The Daily Mail, like its right-of-centre politics, is loved by some Brits and loathed by others. Even before it campaigned stridently for Brexit, the mid-market tabloid had always divided British opinion on politics and much else. When Prince Harry recently lambasted the British media, rival journalists assumed he meant the Daily Mail. But its owner, the quaintly named Daily Mail & General Trust (DMGT), is not just the country’s oldest media group but, arguably, its most successful.
The success is measured by its best-selling flagship daily in print and online, but also by more than 50 years of profit from media investments around the world.
Last month, DMGT’s 20% stake in the UK’s fast-growing Cazoo car site was valued (pre-IPO) at some £1bn – more than 10 x the investment just two years previously. The stake is now worth the equivalent of 50% of the value of the £1.2bn-revenue DMGT group, with its worldwide portfolio of newspapers, information services and exhibitions, employing more than 5,000 people.
But this was no lucky break. It was simply the latest (and largest) investment success from a listed company which has long been been a formidable media investor.
The strategy essentially began in 1969 when DMGT invested a mere £6k in the launch of Euromoney magazine by the Daily Mail’s financial editor Patrick Sergeant. It became the leading magazine of the burgeoning wholesale financial markets and the flagship for one of the world’s most successful B2B media groups.
Euromoney achieved sustained growth, through good times and bad, by aggressive exploitation (especially through sponsorship) of events – and well-timed acquisitions. The success was reflected in tight cost control juxtaposed with very high senior management rewards – and (more or less) uninterrupted profit growth. The separately listed company generated annual profits of £50m+ for years before DMGT (having retained a 70% share for decades) sold its remaining 49% for the equivalent of £900m in 2019. Good timing: the Euromoney market cap is now £1bn.
Two decades later, DMGT became a minority investor in an early-stage company called Cartograph which was pioneering catastrophe risk modelling for the insurance industry using research at Cambridge University. It was introduced to the California-based RMS which was the market leader, spun-out of Stanford University. In 1998, it acquired RMS and merged it with Cartograph. RMS profitability grew to more than £50m. In 2020, it made £34m operating profit on revenue of £248m – equivalent to 27% of DMGT’s total profit. Not bad for a total acquisition price of £130m – even though RMS’ diversification into software development led to the founder’s departure and (one suspects) to the re-set in operating profits.
Over succeeding years, DMGT: built radio groups in the UK and Australia at a total cost of less than £50m before selling them for £210m; made a 14 x return by selling its stake in the Zoopla property digital for £642m (having invested just £45m); and doubled its money by selling the unprofitable energy information business Genscape for £220m in 2019.
It has been able to work successfully with entrepreneurs and to retain them when that is the key to growth. In the build-up of its B2B information and events, DMGT created equity-based compensation schemes which were then uncommon in UK listed companies. Even as a large majority shareholder, it allowed Euromoney to operate with a substantial level of independence.
It is easy to see that, as it began to diversify from newspapers, DMGT’s Harmsworth family ‘owners’ had recognised the investments in new companies should not be managed by the newspaper-centric parent. But the ‘light touch’ management was balanced by strong financial controls and reporting – and close attention to cash usage. DMGT was always as interested in choosing the CFO as the CEO.
But much of the investment activity has comprised early-stage minority stakes and, therefore, relatively small sums rather than large acquisitions. While DMGT usually has board representation, it frequently has less than a 30% shareholding, has no intention of obtaining control – and is willing to sell when the time and price are right.
It has mostly taken a long-term view: its ownership lets it be a patient investor/owner when that matters. Insiders sometimes describe DMGT as “permanent capital” to distinguish it from other listed companies. The company breeds very strong loyalty – and longevity – among its executives. But there has traditionally been little executive mobility across its divisions, a reflection of the diverse cultures it has allowed to flourish.
DMGT currently has investments in some 20 companies across the edtech, property and media sectors. These – with the exception of Cazoo – have a total value of about £80m. The larger investments include: Yopla real estate agent (45%), Praedicat insurance (27%), and Excalibur, owner of discount coupon business Wowcher (24%).
There have, inevitably, been failures including the Channel One London TV channel in the 1990s and, more recently, the attempt to create BuildFax, a US property information business which was sold to Verisk for $42m in 2019. Interestingly, DMGT has not been particularly successful in launching its own new businesses outside the core newspaper sector where it had launched the Mail on Sunday and Metro.
The Harmsworth family may always have seen their ownership control as being the priority which enables the long-term view. But the key objective may also have been to improve the quality of the portfolio over time, rather than chasing scale. Another feature of the DMGT approach is its consistent re-investment of 8-10% of revenues in organic development.
DMGT has not raised equity since 1926 and seems unlikely ever to want to do so. That has meant executives have always had only cash and debt to work with, which has imposed strict disciplines on the business. It might explain why, having built up the B2B group, it exited consumer magazines and radio. It had to make a choice.
