View from City Road: Slimline Mirror could prove an attractive buy

When Robert Maxwell took control of Mirror Group Newspapers (or Mirror Group as it was then called) he put a sign up in the newsroom. It said: 'The gravy train has hit the buffers.' Like many things in the Maxwell empire, it was a lie. The gravy train powered on during the six-and-a-half years Maxwell controlled MGN and only screeched to halt when David Montgomery became chief executive in November.

Few outside MGN doubt that the excesses enjoyed by staff had to stop. But in derailing the gravy train, Mr Montgomery caused reverberations which at times have seemed to threaten the very fabric of MGN. This may have been caused by his abrasive style - it is noticeable that MGN's operations director Murdoch MacLennan has pushed through many more redundancies away from the Holborn Circus head office with hardly a peep of protest from the unions. But it has brought much debate about whether MGN would maintain its support for Labour.

It is blithely said that the Daily Mirror's unique selling point is its leftward stance. But then, two-fifths of Sun readers vote Labour. The commercial importance of the Mirror's political leaning is hard to measure.

The acid test is whether, if it became commercially expedient, MGN would stop supporting Labour. The banks, which control 54 per cent of the shares, are alive to their social responsibilities. But once the shares are placed, and MGN starts behaving like a normal public company, Mr Montgomery's responsibilities will be towards his shareholders, not a Labour Party with which he already has a difficult relationship.

Commercially Mr Montgomery has done a good job. Ignoring the pounds 117m of redundancies, write-downs and wholesale housekeeping, MGN made pre-tax profits of pounds 32.5m during a dreadful year. The shake-up should mean it can make pounds 65m this year putting the shares, which jumped 11p to 115p yesterday, on an earnings multiple of 10. It may be able to pay a dividend at the end of this year. Putting the shares on a market rating, they could be worth 170p.

Pending the sale of the banks' holding the shares may however trade at a discount. Even so, they are a buy up to 150p.