Compact's success helps boost Independent News & Media

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The successful launch of The Independent's compact edition should help to halve losses at The Independent and Independent on Sunday this year, with a return to profitability expected in 2005.

The successful launch of The Independent's compact edition should help to halve losses at The Independent and Independent on Sunday this year, with a return to profitability expected in 2005.

In an upbeat statement to accompany full-year results yesterday, Independent News & Media, said the launch had helped The Independent to its highest circulation since 1997 and its highest market share (11.7 per cent) since April 1996.

Ivan Fallon, the chief executive of Independent News & Media (UK), disclosed that between £4m and £5m had been invested in the launch of The Independent's compact edition, which he described as "the best money we've ever spent".

"We spent more than we'd intended," Mr Fallon said, "but given the success of our initiative, we'd have been crazy not to follow it through with further investment. With the extra revenue we are getting from circulation and some further recovery in the advertising market, my expectation is that the operating loss should halve this year. Next year we expect to see the titles return to profitability."

Operating losses at the two national newspaper titles last year were about £9m, a substantial reduction on the nearly £20m of annual losses the titles were chalking up three years ago and much less than that recorded by a number of other national newspapers in what was generally a grim year for the industry. It was recently reported that the Financial Times lost £32m last year.

The Independent's compact edition is widely regarded as the most successful newspaper innovation in years. Its success in driving circulation was recognised in last week's British Press Awards, when Simon Kelner, the editor, picked up the coveted Newspaper of the Year award.

Mr Fallon said no decision had been made on if and when the broadsheet edition might be dropped. "We launched the compact on the basis that we were offering our readers choice. Our readers will determine which way we go. Nearly 75 per cent of them have already opted for the compact, but we obviously don't want to chop off our remaining broadsheet readers."

Since the compact was launched, The Independent has bucked the trend of falling circulations elsewhere in the industry to record year-on-year gains of more than 15 per cent.

Independent News & Media, The Independent's Ireland-based parent company, recorded a 19.8 per cent increase in pre-tax profits before exceptionals to €154.6m (£103m) last year, with virtually all the group's myriad of newspaper and other media interests around the world recording robust performances.

Sir Anthony O'Reilly, the executive chairman, said that trading this year had started positively and he was confident of further improvement in underlying profitability for 2004. "We believe our shareholders can look forward with confidence to the future," he said.

The group's worldwide restructuring and cost reduction programme was already producing results in terms of margin improvement. Reduced losses from the British national newspaper titles ought further to enhance the position this year and next, with the aim of improving the group profit margin from the present 17 per cent to 20 per cent over time.

The main financial feature of last year was the recapitalisation programme, which has succeeded in substantially reducing debt. Mr Fallon said the balance sheet was now restored to a position healthy enough for the group to reapply for investment grade, though there was no need, at the moment, to raise new funds.

Sir Anthony is due to announce proposals to split the role of chairman and chief executive, which he has combined, at the annual general meeting in June. A final dividend of 5.15 cents is being proposed, up 8.9 per cent on last year. The shares closed down 10 cents at €1.95 yesterday.