Independent News warns about tough trading

Published May 21, 2012

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The share price of Independent News & Media (INM), which publishes Business Report, remained unchanged at 27 euro cents (R2.87) at the close of trading in Dublin on Friday following the release of an interim management statement showing that trading conditions were tougher than management had earlier expected.

The interim statement revealed that group revenue was down 5.2 percent in the 19 weeks to May 11, in the face of tough trading conditions across all of its operations in Ireland and South Africa. Circulation revenue was down 4.4 percent and, despite a 17.6 percent increase in digital revenue, total advertising revenue was down 7.9 percent.

The statement said that operating costs “continue to be well managed”, with total group operating costs down 2.8 percent. “Cost savings were delivered across all operations, which more than offset inflationary cost pressure in South Africa and significant energy price increases.”

In its outlook for the remainder of financial 2012, the statement noted that “forecasting in the current climate is very difficult and, at present, advertising conditions remain challenging and erratic”.

“Visibility remains short and susceptible to influence by macroeconomic factors.”

It also referred to the group’s strong portfolio of market-leading and profitable titles. “The group has a well-invested and increasingly efficient asset base, with no significant near-term capital expenditure requirements,” it says.

Management continues to focus on maximising cash flow in order to reduce its debt, which at the end of the period was B420 million. This represents a debt reduction of just e6.8m since December. Much of that reduction can be attributed to dividends received from the 29.5 percent stake it holds in Australian-based APN.

The statement noted that Margaret Jay, the group’s senior independent director, had indicated that she would not be standing for re-election at next month’s annual general meeting.

This will reduce the number of board directors to just eight.

The number of board directors could be reduced to seven if a sufficient number of shareholders support the recommendation of the board, led by chairman James Osborne, that Paul Connolly not be re-elected.

In a notice issued to shareholders last month, Osborne said that the board was not recommending Connolly’s re-election.

Connolly was appointed to the board three years ago on the recommendation of Irish telecoms’ billionaire Denis O’Brien, who is currently the group’s single largest shareholder, with a stake of 29.9 percent.

The board is opposing Connolly because he has initiated legal action against the board in a bid to block its payment of e1.87m to former chief executive Gavin O’Reilly.

The decision to make the payment to O’Reilly was part of an agreement, reached last month, with the majority of the board and appears to have been designed to secure O’Reilly’s departure from the group.

In recent weeks O’Brien has built his stake in the company from 22 percent to 29.9 percent in what has been seen, by Dublin commentators, as a move to secure Connolly’s position on the INM board.

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