Say what you like about Rupert Murdoch (and in the aftermath of the phone-hacking scandal, people often do) there’s no denying that his decisions continue to influence the world of media business. A week after News Corp announced that it is to separate his publishing interests from its other businesses, analysts have begun to question whether other media conglomerates ought to follow suit. Today’s Financial Times reports that questions are being asked as to whether Daily Mail and General Trust (DMGT) would benefit from taking similar action.
DMGT’s business interests range from newspapers, notably the Daily Mail, to events and financial information services. This year, the group’s business to business operations, including Euromoney and Risk Management Solutions, were responsible for half of the company’s income, with the publishing arm accounting for the other 50 percent. However DMGT newspapers brought in just 26 percent of operating profits. Analysts have identified Northcliffe Media, the group’s regional newspaper publisher, as the biggest drain on resources. Last year a review by Ernst and Young showed that in the space of five years Northcliffe’s value had suffered a steep drop from £1.5b to £150 million. The regional media group has recently recorded a 34 percent increase in operating profit, due largely to the cost-cutting measures taken by managing director Steve Auckland, but that is not likely to dissuade DMGT from its goal of selling it off.
However, if no buyer is found then a News Corp-style split may be the best alternative.
News Corp’s share prices have already benefitted from news of the split, and no doubt investors in DMGT would hope that the separation of the company’s less lucrative companies could be of similar benefit to its stock market value. DMGT was dropped from the stock market’s FTSE indices on June 18th, as the Financial Standards Agency brought in new rules that give precedence to those companies whose shares carry voting rights. At present Viscount Rothermere and his family own 93 percent of the company’s voting shares, which they seem reluctant to relinquish. Exclusion from the FTSE 250 does not severely hinder the day-to-day running of DMGT, but it does mean that the company has not been able to reap the full rewards of its success in the USA. 51 percent of the company’s operating profit comes from the fast-growing US market and attracting more investments from America is surely one of the business’s main goals.
To say that these are hard times for news publishers would be an understatement. For the year 2009-2010 The Guardian Media Group reported losses of £171m and Independent titles The Independent, The i and the Evening Standard today reported a 22.5 percent rise in pre-tax losses. DMGT’s titles do not find themselves facing problems as severe as those of their competitors, but an uncertain future could persuade the conglomerate that reducing their holdings and separating the regional titles from the nationals is the way forward.