Trinity Mirror issues gloomy prognosis

 

Trinity Mirror has lost more than a fifth of its value after the newspaper publisher warned that its cost base would rise sharply this year.

Sly Bailey

Ad-ache: CEO Sly Bailey has advertising revenue problems

A surge in overheads would eclipse the savings it expected to make from a wide-ranging cost- cutting plan this year, the owner of the Mirror titles said.

In a gloomy prognosis for its prospects, the group said its austerity measures would be 'more than offset by general inflationary price increases'. Because of the boom on commodity markets, newspaper print costs had soared by 'in excess of 20%', it added.

The warning sent shares in Trinity Mirror down 18.25p, or 22%, to 66p.

Shares in Daily Mail and General Trust, which owns the Mail, closed 17.5p lower at 540p, while regional newspaper group Johnston Press lost 0.5p to close at 11.5p.

Investors were further unsettled by Trinity Mirror's downbeat assessment of the advertising market since the start of 2011. Excluding the Manchester-based titles Trinity recently bought from the Guardian Media Group, ad revenues fell 10% in January, including a 9% fall at its national titles and an 11% drop at its regional wing.

Britain was facing a 'volatile and slow recovery as public spending cuts and taxation increases continue to impact consumer confidence' and the jobs and property markets, it warned.

The slump in advertising revenue at Trinity, which is run by chief executive Sly Bailey, is in marked contrast to the bounce in spending currently lifting the television market. This week ITV revealed that its ad turnover had risen by 12% in the first quarter of 2011 as major companies increase marketing spending as the economy recovers.

Regional papers are heavily dependent on jobs and classified ads, which have been hit hard by the austerity cuts and the rise of internet giants such as Google.

Lorna Tilbian, an analyst at stockbroker Numis, said: 'Uncertainty remains over recruitment advertising which requires a rebound in UK blue-collar employment to show meaningful growth.'

The downbeat outlook overshadowed stronger-than-expected annual results from Trinity Mirror. Pre-tax profits grew 17% to £123.3m last year after the acquisition of Manchester Evening Post and a slate of other regional papers from GMG shored up its revenues. Operating profit at its national titles rose 3% even as revenue fell by more than 6% as Trinity Mirror stripped out costs.

The group reduced its net debt by £58.1m to £265.9m and flagged up a 'material' fall in its pension deficit to £161m.