Mecom, the European newspaper group founded by David Montgomery, the former executive of Mirror Group, suffered 30 per cent plunge in its shares despite reporting that 2007 trading was in line with expectations.

The fall came after analysts forecast that interest costs and depreciation charges would affect the group’s profit-ability. Numis Securities, Mecom’s broker, cut its forecast for 2008 pretax profits from £128 million to £102 million, although it maintained its “buy” recommendation on the shares.

Numis highlighted concerns over the integration of acquisitions and restructuring of the company. The broker raised its estimate for depreciation by £7 million to £56 million and for the interest charge, also by £7 million to £40 million. The company did not provide a forecast for interest and depreciation in the statement.

Despite a largely positive trading update from Mecom, the final paragraph could suggest that the group is under some pressure. The company said that it will next year “continue to focus on margin improvement through cost reduction and revenue development”, and “should be able to improve profit margins towards the level of our initial expectations”.

Mecom, which made its stock market debut in May 2005, also alluded to pressure in the Danish newspaper market. It said that it expects to see a “modest fall” in revenues, which was attributed to the deteriorating advertising market and increased competition. It added that the new management team in Denmark had started a restructuring and had identified areas for further cost reduction in 2008.

Mr Montgomery, executive chairman of Mecom, said that the business was “very much on track” oper-ationally. He told The Times: “The market is extremely nervous and unforgiving at the moment, especially in the FTSE 250 area. Nothing has fundamentally changed with our company. The market is nervous about high depreciation charging. These are technical, almost opaque reasons and not to do with the company’s stability, just with sentiment.”

With the exception of Denmark, where there was a modest fall in profits in 2007, all markets showed growth last year, Mecom said. The company, whose first-half loss widened on acquisition costs and charges related to the closure of a Danish newspaper, has been acquiring European publishers to create a company with titles in the Nether-lands, Germany, Denmark, Norway and Poland.

Mecom said it will bolster its online business to expand sales and become less dependent on newspapers.

The shares closed down 14½p at 33¾p yesterday.

Times Recommends

• C&G axed - 1,660 jobs to be lost
• UK house prices rise 1.1% as buyers return
• Mixed reaction to US banks repaying bailouts