Investment Column: Trinity Mirror needs a new sparkle

Exciting Dyson looks high enough for now

Trinity Mirror, the national and regional newspaper publisher, issued a trading statement yesterday which triggered a batch of generally positive notes from analysts.

Our own approach to this stock has been a little more bearish, however. Having tipped it at the beginning of the year as a buy at 532p, we decided to sell when it reached 642p in the summer. The shares are now back at 615p, so is it time to buy back in?

Yesterday's pre-close update showed that group advertising revenue growth had slowed in the second half of the year from 5.6 per cent to 4.2 per cent. This was due mainly to slower regional newspaper advertising growth, which was 4.5 per cent versus 6 per cent in the first half.

National advertising revenue was flat at 2.7 per cent growth, although within that, UK nationals - up 1.6 per cent - fared a lot worse than the group's Scottish nationals, up 6.1 per cent.

On circulation, the flagship Daily Mirror has been falling steadily this year, as has The People, although the Sunday Mirror has managed some positive growth. That said, circulation revenue growth for the nationals rose 3.3 per cent thanks to cover price increases, although first-half circulation revenue growth was 6.3 per cent.

Any industry that is growing revenues from falling sales must be milking the assets. In the short term investors can live with this but Sly Bailey, the Trinity Mirror chief executive, needs to be confident that Richard Wallace, her flagship editor, has got a plan to reverse the Daily Mirror's circulation decline soon.

There are other imponderables. One is the cost of newsprint in the coming year, whether the company will raise or beat cost-saving targets and how successful extra colour printing capacity might be.

It is hard to see where a positive surprise might come from to reinvigorate the share price, short of a takeover bid. The shares trade on a 2005 price-earnings ratio of 12.7 times and a yield of 3.3 per cent which means they are getting cheaper but are not quite cheap enough yet. Avoid for the time being.

Exciting Dyson looks high enough for now

There can't be too many stocks that have outperformed Dyson Group over the last four years - the chemicals group's shares have soared from 63p to 343.5p yesterday, a rise of nearly 450 per cent.

The company reported interim results yesterday, showing pre-tax profit of £1.19m, up from a loss of just over £1m in the same period last year.

This is no flashy arriviste, either. The company was founded in 1810. However, in the late 1990s it went through a transformation and management has steered the company toward two main projects - a high-performance thermal dynamics business, Saffil, bought from ICI in 1998 for just over £3m, and a high-speed disk drive technology called Carolite.

Saffil is increases efficiency in catalytic converters by allowing the converter to operate at much higher temperatures. Most leading car makers are customers. The global market for this technology is expected to grow to about £110m per year and Dyson expects to maintain at least a 50 per cent share.

Global demand for hard drives is growing fast and Dyson believes that Carolite, a compound which allows for smaller, faster hard drives with increased capacity, could grab a decent slice of a market that could get close to a billion units a year by 2007.

That said, it's still jam tomorrow. The company doesn't expect to sign its first commercial contract for Carolite for another 18 months. The shares trade on 28 times expected 2005 earnings and yield little more than 1.5 per cent. An exciting business, but fully valued. Hold.