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DMGT slumps as it warns of further declines in newspaper advertising after 2017 loss

Liberum cut its rating on the stock to 'hold' from 'buy' and lowered its

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DMGT reported another fall in newspaper circulation volumes and ad revenues

Daily Mail and General Trust PLC (LON:DMGT) shares plunged after saying its advertising revenues are likely to remain “volatile” in the new financial year as it reported a 2017 loss.

The owner of the Daily Mail newspaper and MailOnline posted a statutory loss before tax of £122mln in the year to September 30, compared to £202mln last year, including impairment charges and exceptional costs related to its reorganisation and joint ventures.

READ: Daily Mail upgraded by Goldman Sachs to 'neutral' from 'sell' following underperformance

The prior year’s profits gained from the disposal of regional newspaper publisher Local World and e-commerce business Wowcher.

This year’s statutory earnings per share rose to 97.8p from 57.8p in 2016, boosted by the proceeds of cutting the group’s controlling stake in financial information service Euromoney to 49% from 67%.

Net debt decreased by £214mln during the year to £464mln, in part thanks to the reduced stake in Euromoney.

Excluding disposals and exceptional costs, the company delivered pre-tax profit of £226mln, though this was down 13% on the previous year.

MailOnline the saviour amid weak newspaper ad revenues 

Revenue was broadly flat on an underlying adjusted basis at £1.6bn and statutory revenue, excluding Euromoney, edged up 3% to £1.5bn.

Strong underlying revenue growth of 20% in MailOnline mitigated a 4% decrease at the Daily Mail and The Mail on Sunday newspapers.

The company said tough newspaper advertising market conditions “eased a little”, with underlying print advertising falling 5%, compared to a 12% drop last year. However, circulation volumes continued to fall at its newspapers.

The DMG Media division, which is home to its newspapers and website, delivered a 10% increase in underlying operating profit of £77mln as the MailOnline moved into a profit in the final quarter and the group cut costs in the newspaper businesses with the closure of its Didcot printing plant.  

Cautious outlook

Looking ahead, advertising revenues are “likely to remain volatile” in the DMG Media division as it expects declines in newspaper circulation volumes and print advertising to continue to offset digital advertising growth. 

The dividend per share was raised to 22.7p from 22.0p.

“The board is confident that the new strategy and strong balance sheet will, over the medium term, generate consistent earnings growth that will underpin DMGT's long-standing commitment to deliver sustainable annual real dividend growth,” said chief executive Paul Zwillenberg.

Liberum downgrades DMGT

Liberum downgraded its rating on the stock to ‘hold’ from ‘buy’ and cut its target price to 765p from 785p. The broker said while the full year results were broadly in line with its forecasts and the news that MailOnline has moved into profitability may be taken well, it is “concerned about the guidance”.

“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,” it said.

Shares fell 24.50% to 530p in morning trading. 

Quick facts: Daily Mail and General Trust

Price: 752 GBX

LSE:DMGT
Market: LSE
Market Cap: £1.58 billion
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