Friday 20 April 2018

INM shares fall after company issues shock profit warning

Independent News & Media’s headquarters at Independent House in Talbot Street, Dublin
Independent News & Media’s headquarters at Independent House in Talbot Street, Dublin
Donal O'Donovan

Donal O'Donovan

Independent News & Media (INM) has issued a profit warning, blaming in part the costs of an independent review of corporate governance undertaken after a high-profile board-level disagreement between the chairman and CEO.

Shares tumbled on the news, closing down 14pc at 11 cents each yesterday.

Despite the warning, it is understood that INM remains on course to generate full-year profits in 2017 of more than €30m, beating rivals but materially lower than the €38m consensus forecast.

The bearing of the independent review at board level on the group's profitability highlights the impact of ongoing strains at the top of INM.

INM's board appointed a senior counsel and a corporate governance expert to conduct an independent review of governance structures, after a rift between CEO Robert Pitt and INM chairman Leslie Buckley in relation to a disagreement over the level of a potential bid for radio station Newstalk. The Office of the Director of Corporate Enforcement is also examining the situation.

Earlier this week it emerged that Robert Pitt may not vote to support some or all board resolutions that will be put to shareholders at the annual general meeting in August, a highly unusual situation.

Those resolutions include backing the re-election of his fellow directors.

In a trading update issued yesterday, INM cited a number of factors for the warning, including ongoing uncertainty arising from Brexit, lower than expected growth in digital revenues and increased costs arising from legacy libel awards as well ongoing declines in circulation and advertising.

Profits are also affected by the failure to lock in M&A after a takeover of regional newspaper publisher Celtic Media was abandoned.

The company said the challenges experienced in the first half of 2017 are expected to continue through the rest of the year.

"INM announces a material reduction in its expectation for full year profit before tax to below market consensus driven by the challenges the media industry and INM continue to face.

"These include a decline in circulation and readership, a decline in advertising revenues, ongoing uncertainty arising from Brexit, lower than expected growth in digital revenues and increased costs arising from legacy libel awards and the independent review," the company said in a trading statement.

The group has been hit by a number of large libel cases linked to its 'Sunday World' newspaper this year, some dating back to the 1990s.

The "unpredictability of the level of recent awards" materially impacted this year's performance and management are reviewing the provisioning of other outstanding cases, INM said.

Circulation and advertising declines are running at 7pc, better than peers.

The group said cost-saving plans are in place to partially mitigate revenue declines, and the group remains on course to generate substantial full-year profits.

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