Investment: Adscene looks for takeover chances

ADSCENE, the regional publisher, is looking for acquisitions to bolster its publishing business after pulling out of commercial printing.

Robert Broadley, the finance director, said the company was looking to use its balance sheet strength to invest in its existing businesses as well as outside the group.

Last month Adscene, which publishes a range of local paid-for and free weekly newspapers in London and the Midlands, sold its Flair Press subsidiary for pounds 1.3m. The move largely ends the company's exposure to volatile commercial printing.

The sale, which triggered an exceptional accounting charge of pounds 5.4m, pulled Adscene into the red for the first half of its financial year. In the half to 28 November the company reported a pre-tax loss of pounds 3m, after a profit of pounds 2.9m in the same period the previous year.

However, Mr Broadley pointed out that the sale had reduced Adscene's balance sheet gearing to 28 per cent, giving it scope for expansion. "It takes some of the pressure off the organic growth," he said.

Despite the rapid consolidation in regional newspapers, now dominated by a few large groups, Adscene insisted that it had an independent future. David Fordham, the chief executive, said its operating margins, which widened to 19 per cent, are at least as good as those of its larger rivals.

Nevertheless, analysts pointed to signs of a slowdown in advertising sales. Advertising revenues rose by 3 per cent, driven by increased recruitment advertising. But motor and other forms of classified advertising showed falls.

"Recruitment advertising will decline as unemployment increases," Mr Fordham said. "But we still hope to report growth in advertising in the second half."

Adscene shares, which have risen sharply in recent weeks from last year's low of 110p, fell 2p to 163.5p. Analysts said the shares now trade on a multiple of 11 times historical earnings, reflecting the concerns that profits would be undermined if advertising began to fall.