The Independent and the Independent on Sunday lost around £10m last year as the cost of improving the papers' editorial offering and marketing spend ate into revenues.

The loss - which does not include the cost of turning the Independent tabloid between September 2003 and May last year - was in line with results the year before.

But with circulation rising at the Independent and advertising revenues up 20% so far in 2005, the titles will narrow their losses this year and reach breakeven at some point in 2006, according to the group's chief executive, Ivan Fallon.

"We would hope that during the course of 2006 we will reach the breakeven point, though that doesn't mean we will show breakeven for the whole of 2006, I'd be surprised if we did. But we hope to get to that point in 2006."

Mr Fallon was toasting the success of the Independent's transformation from broadsheet into a tabloid, a change that has given its circulation a major boost.

Circulation increased 23% over the course of 2004, though advertising revenues were hit by a dispute with advertising agencies over rates for the new size.

Mr Fallon said the two papers recorded an increase in advertising revenues of 2% over the whole of 2004, with the second half of the year better than the first.

"The key factor was to get the Independent's circulation up, then get advertising up, and then have a big drive in 2005," he said.

"So far advertising's up 20%, and our target for the year is more than 20%. So we're absolutely on target - and no other newspaper in Britain is recording 20% increases in advertising."

He said the dispute with advertisers had been resolved as "an honourable draw", with advertisers "responding very well" to the Independent's improved market share.

While the focus is on driving advertising growth, circulation growth is not expected to be of the same order.

"In the two and a half months of this year revenues are 2% ahead of last year, and we're not looking for huge circulation growth in 2005," Mr Fallon said. "But we hope to maintain what we did last year."

Although pleased that the paper was narrowing the gap on the Guardian, he said the target was "to get the Independent into profit".

The Independent was planning fresh developments and innovations, he said, as the paper evolved its style and content.

And the Independent on Sunday would probably one day turn tabloid too, he said, though he added that there was no rush to change.

"It's been in our plans for some time, but we have no immediate plan to do it," he said. "It's doing very well and while it's doing well we have no plan to disturb it."

"But at some stage we will do it - it looks a bit of a fish out of water compared with the six-day-a-week Independent."

Mr Fallon was speaking as the papers' parent company, Dublin-based Independent News & Media, announced full-year results that showed turnover up 14.2% to 1.56bn euros - £1.08bn - while profits before tax were up 55% to 189.1m euros - £131.5m.

The total revenues of the UK operations, which also includes earnings from the profitable Belfast Telegraph, were up 8.7% in 2004 to 201.9m euros or £140.4m, INM said.

The chief executive, Tony O'Reilly, acclaimed "record results" at the company, which trades in the UK, Ireland, Australia, New Zealand and South Africa and owns more than 200 newspapers worldwide.

» Media Guardian | Independent eyes breakeven in 2006
16 March, 2005
By Chris Tryhorn