Granada interim profit soars under new chief

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The Independent Online
GRANADA Group, the television and leisure group, made higher profits under its new chief executive, Gerry Robinson, in the six months to 11 April than in the whole of the previous year.

Pre-tax profits were pounds 57.2m, compared with pounds 38.5m in the equivalent period last year and pounds 56.9m in the whole of 1990-91. Earnings per share rose 15 per cent to 8.2p and the interim dividend is increased a tenth to 2.75p.

The figures sent the shares up 13p to 257p. But analysts were concerned by two items disclosed by Granada but not included in the pre-tax figures.

One was a pounds 13m provision for the group's involvement in Lakewoods, the UK holidays joint venture with John Laing which failed to get off the ground.

The second was a claim of pounds 8.5m by the Customs and Excise for unpaid VAT last year. It has disputed Granada's view that there is no VAT to pay on insurance on TV sets. Granada has legal advice that it is right but if it loses it may have to pay another pounds 3m for VAT accrued this year.

The recovery is partly due to a 44 per cent drop in interest payments, due to last year's rights issue and sale of the bingo division, and partly due to cost savings.

The cost-cutting measures, originally started by Mr Robinson's predecessor, Derek Lewis, have reduced the number of Granada's employees by 10 per cent in the last year, bringing the total to around 20,000.

The areas affected included the troubled computer services operation, television rental, where 600 people were made redundant, and Granada Television, which has lost 100 staff, including its chief executive, David Plowright.

The computer services arm lost pounds 13m last year, but is now back in profit, having made pounds 4m in the first half. Granada is hoping to see those profits double by next year.

The television rental side increased profits despite a falling market. Analysts said that a long- running price war with Thorn EMI appeared to be over.

Television enjoyed an 8 per cent increase in advertising revenue and a fall in its levy to the Government. Granada has pulled out of making films which have not been pre-sold, despite the success of projects such as My Left Foot and The Field.

In leisure, both bowling and discos suffered a 17 per cent fall in revenues due to heavy competition and price discounting. The amount spent on catering at motorway services also fell.

Nigel Reed of Paribas Capital Markets said the figures were impressive. He has increased his forecast for this year's profits to pounds 118m and for next to pounds 139m.

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