British media group Daily Mail General Trust expects full-year earnings to be at the lower end of forecasts after weak advertising, particularly in travel and retail, hit its consumer business.
The company, whose flagship Daily Mail newspaper is Britain's top-selling mid-market tabloid, said underlying revenue at its consumer media business was down 3 per cent in the 11 months to the end of August, due to higher printing costs and weaker ad revenues.
The fall overshadowed a much stronger performance from the business unit, which hosts events and provides information on property, financial and other markets. Its underlying revenue was up 9 per cent.
However, the fall in underlying ad revenues in the 11 weeks to September 18th showed a significant improvement on the previous quarter.
"National newspaper advertising was not as bad as feared," analysts at UBS said in a note to clients.
Chief financial officer Stephen Daintith said the Metro newspaper had performed strongly in terms of advertising and said all advertising categories had started to recover at the Daily Mail.
He said operating profits would be down by a mid-single digit percentage on last year and said he was still worried about the company's first quarter that starts in October.
"Despite our continued focus on operational efficiency, the weak consumer advertising environment means that full year group operating profit will be lower than last year," chief executive Martin Morgan said.
"We expect some growth in earnings per share compared to last year, given lower finance and tax costs, but at the lower end of market expectations."
The outlook for operating profit was in line with forecasts, but analysts said the comments on EPS were disappointing.
Analysts are expecting operating profit for the full year of £298 million, according to Reuters, and earnings per share of 48 pence.
The chief executive said the Daily Mail and Mail on Sunday had continued to improve their market share. Asked if the group would launch another Sunday title to capitalise on the closure of the News of the World tabloid, he said the group was focused on promoting its existing paper.
"Full year pre-close contains no particular surprises, but no new catalysts in our view, and guides to the lower end of consensus forecast range," Investec said in a note. "Overall, the message sounds somewhat downbeat in our view, but the stock looks cheap given the quality of assets within its portfolio."
Reuters
