INM making headway on debt despite tough climate
INDEPENDENT News & Media (INM) yesterday released a solid trading update despite extremely difficult market conditions.
In an interim management statement for the 45 weeks to November 11, 2011, the company, which publishes this newspaper, said operating costs fell by 3.2pc, with a net debt reduction of approximately €40m since December 31, 2010.
"Operating costs in the Island of Ireland division have been reduced by 5.9pc despite a 31pc year-on-year increase in the price of newsprint," the company said.
The ongoing economic crisis resulted in tough trading conditions for the group, but unlike many other media companies in Ireland, INM expects to report a full year operating profit for 2011. Yesterday, the company said the operating profit will be in the range of €74m to €78m, with strong cash management ensuring the debt pay-down will be in line with the group's stated objectives.
The company said the expected seasonal lift in advertising for the second half of 2012 had not fully materialised, and the export-led recovery of Ireland's prolonged recession has yet to translate into increased confidence among consumers.
While there has been "some recent moderation" in the negative trends in both year-on-year group advertising and circulation, it said visibility still remains poor.
"Year-to-date group advertising revenue is currently 6.4pc behind last year (compared to 7.3pc behind in H1 2011) while group circulation revenue is currently 1.6pc behind 2010 (down 2.1pc in H1 2011). Stringent controls and a continued focus on cost efficiencies have substantially mitigated the impact of these reduced revenues," the company statement said.
However, all INM's market-leading publications remain profitable and cash generative, and debt reduction for the year is on target.
It said that market conditions would remain challenging in Ireland and South Africa, but there had been some positive moderation in advertising trend lines since the first half of 2011.
The company said it remained "well positioned" to benefit from a cyclical economic recovery when it occurs, due to the group's "strong" operating leverage and "sustainable operating cost reduction" over the past three years.
However, businessman Denis O'Brien called for the removal of Independent News & Media (INM) chief executive Gavin O'Reilly following the trading update.
Mr O'Brien said INM was now a "company in crisis", and the board needed a "radical overhaul". He claimed that Mr O'Reilly had "lost the confidence of investors and the investment community".
"Independent News & Media issued its second profit warning in three months. The announcement has resulted in a further erosion in shareholder value, and I believe that the future of INM is more uncertain than at any time in its history," Mr O'Brien said in a statement.
He said there was now the added risk that the company will again encounter difficulties with its bankers. Costs must be immediately reduced by 10pc to 15pc, so the business can get back on its feet.
"It is obvious the senior management team do not have the experience or vision to put in place a strategy that will ensure the company's survival. For the sake of all shareholders, it is time for change," Mr O' Brien said.
In response, a spokesman for INM said it was "ludicrous" for Denis O'Brien to claim that a company that had just affirmed a profit range of between €74m -- €78m is "in crisis".
"The issue here, as it has always been with Mr O' Brien, is that he wants to take control of Independent News and Media without paying for it. If he wants to control the company, he, like anybody else, can make a bid," he said
He said the fact that INM was making a large profit in the worst media trading conditions Ireland has ever experienced was no small achievement.
"If Communicorp was to publish its accounts for last year, we would at least have the ability to judge whether Mr O'Brien is capable of extracting a better performance from this very difficult market," he added.
He said that Mr O'Brien's recent "tirade" against Independent News Media editorial coverage and the media in general early this week proved that his motivation was not commercial and not in the interests of all shareholders.