Newspaper publisher Trinity Mirror (TNI) continues to struggle with volatile trading in its print division. Print sales are expected to fall by 12% in the 26 weeks to 2 July. This in itself is not terribly surprising.
Advertisers are using Trinity Mirror, like all other print newspapers, less as readers increasingly get their news online and on their mobile phones. The company runs its own news and social interest websites but revenue here is not growing fast enough to offset print declines.
DIGITAL NOT GROWING FAST ENOUGH
Digital sales grew just 5% overall during the period, although online advertising income was 18% up.
‘I anticipate that the second half will show improving revenue momentum as we benefit from initiatives implemented during the first half of the year,’ Trinity's CEO Simon Fox says today.
AJ Bell investment director Russ Mould says the figures were ‘no worse than expected’ except for a further £7.5m for legal bills related to the past phone hacking scandal. Trinity claims that 80% of civil lawsuit claims from that calamity have now been settled but the company faces bigger challenges than legal costs.
MASSIVE CHALLENGES TO FACE
Mould argues that Trinity Mirror has to ‘reduce debt and the £466m pension deficit, drive growing digital sales and prove the dividend can be paid to convince investors it is a value stock, not a value trap.’
‘For the moment, the signs here are good since earnings and cash flow cover exceeds six-times,’ Mould explains.
That goes some way to explain today's more than 5% share pirce jump to 100p. Yet that remains less than half the level of two years ago.
Even after today's rise in the share price the stock remains trading on a hugely discounted rating, about 2.9 times forecast earnings per share for the year to 31 December 2017. The dividend yield stands at 5.35%.
‘This is the market’s way of politely telling analysts that their earnings and dividend forecasts are too optimistic,’ says Mould, ‘or telling the company that it is dying on its feet.’