Profits at IN&M down 6.3% in first six months

OPERATING PROFITS at publishing group Independent News & Media (IN&M) fell by 6.3 per cent in the first six months of the year on the back of falling revenues and weak demand for advertising.

However, all of the group’s titles remain profitable. Group profit, before exceptional items, slipped to € 34.5 million, as revenues fell by 12.3 per cent to €284.6 million.

Advertising revenues fell by 7.3 per cent across the group, with Ireland faring worse, with advertising dropping by 11.1 per cent. Circulation was 2.1 per cent lower at group level, and by 3.3 per cent in Ireland. “It’s probably some of the toughest conditions we’ve ever seen in Ireland,” said IN&M chief executive Gavin O’Reilly, adding that the consumer side of the domestic economy was “still hurting”.

This reduced consumer spending is having a severe impact on advertising sales.

“Advertising remains very volatile week by week with no clear underlying trend emerging,” Mr O’Reilly said, but he added that while advertising remains weak, the rate of decline is slowing.

In Ireland, an 11.1 per cent decline in advertising, which accounts for 28 per cent of Irish revenues, meant total revenues reduced by 10.2 per cent on the same period in 2010 to € 183.2 million. Operating profits fell back by 23.8 per cent to € 20.2 million.

The group did get a bounce from the demise of the News of the World, which had a "material and positive impact" on its two Sunday titles, the Sunday Worldand the Sunday Independent.Digital revenues were also up and now account for 7 per cent of advertising in Ireland.

The group continues to target revenues of more than 15 per cent in the medium term from this segment. Recent initiatives include the establishment of consumer coupon site GrabOne, which now has a 10 per cent market share.

In South Africa, which generates 36 per cent of the group’s revenues and 49 per cent of its operating profit, revenues increased by 1.8 per cent to €101.4 million, although operating profit fell back by 9 per cent to €19.1 million as advertising revenues declined by 3.7 per cent. Debt reduction continues to be a priority for the group. It paid down its € 452 million net debt by €21.5 million in the first half of the year, and generated €23 million in cash which it will also use to pay down its debt.

“The priority continues to be debt pay-down, with all cash flow applied to net debt reduction,” Donal Buggy chief financial officer said, adding that IN&M has no significant debt maturities until May 2014. The group took an exceptional €11.4 million charge for impairments at its Belfast title and those of its Australian associate APN, lowering operating profit to €23.1 million.

IN&M’s 31 per cent stake in APN is now worth € 110 million, and the Irish group expects to receive a full-year dividend of €14.6 million for 2011.

Looking ahead, Mr O’Reilly said IN&M would continue to focus on cash-flow generation to pay down debt and on its cost reduction programme. In the first half of the year, cost savings of €6.6 million were achieved, he said.

Pointing to “marginally improving advertising” in the second half of the year, he said the company was targeting full year earnings of €78-€83 million. At the upper end, such an outcome would be flat on last year.

The stock closed up by 6.4 per cent at €0.28 in Dublin yesterday.