De La Rue crashes as Daily Mail rockets

The reaction to news from these two big names could not have been different. Here's how events unfolded.

MailOnline produced a headline-grabbing performance for Daily Mail & General Trust today as the conglomerate's shares extended their gains for 2019 to more than 25%.

Daily Mail (LSE:DMGT) said the stronger-than-expected 16% rise in half-year revenues for the MailOnline website was enough to offset the 12% underlying decline in advertising revenues at its traditional print business, which includes the Daily Mail and Mail on Sunday.

Source: TradingView Past performance is not a guide to future performance

While conditions remain tough, the group now thinks that annual consumer media revenues will decline by the low single digits rather than the mid-single digits previously thought.

That guidance and today's better-than-expected results helped shares to jump 10% as the publisher continues to repay the faith of investors following the grim headlines generated by crushing falls for the share price in the wake of 2017 and 2018 results.

While 2018 was always set to be a year of transition, CEO Paul Zwillenberg has injected some momentum into the share price this year. This included April's distribution of £862 million to shareholders from its entire holding of Euromoney shares and a £200 million special dividend.

The Euromoney disposal followed a £642 million windfall from the sale of a 30% stake in Zoopla owner ZPG in 2018 as DMGT sought to boost its balance sheet strength and address criticism about the sprawling nature of its portfolio of business-to-business assets.

The B2B division, which includes US-based education technology businesses Hobsons and Naviance and energy information arm Genscape, remains on track to deliver low single digit full-year revenues growth and an operating margin in the mid-teens.

Credit Suisse raised its forecasts for earnings per share (EPS) in 2019 and 2020 by 3% to 39p and 2p to 45p respectively following today's results. However, the broker is waiting to see further progress before it upgrades its neutral recommendation.

It said:  

"The company is making good strides with its simplification programme but has yet to demonstrate a return to consistent group top line growth."

While Investec Securities says the stock is not cheap in absolute terms at about 15 times 2020 earnings, the broker's 800p target price is based on forecasts of a 14% annual growth rate in EPS with significant scope for consensus upgrades and the benefit of a 3.5% dividend yield. Numis Securities has retained its buy recommendation and 877p price target.

The recent recovery in the DMGT share price is in sharp contrast to the performance at De La Rue, where the stock slid more than 30% to the lowest level in around 15 years. The bank note and passport printer warned that profits for this year would be lower than the £60.1 million achieved in full-year results today.

Chief executive Martin Sutherland, who is to step down after five years in charge, said competitive pressures in the bank note print market and the conclusion of De La Rue's UK passport contract in 2020 presented "significant challenges".

A new three-year cost reduction programme is expected to deliver £20 million of annual savings by 2022 as part of a new transformation plan. It comes as the company wraps up a five-year plan started in 2015 to create a more technology led security product and services provider.

For shareholders, however, there's little evidence that the strategy has resulted in improved returns with the shares significantly below their 547p level at the start of May 2015.

Source: TradingView Past performance is not a guide to future performance