’Bored with your share portfolio? Buy Maiden and add some spice to
your stock.’ Perhaps the outdoor advertising group should run a campaign
along these lines. There’s certainly never a dull moment for Maiden’s
shareholders.
Last week, the company followed two recent shock profit warnings with an
announcement that its pre-tax profits of pounds 3 million in the first
half of 1998 had somehow descended into pre-tax losses of nearly pounds
2.7 million in 1999.
So Maiden shares are quite obviously a sell then? Not so hasty, you
bearish shareowners. It seems Maiden’s chairman Ron Zeghibe is promising
to post a record second half of the year. That would make it an
exceptional second half indeed, given that Maiden’s 1996 and 1997
results were extremely impressive.
Confused? You will be. While Zeghibe is busy explaining to investors and
analysts that the problems were down to people’s lack of confidence in
the economy, his rivals have spent the last week telling anyone who will
listen that it is not a cyclical economy thing, but more a 48-sheet
thing. One or two have gone as far as to suggest that it’s only a Maiden
thing, although Mills & Allen’s performance in the first six months was
almost certainly worse than Maiden’s.
It is hard to pick the bones from the argument. Maiden’s rivals say they
are fed up with Maiden blaming the market for its own failings. Maiden
says it is fed up with its privately owned rivals attempting to talk the
market up, while it ’has to give an honest appraisal to the City’.
The truth is that all the players in the 48-sheet market, in which
supply has considerably exceeded demand, have struggled to make a profit
in the sector and Maiden has 40 per cent of the market. In addition, it
has 12 per cent of the six-sheet market in which the explosion in the
number of sites has certainly had a negative effect on margins.
But Maiden’s rivals might actually consider that Zeghibe has protected
rather than ’talked down’ the market. By focusing on ’general business
cycles’ and a ’lack of confidence in the economy since the World Cup’ he
has deflected some of the attention from the kernel of the problem,
namely over-supply in two of the traditional poster sectors.
For his part, Zeghibe surely realises he has promised a lot, and that
the City is unlikely to react well if he can’t deliver. He insists he is
not ready to sell the company - the staff own 70 per cent of the shares
- but anything less than a chunky profit in the second half and his
stewardship will surely be called into question, especially as there are
a host of buyers waiting in the wings.
jonah.bloom@haynet.com.
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