Media: All about ... Daily Mail & General Trust

the FTSE share index by 18 per cent over the past 12 months. Most
observers cite its failure to dispose of its regional newspaper arm,
Northcliffe Newspapers, as the reason for the downward pressure on its
shares.

However, analysts argue the drop into the lower echelons of the FTSE 250
is not a disaster for DMGT. Paul Richards, an analyst at Numis, says:
"As a company with a market capitalisation of between £2.5 billion
and £3 billion, DMGT is always going to be on the fringes of the
FTSE 100 and media is having a difficult time relative to sectors such
as oil and engineering. The Daily Mail has been going for more than 100
years. I can't see it changing the way it does things."

DMGT's ownership structure also insulates it from the vagaries of the
market. While a big drop in share price tends to annoy shareholders in
most companies, it is unlikely that DMGT's will call for management
changes, given that its chairman, Lord Rothermere, controls 63.1 per
cent of its voting equity through Rothermere Continuance Limited.

1. The current Lord Rothermere, the great nephew of the founder of the
Daily Mail, Alfred Harmsworth (later Lord Northcliffe), has been the
chairman of DMGT since 1998. He inherited the post from his father, the
previous Lord Rothermere. DMGT was incorporated as a company following
Lord Northcliffe's death in 1922, but traces its history back to the
launch of the Daily Mail in 1896.

2. DMGT has a surprisingly diversified portfolio of businesses,
something that should bolster it as the traditional newspaper market
contracts. It operates six divisions: Associated News-papers,
Northcliffe Newspapers, DMG Information (a business-to-business unit
covering areas such as real estate and chemicals), Euromoney (a
business-to-business operation focusing on international finance), DMG
World Media (an exhibitions and publishing arm) and DMG Radio (which has
a stake in GCap Media and operates radio stations in Australia).

3. The aborted sale of Northcliffe Newspapers in February threw the
spotlight on DMGT. DMGT received three offers, but all apparently fell
short of its estimated £1.5 billion valuation. Instead of selling,
DMGT restructured Northcliffe into six regional divisions and brought it
closer to Associated Newspapers by making Kevin Beatty, the managing
director of Associated, the managing director of both operations.
Michael Pelosi, the managing director of Northcliffe, now reports to
Beatty.

4. Despite the difficult advertising economy, Associated Newspapers is
still a cash cow for DMGT. However, its operating profit fell by £4.9 million to £39 million during the six months to 2 April.
Circulation revenues were unchanged and the Daily Mail's first
coverprice increase for five years should help sustain this. However,
display advertising revenue fell by 9 per cent to £175 million,
owing to lower volumes. Analysts are not unduly concerned, though.

Richards says: "We feel more comfortable with DMGT than almost any other
newspaper publisher, reflecting the high quality and unique nature of
the Daily Mail's readership."

5. Like other companies rooted in the newspaper business, DMGT faces the
issue of future-proofing its activity through digital investment.
Observers argue that DMGT is well placed to do this because its
ownership structure enables it to take a long-term view when investing
in new ventures. In recent months, it has spent more than £40
million across the online recruitment sector - acquiring Jobsite,
Zambeasy and Office Recruit - plus £45 million on the dating
website company Allegran and the car information resource Data Media
Retail. The digital operations of Associated and Northcliffe were
brought together in May as Associated Northcliffe Digital, under its
managing director, Andrew Hart. The unit is now based at Associated's
Kensington HQ and also runs websites including This is London, This is
Money and This is Travel.

WHAT IT MEANS FOR ...

DMGT

- While it is not great news for DMGT to disappear from the FTSE 100,
analysts believe that it has the strength to fight back.

- Its investment in digital media is seen as a positive thing and
evidence of a strategy to take the business forward.

- Its diverse portfolio and strength in areas such as exhibitions and
risk management solutions are seen as some insulation against problems
with the display ad market.

- Eyes will be focused, however, on DMGT's national and regional
newspaper businesses. The City will be keen to see that promised savings
on the regional side are delivered.

THE MEDIA SECTOR

- DMGT's slide out of the FTSE 100 could be said to reflect the weakness
of the media sector as a whole.

- The majority of listed media stocks have underperformed the FTSE index
as a whole over the past year. The worst-hit have been broadcasting
shares, with BSkyB, ITV, Chrysalis, GCap, Scottish Media Group and
Ulster TV all down against the total index.

- It is not just display ad revenues that are an issue for listed
companies, but also recruitment advertising in regional press, which has
declined owing to the internet. DMGT's rivals Trinity Mirror and
Johnston Press are especially under the microscope. Johnston's shares
are down 19 per cent over the past year and Trinity Mirror's down by 31
per cent against the FTSE index.