Disposal of Reed stake values BSkyB at pounds 1.2bn: Satellite broadcaster's move into black boosts News International profits

REED INTERNATIONAL, the publisher, sold its 3.66 per cent shareholding in BSkyB yesterday for pounds 62.3m as the satellite broadcaster announced a move into profits before interest payments.

That step into the black gave a big boost to profits from News International, which in addition to owning 50 per cent of BSkyB publishes newspapers including the Times, Sunday Times and Sun.

The results showed an pounds 87m profit in the first six months to December compared with a pounds 55m loss the previous year. That included a pounds 7.5m profit for BSkyB compared with a pounds 20.9m loss. News International's shares rose 14p to 764p.

The disposal, to BSkyB's other main shareholders, Pearson, Granada and Chargeurs of France, put a lower value on BSkyB than many analysts had expected. At about pounds 1.22bn the implied value of the company was towards the bottom of a range between pounds 1bn and pounds 4bn.

Pearson's shares were marked down 13p to 361p and Granada's 6p to 369p. Pearson and Chargeurs both hold stakes of about 16 per cent in BSkyB, with Granada owning 12 per cent.

The sale of the stake is the first time since BSkyB was launched that a transaction has fixed the value of the business. Valuing the company has been difficult because it is yet to make a profit and future returns depend on guesses as to how quickly people will buy satellite dishes. In the year to last June BSkyB lost pounds 188m.

Figures also out yesterday suggested that, by the year 2000, 9.5 million households - 45 per cent of the UK total - would be able to receive satellite broadcasts. At present 3.4 million homes watch BSkyB, either via a satellite dish or through a cable service.

News International would not say how well individual titles performed, but overall operating profits at the UK newspapers rose 20 per cent. The improvement reflected lower costs and a small increase in turnover thanks to higher cover prices. News said the advertising market remained difficult.

BSkyB benefited from a 79 per cent improvement in weekly revenues thanks in large part to an increase in the number of subscribers to the sports channel.

Sales of satellite dishes are still running about 15,000 a month below the target of 80,000, but BSkyB secured sole rights to the new FA Premier League football matches at the beginning of this season and is benefiting from exclusive rights to broadcast the England cricket tour of India.

Frank Barlow, BSkyB chairman, said: 'We didn't expect the Premier League coverage to break even in the first year, but it has more than broken even.'

Weekly revenues at BSkyB have risen to pounds 6.6m a week, generating operating profits of just under pounds 1m. James Capel, the stockbroker, now forecasts operating profits of pounds 41m in the year to June after a pounds 47m loss last year, and sees a profit after interest payments in two years' time.

News International's profit helped its Australian parent, News Corporation, to record a 94 per cent jump in profits from Adollars 252m to Adollars 490m. Two years ago Rupert Murdoch's media empire was almost brought to its knees under a mountain of debts, but it has raised money through equity issues and reorganised much of its bank borrowings so that it pays lower rates of interest.

The two US television businesses, Fox Broadcasting and Fox Television, increased profits almost 20 per cent. Advertising revenues improved on the back of higher audience ratings and Fox is now number two to the ABC network, outperforming NBC and CBS.

Twentieth Century Fox, the film studio, performed badly thanks to disappointing winter releases. Home Alone 2: Lost in New York, however, has taken dollars 320m at the box office, making it one of the biggest-grossing sequels ever.

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