Trinity Mirror’s (TNI) acquisition of the Daily Express (and other titles in the publishing wing of Richard Desmond’s group, Northern & Shell) has been given the green light by investors. It has the finances in place – following the listing of 25.8m new shares – and the deal is expected to be approved by competition regulators given the starkly contrasting political views at the flagship titles (the Daily Mirror is pro-Labour, while the Daily Express backs hard-right Brexiteers). But the biggest test is yet to come: will readers pick up the new publications fast enough to deliver a return to earnings growth at the struggling newspaper group?
Numis seems to think so. The broker has upgraded its full-year pre-tax profit and earnings guidance to £134m and 36.7p (from £123m and 36p in 2017), partly thanks to the Northern & Shell acquisition. Meanwhile, Peel Hunt believes that “the value of the purchase is increasing the scope to finesse the control of costs”. Trinity Mirror has already proved adept at saving money. In the 2017 financial year, the group delivered structural cost savings of £20m, £5m ahead of the initial target set for the year. This cost control enabled the adjusted operating margin to rise 0.7 percentage points to 20 per cent.
But top-line numbers show why management is hoping to expand its readership. On a like-for-like basis, group revenue fell by nearly a tenth as a “weak print trading environment” dragged print publishing sales down 11 per cent to £494m. The division – which contributes 79 per cent of the overall top line – reported a decline in both circulation and advertising demand.
Still, the the Daily Mirror appears to have retained its popularity, just in a different format. Mirror online was the most popular commercial news brand in December and its total digital audience grew by 7 per cent year on year, with two-thirds of the total page views now coming via the mobile site. The challenge – an industry-wide dilemma – is in monetising that migration online. Digital publishing revenue may have risen 7 per cent on a like-for-like basis, but still only contributes 15 per cent of group sales.
| TRINITY MIRROR (TNI) | ||||
| ORD PRICE: | 78p | MARKET VALUE: | £232m | |
| TOUCH: | 77.6-78p | 12-MONTH HIGH: | 122p | 65p |
| DIVIDEND YIELD: | 7.5% | PE RATIO: | 3 | |
| NET ASSET VALUE: | * | NET DEBT: | £9m | |
| Year to 31 Dec | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2013 | 664 | -161 | -39.0 | nil |
| 2014 | 636 | 82.0 | 28.1 | 3.00 |
| 2015 | 593 | 67.2 | 33.9 | 5.15 |
| 2016 | 713 | 76.5 | 24.9 | 5.45 |
| 2017 | 623 | 81.9 | 23.0 | 5.80 |
| % change | -13 | +7 | -8 | +6 |
| Ex-div: | 10 May | |||
| Payment: | 8 Jun | |||
| *Negative shareholder funds | ||||
