DMGT's share price slumps 19p as investors react to unexpected 10% rise in cover price of Daily Mail from Monday
Daily Mail & General Trust's share price hit its lowest point in almost 18 months on Thursday, as investors reacted to an unexpected announcement that the price of the Daily Mail is being increased to 55p to counter falling revenues and rising costs.
The price of the Daily Mail is to increase by 10% from 50p to 55p on Monday, the first rise since April 2008, as it struggles with rising newsprint costs and a deteriorating advertising market.
DMGT, which also owns the Mail on Sunday, Metro and more than 100 regional newspapers, said the advertising market has worsened since its last market update in May.
The company said that ad revenues at its national newspaper division, Associated Newspapers, fell 7% year on year in the 13 weeks to 3 July, with the last five weeks of the period down 9%.
In May the publisher said ad revenues at Associated were down 5% after the royal wedding failed to give an expected boost.
The market update took investors by surprise, with DMGT's share price slumping by 19p, or 4.44%, to 419.9p ? the lowest since December 2009.
Alex DeGroote, an analyst at Panmure, said he was downgrading his DMGT profit forecast for its full year to the end of September by 2% to 3% ? about �6m ? to about �250m, as the positive news of the price rise was more than countered by concerns about the deteriorating advertising performance.
DMGT said the ad slump comes against the "backdrop of the fragile consumer economy, which has meant continued uncertainty for the retail sector".
"The continuing high cost of newsprint means it is necessary to increase the cover price of the newspaper," the company added. "The cover price increase will mitigate some of the impact of the recent decline in advertising revenues."
It is the first cover price increase for the weekday Daily Mail since April 2008. The price of the Saturday edition and the Mail on Sunday remain unchanged.
DMGT said that the outlook remains "uncertain" but year-on-year comparatives for advertising performance are "less demanding" from July through September.
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Source: http://www.guardian.co.uk/media/2011/jul/14/dmgt-share-price-18-month-low
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