DMGT's gloomy guidance soils solid results report

Shares in Daily Mail & General Trust (DMGT) neared three-year lows as a newly announced rolling share buy-back and robust final results were not enough to offset its gloomy guidance for the new financial year.

Annual turnover rose 1% to £1.85bn, with adjusted profit before tax down 4% to £281m.

However, earnings per share increased 7% to 59.7p and the full year dividend was increased by 5% to 21.4p.

The media arm, which publishes the Daily Mail and Metro newspapers and associated websites, saw underlying revenue fall 3% but drove an underlying profit improvement of 15% thanks to cost efficiencies.

Newspaper sales from the daily and Sunday paper fell 7% to £499m but MailOnline increased revenues 18% to £73m, resulting in an overall 4% decline for Mail titles, though the Metro freesheet enjoyed a 1% increase to £75m and the Wowcher deals unit expanded 25% to £30m.

The business-to-business (B2B) arm lifted underlying revenue 3% but failed to prevent a 12% decline in underlying profit as profits growth at the information and events arm were blotted by increased costs at the RMS-One catastrophe modelling unit, as well as ongoing challenging market conditions for Euromoney Institutional Investor.

"Resilient" was how chief executive Martin Morgan described the results, hailing the "strength and diversity" of the portfolio that enabled the navigation of such challenging market conditions.

"Through our strong balance sheet, we have been able to invest in our market-leading businesses while increasing shareholder returns through both the dividend and buy-back programmes. Continuing investment to drive innovation, coupled with active portfolio management, ensures that DMGT is well placed to create long-term shareholder value."

He pointed to "significant" organic investments currently being made in MailOnline, RMS and commercial property information business Xceligent and across the wider DMG information portfolio, although this will have consequences for margins.

He warned that challenging market conditions in the UK print advertising market and those facing Euromoney in the investment banking and commodities sectors are likely to have an adverse impact on the new financial year, as will the disposal of DMGT's stake in Local World that completed a few weeks ago.

RMS is expected to deliver low single-digit growth stable margins; DMG information is expected to see 10% growth and lower margins at mid-teens levels due to increased investment and a number of low margin and loss making investments made in the year; while events is expected to grow mid-single digits with a margin increase to around 25%.

Euromoney itself has indicated that second-half trends will continue into FY16, while media is expected to deliver stable revenues and margins. Joint ventures and associates are expected to be in the range of £15m-20m.

The board may hope of easing shareholders through that by following its £100m share buy-back programme with a new rolling programme, making on-market purchases of shares, with the size dependent on the group’s portfolio management activity.

But analysts at Nomura said that management's guidance for events looks very light and RMS margin and revenue growth looks weak.

"This guidance is well below our expectations and we would expect consensus EPS to move down well below 62p, despite the rolling buy-back announced."

For its part, broker Numis said the combination of the Local World sale and Euromoney outlook added to the new guidance would reduce its 2016 PBT and EPS forecasts to £257m and 54p, from £304m and 61.5p respectively. But the broker said it still rated the shares a 'buy' on a reduced price target of 970p.

Shares in DMGT were down 6.6% to 658.36p at 1055 GMT on Wednesday.