Media firms enjoy third-quarter boom

Rhian Nicholson
30.10.09 15:01

Listed media companies saw a dramatic turnaround in fortunes during the third quarter of 2009 with the value of stocks rising by 33.5%, according to accountants Grant Thornton.

The Media Watch index found that 70% of the 100 listed media-related companies it monitors were on the rise between July and September. The sector outperformed the FTSE 100 (UKX), which piled on 18% during the same period along with other broad indices including the FTSE All Share and FTSE AIM All share.

This strong bounce back in the third quarter follows on from a rise of 20% in the second quarter - and a fall of 18% at the start of the year.

Media stocks have seen annual falls of 58% and 46% in 2007 and 2008 respectively. The sector was one of the hardest hit when the overall market was in decline.

As conditions improve, well known players Yell Group, Trinity Mirror and Johnston Press are among those leading the charge.

In the third quarter, Yell Group (YELL) announced plans to completely re-finance the group which were received well by investors while Trinity Mirror (TNI) 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.

Meanwhile, Johnston Press (JPR) recently announced the successful negotiation of a three-year �485 million financing facility under a plan to restructure its debt.

In contrast, Rambler Media, which experienced weak advertising demand and Phorm, which received negative news from BT and Talk Talk on its Webwise product lost more than 30% of their value during the period.

Mark Henshaw, head of Media and Entertainment at Grant Thornton, says: "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."

He says the focus on cost-cutting is paying dividends while they adopt new strategies to survive in a rapidly changing environment such as focusing on digital platforms to reach audiences, and for publishers, switching from daily to weekly editions.

However, the sector remains vulnerable.

"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," Henshaw concludes.

Media firms enjoy third-quarter boom

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