The publishers of the Daily Record and Scotsman newspapers are among the beneficiaries of a surge in interest in media company shares, according to a survey conducted by an accounts and business advice consultancy.
Share prices in the likes of Trinity Mirror and Johnston Press have increased these last few weeks, says Grant Thornton UK LLP, in its latest Media Watch Index.
Collectively, media shares have increased by 33.5 per cent during the third quarter of this year, the highest quarterly growth this year, according to the Index.
Grant Thornton tracks the performance of 100 UK-listed media-related companies – excluding those on the FTSE 100 and so-called Micro Cap companies (publicly-listed companies but with small market capitalisation).
Says Grant Thornton: “[The Index] reveals a steady improvement in the performance of media stocks and may signal a re-bound to a more consistently positive sentiment for the media industry as a whole after over two years out of favour with the market.
“The majority (70 per cent) of listed media companies were in positive territory in Q3 and media stocks outperformed the FTSE 100, (which saw an 18 per cent growth in the period) as well as all other broad indices including the FTSE All Share and FTSE AIM All share.”
During the first quarter of this year, media stocks fell by 18 per cent. During the second quarter, they rose by 20 per cent. Two years ago, they fell in value by 58 per cent. Last year, it was 46 per cent, more than double the drop in the FTSE All Share (21 per cent) and the FTSE 100 (18 per cent).
Continues Grant Thornton: “Leading the charge of Q3's index is an increase in the performance of some of the UK's larger and more well established media companies such as Yell, Trinity Mirror and Johnston Press. Yell announced in Q3, plans to completely re-finance the group, received well by investors and Trinity Mirror saw its share price rally largely due to a review of production of a regional title, as well as the prospect of cheaper newsprint in 2010. Johnston Press recently announced the successful negotiation of a three-year, £485 million financing facility under a plan to restructure its debt.”
Says Mark Henshaw, Head of Media and Entertainment at Grant Thornton: “Media stocks are re-bounding well from the market downturn. Whereas the larger listed companies are leading the way, smaller media stocks have also picked up in value this year.
“As well as responding to the general current pick-up from the economic downturn, media companies are now heavily focusing on cutting expenses. They are also adopting new strategies to innovate and differentiate to meet customer demands such as focusing on digital platforms to reach audiences, and for publishers, switching from daily to weekly editions. By demonstrating their ability to adapt to market conditions, this has helped instill more confidence in media stocks with investors now seeing more attraction in listed media companies.”
“The worry is however, that as one of the hardest hit sectors when the market dropped, a fragile UK Plc means that the current rally in share prices could reverse and once again we may well see media shares at the forefront of stocks being sold.”