMG Information 12% Northcliffe Newspapers 25% Associated Newspapers 42% DMG Broadcasting: Television Page 17 DMG Broadcasting: Radio Page 18 dmg world media Page 19 DMG Information Page 20 Teletext holds the licence for the commercial teletext services broadcast on ITV1, Channel 4 and Channel 5. The company also operates commercial information services on Freeview and Sky, as well as on the internet and on mobile phones. Teletextholidays.co.uk is one of the UK s leading travel sites. DMG Radio Australia holds ten radio licences, including the Nova FM stations in Sydney, Melbourne, Perth and Adelaide. A further Nova station will be launched in Brisbane in 2005, as will new FM stations in Sydney and Melbourne. During 2004 it launched Star 1045fm on the Central Coast of New South Wales. DMG Broadcasting also owns 29.9% of GWR Group plc, the UK s leading radio broadcaster. dmg world media is an international exhibition and publishing company that produces more than 300 market-leading trade exhibitions, consumer shows and fairs each year and publishes 65 related magazines, newspapers, directories and market reports. The company maintains a worldwide presence through 38 offices in the United States, Canada, Brazil, the United Kingdom, France, the United Arab Emirates, China, Australia and New Zealand. DMG Information s business to business division operates in real estate, insurance mapping and geospatial information, and chemical information. The careers division comprises Hobsons, a graduate and educational recruitment publisher, and Study Group, a provider of academic, English Language, and vocational education. Teletext Teletext Holidays Nova 969 (Sydney) Nova 100 (Melbourne) Nova 1069 (Brisbane) Nova 919 (Adelaide) Nova 937 (Perth Joint venture) Five AA (Adelaide) Brisbane 97.3 (Joint venture) Star 1045 (Central Coast) Daily Mail Ideal Home Show (UK) Index and Big 5 (Dubai) Global Petroleum Show (Canada) California Gift Show (US) Surf Expo (US) Palm Beach Classic (US) 80+ Home and Garden Shows around the world Risk Management Solutions Environmental Data Resources Landmark Information Group Property Portfolio & Research Trepp Sanborn, RMSI, Dolphin Hobsons Study Group ,483 Building 10, Chiswick Park 566 Chiswick High Road London W4 5TS, England Tel Level 5, 75 Hindmarsh Square Adelaide SA 5000 Australia Tel Equitable House, Lyon Road Harrow HA1 2EW England Tel Stamford Landing 68 Southfield Avenue, Stamford Connecticut CT 06902, USA Tel

5 19m Over 19 million people use Teletext services every week. DMG Broadcasting: Television During the year Teletext has made substantial investment in its platforms, putting the company in a strong position to continue to grow audiences and revenues via the web and digital TV. 01 Daily Mail and General Trust plc

6 No.1 Nova stations are the No.1 choice for all people under 40. DMG Broadcasting: Radio In the most recently released independent listener surveys, Nova is the No.1 station for the under 40s in every market in which it was surveyed. Nova is also the No.1 commercial FM station in Australia s two largest markets of Sydney and Melbourne. 02 Daily Mail and General Trust plc

7 +20% Environmental report sales in the UK grew by over 20%. DMG Information Landmark Information Group enjoyed a successful year. The need to consider environmental factors when buying property was increasingly recognised by the market and Landmark s mapping and GIS services also experienced healthy levels of growth. 03 Daily Mail and General Trust plc

8 +10% Euromoney Institutional Investor increased its revenues by 10%. Euromoney Institutional Investor Euromoney had its best September issue for five years and Institutional Investor increased its advertising revenues in Daily Mail and General Trust plc

9 16.7% The Mail on Sunday achieved its highest ever market share of 16.7%. Associated Newspapers Associated Newspapers achieved record profits, with the Daily Mail and The Mail on Sunday once again outperforming markets in overall decline. The Daily Mail achieved market share growth of 0.42% the highest of any national newspaper. 05 Daily Mail and General Trust plc

10 +5% Northcliffe Newspapers evening newspaper readership is up by 5%*. Northcliffe Newspapers Northcliffe's paid-for evening titles have increased their unduplicated weekly readership by 5% over the last three years, bucking the industry trend. Northcliffe s evening titles now reach 7 in 10 adults at least once a week*. * Source: TNS Media Base: All Adults in 10%+ circulation areas. 06 Daily Mail and General Trust plc

