Mecom issues profit warning as ad revenues slide

Mecom, the European newspaper group chaired by former Mirror boss David Montgomery, has issued a profit warning after advertising revenues fell nine per cent year on year in September.

The group, which publishes titles in the Netherlands, Denmark, Norway, Germany and Poland, said this afternoon that pre-tax profits for 2008 were likely to be 10 per cent lower than analysts expected.

Mecom also confirmed today that it had received a number of ‘expressions of interest’for a number of its newspapers, but said there was no certainty that the group will dispose of any titles given the ‘current market conditions”.

On a like-for-like basis, Mecom said group revenues were down 2.6 per cent in the three-month period to the end of September. Advertising revenues in the same period fell 7.2 per cent.

The decline was the most marked in September – down nine per cent year on year – and Mecom warned that the downward trend looked set to continue for the rest of the year.

‘The negative trend in advertising seen in the second half of September has continued into the first half of October and the outlook remains uncertain and challenging,’the company said in its trading update today.

‘A number of cost initiatives have been accelerated in recent months, but these will not be sufficient to offset the effect of lower advertising revenues.”

Circulation revenues in the three months to the end of September rose four per cent, helped by a series of cover price rises, the company said.

Mecom said its levels of debt had risen – up £41m since June to reach £587m at the end of last month.

The company stressed that it was staying within its banking covenants and said it was ‘committed to reducing debt levels to a more appropriate level for the current economic environment”.

Mecom executive chairman David Montgomery, the former Mirror Group chief executive, added: ‘The deterioration in global economic activity is being reflected in a recent slowdown in advertising performance and a weakening in the market outlook.

‘We remain confident that Mecom’s operating model is the right one and progress continues to be made in restructuring the cost base and developing new revenue streams.”

Shares in Mecom closed down 23.7 per cent to 3.7p – giving the group a market value of £58.2m.

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