Trinity To Reap Rewards Of Cost-Cutting, Says Merrill Lynch
Trinity Mirror is on track to achieve its objective of £25 million of annualised savings by 2005, following a spate of cutbacks throughout the company, according to analysts at Merrill Lynch.
Pre-tax profits at the group rose by 2.6% to £80.4 million in the first six months of 2003, while turnover was down marginally to £551.5 million (see Trinity Mirror Review Sheds NI Titles, Retains Nationals). This was something of an achievement given the uncertain economic and advertising environment and full-year results are expected to be equally satisfactory.
Merrill highlights the disparity between Trinity’s regional business which has considerable margin potential and the national newspapers which are still losing readers and revenue. The more hands on approach to managing the nationals is welcomed and stabilisation of the rate of circulation decline (to around -2% p.a.) would be regarded as a success. For the full year, analysts expect a 0.8% ad decline, which implies modest growth of 1-2% in the second half of 2003.
Bailey has been critical of the previous management for failing to fully capitalise on the merger of Trinity and Mirror four years ago. Efforts are therefore being made to increase the synergy between the two wings through close integration of procurement, supply chain management, content sharing, cross promotion and ad sales.
As part of this, Trinity is preparing to axe hundreds of jobs in advertising, administrative, distribution and editorial operations. Additional savings will be accrued from the closure of the Daily Mirror‘s Saturday magazines (see Trinity Mirror Closes Saturday Magazines To Cut Costs) and the sale of the Northern Ireland newspaper division.
The company aims to make savings of £4 million in 2003 with a further £16 million targeted in 2004. While the recent strategic review was lacking in radical action, the pragmatic steps taken should ensure modest share price out-performance. Assuming the sale of the Northern Ireland titles, Merrill Lynch is forecasting earnings per share (EPS) of 39.5p for 2003 and 43.3p for 2004.
Shares in Trinity Mirror were down 5.5p at 494.5p at noon today.
