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Newsprint costs flatten profits at Portsmouth

High newsprint costs, an extensive capital investment programme and the loss of national newspaper printing contracts have flattened profits at Portsmouth and Sunderland Newspapers, the publishing and convenience shop company.

Pre-tax profits before extraordinary items were down marginally at pounds 9m for the year ending 30 March, from pounds 9.3m last year, reflecting what the company called "difficult trading conditions". The shares lost 15p to close last night at 690p. The company declared a final dividend of 9.01p, for a total of 12.87p on the year, 10 per cent more than last time.

Charles Brims, chief executive, said the results were in line with expectations, but conceded that the loss of the contract to print the Daily Mail and the Mail on Sunday had been a disappointment.

He added, however, that the company aimed to sign up a national newspaper in 1997, once new presses at Hartlepool and Sunderland were operational. "These will be state-of-the-art kit and of very high quality," Mr Brims said.

The company spent pounds 23m on the new presses and other capital projects in the year, with a similar amount budgeted in fiscal 1997. The flat profits in the financial year were offset by a pounds 10m exceptional gain on the sale of the Croydon Advertiser, sold to Southern News late last year. Mr Brims said the sale would allow the company to consider making acquisitions elsewhere in the UK, where the regional newspaper market is undergoing a period of rapid consolidation.

"Two years ago, we thought the situation in the regional market was relatively stable, and didn't expect opportunities to expand," Mr Brims said. "We are now looking at possibilities, and the sale of the Croydon Advertiser Group gives us the means to do so."

Difficult trading conditions in the newspaper market are expected to be offset in the future by supplying services to the electronic media, including audiotext, cable television and the Internet.

P&S has diversified away from core newspaper publishing and printing, developing a chain of convenience shops.One Stop Community Stores underwent rapid expansion in the year, rising from 22 to 122 outlets. Mr Brims warned the high proportion of new shops would mean lower revenues.