Regulatory changes to hit XLMedia's 2018 results

In a trading update for the year to the end of December 2018, the company said underlying trading in the year to date has been stable, with the group actively focusing on higher margin business and ending certain lower margin media buying activities. It has also seen some impact from regulatory changes, mostly the closure of the Australian market at the end of last year and some uncertainty regarding the regulatory status of certain European markets this year.

"These regulatory changes have triggered a re-alignment in how operators and marketers can work which should lead to a clearer and more functional environment. There has also been some reduction in SEO performance in few specific territories."

As a result, XLMedia now expects to report lower revenues than expected of around $130m, with marginally lower adjusted earnings compared to the prior year and a corresponding impact on pre-tax profit.

On the plus side, however, the company said the recently-acquired personal finance assets continue to perform well and it expects total publishing revenues in this sector to continue to grow as a proportion of overall group publishing revenues this year.

"Elsewhere across the business an accelerated effort to increase our reach whilst adding new channels, markets and products is currently being undertaken in an effort to optimise performance and group diversification.

"Furthermore, with the US Supreme Court repealing the ban on sports betting last month, we have accelerated our efforts to ensure we are well positioned to service those operators who will be active in the market, although we believe its positive effects will only be felt in the medium to long term."

Berenberg, which rates the stock at 'buy', pointed out that the regulatory changes are one-offs which should favour the group in the long run.

"With the business model still solid, the company accelerating its efforts in the US and the company in evaluation stages for a number of deals, we would view a pullback in the shares as an entry point for longer-term investors," it said.

At 1040 BST, the shares were down 29% to 121.80p.