11 300+ dmg world media and its partners organise more than 300 exhibitions worldwide. dmg world media We create vibrant marketplaces that bring people together to do business. We also produce more than 65 related magazines, newspapers, directories, market reports and industry databases to support our customers around the world. 07 Daily Mail and General Trust plc

12 CHAIRMAN S STATEMENT OUR STRATEGY OF CONTINUING TO INVEST IN MARKET-LEADING BUSINESSES THROUGH TOUGH TRADING CONDITIONS HAS CONTRIBUTED TO A STRONG UPTURN IN OUR PERFORMANCE. The Viscount Rothermere Chairman I am pleased to report good results. The Group s adjusted profit* before tax rose 27% from 185 million to 234 million in the year to 3 October Net debt fell by 93 million to 780 million, despite spending 214 million on acquisitions to nurture our businesses. The year saw some important developments. Key points Newspapers remain at the heart of DMGT. Continued growth by our newer businesses means that 40% of this year s adjusted operating profit has been generated by our nonnewspaper divisions. * Adjusted profit (before exceptional items and amortisation and impairment of intangible assets) We spent much time and money considering an acquisition of the Telegraph Group. At the right price, this would have been a good deal for DMGT but the price went beyond what we thought was right. A consequence of the sale of the Telegraph was the departure of Murdoch MacLennan, Managing Director of Associated Newspapers for the last 10 years. I thank Murdoch for his achievements and wish him well in his new role. I am pleased that we have such able replacements in Kevin Beatty, who has moved across from Northcliffe Newspapers to Associated, and Michael Pelosi, who takes over as MD of Northcliffe. I am confident that they will lead their divisions to new heights. The year also saw two broadsheet titles become tabloids creating new challenges for our newspapers. To their credit, the Daily Mail and The Mail on Sunday maintained their circulations, thereby again increasing their market shares. We are just completing a 90 million programme of investment in our press facilities in London, Stoke, Derby and Bristol. So far, everything has been finished ahead of time, under budget and is working well. John Bird, and his team at Harmsworth Quays, and Mark Ellington, and his team at Northcliffe, deserve much of the credit. As a result we look forward to better papers and higher advertising revenues. Our broadcasting division faced major decisions. Even though our shareholding will be diluted from 29.9% to 14.3%, we decided to support the proposed merger between GWR and Capital Radio, because it seemed the best way of increasing the value of our investment. The OFT is considering whether to refer the merger to the Competition Commission but we hope it will be cleared without too many conditions. If it is not, the good intentions of the 2003 Broadcasting Act will be further diluted. 08 Daily Mail and General Trust plc

13 +50% Number one FM stations We now have the number one FM station in both Sydney and Melbourne and will complete our Nova network during DMG Information: the fastest growing division DMG Information was again the fastest growing division with a further 50% increase in operating profit. Risk Management Solutions was again the largest contributor to this growth. 90 million investment We have completed a 90 million programme of investment in our press facilities in London, Stoke, Derby and Bristol. This was finished ahead of time and under budget. In Australia, DMG Radio was successful in bidding for further licences in Adelaide, Brisbane, Sydney and Melbourne. These acquisitions were neatly balanced by the sale of our chain of regional radio stations for an excellent price. We now have the number one FM station in both Sydney and Melbourne and will complete our Nova network during Among our other divisions, dmg world media had a strong trading year and continued to make small fill in acquisitions which generate high marginal returns. DMG Information was still the fastest growing division with a further 50% increase in operating profit. Risk Management Solutions was again the largest contributor to this growth. Convinced that the internet will become more and more important in our lives, I am encouraging our consumer publishing enterprises to increase their investments in it with the aim of building a leading presence in key channels. Klaus Schwab has this month retired from the Board after six years service. He has a busy schedule as President of the World Economic Forum and I am grateful for his advice and guidance during his time as a Director. After five years marking time in difficult markets, it is good to see a big growth in profits properly reflecting the strength of the Group. These results are largely due to the skill and dedication of our excellent employees. I thank them and hope to report good figures again next year. The Viscount Rothermere Chairman 09 Daily Mail and General Trust plc

