Wilson & Horton Holdings (WHH), the New Zealand newspaper group, wholly owned by Independent Newspapers (INP), has incurred a loss before tax of 128.9 million New Zealand dollars (€63.0 million) in 1998 compared with a profit of NZ$39.96 million (€19.5 million) in 1997.

The reversal was due to an exceptional charge of NZ$155.75 million (€76.15 million) and an increase in interest costs. Almost 74 per cent of the exceptional charge was due to an unrealised foreign exchange loss on borrowings as a result of the fall in the value of the New Zealand dollar. Restructuring costs, forming part of INP's worldwide restructuring programme, accounted for most of the remainder. WHH was used solely as the acquisition vehicle to acquire Wilson & Horton, the publishing group, and the increased interest was due to additional funding raised to complete the purchase of the outstanding shares. The unrealised foreign loss on the borrowings hit the New Zealand earnings under New Zealand accounting rules but will not impact INP's earnings. WHH "is part of a diverse international group which, by its nature, is funded through a mixture of currencies.

The NZ$114.6 million (€56 million) foreign exchange loss on the acquisition borrowings will not affect Independent Newspapers Plc's group profit and loss account because under Irish and UK accounting standards, these are treated as non-cash movements and do not affect the operating profitability of the worldwide INP group" said INP's finance director, Mr James Parkinson. Asked about the impact on the group's balance sheet, he said it will reduce reserves by about £40 million (€51 million) in the 1998 accounts. This, he added, will increase gearing marginally, to a little over 80 per cent.

However, Mr Parkinson noted that since the year end, most of the loss - about NZ$98 million (€47.9 million) - has been reversed. There could therefore be a claw back this year but that will depend on the exchange rate of the New Zealand dollar. INP has already decided to make a once-off reduction of £360 million (€457 million) in its reserves this year. That would reduce the size of its balance sheet by almost one-third and more than halve shareholders' funds.

Mr Parkinson said the restructuring costs are more than offset by the capital profits achieved on the sale of INP's French outdoor advertising business in 1998.