Trinity Mirror shares surge on recovery of advertising revenues

Published on Wednesday 28 July 2010 22:39

SHARES in Trinity Mirror surged yesterday after the publisher surprised the market with better-than-expected first-half figures.

Operating profit jumped by more than one quarter to 61.7 million, driven by cost savings and improved advertising trends. This was despite flat revenues of 382.2m during the six months to the end of June.

The increase in profits sent shares surging 32 per cent higher, up 24.25p to 100p.

Chief executive Sly Bailey said the improved performance came despite a fragile economy and volatile trading conditions.

Although the group stopped short of reinstating its dividend - which will be brought back after clear evidence of economic growth and stability of advertising - the tone was bullish.

Bailey said: "Looking ahead to the second half of the year, we remain cautious on the economy but are confident of delivering a robust performance for the full year, driven by stabilising revenues and continued cost efficiencies."

The group's five national titles - which include the Daily Record and Daily Mirror - posted a dip in revenues as cover prices were frozen in an effort to retain circulation among cost-conscious readers. However, increased corporate spending on display adverts led to a 2.2 per cent increase in advertising revenues, which in turn helped lift the division's operating profits.

Circulation among the nationals continued to decline, but at a slower rate, with revenues from newspaper sales down 6.2 per cent. In volume terms, circulation was down 7.2 per cent at the Mirror, 6.4 per cent at the Record, and 8.1 per cent at the Record's sister Sunday Mail.

Trinity Mirror noted a "weaker performance" by its Scottish papers, which are more reliant upon cyclical classified advertising than its other national titles.

Alex DeGroote, an analyst at Panmure Gordon, said: "Scotland was probably a marginal drag on the overall performance."

Excluding the 30 regional titles purchased earlier this year from Guardian Media Group (GMG), advertising fell 8 per cent within the regional division. These local papers tend to be more heavily reliant upon classified advertising linked to sectors that continue to be hampered by the downturn, such as employment and property.

However, regional operating profit surged more than 67 per cent to 28.9m, mainly on the back of cost savings.

Regional profits were also helped by the GMG titles, which DeGroote said had moved into profitability earlier than expected. That acquisition took the total number of newspapers in the regional portfolio to more than 150 paid-for and free titles.

Regional revenues rose 4.5 per cent to 162.4m, but would have fallen from 155.4m to 144.2m without the GMG papers.

DeGroote, who is bullish on Trinity Media because of its relatively low share price, said the results were quite positive.

Taken together with upbeat figures earlier this week from Daily Mail & General Trust, he said this could signal the start of a turning point for the battered publishing sector.