INM says trading conditions difficult and advertising lift absent
TRADING conditions since the announcement of Independent News& Media’s first half results in 2012 have remained erratic and heavily influenced by economic uncertainty, particularly in the eurozone, the media group said today.
However, all of INM’s market-leading publications remain profitable and cash generative, and debt reduction for the year is on target, 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, who continue to save rather than spend in anticipation of more tax increases and austerity.
In an interim management statement for the 45 weeks to November 11 2011, the company, which is headed up by chief executive Gavin O’Reilly, announced that:
- Total Group Revenues declined by 5.6pc
- Total Advertising Revenues declined by 6.4pc
- Total Circulation Revenues declined by 1.6pc
- Operating Cost reduction of 3.2pc
- Net Debt reduction of approximately €40m since 31st December 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 global contagion has impacted on consumer confidence in South Africa where advertising growth has been less than anticipated, and INM’s operations have experienced cost increases of 3.5pc despite much higher inflationary cost pushes.
“Overall, and while there has been some recent moderation in the negative trends experienced in both year-on-year Group advertising and circulation, 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 statement said.
The company added that market conditions in both Ireland and South Africa remain challenging and there has been some positive moderation in advertising trend lines since the first half of 2011.
“However, the anticipated seasonal lift in advertising in H2 has not fully materialised due to the negative effects of the continuing recession and unprecedented eurozone political and economic crises,” it said.
“Given the continuing weakness in broader market conditions and still-poor advertising visibility, we expect full year operating profit in 2011 to be in the range of €74m to €78m, with strong cash management ensuring debt pay-down in line with the Group’s stated objectives.”
The statement added that INM was well positioned to benefit from a cyclical economic recovery when it occurs.
“As market conditions improve, the Group’s strong operating leverage, enhanced by the significant and sustainable operating cost reduction delivered over the past three years, should convert any incremental revenue growth into an improved operating profit performance, enhanced cash flow conversion and further debt pay-down.”
Reacting to the trading statement, businessman Denis O’Brien, who is the main shareholder in INM with a 21.6pc holding, said the figures showed a further erosion in investor value while the company has an uncertain future.
“It is now incumbent on the board - at this late stage - to immediately address the issues which threaten the future of INM.
“The first action must be the removal of the chief executive.
“In addition, the board needs a radical overhaul, with fresh blood required to make the necessary changes.
“Costs must be immediately reduced by 10pc to15pc so the business can get back on its feet.”