The past five years have been tough for Trinity Mirror (LSE: TNI), as the company has struggled with a high level of debt and falling revenue.
However, the company — one of the UK’s largest multimedia publishers — has made an impressive recovery, paying down debt and adjusting its business model. As a testament to this recovery, Trinity Mirror’s board recently approved the company’s first dividend payout since 2008, and a progressive dividend policy has now been introduced.
And there are many other reasons why Trinity Mirror makes a great investment. Here are just three…
Digital offering
Traditionally, Trinity Mirror is a newspaper publisher. The group owns national titles such as the Daily Mirror, the Daily Record, the Sunday Mirror and the Sunday Mail. The company also publishes a number of regional titles, like the Liverpool Echo, the Manchester Evening News and the Newcastle Chronicle.
Unfortunately, the market for newspapers is in terminal decline, and no one is aware of this more than Trinity Mirror. The group’s circulation declined 13.4% for paid-for dailies, 14.3% for paid-for weeklies and 19.3% for paid-for Sundays during the first half of this year. Print advertising fell by 8.8% over the same period.
To combat t
his trend, Trinity Mirror is going online, and the company’s online growth is exploding. Digital revenue increased 47.5% year on year during the first six months of the year. Monthly unique users increased 91%, to 61.3m year on year, with average monthly page views increasing 132%, to 440.2m
This digital growth is offsetting declining print revenues. Indeed, for the first six months of this year Trinity Mirror only reported a 2.3% decline in revenue and 2.2% decline in pre-tax profit. Impressive figures considering the decline in print advertising income.
Cost control
As Trinity Mirror shifts onto a digital platform, the company is also cutting costs to boost margins. During the first half of the year, costs fell by £3.9m or 1.7% to £228m. These figures include structural cost savings to help mitigate the impact of a challenging print market.
Ultimately, tight cost control and revenue maintenance are helping Trinity Mirror pay down net debt with cash generated. Specifically, the company’s total debt has fallen from £355m, as reported at the end of 2010, to only £60m at the end of June this year — a sizable fall. Interest costs have fallen by 37% over the past year alone.
Low valuation
As Trinity Mirror’s recovery story takes hold, it’s not too late for investors to get a piece of the action. At present levels the company currently trades at a forward P/E of only 5.6. Further, the City has a dividend yield of 1% pencilled in for next year. As the group continues to pay down debt, the City is expecting the payout to rise by 88% during 2015, implying a dividend yield of 1.9%.
That being said, Trinity Mirror does have a large pension deficit of around £285m, which the company is going to have to pay down over time. So, the company remains a risky bet.