Mirror halts shares fall with defence of finances
Thursday 17 July 2008
Trinity Mirror was forced to make a formal statement on its financial health yesterday after analyst concerns spooked the market and the media group's stock dropped by 18.6 per cent in a single day.
Against a backdrop of newspaper advertising stung by both online competition and economic uncertainty, Trinity Mirror's shares have fallen by a massive 61 per cent since the company issued a profit warning at the end of last month, and 85 per cent since the start of the year. But the stock bounced up by 10.5 per cent to close at 60.5p after yesterday's statement, which confirmed that it is both cash generative and trading within its revised expectations.
The latest wave of distrust in Trinity stock came after Kaupthing expressed concern that the publisher might struggle to raise the money in the event that its pension schemes need topping up when they are valued at the end of the year.
The Icelandic bank also raised the possibility of breached banking covenants if a full-blown recession caused even more problems in the ad market.
The company was unequivocal in its denial. "Trinity Mirror is trading comfortably within the covenants for its debt facilities," it said. "There are no liquidity issues with any of our pension schemes and deficits continue to be funded in accordance with payment schedules agreed with the trustees."
Even with such assurances, Trinity is still a source of scepticism in the City. Landsbanki, while maintaining its overall "hold" rating, cut its target price by 3p to 57p. Andrew Walsh, an analyst at the bank, said: "The key risk remains the weakness of the advertising market, although we recognise that our current estimates – in the regionals if not the nationals – represent record two-year falls."
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