Daily Mail group shares slump to five-year low

Shares in the owner of the Daily Mail and Mail Online have slumped by more than 20% after it reported a sharp drop in annual profits and warned of a tough year ahead.

Daily Mail & General Trust (DMGT), which also owns the Mail on Sunday and Metro newspapers and is the largest shareholder in business-to-business publisher Euromoney, said its business would be “adversely affected by recent disposals and challenging conditions in some of our sectors”.

The shares hit a five-year low of 500p in early trading on Thursday, falling 28% at one point before closing 23.8% lower at 534.5p.

DMGT is also the largest shareholder in ZPG, the company behind the property website Zoopla and the price comparison site uSwitch. It has reduced its stake in Euromoney to 49% from 67%.

DMGT posted a 13% fall in adjusted profits before tax to £226m for the year to the end of September. Revenues were also down 13%,to £1.66bn.

The company made a statutory loss before tax of £112m, as it took a hit from writedowns totalling £206m. It wrote down the value of three investments: energy information business Genscape; and property information firms Xceligent and SiteCompli.

DMGT’s chief executive, Paul Zwillenberg, highlighted Mail Online’s move into profit in the final quarter and the launch of new initiatives such as DailyMailTV in the US. Mail Online is also expected to make an operating profit over the coming year.

Zwillenberg also pointed to cost savings in the newspaper businesses, including the closure of the Didcot printing site. He said the company had “delayered management” and “reduced overheads” following asset disposals, and described the coming year as a “year of transition”.

DMGT hinted at further asset sales, saying: “Where DMGT is not the best owner, further divestments will be made.”

Revenues for the Daily Mail, Mail on Sunday and Mail Online combined were £574m last year, boosted by increases in print cover prices. The website contributed £119m. The Mail businesses made an operating profit of £71m.

The company said that while print advertising revenues fell by 5%, digital advertising grew by 18%.

It expects further growth in digital advertising revenues, helping offset declines in newspaper circulation and print advertising, but warned that “advertising market conditions [were] likely to remain volatile” – mirroring the experience of rivals. The underlying rate of decline in revenues at its media business is expected to be in the mid-single digits.

Steve Liechti, analyst at banking group Investec, said the outlook for the media business was worse than expected.

Analysts at stockbroker Liberum downgraded their rating on DMGT shares from “buy” to “hold”, arguing that the outlook for 2018 “does not look great on the consumer media side”.

Liberum’s Ian Whittaker and Annick Maas said: “What is clear is that DMGT faces another year of ‘transformation’ but it is not entirely clear when we will get the acceleration of top-line growth.

“The question we would have is, if Mail Online is becoming a greater part of the group (17% of revenues in 2017) and is moving into profits and is faster growth, why is the like-for-like revenues trend going backwards as well as the margin?”

They also expressed concern about the writedowns. “That points to the risk of what has been DMGT’s change into an almost-VC style structure where it takes multiple investments.”