European news publisher’s shares slump by almost 50% as it shocks the market with second profit warning in six weeks
Shares in the media group Mecom slumped by almost 50% to an all-time low on Wednesday as the European newspaper publisher shocked the markets with its second profits warning in six weeks.
The publisher, which recently upset investors by warning in April that revenues were 12% down year on year, said it has seen a “significant deterioration” in advertising revenues since the beginning of April, with its Dutch business – the most important in the group’s portfolio – down 17% year on year.
Mecom, which was founded by former Mirror Group executive David Montgomery and also has operations in Denmark and Poland, said that it now expects earnings before interest, tax, depreciation and amortisation (Ebitda) to be down €14m (£11.3m) year on year in the first half to about €52m. The company makes a loss at the pre-tax profit level.
Tom Toumazis, Mecom’s chief executive, said: “It is clearly highly disappointing that Dutch advertising markets have deteriorated further since our last update, with a significant effect on the group’s financial performance.”
The latest drop in the company’s value prompted the group’s senior non-executive director, Michael Hutchinson, to increase the size of his stake in the company by 76% after purchasing £30,000 worth of shares, which closed the day down 70p, or 48%, at 76p.
However, Hutchinson’s confidence in a share price recovery did not appear to be shared by the company’s executive directors, who did not increase their stakes, or by City analysts.
Patrick Yau, an analyst at Peel Hunt, said: “Given the guidance from management, these cuts are chunky in size and are likely to weigh on sentiment around the stock for some time. We expect that it will take the market some time to regain its confidence in the underlying fundamentals.
“Until the company can deliver numbers in line with new guidance, we suspect the shares will be dull for now.”
Canaccord Genuity’s Simon Davies added: “We expect material short-term weakness in the shares.”
Full-year Ebitda, which was estimated to be about €107m, will now be as much as 21% down: Mecom forecasts between €85 and €95m.
The advertising outlook remains bleak with Mecom admitting that there is “no reason for the recent declines in advertising to abate in the second half, especially given the current recession in the Dutch economy and the deepening crisis in the eurozone”.
Looking ahead to the next two years, Mecom said that its assumption that print advertising would only suffer “moderate declines” was wrong.
“The current trends, together with the medium-term economic outlook, now indicate that this assumption needs to be reassessed,” the company added.