Trinity Mirror and its new chief have much to prove to investors

Advertising is improving, as seen in a current rally in media stocks. Trinity Mirror was yesterday the latest to confirm that we are now seeing year-on-year growth but this should be seen in the context that this time last year, advertising was severely dented by the impact of 11 September.

Trinity publishes The Daily Mirror, Sunday Mirror and Sunday People and well as dozens of local and regional titles. It has just landed Sly Bailey, who currently runs IPC magazines, as a very interesting choice to be its new chief executives. Philip Graf, the incumbent, is to quit in February.

Although Mr Graf was a solid newspaper man, his experience was in regional titles. The City felt he didn't have a strong grip on a strategy for the nationals and much is expected from the 40-year-old Ms Bailey. She will have a steep learning curve to climb in newspaper knowledge.

The company has big problems with its national titles, despite their established brand name and market positions. Its national strategy, announced earlier this month, to cut the cover price, has been met with much criticism and has kicked off a price war with arch-rival, The Sun. Despite the recent editorial coup of the Paul Burrell story (which boosted circulation), this business has been about manag- ing decline.

Even with the regionals, Trinity has difficulties arising mostly from the fact that much of its stable is in the South-east, which has been hard hit by the economic downturn. When the economy is not doing well, recruitment advertising falls away sharply.

Trinity reported in a trading statement, ahead of full-year results, that across the group, ad sales were down 2.5 per cent in the third quarter of the calendar year, but are 0.3 per cent up in October and November. This is worse than the figures just reported by competitors Daily Mail and General Trust and Johnston Press.

Within that, regionals were up 1.2 per cent in October and 0.6 per cent in November. At the nationals, October ad sales were down 1.7 per cent but gained 5.7 per cent in November (November 2001 was very poor). The stock, down 9.5p to 409p, trades on a forward multiple of 12. Trinity has much to prove, as does Ms Bailey. Hold.

Steer clear of troubled WS Atkins

How ironic that the engineering consultancy and PFI contractor WS Atkins has found itself on the receiving end of a botched consultancy job in the implementation of its new IT system.

That fiasco, along with tough market conditions, were behind the company's October profit warning which wiped 72 per cent off the company's shares in a day.

It estimated yesterday that the whole IT debacle had chopped about £10m off profits and admitted that overheads had increased by £20m to £57.5m, largely as a result of the costs involved. Still, it could have been worse and the company's results for the six months to 30 September were slightly better than its own forecast of a loss of about £5m.

Adjusted pre-tax losses came in at £2.5m, compared with an £18.6m profit a year earlier, and sales were up 17 per cent at £449.2m. There was no dividend. Adding in exceptional items, pre-tax losses totalled £32.8m, compared with a profit of £14.6m a year before.

The company's cost-cutting plan is well on track. It has made almost all of the planned 400 job losses, which will produce annual savings of about £15m.

But debt jumped to £105.4m from £31.6m and the company is now talking to its banks to get new facilities in place by the end of the financial year.

It is also still looking for a new chief executive, although it admitted yesterday it will first appoint a chief operating officer. That candidate is then expected to step up to the CEO role.

Meanwhile, market conditions are still tough, particularly in North America and in the UK private sector markets.

WS Atkins' share price, which closed down 10 per cent to 94p yesterday, has almost doubled from the October alert. The company is predicting profits of about £15m for the year, translating to earnings of about 10.2p a share and putting the stock on a forward multiple of around 9 times. Avoid, given the uncertainties.

Berkeley confident despite housing slowdown

Berkeley is the class act in the housebuilding sector. Not only does it live off fat operating margins (19 per cent for the six months to 31 October) but it puts up imaginative city-centre developments that provide regeneration to urban areas.

The company yesterday reported a stronger-than-expected 25 per cent jump in pre-tax profits to £112.8m, for the interim period. Unit sales, at an average price of £285,000, were up 20 per cent to 1,810.

Berkeley warned, however, that the market is slowing, especially in detached homes in the South-east and apartments in central London. This is hardly surprising given the economic slowdown and City job losses (those huge bonuses have disappeared). But the message was "don't panic". The housing market is underpinned by a structural shortage of supply and low interest rates, making mortgages cheap. Also, given the dramatic plunge in equities, many people regard property as the safe place to invest money.

Berkeley is very exposed to the London market and that is why, despite its continued good operating performance, the stock market has punished the company. The stock has fallen from 837.5p in May, to close yesterday at 525.5p, down 22.5p.

The company is right to be cautiously optimistic. Evidence suggests prices have fallen back considerably in London "hot spots". But Berkeley is sitting on forward sales worth £1bn and no dramatic housing crash seems likely. On a forward multiple of less than 5, it's worth hanging on to this stock.