Shares in Daily Mail & General Trust slumped the most since 2001 after giving investors news they didn't want to hear: 2018 will essentially be a lost year.
The publisher of the Daily Mail newspaper said fiscal 2018 will be a "year of transition," warning of weakness across its businesses, a higher tax rate and a hit from asset sales. The stock fell as much as 29 percent Thursday, the most since the Sept. 11 attacks, when the company's trade publishing business suffered losses from canceled New York events.
The plunge shows some investors are losing patience with the company's delays in delivering a turnaround, a little over a year after CEO Paul Zwillenberg took over. Panmure Gordon & Co. berated the company for what it called "arguably the fifth transitional year in a row," highlighting how one of Britain's biggest media brands is struggling to reinvent itself from a tabloid publisher to a diversified global media group.
While the company, known as DMGT, didn't put firm numbers on the outlook, analysts took down their ratings. Panmure Gordon's Jonathan Helliwell forecast a more than 20 percent slide in earnings per share in the coming year. He called the guidance "notably weak" in a note to clients and said the warning of a transitional year "may be the understatement of the century."
The company also announced impairment charges of 206 million pounds ($277 million) against several of its investments, including Genscape, SiteCompli and Xceligent. "That points to the risk of what has been DMGT's change into an almost-VC style structure," says Liberum analyst Ian Whittaker, who downgraded the stock to hold from buy.
Zwillenberg opened up the business to dramatic changes, saying in December 2016 that there were "no sacred cows" he wouldn't consider selling. The company subsequently reduced its stake in trade publisher Euromoney to a minority holding. Zwillenberg, a former management consultant who met company Chairman Jonathan Harmsworth—known as Lord Rothermere—in college, reiterated the message Thursday.
"It has become apparent we need to implement real change across the group, and at pace," Zwillenberg said in a presentation to analysts. "It's good that we started on this path last year, because the headwinds in many of our markets have intensified over the past 12 months."
Never a quick turnaround
The company has been diversifying, focusing on expanding digital and business-to-business information and events management units. While the MailOnline web publishing business reported its first profit on Thursday, the Daily Mail is grappling with declining circulation and advertising in the print business. The property information portfolio has been hit by declining residential transactions in the U.K., while the sustained low oil price has affected sales bookings for Canadian energy-related events.
"This was never going to be a quick turnaround," said Crispin Odey, founding partner and portfolio manager of Odey Asset Management, which owns shares in the company. Odey said he supports the company's strategy of focusing on MailOnline over the newspaper business.
The stock was down 24 percent to 535 pence at 3:52 p.m. in London, giving the company a market value of 1.91 billion pounds. The shares had fallen 9.7 percent year-to-date before Thursday, driven by investor concern over weakness in its information and events businesses.
Full-year sales at the publisher rose 1 percent to 1.66 billion pounds, once adjusted for disposals including its reduced Euromoney stake. That narrowly missed an average estimate of 1.67 billion pounds, based on a Bloomberg survey of 11 analysts.
The company will not provide a trading update between its third quarter and full year earnings statements next year, as it has done previously, it said.
-- Bloomberg News