The past five years have been tough forTrinity Mirror(LSE: TNI), as the company has struggled with a high level of debt and falling revenue.
However, the company one of the UKs largest multimedia publishers has made an impressive recovery, paying down debt and adjusting its business model. As a testament to this recovery, Trinity Mirrors board recently approved the companys 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
Traditionally, Trinity Mirror is a newspaper publisher. The group owns national titles such as theDaily Mirror, the Daily Record, the Sunday Mirror and the Sunday Mail. The company also publishes a number of regionaltitles,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 groups circulation declined13.4% 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 this trend, Trinity Mirror is going online, and the companys 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.
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 companys 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.
As Trinity Mirrors recovery story takes hold, its 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.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.