Dismal profits forecast for Independent

For Independent Newspapers, 1998 looks like it is going to be a dismal year at least by the standards of the past few years when the Indo has been able to turn in near 50 per cent increases in profits.

But now, Independent is facing its first fall in profits, with company broker Davy pencilling in 1998 profits of £95 million, down £5 million from the 1997 outturn, while NCB analyst Rory Gillen is looking for 1998 profits of little more than £83 million.

Indo's current difficulties are directly due to the problems in the Antipodes and South Africa where the group derives almost 60 per cent of its profits. The South African rand has sunk like a stone which means that Indo's profits will suffer on translation to Irish pounds, while the situation is the same in New Zealand where the economy is verging on recession. As a result, Indo shares have come off from a 1998 high of 475p to this week's low of 305p. It is arguable that the selling of the shares has been overdone with all the bad news from the southern hemisphere more than priced into the shares.

Even taking NCB's bearish earnings forecast of 21.1p for the current year, this puts Indo on a forward p/e of less than 15. That, by any standards, is a low rating and one that is hardly justified.