Telegraph profits slide but outlook brighter

Profits at the Telegraph Group, the national newspaper publisher, plunged by more than 20 per cent in 1995, as the company struggled with higher newsprint prices and the effects of a debilitating cover price war, writes Mathew Horsman.

Pre-tax profits declined to pounds 35.5m from pounds 45m a year earlier, on turnover marginally ahead at pounds 255m, as shares declined 16p to 463p. The drop would have been even greater but for a pounds 7.5m exceptional gain on the sale of a stake in Carlton Communications during the year.

But Stephen Grabiner, managing director, said the company "had turned the corner" and that the current year would see a marked improvement.

Conrad Black, the company's Canadian chairman, added: "1995 was a year of unrelenting challenge for the Telegraph but, at the end of it, the company emerged fitter and stronger."

Analysts supported the company's upbeat message on current trading, pointing to the improving profit trend quarter to quarter in 1995. From a low point of just pounds 500,000 in the third quarter, pre-tax profits hit more than pounds 9m in the final three months of the year, up from pounds 2.4m in the comparable period in 1994.

Mr Grabiner said he expected the newsprint price increases of the past 18 months had reached their height, and that further rises were unlikely. At the same time, the cover price war launch in 1993 by Rupert Murdoch's News International is all but over, he said.

He expected that newspapers would siphon some of the increased revenues from higher cover prices into bigger promotional budgets. "The price war is becoming a promotion and marketing war," he said.

Advertising at the start of the year showed a mixed picture with classified and financial recovering strongly but display well down year on year.