LONDON (Reuters) - The publisher of Britain’s Daily Mail newspaper warned revenue and profit would decline in its media business over the coming year, with the grim outlook for the print business sending its shares 25 percent lower.
Daily Mail & General Trust reported a 13 percent decline in pretax profit in the year to the end of September despite its highly popular MailOnline website moving into the black in the last three months.
In common with other newspaper groups, DMGT is battling tough print advertising markets and long-term declines in circulation.
However, its titles have been outperforming rivals and retain a strong influence on British politics and its comments had particular resonance.
Chief Financial Officer Tim Collier, who joined the business in April, said the print advertising market would remain difficult and circulation would stay under pressure.
“Last year we managed to offset those circulation declines and advertising decline with increasing cover prices across all three titles and this year we haven’t got that,” he said.
The Daily Mail sold 1.39 million copies a day in October, down 8 percent on a year earlier, according to ABC data. It was third in the market behind its free sheet Metro and Rupert Murdoch’s The Sun.
Chief Executive Paul Zwillenberg, who joined 18 months ago to overhaul a company that stretches from MailOnline to business-to-business information, said the company needed to raise its game.
“Am I happy with the performance? No, not yet,” he said.
He said he would now roll out a company-wide performance improvement programme to position it for the future.
The company, which is chaired by Jonathan Harmsworth, the great grandson of one of the pioneers of popular journalism, said the underlying rate of revenue decline in its media business was expected to be in the mid-single figures in its current financial year.
The operating margin would drop to about 10 percent from 11 percent in the previous year.
Zwillenberg emphasised he would be cautious about raising cover prices, and would not alienate its loyal readership.
“(Our franchises) still have juice left in the lemon,” he said. “We are not going to squeeze that like our competitors might for short-term gains.”
Underlying revenue rose 1 percent in its media business over the past year, driven by an 18 percent rise in digital advertising on sites including MailOnline, which Zwillenberg said had “addictive, seriously popular” content.
Online advertising was overtaking print advertising within the Mail brands, he said.
“In a week when several large well-known digital media businesses have announced challenges, MailOnline continues to outperform,” he said, referring to reports that BuzzFeed and Vice Media were failing to meet growth targets.
Collier said the challenge for DMGT was print advertising, which fell 5 percent in the year.
Analysts at Liberum, who downgraded their recommendation from “Buy” to “Hold”, said the guidance looked underwhelming.
“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,” they said.
Barclays said the results showed a business that was yet to reach a floor in terms of profit numbers as the new management worked through the portfolio.
Collier said he had reviewed DMGT’s business-to-business units, and had written down the assets by 206 million pounds, reflecting challenges in the trading environment for its energy and property information businesses.
He said he had also decided to sell its EDR, its U.S. commercial real estate environmental information business. ($1 = 0.7423 pounds)
Editing by Kate Holton and Keith Weir