O'Reilly protests too much about keeping assets

There was an element of protesting too much about Gavin O'Reilly's denial this week that Independent News & Media plans to dispose of some assets to cut debt.

For one thing, the firm is on record that it is seeking to sell its interest in Chorus, the loss-making cable television operation. In fact, it was the tacit agreement by Independent News & Media to dispose of Chorus that cleared the way for Sir Anthony O'Reilly - chairman, chief executive and controlling shareholder in Independent News & Media, and also Gavin's dad - to invest in Eircom after all.

If Independent has now decided to hold on to Chorus, then surely it would be obliged to consolidate the cable television company results into its group accounts. Doing so would have put a rather different gloss on the full-year figures last year and, one presumes, would have had a negative impact on the interim figures published last week.

Chorus lost €36.6 million last year and consolidating its 50 per cent share of this would have seen Independent return a loss after tax and financing costs of around €15 million for 2001.

The market is taking a somewhat sceptical view of the assertion by Mr O'Reilly, who is chief operating officer, that the company can make inroads into its debts of €1.3 billion without disposal.

Certainly there is little to support this assertion in the figures released this week, which show that debts are just €18.5 million below the same period last year. However, Independent News & Media is confident that it can cut debt by €150 million through lower capital expenditure, interest costs and better management of working capital.

Cutting the debt is seen as the key to reviving the company share price, which is down 33 per cent in the year to date. As house broker Davy points out, the shares do seem oversold on the basis of the group's forecast earnings and dividends.

Trimming the debt by €150 million through good housekeeping is unlikely to really make much impression on the share price and the pressure for asset disposals must be mounting.

Apart from Chorus, the other Independent News & Media assets that are speculated to be on the block include iTouch, the loss-making mobile telephone news service, and loss-making UK national titles the Independent and the Independent on Sunday.

There is also a strong case for the company to sell its Australian radio stations, as this would remove one potential obstacle to a bid for John Fairfax Group, one of its Australian rivals.

Analysts say this disposal would get around Australia's tough laws on cross ownership of the media, leaving only the rules on foreign ownership to be circumnavigated.

But, it is all idle speculation according to Independent.