Asset change to boost profits

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The Independent Online
LONRHO'S profits this year will be boosted by a decision to reverse its practice of attaching a value to its newspapers, such as the Observer and the recently-sold Scottish titles, writes Gail Counsell.

The group, which began including newspapers as assets in 1988, said it was ending the practice because the basis on which such intangible assets were valued was 'extremely subjective' and the investment community tended to ignore them when making gearing and other calculations.

At the end of September 1991, Lonrho had pounds 131m of intangible assets, pounds 117m of which was the group's newspaper titles and pounds 14m development costs. By the interim stage disposals such as the pounds 45m sale of its Scottish weekly titles had reduced intangible assets to pounds 81m. Now the Observer remains as the only intangible still in the balance sheet. The valuation attached to it at present is unclear, although media analysts doubt that it would be significant, given that it is currently thought to be losing more than pounds 20m a year.

Accountants said yesterday that the change would mean any gain recorded on sales of intangibles would be increased by the amount by which the assets had previously been recorded in the balance sheet.