Count on Bailey to build value after Trinity Mirror mess

Trinity Mirror's trading statement, issued a week ago and containing about as much cheer as a post-courtroom booze-up with Chris 'n' Billie, took no-one by surprise, writes Ian Darby.

Another litany of gloom for national titles (the Daily Mirror's circulation falling 5.2% for the first five months and ad revenues also down) alleviated slightly by better performance among its 250 regional titles (ad revenue up by just over 1%).

Expressions of doom and warnings of volatile conditions were met almost with indifference from the market. By Friday, Trinity Mirror's share price had fallen just 4.1p on the week to 429p. Analysts expressed the view that the statement was pretty meaningless until the findings of a strategic review conducted by the chief executive, Sly Bailey. The results will be made public when Trinity Mirror publishes its interim results on July 31.

If you believe the more gung-ho observers, Bailey will advise the board to sell off one or more of its national titles or hive off its regional business to create a specialist business in either the national or regional market. However, most agree that such radical solutions are unlikely. The disposal of several regional titles (reportedly its Irish titles) is more likely -- creating a more streamlined group that will satisfy the City and its shareholders. It seems clear there will be more personnel changes after the departures of national newspaper top brass -- the managing director, Mark Haysom, and the marketing director, Alisdair Luxmoore.

The important thing, though, is that after two years of internal focus (first through the introduction of McKinsey consultants by the previous chief executive, Sir Philip Graf) and now with Bailey's completion of the strategic review, Trinity Mirror will at last have a clearly defined direction.

Management blunders added to the mess -- the cover-price war with News International had a disastrous effect on revenues while failing to improve circulation and management rejected plans for Apollo, a joint sales operation with the Telegraph Group, at the last minute.

Media agencies still feel that Trinity Mirror's national titles are underperforming but that, on the commercial side at least, there have been recent improvements. They want to see clearer editorial propositions, particularly at the schizophrenic Mirror. It's difficult to see the sense in the editor, Piers Morgan, remaining, after lukewarm comments by Mirror executives about him.

But Morgan's future is a sideshow. My bet is that Bailey will build value via a more streamlined management and those clearer product offerings. Given the healthy margins in Trinity Mirror's regional business and a sense that Bailey and her team can get the nationals back on track, my bet is that we'll look back within two years and feel that its current market capitalisation of £1.2bn undervalued the company.

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