Last updated: April 8, 2013 11:29 pm

Mecom warns as ad revenues drop further

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Shares in Mecom lost more than one-third of their value on Monday after the European publisher revealed a further deterioration in advertising revenues and issued a profit warning.

The London-listed newspaper group – which is in talks to sell its Dutch and Danish operations – cautioned that advertising at its Netherlands publications in March and April had contracted by more than a fifth, year-on-year.

“If the pattern of recent declines in advertising revenues were to continue, total Dutch revenues would fall significantly short of current market expectations,” the company said.

The publisher, which has a portfolio of more than 250 printed titles and about 200 websites, earns almost two-thirds of its revenues from its Dutch businesses.

Its shares fell 34 per cent to 55p in Monday trading, valuing the group’s equity at £100m.

Mecom had begun the year badly, reporting a 28 per cent decline in Dutch advertising revenue in January and February, compared with the same months a year ago.

But while the more than 20 per cent fall in advertising income for March and April represented a slowdown on the previous two months, the figure was still worse than the company – and media analysts – had forecast.

Mecom blamed the struggling Dutch economy for much of its troubles. “The depth of the crisis is expected to affect advertising revenues for the foreseeable future,” it said. “Any improvement in economic conditions and consumer confidence is not anticipated until later in the year at the earliest.”

However, the company suggested that the effect of the advertising decline on its earnings before interest, tax, depreciation and amortisation (ebitda) would be partially mitigated by cost reductions that it implemented last year.

Even so, the profit warning prompted Simon Davies, analyst at Canaccord Genuity, to cut his 2013 adjusted pre-tax profit guidance for Mecom by two-thirds to €10.1m, while his ebitda forecast contracted 27 per cent to €53.2m.

“The deteriorating economic backdrop in the Netherlands suggests no grounds for a material improvement through 2013,” Mr Davies argued, although he reiterated his “hold” recommendation on the stock.

Mecom’s Dutch operations comprise Wegener – a publisher of regional daily newspapers and free weekly door-to-door publications – and Limburg Media Group, a regional publisher in the southern Dutch province.

The Dutch division publishes eight paid-for daily newspapers and about 165 weekly free-sheet titles.

Last year, Mecom launched a strategic review as part of an effort to trim down its businesses – a move that resulted in the €4m sale of its Polish division, and the €26m disposal of Autotrack, the Dutch online classified car adverts business.

Last month, the group reported a widening of its 2012 pre-tax losses from €27.7m to €102.3m year on year, from revenues that contracted 9 per cent to €910.5m.

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