Listed media companies witnessed a dramatic upturn last quarter where they saw their valuations rise by 33.5 per cent in Q3 2009, its highest quarterly growth this year, according to the Media Watch index from accountants and business advisers, Grant Thornton UK.

Media Watch tracks the performance of 100 UK listed media-related companies (excluding those on the FTSE 100 and Micro Cap companies). It reveals a steady improvement in the performance of media stocks and may signal a rebound 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%) of listed media companies were in positive territory in Q3 and media stocks outperformed the FTSE 100, (which saw an 18% growth in the period) as well as all other broad indices including the FTSE All Share and FTSE AIM All share.  

The performance of media stocks on the Media Watch index followed a rise of 20 per cent in Q2 after falling 18 per cent in the first quarter of this year. Media stocks had seen annual falls of 58 per cent and 46 per cent in 2007 and 2008 respectively and was one of the hardest hit sectors when the overall market was in decline. Last year, the performance of media companies were also more than double that seen by the FTSE All Share (21%) and the FTSE 100 (18%).

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. In Q3, Yell announced 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 £485million financing facility under a plan to restructure its debt.

Mark Henshaw, head of media and entertainment at Grant Thornton, said: "Media stocks are rebounding 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."