Trinity Mirror Share Discussion Threads

[cjohn] 13/2/2018 09:53

This is an essential deal.

Like for like turnover was down 9% in the year; so they had to buy more turnover.

The price paid is on the high side in my view; but if they manage to strip out duplicated costs, the deal should be positive overall.

I've already spoken - sometime ago - about the folly of their share buyback program. They are not brilliant capital allocators. Buy back shares at an average of 100P and issue a load at 77p. Ridiculous destruction of shareholder value and, frankly, foreseeable. But this is a mere detail.

By the way, regarding the fall in theTrinity pension déficit; they write this has been driven by "strong asset returns and a change in mortality assumptions.... partially offset by a further reduction in discount rates."

So we might expect to see the discount rate applied to be more generous at the next half-year, given recent rises in 10 year bond yields. This would cut the déficit. On the oher hand, there has been a recent fallback in share prices; and bond prices will obviously drop too, if interest rates rise. Likewise I wouldn't expect the recent drop in projected life expectancy to continue.

[foot in mouth] 12/2/2018 11:59

I think their spare cash is going on this acquisition and not on a share buyback. If this does turn out to be a good deal the share price should take care of itself.

[kazoom] 09/2/2018 14:28

Thanks Twixy - yes I didn't read carefully enough. From today's RNS :

Trinity Mirror will fund the cash element of the purchase price, the contributions to the Northern & Shell Pension Schemes and transaction costs by the utilisation of a new £75 million amortising term loan facility, which will be fully drawn, with the balance being drawn down from its existing debt facility and cash balances.

So actually have more headroom than I quoted above.

[jimbox1] 09/2/2018 14:02

The deal looks like plenty of jam today for Desmond, but jam tomorrow for TNI shareholders.

[twixy] 09/2/2018 13:50

Kazoom - I believe there is an additional GBP75MM debt facility negotiated - I don't have the detail in front of me, so hope I am not going mad!

[kazoom] 09/2/2018 13:41

I think I have the answer to the pensions question - this from the Northern & Shell Media Group Dec-2016 AR. (I believe this encompasses all of the schemes concerned).

So the schemes are about a third the size of TNI's and much better funded. Dec-16 Comparison is :







£m
TNI
N&S
Total


Assets
1,662
748
2,409


Liabilities
2,128
771
2,898


Gross
-466
-23
-489


% shortfall
-22%
0%
-17%


Net of Tax
-385
-20
-405



The £70m payment (out to 2027) into the N&S schemes should bring them healthily into surplus (it won't be possible to net that off against short in the TNI schemes).
If the pension fund trustees have been smart, they will have locked TNI in to making those payments even if the assumptions improve and the schemes go into earlier surplus, although from a shareholders point of view it would nice to think that is not the case I somehow doubt it. I would think though that they will merge the fund management and admin pieces and that will be part of the assumed cost savings.

[waspfactory] 09/2/2018 12:18

Good post kazoom, sums it up nicely - I'm happy to be holding.

[foot in mouth] 09/2/2018 12:02

Peel Hunt 09/02 Reiterates Buy Buy 190.00p

[gfrae] 09/2/2018 11:05

Great summary,Kazoom, thank you, and foot .. UK 10 year bond yields are at a TWO year high,so maybe rates are beginning to turn....though a few more 1000 point drops in the Dow could easily put an end to that !

[foot in mouth] 09/2/2018 10:56

....and of course some of the pension deficit might melt away anyway if interest rates do end up rising in the months and years ahead.

[kazoom] 09/2/2018 10:42

2017 marginally ahead of market expectations - GOOD
Pension deficit down - GOOD
Debt Down (temporarily) - GOOD
Dividend up - GOOD (unless you think the new debt could be problematic)
Provision for phone hacking increased - BAD (only a small number, but 2 increases over the year - is there more to come?)

Confirmed details of the acquisition - GOOD
25m new shares to be issued to Desmond (@c. 77p) - MODERATE (less than had been mooted at one point)
No mention of other new equity to meet the cash consideration - GOOD
Total cost including up front payment to pension scheme 167.9m - OUCH but
materially earnings enhancing in the first full year of ownership - GOOD

OVERALL : B- from me.

I'm puzzled (although not greatly troubled) by the pension scheme, the Guardian mentioned a deficit of £19m, which tallied with something I thought I remembered.
Yet we are paying in £70m out to 2027. (Desmond was going to pay in £33m to 2020 anyway). Anyway I don't think the amount is particularly troublesome, but I would like to know what the assets and liabilities of the scheme(s) are.

