What's new:
■ Operating profit improvement
■ Advertising outlook brighter
■ No phone-hacking claims served
Look beyond the phone-hacking allegations that dragged down Trinity Mirror's (TNI) share price in October and the newspaper publisher is making solid progress.
True, advertising and circulation revenue was down 12 per cent and 16 per cent, respectively, in the 17 weeks to 28 October, but cost-cutting initiatives are beginning to reap benefits. Adjusted operating profit is expected to be around £105m, matching last year's performance, and stronger cash flows have allowed a further £19m reduction in borrowings, taking net debt down to £162m, from £221m at the start of the year. Encouragingly, Trinity Mirror is seeing an improvement in advertising trends in November, particularly for its nationals newspaper division.
However, online competition continues to take its toll. The group's nationals business saw total revenue fall by 12 per cent to £135m over the 17-week trading period, while sales of the regional titles dropped 9 per cent to £89m. There was an 8 per cent pick up in digital revenues to £14m, but the online business only accounts for 6 per cent of group turnover.
Management appears to be addressing head on the allegations of wrongdoing by Trinity Mirror journalists. It stresses that no claims have yet been served and has issued notices requiring claim forms to be served.
Panmure Gordon says...
Buy. A strong November pick up in advertising at Nationals plus lower than expected net debt means we've upgraded our full-year EPS estimates by around 5 per cent to EPS of 28.1p, rising to 28.8p in 2013. Trinity Mirror's guidance on full-year adjusted operating profit to £105m - we had anticipated £102m - was also encouraging, as was the lowering of full-year guidance on restructuring costs from £15m to £10m. We're also impressed by Simon Fox, the new chief executive, who interestingly talks of "significant unrealised potential". An earnings multiple of 2.5 is also at an absurdly low level and, in our view, a reinstatement of the dividend is coming.
N+1 Singer says...
Hold. Although revenue is down, we're currently forecasting that cost management initiatives should deliver a full-year operating profit of £100.8m, slightly ahead of analyst consensus (£100.2m). The update on strategy and costs savings, scheduled for 14 March 2013 alongside preliminary results, is later than we had hoped. That said, the 'One Trinity Mirror' initiative, which integrates the Nationals and Regionals businesses under one management structure, supports our forecasts. Overall, we are confident that Trinity Mirror can support a conservative dividend. Our target price is 70p.
