Newsquest links with rivals to give local news on the Net

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NEWSQUEST, the regional newspaper publisher, is poised to join forces with two of its largest rivals to launch an Internet site that brings together regional news and information from all over the country.

The site, to be called This is Britain, is designed to become a so-called "portal", offering access to regional news drawn from the papers published by Newsquest, Trinity and Associated Newspapers.

Paul Davidson, Newsquest's managing director, said the site would bring together a large audience of Web surfers interested in local news, allowing it to sell advertising and sign supply deals with other popular suppliers such as Yahoo! and Microsoft's MSN. "The joint venture can offer almost national coverage of local news," he said.

The site will allow Newsquest to boost its Internet revenues further. The group, formed three years ago when it bought Reed Elsevier's regional newspaper operations, has already put many of its papers online under the the "This is..." banner. It has also launched an auction site and sites listing property and second-hand cars.

Sales are still small, with Newsquest making revenues of pounds 0.5m in the year to last December. However, these are expected to grow exponentially this year, rising to between pounds 2m and pounds 3m. Given the multiples being attached to Internet companies, Newsquest's business would be worth a substantial amount if it was valued on a stand-alone basis.

"The Internet demonstrates you must have partners," said Jim Brown, Newsquest's chairman. "It's running at such a speed that if you're not right up there at the front you're not going to get in."

He was speaking as Newsquest shrugged off fears of a slowdown in regional advertising revenues to post pre-tax profits of pounds 81.4m, up 13 per cent on an underlying basis on the previous year. Underlying sales were up 5.8 per cent.

John Pfeil, finance director, said the second half had seen some slowdown, especially in December. Advertising revenues grew by 3.5 per cent, while profits were up 7 per cent. However, he added that both measures were showing better growth rates for the first few months of the new year.

Newsquest shares were marked down on the figures, falling 10p to 367.5p. However, analysts pointed out that the shares have had a strong run, rising more than 60 per cent in the past six months.

"It's a pretty bullish statement, which perhaps signals a return to health for the industry, which has been in terminal circulation decline for years,'' said Sutherlands analyst Angela Maxwell.

Profit growth in 1998 was boosted by a 60 per cent drop in interest payments to pounds 20.4m as Newsquest continued to pay down its debt load. The company plans to carry on reducing its debt, although borrowings may rise if it makes a successful bid for Portsmouth & Sunderland, the rival publisher. Three bidders have asked the Monopolies and Mergers Commission to consider their interest in P&S, and a ruling is expected in May.

The improved outlook for regional advertising yesterday prompted analysts to upgrade their profit forecasts to about pounds 75m for the current year. With the shares now trading on a forward earnings multiple of just 14, they are now rated as a long-term buy.