Shares in Daily Mail & General Trust fell to a four-year low yesterday as concerns over the publisher's cautious outlook offset the impact of a robust performance over the past year.
Shares in the publisher of the Daily Mail and the Evening Standard fell by 9 per cent to 525p, the stock's lowest level in four-and-a-half years. The newspaper publisher's shares have underperformed other UK media stocks by around 15 per cent this year and the group's cautious view of its prospects, described as "lukewarm" by investment bank UBS, added to the pressure.
DMGT said: "Overall, the strength of the group's portfolio of market-leading business and consumer media businesses makes the board optimistic of achieving another year of steady growth in earnings, provided that the UK economy does not deteriorate substantially."
Peter Williams, the finance director of DMGT, argued that given the current volatile market conditions, the note of caution was sensible despite the robust performance of the company. "The idea that we should have put out a statement saying we expect a fabulous year of sweetness and light would have been irresponsible," he said.
Mr Williams added that it would be "delightful" to prove the doubters wrong in the long run but warned that a lack of visibility in the advertising market makes predicting how advertising revenue will perform after Christmas very difficult.
Alex Degroote, an analyst with Panmure Gordon, described the note of caution as "common sense" and said the stock was very cheap on valuation terms. He said that he has downgraded his DMGT forecasts by 3 per cent, a third of the share price decline.
Overall the publisher reported an 11 per cent rise in pre-tax profit for the year to the end of September, despite a 16 per cent decline in operating profits at its Associated Newspapers division due partly to a poor performance of its Teletext information service.
Circulation at the Daily Mail fell by nearly 2 per cent and overall UK circulation revenue fell by 1 per cent. However, the company now derives more than half of its operating profits from outside the newspaper industry after investing heavily in websites.
Mr Williams said that the company's business-to-business division had continued to perform strongly and the recent credit crunch had, if anything, increased demand for business information. However, he warned that a downturn in the property market would have a short-term knock-on effect on the company's real estate titles.
DMGT also confirmed that Charles Sinclair, the company's chief executive since 1987, would retire from the position in September next year. He will be replaced by Martin Morgan, currently head of the company's business information division. Mr Morgan is credited with building the burgeoning division from scratch but his appointment is not expected to lead to a major shift in strategy given that he has been with the company since 1989.
Mr Williams also denied that Paul Dacre, the editor of the Daily Mail, is preparing to exit the company, as has been rumoured. "He has no intention of stepping down," he said.Reuse content