Thursday 26 April 2018

INM shares up 5pc as media group's profits jump by 13.5pc

'We are seeing a great performance in digital advertising,' said INM chief executive Robert Pitt.
'We are seeing a great performance in digital advertising,' said INM chief executive Robert Pitt.
Peter Flanagan

Peter Flanagan

Shares in Independent News & Media (INM) jumped by more than 5pc yesterday after the media group reported strong half-year earnings and said it is looking at new acquisitions.

The parent of this newspaper said pre-tax profits for the first half of 2015 increased 13.5pc year on year to €15.1m.

The increase in profits came on revenue that was little changed at €157.3m. Operating margin increased 30 basis points to 10.4pc.

The company has cleared its debt completely after selling its stake in the Australian media group APN. As a result, INM now has net cash of €35.4m.

That figure has given the company the ability to start assessing takeover targets, but company chief executive Robert Pitt said the firm would only move if there was a clear business case to do so.

"The cash that we have belongs to our shareholders and we have to invest that extremely prudently and wisely," he said.

"So we would be looking to invest that in revenue streams that will grow and leverage the (INM) business away from the dependency that we still have on print circulation and advertising, although we are seeing a great performance in digital advertising.

"That is our number one priority with those funds," he said.

While the company may look at new deals though, Mr Pitt stressed that INM would not be rushed into any agreements.

"We have to be very cautious. Any investment we do on behalf of our shareholders has to be well thought out and there has to be a compelling case for it," he said.

INM said advertising revenue increased for the second straight year, climbing 2.9pc.

While publishing advertising revenue dipped 1.6pc, that was more than offset by a 43.8pc increase in revenue from digital advertising.

The group also saw its pension obligation fall 14pc to €87.5m during the first half of this year, driven mainly in by an increase in the discount rate applicable to the various pension schemes.

Operating costs across the group fell 0.7pc year on year. "The integration of the group's print and digital news operations is expected to deliver further efficiencies," the company said.

INM titles are market leaders across the Irish newspaper market, reaching some 2.4 million people every week. The Irish Independent leads the daily market, selling more copies per day than 'The Irish Times' and 'Irish Examiner' combined.

Mr Pitt said he believed there would have to be more integration across the media industry, but emphasised that did not necessarily mean one company taking over another.

"We think there will be consolidation in the market. It won't just be consolidation on our side. We think that all people who operate in the market will have to consolidate," Mr Pitt said.

He pointed to a deal announced this week that sees 'The Irish Times' printing INM's 'Sunday World' and the 'Irish Daily Star", while INM's Newspread manages distribution for 'The Irish Times'.

"People's papers aren't affected. The newspaper's voice is not affected, but it is a practical move," he said.

The chief executive also called for the removal of VAT on newspapers. In the UK, there is no VAT on newspapers while it is 9pc here.

"That gives publishers who operate out of the UK in this market a great advantage," he said. "The industry would be of the opinion that newspapers, which are important to retailers, important to readers, and to advertisers, need support on that."

Davy Stockbrokers analyst Robert Stokes was positive on the results.

"We are encouraged by the quality of these results and the level of cash generation the group continues to display," Mr Stokes said.

Davy reiterated its "outperform" rating on the stock. The broker has a 12-month target price of 29.6pc on the company shares.

INM shares rose 5.3pc in Dublin to 18c yesterday.

In numbers...

13.5pc Increase in pre-tax profits

€157.3m Independent News & Media revenue for first half of 2015

€35.4m Independent News & Media's net cash position at the end of June this year.

Irish Independent

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