Fears for the future of David Montgomery's media group Mecom have intensified, as the shares once again plunged despite the company rushing out a results statement in an attempt to calm investors.
The group's shares fell more than 24 per cent to 3.7p yesterday. The market has turned on media stocks in the wake of the credit crunch but Mecom is particularly vulnerable, with analysts pointing to its heavy debt burden and fears it could breach its banking covenants.
Mecom failed to reassure investors with an unscheduled interim management statement, as it warned on full-year profits, pointing to the disintegrating advertising market. The fall in share price marks a drop of more than 96 per cent from its 97p peak in June last year.
Richard Hitchcock, an analyst at Numis Securities, said: "The statement wasn't scheduled, reflecting the intense pressure the shares have been under; they wanted to clear the air."
The results, which cover operations for the three months until the end of September, reported that revenues had fallen 2.6 per cent on the previous year, and predicted that earnings before costs would fall 10 per cent below market expectation. Mr Montgomery, Mecom's executive chairman, said: "The deterioration in global economic activity is being reflected in a recent slowdown in advertising performance and a weakening in the market outlook." Advertising revenues fell 9 per cent.
Mecom's level of debt has risen by £42m to £587m, blamed on the working capital flows during the lower revenue summer months. The company added that it had received "a number" of expressions of interest over assets in several countries but "in current market conditions there can be no certainty that these ... will lead to one or more disposals".
Mecom was heavily hit by the collapse of Lehman Brothers. The week of its fall, the US bank sold 350,000 shares in a discounted block trade of 10.5p each. The move sent Mecom's share price down 13 per cent.Reuse content