Comment: DMGT ponders Northcliffe options

1st Sep 2011 14:20

The closure of the Sunday tabloid the News of the World has given DMGT, publisher of the Mail on Sunday, a big boost.The consequent rise in revenues is likely to make a big difference to full-year profits at Associated Newspapers, DMGT's national newspaper division. Some had speculated that DMGT would lift spending on its newspapers to take advantage of the NotW's demise, but according to Panmure Gordon, which has just had a meeting with DMGT's finance boss, this now seems unlikely.In fact, DMGT is more likely to pay attention to its other divisions, one of which publishes business information, the other local newspapers, although the two are likely to get very different treatment.According to Panmure, arriving at a solution for Northcliffe, the local newspaper division, is "top of the agenda." This could be ominous, because Northcliffe has been struggling in recent years and the recent economic turmoil won't have helped. Panmure describes the business as a "drag on sentiment" and says that an exit from it would be a "positive catalyst" for DMGT shares.Conversely, DMGT is according to Panmure likely to invest more capital in the "B2B" business, which publishes Euromoney Institutional Investor and a host of other specialised titles. The beauty of these products is that DMGT can easily extract subscription revenues from them. So far, it has been unable to develop a method of accruing significant sales from the websites of either of its newspaper arms.That could change though, because the differences between DMGT's two newspaper operations and its B2B business may be not as pronounced as they seem. The Midas column in the Mail on Sunday now has a "Midas Extra" online subscription service, which costs £10 a month. It will be interesting to see how much this generates for the company once it is properly underway. Making money from local newspaper websites may be more of a challenge, but gadgets such as iPhones offer them many opportunities to revive their fortunes. It is also worth mentioning that culture secretary Jeremy Hunt's plans to create local TV stations could involve multi-media operations that include local newspapers - perhaps this will be an irresistable appeal for DMGT.Perhaps DMGT, flushed by the good fortunes of its B2B and national newspaper operations, will conclude that it is worth trying to emulate their success in Northcliffe, rather than getting rid of it.-----Tough times in developed countries over the past few years have forced consumer stocks to look to emerging markets to boost profits and very well they have done too.But that could be about to change judging by a new study of US companies with overseas exposure by Goldman Sachs. Fast-growing countries including the 'BRICs' (Brazil, Russia, India and China) have seen slower growth recently as they tighten monetary policy to cope with inflation. That is likely to show up in the bottom line of many big companies that supply consumer products to their growing middle-classes.Ominously, these include many British giants among the FTSE 100, including: the drug giants GlaxoSmithKline and AstraZeneca; household goods firms Unilever and Reckitt Benckiser; tobacco groups Imperial and British American; and the alcoholic beverage suppliers Diageo and SABMiller.