14 CHIEF EXECUTIVE S INTRODUCTION SUSTAINED INVESTMENT IN SOUND BUSINESSES THROUGHOUT THE ECONOMIC CYCLE NOW PUTS US IN A STRONG COMMERCIAL POSITION. Charles Sinclair Chief Executive Q: Your results this year are good. Is this because your businesses have been operating in booming sectors? A: It s down to a combination of factors. Certainly some of our business sectors have been showing strong growth UK regional newspaper and Australian radio advertising would be two examples. But in addition most of our businesses have been growing their market share and operating more efficiently, and we ve made some helpful acquisitions. Q: How did the Board set the dividend in such a good year? A: DMGT has a policy of seeking to increase the dividend in real terms every year, regardless of the results within reason, as long as we continue to have confidence in the strength of our businesses. This year, the Board decided to go to the top of the range that they hope to maintain. It means that the compound dividend growth over the last ten years is 10%. Q: Can you outline the reasons behind the largest acquisitions and disposals DMGT has made this year? A: The biggest moves this year have been in Australian radio. We bid successfully for licences in Adelaide and Brisbane, which will enable us to complete our national Nova network of stations, and in Sydney and Melbourne, where we will be able to run a second station alongside Nova. Finally we sold our regional stations because someone offered us a very good price and we wished to focus on metropolitan markets. Elsewhere, Euromoney added to its thriving conference business with the purchase of IMN, and DMG Information bought Trepp and, since the year end, Lewtan, to add to its fast-growing business to business information division. Generally we look for acquisitions that will expand or extend existing successful operations in the Group. Of course, the biggest deal would have been the one we did not do, namely the Telegraph Group. Lord Rothermere has referred to that in his statement. Q: What do you see as the greatest risks facing DMGT? A: This is a question that occupies a lot of our time, and rightly so. Inevitably we face economic risks in terms of the health of the economies and the markets in which we operate. There is little that we can do about these in the short term, but for some time we have pursued a policy of investing as willingly in selected overseas markets as in the UK, and we watch the long term health of the markets we serve. We consider that our businesses have two essential assets, our brands and our people. The key risks over which we can have some control are reputation, our capacity to compete and retention of staff. On each of these we have a good record, but we are never complacent. They are all a regular focus of the Group Risk Committee, which I chair and about which you can read on page 31. But we never forget that we are paid to take risks, but manage them. Compound dividend growth over the last ten years is 10% Q: On the issue of staff retention, DMGT is very unusual in continuing to keep open final salary pension schemes, almost unique in the media sector. Why is this and how are they doing? A: We believe in trying to provide the appropriate form of pension provision to all our employees. Thus we have retained final salary pension schemes for our UK newspaper divisions where people tend to stay with us for a long time and where we have a lot of employees over 35. In the other divisions, where many of the employees are younger, and which are more international, we believe defined contribution schemes are more appropriate. For the final salary schemes, it s been another interesting year, with pensions regularly creating newspaper headlines, ever more schemes being closed and ever more legislation. During the year, we have been undertaking the triennial actuarial review 10 Daily Mail and General Trust plc

15 +17% Acquisition of Trepp DMG Information has added to its fast growing business to business information division with the purchase of Trepp, the market leading provider of commercial property data and analytics. Valuing our people We believe in trying to provide the appropriate form of pension provision to all our employees. Share price rises The share price has performed well in the last twelve months, up 17% in the year to November of our schemes. They remain in better shape than many, at worst only marginally in deficit, and, importantly, continue to have an excess of cash inflows over cash outflows to finance benefit commitments. But the cost of providing the benefits they promise continues to grow, mainly because people are living longer. We have outperformed the media sector by 13% We have decided once more to keep our schemes open, because we believe they are appropriate. However, in view of the cost pressures, we are informing members of changes we will be making next year. Any employee who wants to continue earning pension benefits at the same rate as now will be asked to increase their contributions; if they pay the same as now, they will in future earn benefits at a lower rate, as will new employees, at least for their first five years with us. The Group will also be increasing again its contributions into the schemes, but we have been able to hold the cost to an acceptable level, while also being able to focus the investment on our long term employees. Q: Your share price has performed well in the last twelve months, up 17% in the year to November Is this in your view a sensible reflection of the Company s performance? A: This short term increase does mirror the improvement in our trading results over the same period and represents 13% outperformance of the media sector. However, we believe it is more appropriate to look at the long term share price performance against the market and our peers. As you can see in the graphs opposite and on page 39, we have done well over five years and even better over longer periods. Q: In which direction do you see DMGT going over the next few years? A: More of the same. I am sure that newspapers will continue to be a vibrant media form for many years and will remain at the heart of DMGT. At the same time we hope to continue to grow our non-newspaper divisions and we may well find more acquisitions in these areas than in newspapers. 11 Daily Mail and General Trust plc Performance of DMGT A and FT All-Share Index relative to values at 30 September DMGT A (monthly closing price) FT All-Share Index Sept 88 Sept 89 DMGT dividend history for the period (pence) Sept 90 Sept 91 Sept 92 Sept 93 Sept 94 Sept 95 Sept 96 Sept 97 Sept 98 Sept 99 Sept 00 Sept 01 Sept 02 Sept 03 Sept

