Mirror Group loses 84m pounds after provisions: Speculation that banks may sell 54 per cent stake as MGN climbs 11p on promising figures

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The Independent Online
DAVID Montgomery, chief executive of Mirror Group Newspapers, yesterday disclosed pounds 116m worth of write- downs, redundancies and other costs associated with his wholesale shake- up of the tabloid newspaper group.

The provisions meant that the group reported a loss of pounds 84m in 1992. It made a loss of pounds 388m in 1991 after pounds 422m of write-offs due to the late Robert Maxwell's theft from the group and its pension funds.

Ignoring the provisions, MGN's pre-tax profits fell from pounds 47.3m to pounds 32.5m, mainly due to a higher interest charge and pounds 17.9m representing the first of 14 payments made by MGN to replenish its pension fund.

Operating profits rose 16 per cent to pounds 97.5m, while earnings per share fell from 9.5p to 5.8p. There is no dividend.

The good figures pushed MGN shares up 11p to 115p and hastened City speculation that the four banks that hold 54 per cent of MGN's shares would soon sell their holding. However, at this price two of the banks would still be nursing losses on loans secured on the MGN shares and a sale is not expected until the latter part of this year.

Mr Montgomery, who has been in the job five months, rounded on critics of his management style, which have included the resignations last week of Lord Hollick, a non-executive director and Labour peer, and Paul Foot, the Daily Mirror's well respected columnist.

The former Today editor denied that he had failed to recognise unions and accused leaders of the National Union of Journalists of acting unreasonably. 'We have been treating staff very fairly. The staff who have left wanted to leave by and large and did not want to get involved in a new energetic culture,' he said.

He also confirmed the group's support for the Labour Party, declaring the debate over whether MGN would drop its leftward leanings 'a dead issue'.

Mr Montgomery signalled that MGN might be leaving its Holborn Circus headquarters which it has occupied for nearly 30 years. The group is understood to have offered to buy the 489,000 sq ft building - valued at about pounds 60m - from the receivers of the landlord company, Robert Maxwell Estates. The receivers, Grant Thornton, are in turn suing MGN for pounds 3.08m of back rent.

Mr Montgomery indicated there might be a decision within the month. If negotiations were not successful MGN might move out.

The company has calculated that it needs only 150,000 sq ft of space to house all its London-based journalists, advertising and administrative staff.

MGN has already decided to move the Scottish Daily Record from its Glasgow headquarters at Anderston Quay. Maxwell sanctioned a pounds 114m modernisation of the site, building a new press hall, but the money never came through. Five expensive German printing presses have been sitting in a guarded warehouse for nearly two years.

A new press hall will be built at a site near Glasgow airport which should be operational late next year. MGN estimated the change would save it pounds 20m, but has written pounds 54m off on the development. Of this about pounds 10m represents cancellation of construction contracts at Anderston and about pounds 23m write-downs on the value of the lease contracts taken on the presses.

MGN is also closing its London printing site at Stamford Street with the loss of 216 jobs. This, along with other writedowns of excess printing capacity, is costing pounds 46m.

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