Independent raises stake in loss making "Indie"

INDEPENDENT Newspapers and Mirror Group have both increased their shareholding in Newspaper Publishing (NP) from 43 per cent to 46.42 per cent following a rights issue by the loss making British publishing company.

The rights issue will see £9 million sterling in additional finance going into NP - sufficient to cover the group's expected losses in the current year.

The actual size of the rights issue is £23 million, but £14 million of the monkey that Independent and Mirror are putting in comes from the repayment of loans that the two groups gave to NP. In effect, Independent and Mirror are converting £14 million of debt into equity and are only putting in £9 million in new money.

Currently, 13 per cent of NP shares are held by the Spanish publishing Prisa, but Prisa is not taking up its rights and will see its stake in NP fall to 6.73 per cent as a result.

The Spanish group also has an option arrangement where it can sell its remaining shares to Independent and Mirror in 1997 and 1998 at a price linked to profits.

NP chairman and Independent chief executive, Mr Liam Healy, was cautiously optimistic about the prospects for NP - publishers of the Independent and Independent on Sunday - and said that reduced costs and improving revenues have significantly reduced the rate of losses.

NP had losses of £19.5 million sterling last year and is expecting a loss of about £7 million in the current year before breaking into profit in 1997.

Circulation at the Independent hit an all time low before Christmas at around 283,000 a day, though there has been a modest rise in the first few months of 1996.

"Since the refinancing of the company in May/June 1995, the quality newspaper market in the UK has been very competitive," he said.

"However, there has been some relaxation of the aggressive cover pricing policies seen last year, which has been accompanied by an improvement in the company's circulation revenues.

"The cover price of the Independent increased from 30p to 35p in July 1995 and to 40p in January 1996. These increases do not appear to have significantly affected the circulation of the Independent. Year on year actual circulation figures for January 1996 remained largely unchanged," said Mr Healy.

Advertising revenues are thought to have risen by 17 per cent in the first two months of the year.

Analysts in London have conflicting views about the long term survival prospects of NP and some analysts believe that the company has an uncertain future.

"I think it's unlikely it has much of a future," said one analyst. "The real key is adding readers and I haven't seen much evidence of that."

The analyst said the Independent had focused on cutting costs, such as 44 journalists from the newspaper's staff earlier this year, rather than on improving the product.

The track record of other publishers in trying to turn around other loss making newspapers does not bode well for the Independent. Rupert Murdoch's News International last November closed Today, the nine year odd tabloid newspaper plagued by falling circulation and ongoing losses.

"The evidence of turning national newspapers around is quite difficult," said one analyst. "Look at the Express."

The Daily Express, part of the Express newspaper group published by United News and Media, has also been struggling in the highly competitive British newspaper market.

Another analyst, however, said that, with favourable newsprint costs and newspaper cover prices, the Independent could have sustained profitability in the future.