16 ASSOCIATED NEWSPAPERS NEWSPAPERS ARE THE HEART OF DMGT. CONTINUED INVESTMENT IN OUR MARKET-LEADING TITLES, EVEN IN TIMES OF CHALLENGING TRADING CONDITIONS, MEANS THAT THE POSITION OF OUR NATIONAL NEWSPAPER DIVISION HAS NEVER BEEN STRONGER. Associated Newspapers Financial highlights Turnover 2004: 890m % of Group turnover 2004: 42% Operating profit* 2004: 90m Kevin Beatty Managing Director (left) Lord Rothermere Chairman (centre) Paul Dacre Editor-in-Chief (right) * Adjusted operating profit (before exceptional items and amortisation and impairment of intangible assets) Associated Newspapers achieved its highest ever profits* (even after adjusting for the extra trading week this year). The Daily Mail and The Mail on Sunday both achieved solid circulation performances, outperforming markets in overall decline, proving once again the value of long term investment in editorial quality together with innovative, targeted and attractive promotions. The Daily Mail circulation of 2,430,000 was down 0.5% despite a 10p cover price increase on Saturday, comparing favourably to a total market decline of 2.6%, consolidating its position as the second highest selling national daily newspaper and increasing its share of the total market by 0.42%, the highest market share growth of any national newspaper. At 2,361,000, The Mail on Sunday circulation was only 0.25% down on the previous year, despite the overall Sunday newspaper market declining by 1%. It also increased its market share to 16.7%, which is the highest ever recorded and reaffirmed its position as the second highest selling national Sunday newspaper. At the 2004 Newspaper Awards The Mail on Sunday was awarded the print industry s top design award Newspaper Design of the Year. Daily Mail maintains sales and gains market share in declining market. Achieves record advertising revenue. The Mail on Sunday bucks the Sunday newspaper circulation market trend and increases market share. Advertising up 8%. Evening Standard circulation declines, but financial performance much improved. Display advertising up 14%. The New Media division nears profit. Jobsite proves an exceptional acquisition. The Evening Standard average daily net sale of 385,000, was down by 6.6%. The overall financial performance of the title, however, showed a dramatic improvement as a result of improved advertising revenues and the effects of last year s cost reduction flowing through. After a difficult start to the year, classified was by the end of the year showing year on year increases. Metro had an excellent year. The successful launches of two new franchises in the East Midlands and South West, with Northcliffe Newspapers, resulted in distribution reaching one million. This makes Metro the fourth highest circulation Monday to Friday daily newspaper. Readership has grown to 1.9 million, of which 61% are ABC1. The average age of a Metro reader is 31. Associated s total advertising revenues increased by 10.7%, with display up 10.6% and classified up 11.0% (including Jobsite). The Daily Mail produced record total advertising revenue, whilst The Mail on Sunday was up 8% year on year. The Evening Standard increased display revenues by 14.7% but classified was down 6%. Metro increased its display revenue by 27% and classified by 21.4%. New Media, Loot and Ireland on Sunday all achieved excellent year on year growth. The press enhancement project at Harmsworth Quays was completed within budget and on schedule. The last two presses have been installed and were operational in November 2004, whereupon the Daily Mail, The Mail on Sunday and the Evening 12 Daily Mail and General Trust plc

