Independent News & Media took the market by surprise yesterday when it raised €104 million (£82 million) in a share placing. The fundraising followed the release of Independent's half-year results which showed that the Irish newspaper operations remained the main driver of the group's growth.

Independent placed 51.8 million new shares - 10 per cent of the total - mostly with institutions although Sir Anthony O'Reilly bought 13.6 million of the new shares to maintain his 26.9 per cent stake in the media group. The new shares cost the Independent chairman more than €27 million at the issue price of €2.02.

The placing is unusal with half of the share issue subject to shareholder approval while the other half is not as it comes under the existing pre-emption which allows Independent place 5 per cent of equity without getting shareholder approval.

While Independent finance director, Mr Jim Parkinson, said that the timing of the placing was "out of our hands", market sources not connected with the deal expressed surprise at both the timing and size of the fundraising. Independent is raising new equity funding at a time when its shares are at their lowest level for almost three years and 40 per cent off their 2001 high.

Chief executive (Ireland), Mr Gavin O'Reilly said that the new money will be for "general corporate purposes" and not for paying off debt - which has risen from €967 million to €1.5 billion over the past year largely due to the acquisition of the Belfast Telegrpah and the investment in the Citywest printing plant.

Sources close to Independent emphasised that there was no question of the additional equity being raised to satisfy banking covenants.

"The company is fine with all its banking covenants and there is no pressure on Independent to reduce debt. This money is for new developments."

In the first half, Independent increased turnover by 4 per cent to €656 million and operating profits by 13.5 per cent to €109.3 million. Independent, however, was hit by weak local currencies in its southern hemisphere operations, higher interest charges and increased capital investment.

As a result, pre-tax profits fell 17 per cent to €57.6 million although profits would have been marginally firmer if exchange rates had been the same year-on-year.

The Irish newspaper operations were the highlight of a mixed set of results from Independent's various regions. Turnover in Ireland was 12.5 per cent higher on €172.6 million with operating profits 20 per cent higher on €39.6 million.

Operating margins improved from 21.5 per cent to 22.9 per cent.

Mr O'Reilly said that the Irish operations had double-digit advertising growth and that this had outpaced growth in the market to the extent that Independent's advertising market share was up from 44 per cent to 46 per cent. "Even if advertising growth moderates, you will see Independent take a disporoprtionate share of that growth, " he said.

Mr O'Reilly added that the group has no plans to increase the cover price of its Irish newspaper titles, and stated that Independent would not use the introduction of the euro to "round up" cover prices. This suggests that the cover price of the flagship Irish Independent title will be €1.27 from January 1st next rather than being rounded up to €1.30. He also rejected suggestions that Independent was still suffering production and delivery problems at its new Citywest print plant.

ITouch, the mobile phone information company, in which Independent has a 50 per cent stake, increased its revenues in the first half of the year to £6 million sterling (€9.75 million).

The company, which floated on the London Stock Excchange last year, closed the half-year with net cash of £44.2 million sterling. The shares, which were floated at 70p sterling, were 1.5p higher yesterday on 23.5p.