Bloomberg News

Daily Mail Jumps on Share Buyback as Net Debt Declines

November 22, 2012

Daily Mail and General Trust Plc, publisher of Britain’s Daily Mail newspaper, rose the most in more than three years after announcing it will buy back shares in the coming year and debt fell.

The stock rose 11 percent to 524 pence, the biggest advance since April 2009. The buyback will be as much as about 100 million pounds ($160 million), the London-based company said in a statement today. Net debt dropped to 613 million pounds in the year ended Sept. 30 from 719 million pounds 12 months earlier as Daily Mail disposed of assets.

The company, which yesterday said it agreed to sell its regional newspaper business, has been focusing on its conference and exhibition operations to offset a decline in newspapers.

“Net debt at 613 million pounds was strong versus our 671 million-pound estimate,” Gareth Davies, an analyst at Numis Securities in London, wrote in a note today. The share buyback is “a positive and reflecting the strong balance sheet,” he wrote, adding that Numis remains “very comfortable” with a buy recommendation on the shares.

The ratio of net debt to earnings before interest, tax, depreciation and amortization was 1.6 times, less than an internal limit of 2.4 times and “significantly below” bank covenant requirements, according to today’s statement.

“We continued to refine our portfolio of businesses during the year with further acquisitions and disposals aimed at improving our long-term growth potential,” Chief Executive Officer Martin Morgan said in the statement.

Northcliffe Sale

Full-year sales dropped 1.3 percent to 1.96 billion pounds on sluggish advertising revenue in the U.K. That compares with the 1.98 billion-pound average estimate of 14 analysts surveyed by Bloomberg. Operating profit rose 6.8 percent to 300 million pounds.

“First-quarter consumer trading to date has been a little slow and we remain cautious about the medium-term outlook, given continuing external uncertainties, particularly for U.K. advertising,” the company said. “A continued focus on cost efficiencies should provide margin stability.”

Daily Mail said yesterday it will receive 52.5 million pounds in cash for its Northcliffe news business and a 38.7 percent stake in a new media group, Local World, which combines Daily Mail titles with regional newspapers from Iliffe News & Media.

Local World brings together titles including the Nottingham Post and Cambridge News and offers content and advertising through a stand-alone company. Local newspapers have been suffering for years as readers increasingly move online and advertising revenue falls.

Local World is headed by David Montgomery, the former chief of U.K.-based newspaper company Mecom Group Plc. Trinity Mirror, which publishes the Daily Mirror newspaper, will have a 20 percent stake and Iliffe will get 21 percent. The remaining stake will be taken by financial investors including Odey Asset Management.

To contact the reporter on this story: Kristen Schweizer in London at kschweizer1@bloomberg.net.

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net.


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