17 Online Mail Online Mail was launched in May offering an outstanding news, lifestyle and entertainment service. It attracts 504,000 unique visitors a day, creating another channel to our outstanding editorial output. Digital media acquisitions As part of the Group s continuing strategy to develop a powerful portfolio of digital media properties, Jobsite and Find a Property were acquired in March and November 2004 respectively. Jobsite is the UK s leading multi-sector online job board and Find a Property is its largest independent property website. Increased circulation Metro is now fourth highest Monday to Friday circulation national newspaper, having only been launched in the UK in Associated Newspapers Revenue by source Advertising 53% Circulation 43% Other 4% Associated Newspapers Growth in adjusted operating profit* over 10 years ( millions) Standard had access to more pagination and colour. Harmsworth Quays continues to work closely with its key suppliers to increase efficiency and to improve printing quality. During the financial year the contract for the printing of Associated s titles at Bradford ended, with the production being transferred to a site operated by Northcliffe Newspapers in Stoke. ANM, the digital division of Associated Newspapers, made significant progress during the year, having pursued a strategy of building content around the newspaper brands as well as vertical classified listings' sites. Advertising revenue grew 30% year on year and paid for content services were launched for the first time. Two new products were launched in the year the Daily Mail/The Mail on Sunday online and Homesandproperty.co.uk. Jobsite, the UK s leading recruitment website, was acquired in March and is exceeding all expectations. Since the year end Find a Property has been acquired which further broadens the division s portfolio Ireland on Sunday continued to make progress and retains its position as number three in the Irish Sunday newspaper market. Average weekly circulation was slightly down at 152,000, but readership increased to 481,000, an 11% increase on last year. Advertising revenue was up 48% and trading losses were reduced by 22%. Loot had a good year, with advertising revenue up 7.8% and profit up 20%. Circulation again proved difficult, falling 12.9%, which was much in line with the market. Significant investment is being made in Loot.com to provide buyers and sellers with access to a growing online audience. Buy and Sell, Loot s equivalent in Ireland, also had a good year, increasing revenue by 18% and profit by 9%. Associated Newspapers Circulation performance vs the market trend Daily Mail +37.5% The Mail on Sunday +20.7% Other Daily Nationals -18.8% Other Sunday Nationals -25.1% Source: ABC October-September Index (1993/4 = 100) The new financial year has started encouragingly for Associated but with upward pressure on newsprint prices, an extremely competitive circulation market and advertising still somewhat short term, it could be a challenging year. However, with our strong, market-leading editorial products and continued focus on costs, the outlook for the next twelve months is cautiously optimistic /4 1994/5 1995/6 1996/7 1997/8 1998/9 1999/0 2000/1 2001/2 2002/3 2003/4 13 Daily Mail and General Trust plc

