Bottom Line: Pick of the sector

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The Independent Online
EMAP has been positively pounding along the acquisition trail of late, so yesterday's pounds 77m rights issue was only to be expected, especially given that an (as yet unspecified) further pounds 7m purchase is apparently on the horizon.

Since its last fund-raising in June Emap has spent about pounds 229m on adding to its specialist and consumer magazines, branching out into France and buying the Trans World radio group.

With pounds 13m on new launches, the balance sheet was beginning to look a little strained. Net debt as of 19 August was pounds 124m and set to rise to pounds 174m on completion of the Trans World offer.

The one-for-eight issue at 360p will raise pounds 77.2m net of expenses and will boost interest cover from about seven to nearer 13 times. It is unlikely to remain there as the funds will gradually be used for the smaller acquisitions that used to be Emap's trademark.

At 414.5p, down 3.5p, the shares are on about 17.5 times next year's earnings. Reed International is on less than 16 times, but Emap has the managerial edge and its French purchase has the potential to generate significant profits. The shares remain the pick of the sector.

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