Despite posting pre-tax profits up 23 per cent to pounds 365.1m in 1995, the company, publishers of the Financial Times and a leading television programmer, detailed unexpected losses at its US CD-Rom publisher, Mindscape. It also had to rely on an extraordinary profit of pounds 131m from its sale last year of a stake in BSkyB, the satellite broadcaster, to shield a 5 per cent drop in its underlying performance.
The shares rose 7p on the day, to close at 664p. Henderson Crosthwaite reiterated yesterday its breakup estimate of pounds 9 a share.
Analysts were of mixed view on the results. Neil Blackley, at Goldman Sachs, said: "I like the company. It's got some tremendous brands and you can see those shining through."
But other analysts were concerned about the losses of pounds 6.9m at Mindscape, the US publisher of games and "infotainment" titles on CD-Rom, cartridges and floppy discs, bought for pounds 312m nearly two years ago.
Last December, the company warned analysts that operating profits would be down year-on-year in 1995, although no mention was made of Mindscape.
"Clearly, the results at Mindscape are unacceptable," Frank Barlow, chief executive, said. The company has hired the consultants McKinsey to undertake a review of the operations and recently announced the appointment of John Moore, formerly head of Penguin US, as chief executive.
The losses were linked in part to a high rate of return in the new year of product shipped in December for the all-important Christmas season.
"What we must do now is a detailed market study to decide where we should concentrate," Mr Barlow said.
The company's television operations, which include Thames Television and Grundy Worldwide, the independent producers, both performed strongly. Despite criticism last year of the pounds 175m paid for Grundy, Greg Dyke, chief executive of Pearson Televison, told analysts that the acquisition had been a great success.
Westminister Press, the company's regional publishing arm, was also a bright spot, helped by a cost-cutting programme. Lazard Brothers, the investment bank, also turned in a superior performance, and stands to do even better this year once it takes in fees due on its work for Granada on the pounds 3.8bn Forte bid.
Mr Barlow said that future acquisitions were likely to come in the television and media sectors, where management attention has been concentrated in recent years.
A recent restructuring has led to firmer lines of management control and the appointment to the main board of key executives, including Mr Dyke from Pearson Television and John Makinson, formerly managing director of the Financial Times, who replaces James Joll as group financing director on 1 April.
Mr Barlow dismissed reports, first published in the Independent, that Granada had contemplated a break-up bid for Pearson last year.Reuse content