18 NORTHCLIFFE NEWSPAPERS ANOTHER RECORD YEAR FOR PROFITS WITH ADVERTISING REVENUES INCREASING BY 5.9%. CIRCULATION OF THE DAILY TITLES OUTPERFORMED THE INDUSTRY. Northcliffe Newspapers Financial highlights Turnover 2004: 519m % of Group turnover 2004: 25% Lord Rothermere Chairman (left) Michael Pelosi Managing Director (right) Operating profit* 2004: 101m * Adjusted operating profit (before amortisation and impairment of intangible assets) 11% growth in property advertising, 10% growth in recruitment revenues and 5% increase in readership of evening titles. Two profitable Metro editions launched in the East Midlands and Bristol areas. Electronic publishing moves to break even with 1.3m unique users. Northcliffe enjoyed another record year in 2004, achieving growth in adjusted operating profit* of 7%. Most publishing centres reported progress including Aberdeen and Bristol. Their performances were particularly encouraging following difficult market conditions in Other notable performances were from titles in Nottingham, Derby, Tamworth, Devon and Hungary and from electronic publishing. In the UK, advertising revenues recorded growth of 5.9% with recruitment up by 10% and property improving by 11% on the back of a buoyant housing market. However, motors advertising reflected the overall marketplace and, despite a number of initiatives, declined by 1%. Newspaper sales revenues grew by 1.5%. A limited number of titles increased their cover prices during the year but this was partly offset by continued gentle declines in circulation, particularly by the evening titles. Much emphasis continues to be placed on a drive to stabilise the circulation of the 17 evening titles. A programme of evaluating and improving the circulation basics of distribution, canvassing, home delivery, street vending and retail has provided some positive results. The drive to reduce bulk sales continued so as to reach our internal target of actively purchased sales of between 98% and 100% for all titles. Northcliffe s morning and evening titles, which recorded declines of 1.9% and 2.5% respectively, and its weekly titles, which showed an increase of 0.1%, outperformed the industry in the July to December 2003 ABC period. During the January to June 2004 ABC period, the mornings and evenings continued this trend. However, the weekly titles fell below the industry average by 0.7%, despite 14 of the group s 24 weekly titles showing increases. In a broader context readership has increased. Comprehensive audience research has reported an increased audience reach to seven in ten adults over the course of a week for evening titles. After 257 years, the Press & Journal, Northcliffe s much respected morning title published from Aberdeen, and its only daily broadsheet, launched a compact format in August for the Saturday edition. Initial results seem promising, although further research is required before extending this initiative across the week. In June, Northcliffe launched two editions of the popular and successful free distribution morning title, Metro; one in the East Midlands; and the other in Bristol, Bath and Gloucestershire. Both these titles are already profitable. Northcliffe Electronic Publishing continued to grow its offering and its audience. Registered users increased by approximately 60% over the year. Unique users totalled in excess of 1.3 million. 14 Daily Mail and General Trust plc

19 New format a success After 257 years, the Press & Journal changed from broadsheet to a compact edition on Saturdays. Initial reader reactions have been very positive and sales figures have increased. Revamped thisis websites Throughout 2004 Northcliffe Electronic Publishing have successfully revamped and updated the 22 thisis websites within the electronic publishing portfolio. thisisderbyshire.co.uk was the first relaunch in March The division has had its most successful trading year to date breaking even in September. New presses in Stoke and Derby The recently extended Colorliner 80 press at Stoke is one of the largest single press lines in the country. At full capacity it is capable of running 192 pages of back to back colour. Northcliffe Newspapers Turnover analysis 2004 Advertising 65% Circulation 19% Retail 6% Other 10% Northcliffe Newspapers Readership build adults claiming to read a Northcliffe evening title within each period (% reach) Source: TNS Media 2004 Base: All adults 15+; 17 Northcliffe evening titles 10%+ circulation areas Yesterday Within the past week Total Within the past 4 weeks Within the past 3 months Northcliffe Newspapers Weekly penetration of evening titles by age (%) Source: TNS Media 2004 Base: All adults 15+; 17 Northcliffe evening titles 10%+ circulation areas Within the past 6 months Any last 12 months 75+ Extra services like online booking of classified advertisements and letters to the Editor have all helped to enhance the benefits to the users. Breakeven was achieved in September and this performance is expected to improve in The press enhancements at Stoke and Derby were completed ahead of schedule and on budget. This project was part of a wider group initiative to provide additional colour for the Daily Mail and The Mail on Sunday. Our other major engineering project adding extra colour to Plymouth s press has progressed smoothly and will be completed before the end of this year. Titles in Devon and Cornwall, plus The Mail on Sunday, will benefit from this investment. During 2005, Northcliffe plans to start its next major printing development so as to provide enhanced colour and publishing opportunities for titles in Lincolnshire and Humberside. Once again, the Hungarian business reported encouraging growth and a new profit record, assisted by the acquisition of Avízo, a classified publication in Slovakia. Overall, strong advertising revenues and buoyant contract printing led to profit growth in excess of 30%. We continue to seek acquisition opportunities in Hungary, Slovakia and neighbouring countries. In the UK, we completed the acquisition in September of Bargain Pages, a classified publication circulating in Birmingham, Coventry and The Black Country. Bargain Pages sells in excess of 45,000 copies per week. Existing management has been retained and a link with our successful East Midlands operation, Ad-Mag, promises both operational and commercial synergies. We are aware of the need to listen to the views and concerns of staff. For the first time a synchronised staff opinion survey was conducted in every centre. Such surveys are not new, but doing them everywhere at the same time greatly increases their use because it enables appreciation of common attitudes. They also form part of a series of initiatives aimed at reducing staff turnover at a time when competition for staff is ever increasing. Not unsurprisingly, a number of deficiencies were highlighted and are currently being addressed. We plan a follow-up survey in late The new financial year has continued the momentum recently established. Advertising revenues, driven by strong demand for property advertising, are showing a 5% increase. However, recent evidence of a slowdown in the housing market makes it difficult to forecast the prospects for property advertising beyond the near-term. Recent interest rate rises appear to be having a calming impact on consumer expenditure and business confidence. Therefore, at this stage, we take a cautious view of prospects for Daily Mail and General Trust plc

