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Trinity Mirror (LON:TNI)

Share price: 154p (down 3.3% today)
No. shares: 257.7m
Market Cap: £396.9m

Trading update - this covers H1, the 26 weeks to 28 Jun 2015.

The revenue trend seems very poor to me. Revenue for H1 is expected to fall by 11%, with what they call underlying revenue (i.e. like for like) down 9%.

More strikingly, print advertising revenue is down a colossal 19% in the period. To my mind this clearly demonstrates that advertisers are reallocating budgets to other forms of advertising, especially online, social media, etc.

Once again TNI has been able to mitigate the drooping top line with yet more structural cost cutting, targetted at £20m for this year, up from £10m announced in Mar 2015. This is continuing the same pattern of cost reductions to maintain profits, which has been happening for years now.

Although cost cutting also comes at a cost - £15m restructuring charges are expected.

On profitability, they're sticking with full year expectations (for now - note the "at this stage" qualification);

558d1f3fd8ad7TNI_expects.JPG

Phone hacking - a potentially very serious issue, in my view. There's no new info today on this, with the company confirming that "there remains uncertainty as to how matters will progress". I suggest the news is more likely to be bad, than good - because there is already information in the public domain that TNI were heavily involved in phone hacking, and that management very much tried to cover up this issue in the past. So costs are likely to mount, in my view.

Valuation - the bizarre thing with TNI is that, whilst most people accept that the business is in terminal decline, it's still generating astonishing amounts of cash. It's very difficult to think of any other industry which is dying out due to technological & fashion changes, yet is still churning out huge profits.

The big question is, how long can this continue? Valuing a dying company on a PER basis is clearly meaningless, and the current year PER of 4.9 reflects the probably short life remaining for this business, in its current form anyway.

I think it can only really be valued as a special situation, effectively on a winding up - how much cash will it generate before the business has to be shut down? Is there any residual value in the digital businesses, once…

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