Granada profits rise but take-over talk hits shares

Britain's Granada Group plc yesterday reported a 14 per cent rise in annual profits, but its shares went into reverse on investor nerves that the media and leisure company was gearing up for a big acquisition.

"We are now managerially ready for a new acquisition. We will be ready to look over the next year or so," said chairman Mr Gerry Robinson, adding that this would lead to a splitting of the company between media and hospitality.

Granada shares were initially marked up as the company was upbeat on current trading, but then slipped back as investors were concerned over acquisition talk.

The group, which owns one-third of Britain's Independent Television (ITV) and a string of hotels - including the Shelbourne in Dublin - restaurants and TV rental shops, said pre-tax profits for the 52 weeks to September 25th before exceptionals and digital TV costs were £835 million sterling on sales up 6 per cent at £4.08 billion.

Mr Robinson said that the company was targeting the stable developed markets of continental Europe or the US for a large acquisition, which could be either in media or its hospitality side, with contract catering a favourite area.

Chief executive Mr Charles Allen was more specific, saying the group was looking at international contract catering and European media, and also at adding individual hotels to its upmarket Le Meridien worldwide chain over the next 12-18 months.

Mr Robinson is keen to make one final big take-over before he retires in four years' time. Granada has been largely quiet on the large acquisition trail since it won a bitter battle to buy the old Forte hotels empire for £3.9 billion in 1996.

"The results are at the top end of expectations and show solid growth, but the shares have been worried by talk of a major corporate move, probably in Europe," said leisure industry analyst Mr Bruce Jones at Merrill Lynch.

Granada said its profits had been enhanced by a further strong performance across all its businesses, and added that trading over the last two months after the end of its financial year had gone "extremely well".

"We have made an excellent start to our new financial year. We are delighted on all fronts, especially with the turnaround at our London hotels and the strong advertising growth at ITV.

He added that October was a record month for ITV advertising revenue, and revenue for the two months of October and November will be up over 13 per cent. Granada said flotation of its ONdigital pay-TV joint venture would be considered next year, when Granada and its partner Carlton Communications plc will consider a 25 per cent float which could value it in excess of £1 billion.

Its loss on ONdigital in the year was £81 million.