| 12.8°C Dublin

INM targets higher operating profit despite challenging ad conditions

INDEPENDENT News & Media continues to target a year-on-year improvement in operating profit -- although advertising conditions still remain challenging.

Revenues at the media group dropped 5.1pc for the first 18 weeks of the year, according to its interim trading statement released yesterday. The group said advertising revenue was down by 7.9pc and circulation revenue fell by 1.5pc, compared to the same period in 2010.

Sales in April were negatively impacted by an "unusually" high number of public holidays in all of its markets and normal business patterns were also disrupted at the Easter period.

"However, normal trading patterns now appear to be returning and the group's leading titles continue to focus on maximising market share," it said.

For the first 18 weeks to May 6, INM generated free cashflow of €27.3m, thereby reducing net debt to €446.3m, compared to €473.6m at end of 2010.

It said its operating costs continue to be well managed, despite a significant newsprint price increase of 20pc. Total underlying operating costs are down 1.9pc year on year.

Advertising conditions remain "challenging" it said, and the market in Ireland has yet to stabilise, and remains "very short-term and erratic". However, this has been off set in part by better advertising conditions in South Africa.

The group expects the lower VAT rate on newspapers, announced as part of the Government's job initiative this week, to provide some stimulus for the Irish consumer.

"Assuming more normalised group advertising conditions, the easier comparatives in H2, continued cost vigilance and having eliminated loss-making activities, we continue to target an improvement in group operating profit for the year," the statement said.

Media analyst with NCB stockbrokers Conor Harnett said there were no real surprises in the trading update.

"The bank holidays fell badly and impacted on advertising but normal trading has now resumed. South Africa is also better than expected and the company continues to focus on reducing its debt. The target of a further €50m debt reduction by the end of the year looks achievable," he added.

Meanwhile, three INM directors have recommended that shareholders vote against adopting the company's accounts at the AGM on June 3.

Lucy Gaffney, Leslie Buckley and Paul Connolly have indicated they intend to vote against the receipt and adoption of the company accounts as they no longer view fellow board member Bengt Braun as independent because he and INM chief executive Gavin O'Reilly are both members of the board of WAN-IFRA -- a world newspaper body. Mr Braun was appointed to the INM board in March 2010.

Conor Harnett said he was "surprised" that the directors were targeting Mr Braun. "He has a very good background, knows on-line, and has a successful media business himself.

"He is the type you need on the board," he said.

Ms Gaffney, Mr Buckley and Mr Connolly were appointed to the INM board in 2009 as non-executive directors affiliated to Denis O'Brien. Separately, new filings to the stock exchange show that Mr O'Brien increased his stake in the group and now holds 22.02pc of INM.

Irish Independent