Trouble at Trinity

Maybe Sly Bailey, Trinity Mirror’s chief executive, deserves applause. She’s done what many an embattled ceo lacked the guts to do and slapped down a City determined to have its wicked way.

Analysts seemed to believe the Trinity disposals would be Sale of the Century, with both national titles and pretty much the whole of its local newspaper operations on the block. You could almost smell the greed as bankers savoured the fat fees to accompany these disposals.

What we got instead was a very measured response to Trinity’s chronic debt crisis. The Racing Post up for sale, plus two of the local newspaper divisions, but not a sniff of the national titles that have been causing such difficulty.

It’s easy to see Bailey’s dilemma. Satisfying the investors by paying down more debt would surely have reduced Trinity to a company in search of a strategy. Or put another way, would have served as a classic example of short-term financial objectives being allowed to dictate the longer term. Investors need not worry unduly about such things; they can usually walk away.

But having underwhelmed the City and perhaps trashed the share price, has Bailey done enough to salvage the business?

What’s on the table?

Companies sell crown jewels at their peril, and The Racing Post, about 4% of Trinity’s revenue, is certainly a jewel of a brand. It recently saw off competition from The Sportsman, a robust recommendation for any buyer. It has decent margins (ditto). But its profits appear in steep decline and there is a sense that, with the internet changing the boundaries of gambling, the Post may have a great future behind it. So, it’s probably a good idea to sell now, before valuations start falling over a cliff.

Similarly, local newspapers. The problems of the Midland division, featuring the ill-fated Birmingham Mail, are well documented. But putting that anomaly aside, local papers are not the uncomplicated cash cows they used to be.

Associated Newspapers found that the Northcliffe division would not raise nearly as much money as it had hoped and scrapped the auction. Nor will Johnston Press’ gloomy prognostications about advertising revenue a few days ago have helped matters.

Good money after bad?

Even assuming the asset prices raised match Trinity’s expectations, what exactly does Bailey intend to do with the money once she gets it? It is not immediately obvious. If it is used merely to pay down debt, she can expect a recurrence of the present crisis, leading to a spiral of underinvestment and fire sales. On the other hand, if some of the money is invested, will it ever be enough to staunch the rapidly declining Mirror, give the kiss of life to the moribund The People, or revitalise Trinity’s second-class online products?

Despite the evident focus and drive that Bailey continues to bring to Trinity Mirror, sometimes she must wonder whether she is in charge of the right company.