MGN board admits 'Mirror' price rise has lost sales

THE board of Mirror Group Newspapers yesterday admitted that the decision to increase the cover price of the Daily Mirror by 2p to 27p earlier this year has allowed its main rival, the Sun, to claw back a sales advantage.

September's Audit Bureau of Circulation figures, published today, will show that for the first time since March, sales of the Sun will outstrip the combined sales of the Daily Mirror and its Scottish sister title, the Daily Record.

The News International title sold 3,628,000 copies in September, a rise of 45,000 from the August figures, which are depressed because readers are on holiday. The combined Mirror and Record figures show sales of 3,601,000, only 11,000 up from August when the MGN titles were boosted by the pictures of the Duchess of York on holiday with her financial adviser.

This reverses a trend since the death of Robert Maxwell, last November, in which the Mirror first narrowed the gap over the Sun and then, in April, took a lead over its rival for the first time in more than a decade.

Vic Horwood, MGN's chief executive, said yesterday that the price rise strategy had been a success. 'The fact that they are so little ahead of us makes me very confident about the underlying strength of the Mirror and Record.'

However, his position is at odds with that previously stated by Roger Eastoe, MGN's advertising director, who told the Independent in August that the price rise strategy would only be judged a success if the MGN titles could maintain their circulation advantage over the Sun. However, MGN's expectation that News International would increase the Sun's cover price in September has not been met. The Sun's vigorous advertising of its price advantage indicated that it will maintain the price war for some time.

Shareholders had some good news to coincide with the group announcement of half-year pre-tax profits of pounds 15.3m. Indications were that a provision of more than pounds 40m to cover potential losses on guarantees given by MGN to other Maxwell companies may not be called up.

The guarantees covered the rent of two derelict buildings on the northern fringes of the City over which MGN guaranteed a rental income of pounds 5.25m now, rising to pounds 7.75m from September 1995. MGN has refused to pay these guarantees and the matter is subject to litigation from the receivers of the Maxwell companies owning those buildings.

Alan Clements, MGN's deputy chairman, said he was confident MGN would not have to pay the rents, although it was not keen to write back the provision until the litigation is cleared.

Otherwise the position on the finances of the company has not materially changed since the group published its report and accounts, showing provisions of nearly pounds 500m, in July.

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