Southern to move into magazines

As big regional newspaper companies carve up the industry between them, smaller players such as the AIM-listed Southern Newspapers are finding opportunities for growth hard to come by. As a result, Southern has decided to diversify into magazine publishing, and is contemplating a full stock- market listing to fund its expansion plans.

Southern said yesterday it had "sufficient resources" to make a "sizeable start" in magazine publishing, both by acquiring existing titles and starting up new ones. James Sexton, chief executive, said the company was taking a "quiet look" at magazines, as the current round of ownership changes in the regional press "can't go on indefinitely".

Despite laying plans to expand into both consumer and business magazines, Mr Sexton said he was still looking at regional newspapers, but at the right price. He said Southern, the tenth-largest regional newspaper publisher, would like to be one of six big players to control the industry in years to come, and was considering moving to the full market to fund substantial acquisitions. There are currently around 20 key regional publishers in the UK.

He reiterated his statement a year ago that the group was prepared to spend pounds 100m to expand its publishing operations, and, despite not launching a rights issue "since the 1950s", said: "There's no reason why we shouldn't go for a rights issue if we found the right target."

Southern spent pounds 31.5m buying United Provincial Newspapers' Welsh division last November, and the company said it would "look at anything" if United put the rest of its regional newspapers up for sale.

However, Mr Sexton admitted Southern would find it hard to challenge market leaders such as Trinity International Holdings and Newsquest Media Group, which announced last week it was to float.

Southern reported a 25 per cent drop in pre-tax profits to pounds 14.1m for the year to the end of June, after pounds 3.4m re organisation and redundancy costs. Profits in the same period the previous year had been artificially boosted by a property disposal.

Mr Sexton said the "difficult period" of streamlining Southern's publishing regions, which led to 175 redundancies, was now virtually over, although around 25 further job losses were expected.

Underlying advertising revenue increased by 9.1 per cent across the group, although the company did experience a dip in the week of the death of Diana, Princess of Wales. Although there was no evidence of a downturn in advertising revenue, the company said it would be "foolish" to expect the present boom to continue throughout next year.

Circulation across the group fell 1.5 per cent, but increases in cover prices pushed revenue up 1.9 per cent.

Evening titles performed poorly, although Mr Sexton said there were some signs that the circulation decline in the evening market was coming to a halt.

Southern is looking at various promotional activities to boost circulations. One option is to reward loyalty by offering discounts to people who buy the group's papers consistently throughout the week.

Shares in Southern jumped 20.5p to 749p.