Downturn bottoming out, says Independent News & Media

Media group on target to agree refinancing
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Independent News & Media (INM), the owner of The Independent, is confident of agreeing a deal with holders of €200m (£176m) worth of bonds due for repayment shortly, the company said yesterday, adding that it believes the advertising downturn may finally be bottoming out.

Unveiling results for the first half of the year, INM also revealed that it has agreed the sale of INM Outdoor, its South African advertising business, in a deal that will raise €98m. Along with other disposals, the group is on target to raise funds of around €150m this year, a major boost in its attempts to reduce its debts.

INM had been due to repay the bond issue in May, but has deferred the deadline several times in standstill agreements with its creditors, partly because the summer holidays have led to delays in talks. Yesterday, the company said negotiations over the facility were continuing and that "the directors believe that an agreement can be reached that is acceptable to the group".

INM's post-tax profit was €29.8m during the first half of the year, down from €96.5m last year as the global recession hit advertising revenues. However, the group also incurred exceptional costs of €86.8m, mostly relating to writedowns of the value of some of its newspaper assets. Overall, the company lost €34.7m during the first half.

Gavin O'Reilly, INM's group chief executive, warned that the media sector was unlikely to see much of a pick-up in advertising during the second half of 2009, other than the normal uplift seen during the run-up to Christmas.

However, Mr O'Reilly said there was now some evidence that the downturn in advertising was beginning to flatten out. "You're probably at the bottom, though that doesn't mean advertising is about to suddenly rebound," he said.

The group expects its businesses in New Zealand and South Africa, which is already looking forward to the 2010 football World Cup, to recover first.

Mr O'Reilly added that even without a marked recovery, an aggressive focus on costs across the INM group should enable the company to hit its previous profit forecast for the year, of between €180m and €210m before exceptionals, albeit at the lower end of the range.

"A continuing and highly effective focus on operating cost reduction together with a series of business process improvements have yielded significant benefits within the period," said Mr O'Reilly. "As a consequence, any improvement in broader market conditions should translate to good earnings growth and operating margins."

In the UK, INM slipped to a €3.8m loss during the first half, following a sharp fall in advertising sales. But the group said its national newspaper division, comprising The Independent and The Independent on Sunday, had improved its performance thanks to a series of cost-saving initiatives.

Mr O'Reilly dismissed rumours that the two newspapers were up for sale. "We're not selling any of our publishing assets," he said. "All of the speculation is pub chat."