* Q1 sales up underlying 2 percent to 495 mln stg
* Company says trading in line, outlook unchanged
* Shares fall 3.9 percent after strong run
By Georgina Prodhan
LONDON, FEB 8British newspaper group Daily Mail & General
Trust said a decline in advertising revenues at its national titles
accelerated to 9 percent in January from an underlying 2 percent in the quarter
to Jan. 1, pushing its shares down by almost 4 percent on Wednesday after a
strong rally so far this year.
The company said overall revenue for the quarter rose by 2 percent on an
underlying basis to 495 million pounds ($786 million), broadly in line with
expectations, thanks to a strong performance in its business-to-business
divisions, which include risk management and trade shows.
DMGT said trading in its fiscal first quarter was in line with its
expectations and its outlook for the year remained unchanged. It expects solid
growth at its business-to-business operations, a slight improvement at its
national titles and continuing declines in regional newspapers.
Its shares were down 3.9 percent to 444.3 pence by 0855 GMT, the worst
performers in a flat European media index, following a market-beating 16
percent rally since the start of January.
Most analysts attributed the share price drop to the stock's recent strong
run, while noting the weakness in January advertising.
London brokerage Peel Hunt cut its rating to "sell" from "hold" after its
409 pence price target was exceeded. "Once again, a solid B2B performance has
compensated for a difficult consumer media environment, but we see little in the
statement to prompt us to change our forecasts," wrote analyst Patrick Yau.
DMGT Chief Executive Martin Morgan said the company would continue to invest
in its digital businesses while cutting costs elsewhere. The celebrity-focused
MailOnline overtook the New York Times in December to become the world's
most popular newspaper website, and attracted 99 million readers in January.
Morgan declined to give a detailed forecast for newspaper advertising, where
the group's regional titles suffered a 10 percent drop in revenue in the first
quarter that continued through January, as demand for classified recruitment,
autos and retail ads slumped.
"The economic outlook is very hard to read," he told journalists on a
conference call on Wednesday.
DMGT cut its overall headcount by 2 percent in the quarter as it continued
to trim its newspaper staff, while hiring more people for the fast-growing
MailOnline. MailOnline's revenues rose 70 percent year on year but the website
is not expected to be profitable this year.
Rival newspaper group Trinity Mirror said last week it planned to
axe almost a fifth of its editorial staff, as economic weakness in Britain
continues to weigh on a sector that has long been struggling with the migration
of its readers to the Internet.
Morgan said the DMGT's flagship mid-market Daily Mail and the Mail on Sunday
had continued to gain market share, with the Daily Mail reaching an all-time
high of almost 30 percent despite cover-price increases.
He said the gains were a continuation of a long-term trend and unlikely to
be related to upheaval in Britain's newspaper market, which has been shaken by a
phone-hacking scandal that caused the shutting down of the News of the World,
part of Rupert Murdoch's News Corp media empire.