Newspaper publisher Trinity Mirror (TNI) soars 9.9% to 146p as it reports the first net cash position in its history at the interim stage. The £376 million cap also confirms full year profits will be in line with guidance despite a weak print advertising market and flags a modest uptick in revenue trends in July.
While the reported net cash of £23.9 million is to be welcomed, investors should remember that it is dwarfed by a pension deficit of £290.8 million. First half revenues fell by 8.7% but thanks to cost cutting and ‘growth in digital income’ adjusted pre-tax profits only slipped 2.5% to £47 million.
A depressed valuation means the stock is likely to be receptive to any scrap of positive news and even after today’s rise the stock trades on a price-to-earnings ratio of 4.6 based on consensus earnings per share forecasts for 2015.
Liberum, which reiterates a buy recommendation and 275p price target, argues the shares are pricing in a much bigger impact from the phone hacking scandal than is likely. ‘There was nothing new in the statement around the question of damages payments around the phone hacking cases.
'However, the current share price implies Trinity Mirror would pay £400 million in damages vs. its current £28 million provision. Even in a very worst case scenario, it is almost impossible to imagine Trinity would pay these level of damages.’