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Merrill points to turnaround at revamped `Independent'

THE INDEPENDENT and Independent on Sunday are today described as "a turnaround story" in a substantive new investment circular by Merrill Lynch on the titles' parent company, Independent Newspapers.

Pointing to the year-on-year circulation rise achieved by the daily title in February - the first such rise in three years - the investment bank expresses the view that "under single ownership by a group with proven management ability, The Independent's performance can be improved".

It says break-even for the titles is anticipated in three years' time, with circulation targets of 250,000 for the daily and 300,000 for the Sunday.

Independent Newspapers acquired full control of the two newspapers just over a year ago.

Overall, Merrill estimates that Independent Newspapers is 35 per cent undervalued against other European and UK newspaper groups, making it the best-value publishing stock followed by the US securities house.

Returning to the group's two UK national titles, Merrill says; "Editorial changes have improved circulation and advertisers continue to be attracted by the papers' young, urban, affluent readership base. The Independent titles have now been fully integrated into the group's existing UK operations.

"The primary objectives of the new management were firstly to put more copies of the paper into circulation (increased sampling through price promotion and special offers, etc) and secondly to improve the editorial quality and content to appeal to both existing and new readers."

The losses at The Independent and Independent on Sunday have been a factor depressing the share price of the parent company over the last six months. However, Merrill gives an upbeat verdict on the outlook. It reckons losses in the group's UK operations as a whole will narrow to IRpounds 1.8m in 1999. It expects UK operations to be back at break-even in 2,000, rising to a profit of IRpounds 2.6m the year after.