O'Brien research argues case to close London titles

RESEARCH COMMISSIONED by Independent News Media (INM) shareholder Denis O’Brien states that losses at its London titles are running at €27 million a year, close to the £30 million which the board says it would cost to close them down.

Mr O’Brien, who owns 26 per cent of INM, wants the company to close or sell its London Independent and Independent on Sunday titles, and is opposed to the planned sale of its South African outdoor advertising business for €98 million as he argues that the business is profitable.

INM is in talks with a number of its bondholders to which it was due to repay €200 million last May. The group is seeking to renegotiate the overall terms of its bond debts, which total €1.2 billion. Some of the proceeds of the South African sale could be used to repay part of these debts.

INM believes that its London Independent and Independent on Sunday titles will break even towards the end of next year, and also says that it will cost £30 million to close these newspapers.

Mr O’Brien’s research, seen by The Irish Times, disputes this. INM yesterday disputed the figures, saying that they are simply wrong. It says that losses at the titles have been cut by 30 per cent year-on-year and that management has taken out £25 million in costs over the last 12 months.

It adds that the cash losses that will be incurred before the titles break even will be less than half the £30 million closure costs.

The research warns that falling circulation will cost the group cover price revenues, and make the papers less attractive to advertisters, resulting in more losses.

It argues that as INM’S own forecasts for 2009 operating profits are at the lower end of a €180 million-€210 million range, compared with €290 million last year, and as it is beginning to “sell off profitable divisions in an effort to appease its bondholders”, the management’s decision to protect loss-making titles “does not seem to be a strategy which is in the best interests of shareholders”.

INM says the full benefits of the savings achieved over the last 12 months will be seen in 2010, when the advertising market is expected to “at least stabilise”.

Mr O’Brien stated last May that he would like to see the London titles survive, but stressed at the time that this should only happen if they are profitable.

INM recently agreed a four-week standstill pact with its bondholders while talks over the restructuring of its debts continue.