Shares in Ulster Television have soared for the second time in a week, after the company signalled it would use part of its cash pile for a share buyback, or a special dividend. Ulster shares closed up 41p at 240p sterling, valuing the television company at £126 million sterling (£138 million). Only a week ago, Ulster shares were on 166p but rose sharply after Scottish Media staged a dawn raid on the shares to build up a 15 per cent stake.
More buying yesterday has brought the Scottish Media stake in Ulster to over 18 per cent. Ulster TV has also reported a fall in half-year profits from £3.1 million sterling to £2.5 million sterling. But when profits from disposals in 1996 and a fall in investment income are excluded, Ulster improved at the operating level where profits were up from £2.98 million sterling to £3.12 million sterling.
The share price was also boosted by positive comments on the future by the directors and by their decision to go into the market buying shares at 210p. The scale of that buying took the market by surprise, especially the move by chairman Mr John McGuckian to spend £8.4 million on four million additional shares.
This brings Mr McGuckian's stake in Ulster TV to almost 9 per cent and makes him the second biggest shareholder in the television station. After last night's close, he has made a paper gain of £1.2 million sterling on his purchases yesterday and his 9 per cent stake in Ulster TV is worth £11.2 million sterling.
Market sources said the rise in the share price reflected a view that a share buyback was more likely than a special dividend. At the end of the half-year, Ulster TV had cash of £12.1 million sterling.
"Current cash resources are in excess of planned requirements," said the company on the proposal to give some money back to shareholders.
Scottish Media said last night that it had bought a further 1.67 million Ulster TV shares yesterday at 210p sterling. This brings Scottish Media's stake to 18.2 per cent.
Last week, Scottish Media spent £14.1 million on a 13.1 per cent chunk of Ulster TV, bringing its stake at that time to just under 15 per cent.
The Scots, however, ruled out any immediate takeover bid although industry sources said that the buying was, in effect, a "hands off" sign to other potential bidders for Ulster. Scottish Media is the smallest of the big four independent television groups in the UK, where the market is dominated by giants such as Granada, Carlton and United News & Media.
Ulster is highly regarded in the British independent television sector, both for its financial performance and the quality of its programming.
Analysts have said it would be an ideal fit with Scottish Media, which has extensive television and newspaper interests in Scotland, operating Scottish Television, Grampian Television and two daily newspapers, the Glasgow Herald and the Evening Times.
The Ulster results were in line with forecasts and turnover was down marginally to just under £17 million sterling. Earnings per share - adjusted from exceptional gains - were up from 3.8p to 4.1p and a 10 per cent increase in the interim dividend to 2.5p has been declared.
Mr McGuckian said Ulster had a viewing share of 39.2 per cent in the first half - well ahead of the ITV average of 33.2 per cent but a fall from the 42 per cent share of the market at the end of 1996.
He said the station had a disappointing second quarter after an encouraging first three months but the strength of consumer spending and the impact on the economy of the IRA ceasefire "give cause for optimism in the year ahead".
