DMGT prepares to end its tenure as a plc, as the Rothermere family finalise a takeprivate offer of £2.9 billion (c. 18.8x EBITDA) and make a swathe of new appointments as it seeks to reconfigure the business
The Daily Mail newspaper is the crown jewel in the company’s assets, as the wider portfolio has recentred around consumer media
The road ahead is still foggy, with a rickety bridge between its print and online brands—a strategic risk for DMGT, yet also a key opportunity in UK media
The UK print media sector is facing escalating input cost inflation. Newsprint prices are 50% higher year on year in Q4 2021, noting that prices in 2020 were exceptionally low on soft demand. Based on 2019 rates, prices could be 25% higher in H1 2022. The squeeze on margins for print could destabilise the economics of supply overall.
Newsprint inflation is being caused by soaring costs of recycled feedstock, exacerbated by the monopoly of a single supplying mill in the UK after years of attrition. Imports remain substantial, but impaired by the EU-wide crisis in the supply of paper products, alongside bottlenecks at points of entry to the UK.
Although less significant a factor than paper in the cost of printing the news, electricity cost inflation is another worry for printers, noting that these costs were again also exceptionally low in 2020. Wholesale electricity prices surged by 80% in 2021 (Ofgem), due to pressure on gas supplies from Russia, and the global energy crisis, which will persist into 2022.
VMO2’s half-year results were something of a mixed bag with some decent revenue momentum but a big hit to EBITDA as COVID cost-savings unwound and company full year guidance suggests a further deterioration in Q4.
Volt, VMO2’s convergence product, is well-conceived and executed. With a following wind it should avoid the pitfall of revenue dilution whilst potentially offering some upsides.
The company remains in strategic limbo awaiting an outcome on its wholesale discussions with Sky. This will determine not just fibre expansion plans but also branding and co-marketing of its central products.
VMO2’s inaugural results reinforced the company’s focus on profitability with EBITDA growth of 6% and record margins. Flat revenues year-on-year benefited from the annualisation of the COVID-19 hit but incorporated little by way of rebound.
Much remains to be seen in terms of strategy but indications thus far are reassuring with B2B a clear focus for revenue growth, and the benefits of direct distribution feeding through to profitability.
The company’s decision to build an overlay full fibre network is a bold, but smart, move—allaying justified obsolescence fears about its network, enhancing strategic flexibility, and reducing its cost base.
With the O2/Virgin Media merger now approved, VodafoneZiggo in the Netherlands may hold clues to their likely approach to the market although their starting point is not quite the same and some lessons may have been learned.
We remain sceptical of the merits of discount-led convergence strategies. The pandemic, however, has eased the route to cross-selling and strengthened the case for convergent technologies.
Virgin Media’s network strategy will be key with significant risks from wholesaling their cable network and from expanding their footprint.
The highlight of what seems set to be O2’s final results as a standalone company is OIBDA growth of almost 8% in spite of a drag from weaker net adds.
It has also been a good quarter for O2 strategically with preliminary merger approval and contiguous 5G spectrum although that may be matched by its peers in subsequent deals given H3G’s openness to negotiation.
The annualisation of COVID impacts as well as an improving mobility picture will provide a significant boost to trends, although the roaming drag seems unlikely to reverse any time soon and O2’s relative growth will suffer from lower in-contract price rises than peers this spring.
The press industry lost £1 billion off the topline from the calamitous decline in print revenues due to pandemic-related mobility restrictions, partly offset by gains on digital subscriptions, much harder to precisely size in revenue terms.
Trapped at home for the most part, online traffic to BBC News and news publisher services boomed. Popular news sites marginally grew digital advertising while the quality nationals attracted 800,000 new paying subscribers to reach nearly three million in 2020.
The outlook for 2021, in the transition to the ‘new normal’, is mixed. Consumer work patterns and news, information and entertainment habits are unlikely to ‘bounce back’ to pre-pandemic levels, placing free commuter titles at particular risk. Signs of confidence through online innovation are welcome.
The press industry lost £1 billion off the topline from the calamitous decline in print revenues due to pandemic-related mobility restrictions, partly offset by gains on digital subscriptions, much harder to precisely size in revenue terms.
Trapped at home for the most part, online traffic to BBC News and news publisher services boomed. Popular news sites marginally grew digital advertising while the quality nationals attracted 800,000 new paying subscribers to reach nearly three million in 2020.
The outlook for 2021, in the transition to the ‘new normal’, is mixed. Consumer work patterns and news, information and entertainment habits are unlikely to ‘bounce back’ to pre-pandemic levels, placing free commuter titles at particular risk. Signs of confidence through online innovation are welcome.
The Telegraph’s carefully executed outsourcing of print advertising sales to Mail Metro Media fine-tunes its subscriber-first strategy.
Consolidation and collaboration are inevitable in a highly-competitive, structurally-shrinking news industry.
Reader-first models have emerged as the consistent theme for quality publishers, but the trade-offs, investment approaches and executions are highly differentiated.
Capital-rich DMGT has offered a £70m cash consideration, c.10x EBITDA, for New Scientist.
DMGT has tightened its portfolio in recent years, and recent acquisitions firmly push the core business back towards consumer media.
Why New Scientist?