There may be no more interesting example of a traditional media company coming to terms with the digital future than DMGT. It was founded in 1896 by the newspaper pioneer Alfred Harmsworth (later Lord Northcliffe) who launched the country’s Daily Mirror and the Daily Mail in the late nineteenth century and once owned The Times, Sunday Times and The Observer. The company’s current chairman is Northcliffe’s great great grandson Jonathan Harmsworth (the fourth Lord Rothermere) whose family controls the listed company through its ownership of all the voting shares.
He has been an engine of innovation in the news business. DMGT raced to launch the Metro in the UK before the Sweden-based creator of the free tabloid could get there. And the 18-year-old Mail Online has become one of the world’s largest news sites, with 12.6m global daily uniques, £140m revenue, and the kind of (albeit modest) profitability that the over-funded BuzzFeed has been struggling to emulate.
But dynasties have pressures of their own. Nobody should doubt the emotional ‘weight’ of a fourth-generation family business whose current leader may feel the responsibility to ensure his own son eventually inherits an (even) better business than he did. That may be tough in times when many traditional media businesses will not even survive.
The previous generations of Rothemere’s family managed to distinguish themselves by improving a newspaper business. His own father, who inherited in 1968, made his mark with the 1970 relaunch of the Daily Mail as a mid-market tabloid. It transformed the company’s finances for the following 40 years. The newspaper that had, in 1902, been Britain’s first million seller, climbed back to 2m during decades when most other circulations were falling fast. It was a game changer for the market and for DMGT which generated the cash for US and B2B expansion.
The investment successes have literally paid dividends. DMGT increased its payout again last year – even though operating profit was cut by 75%, almost wholly due to its Covid-hit B2B operations. And the share price has gained 30% in the last 12 months. Even investors who have never liked the family monopoly of voting stock know the company has (mostly) been great news.
But the corporate strategy has always been a bit confusing. In the days when Euromoney and, then, RMS first flipped the majority of DMGT profits to B2B, it looked as though the newspaper-centric group was changing fundamentally and might – eventually – dispose of its legacy business. Amid rumours that executives were pushing for a change of name from the Daily Mail, the seismic shift seemed at least possible. But the sell-down of Euromoney seemed to settle things: why would a B2B-focused group choose not to retain what was one of the world’s best performing business information companies? It was just another investment after all. And, now with the Covid collapse of exhibitions, consumer media is again 50% of DMGT revenue.
In that sense, the M&A of recent years has largely confirmed that DMGT remains primarily a B2C company whose B2B portfolio is (more or less) as disposable as its diverse financial investments. But times are changing, and the legacy news brands are not the cash cows they once were. The consumer media revenue/operating profit declined from £731m/ £96m in 2015 to £604m/£56m in 2020. Notwithstanding Covid, the trend is predictable enough and reflects the need to replace falling revenues from advertising and news-stand sales with subscriptions; and digital for print. We might also expect accelerated growth in video and interactive news services, funded by subscriptions or e-commerce. But something’s cooking…
The recent deal, under which DMGT will sell print advertising for the Telegraph Media Group, creates a platform responsible for more than £300m of advertising sales. It might be even more strategic than it looks. These two long-established UK news brands share political viewpoints and also a rivalry with the Murdoch family’s News Corp.
The Telegraph-Mail sales deal may just morph into the kind of partnership that helps to clear the regulatory barriers to any future collaboration – or change of ownership. The arrangement might also, conceivably, become a ‘poison pill’ that makes it difficult for any other publisher to acquire the Telegraph when (as expected) the Barclay family decides to sell.
Since the Telegraph owners have substantial interests in e-commerce, there might be some intermediate stages in the relationship (as well as the scope to share more costs) – before the real deal.Acquiring the Telegraph would be transformational for DMGT because it:
- Has 400k digital and 200k print subscribers
- Will make some £20m profit in 2021
- Complements the existing Mail newspapers and provides formidable, like-for-like opposition to News Corp UK’s The Sun and The Times
The dream deal to create the UK’s largest news group would enable DMGT to develop paid-for digital services in strong ‘verticals’ currently shared by the Telegraph and Mail, including Health, Personal Finance, Travel, Homes, Sports, and Business; and also e-commerce. Daily Mail TV in the US (with 1m viewers daily) might also prompt a UK television/ online news network, perhaps on the lines of Newsy (see separate story: Will it become the new CNN?). Was DMGT tempted to invest alongside Discovery in the forthcoming launch of GB News?
Meanwhile, there is Mail Plus – the scarcely-promoted, ads-free, video-rich, enhanced ‘newspaper’ – with more than 80k subscribers. It seems so much like the future. But, for the company which infuriatingly blurs the distinction between opportunism and strategy, anything can happen.
Additional reporting by Alex DeGroote