So the immediate cash to be stumped up is £89m (48 to Desmond and 41 to the pension scheme) which presumably will bring the net debt to £99m (less any cashflow before the deal closes). As they have a revolving credit facility of £110m I presume they are not raising any more debt to fund this (although you would think they could - given the increased assets and profits).

Only £10m leeway in the debt is a little tight, but as they remain very cash generative (despite two more calls on cash - payments to the S&N pension c. £3m pa and any restructuring costs) then that should not be a problem. Whilst you can never really rule out 'smoke and mirrors' (no pun intended) I don't think they would have increased the dividend if they expected a cash crunch.

When they say materially earnings enhancing in the first full year of ownership I presume they mean FY2019 rather than the first 365 days, so presumably a drag on EPS in 2018. I guess only a small drag in the short term though - with £20m of projected annual savings by 2020 with a significant amount in 2019 (say £15m?) and EPS to be materially improved in 2019 I don't think 2018 can be too far down.

Overall then I'm pretty much satisfied with this and it's good to get the uncertainty out of the way.

[patience a virtue] 09/2/2018 09:30

Seems a good deal to me too. Happy with the trading update and happy to add and hold. Onwards and upwards.

[harry_david] 09/2/2018 09:29

The market seems to like it, a 7.5% kick on a bad day is not bad. For me the trading statement, especially the jump in display digital advertising is of immediate interest.

[this_is_me] 09/2/2018 07:52

It looks like a good deal.

[xxx] 09/2/2018 07:46

Cjohn, as a shareholder I am a little nervous, but as a citizen, the 'revelation' should be acted upon.
I wrote to the chairman asking if, in the light of devleopments, the company had approached the appropriately named, Sly Bailey, to ask for reparations or considered civil litigation, bearing in mind her behaviour.As always , the moving forward focus was wheeled out.
I would encourage all shareholders to write to the new chairman asking for the company to take action, both to segregate TNI from the actions of the previous management and to hold those who lied to shareholders and all UK citizens, to account.

[smicker] 06/2/2018 17:02

The distribution of online advertising revenue sounds interesting.

[twixy] 05/2/2018 16:28

CJohn - share price drop - I did wonder that myself. It's recovered towards the end of the day so not sure now.
Hopefully we will get confirmation of the acquisition in the coming days so that the analysts can start reviewing the benefits of the synergy and improved earnings!

[cjohn] 05/2/2018 13:32

I wonder if the drop in share price today in part reflects the hacking settlement with Hugh Grant and what this has revealed.

The damages paid to Hugh (six figures) are not significant.

What perhaps is is that Mirror Group has admitted that top executives orchestrated and condoned hacking then lied to regulators - including the Leveson Inquiry -shareholders and victims, for years, claiming they had no knowledge of hacking and that its scale was minimal.


I wonder if this might have further financial implications, above damages to individual victims. Is there anyone on here with a serious legal background who could comment?

These hacking trials reveal the worst of British journalism. The criminal arrogance and lack of respect for rights of tabloid groups.

Sly Bailey, the COE, during the worst of the hacking, when she was replaced was paid off with a handsome 7 figure bonus, approved by the board. .

[cjohn] 05/2/2018 10:25

I'd certainly agree with you there, gfrae!

Whatever the disadvantages and risks, however, I think they have to go through with this. They need to buy turnover, given how quickly turnover in the core business - print circulation and advertising - is declining.

They don't seem to have other siginificant strategic options.

[gfrae] 05/2/2018 09:37

Kazoom, Do we know the size of the N and S pension fund ? Administrator and guarantor of large pension funds is probably not the best business these days !

[cityconindex] 05/2/2018 01:11

Kazoom share price is going to turn, as long its a good deal and past issues like phone tapping and pension deficit are also turning in the company's favour then it will make it a more attractive proposition, to own. Me, am after a divi hike for 6p final.

[kazoom] 05/2/2018 00:11

I agree CJohn - the latest rumours (TNI source suggest it's not THAT close to closing) present an 'OK' deal.

Better than some of the previous rumours though :

£20m of shares, previous rumour was £30 I think - still more than I would like at this share price level but better.

£42m up front with £40 for the pension schemes - I think this then could be done from cashflow and existing debt facilities.

I have no idea what the £5m subject to Irish regulators is all about.

£60m in deferred payments by 2023 - would be covered by ongoing cashflow.

Overall, for me this looks a better deal than previously mooted, so would hope to see a positive Share Price reaction - but tbh the TNI shareprice rarely seems to respond logically to fundamentals - imho.

[foot in mouth] 04/2/2018 19:48

Let's hope this gives a much needed boost to the share price.