20 EUROMONEY INSTITUTIONAL INVESTOR +25% A MIX OF ORGANIC GROWTH, TIGHT CONTROL OF COSTS AND FOCUSING ON HIGH MARGIN PRODUCTS LED TO FURTHER PROFIT IMPROVEMENTS. Financial publishing Absolute Return is a leading authority for the US hedge fund industry. It contributed to the strong performance of the high growth HFI business. Conference revenues accelerate The conference businesses had an excellent year with revenues up 25% helped by the acquisition of IMN. IMN is the world leader in events for the securitisation and indexation sectors and revenues of its annual Global Asset Securitisation event in Barcelona in June grew by a third. Euromoney Institutional Investor Financial highlights Turnover 2004: 175m % of Group turnover 2004: 8% Euromoney Institutional Investor ISI revenue (US$ million) Padraic Fallon Chairman (left) Richard Ensor Managing Director (right) Operating profit* 2004: 31m * Adjusted operating profit (before amortisation and impairment of intangible assets) The profits of many of Euromoney s publishing businesses fell due to a combination of weak advertising revenues and the decline in the US dollar. However, advertising revenues showed signs of recovery and there was a continued strong performance from the events and training businesses. In general, Euromoney s traditional financial advertisers have been slow to increase their advertising spend in spite of better market conditions. Financial advertising revenues, excluding Hedge Fund Intelligence (HFI), fell 4%. Institutional Investor was the only major title to increase advertising revenues over the year although Euromoney magazine saw a marked improvement in the second half. Both titles were helped by strong performances from emerging markets, particularly Eastern Europe and Asia. In contrast, the recovery in advertising from the key London and New York financial centres has been slow. The weakness in advertising meant that profits* from financial publishing (excluding HFI) fell by 1 million. However HFI, acquired in August 2003, has performed well ahead of expectations since acquisition. Profits* from business publishing increased by 0.9 million despite a fall in revenues. Gulf, the Houston-based energy publisher, the legal publishing business, and Engel, the pharmaceutical marketing publisher, all experienced a strong second half advertising recovery. The conference businesses had an excellent year, helped by a better than expected contribution from Information Management Network (IMN). Excluding IMN, conference revenues increased 25%. Euromoney Conferences was the best performer. Euromoney Seminars and Institutional Investor Memberships also had good years. Adhesion s profits increased as a result of a good contribution from the biennial Vinisud wine exhibition. The results of the last three years have demonstrated the value of conference businesses, particularly ones that are predominantly sponsor-driven, as a more robust revenue stream than advertising. This has reinforced Euromoney s strategy of expanding its portfolio of market-leading annual events through a mixture of organic and acquisition growth. IMN s performance since acquisition in February has exceeded expectations. Euromoney s training businesses also had an excellent year, continuing the growth begun in The businesses benefited from continued investment in new courses and marketing to increase delegate numbers. The financial and legal training businesses depend heavily on the performance of the global and emerging market financial institutions. Both have increased hiring and training budgets during the year which, combined with an improved travel outlook, has helped trading conditions. Operating profits* from databases and information services increased by 0.6 million. Stronger emerging markets helped ISI, the electronic information service on emerging markets, have one of its best sales periods for several years. Subscription revenues increased by 14%. During the year, ISI expanded its service to cover a further 15 countries, bringing the total to more than 60, with nearly 9,000 information sources now available to subscribers. The benefits of this investment, and the contribution from high growth businesses such as ISI, HFI and IMN, will form the base for stronger organic growth in 2005 and beyond. 16 Daily Mail and General Trust plc