INM shares surge on ‘resilient’ performance

Media group cuts dividend to pay down debt
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The Independent Online

Independent News & Media (INM), the parent company of The Independent, is set to report annual revenues of €1.4bn (£, just 3 per cent down despite the economic headwinds battering the media sector.

INM, which has publishing operations across the globe, forecast an operating profit of €275m before exceptional items for 2008, it said in a statement to the market yesterday.

“These results demonstrate that – even in tough economic conditions – INM continues to be a profitable and cash-generative business,” the publishing group said.

INM outlined its plans to pay down debt, including scrapping the full-year dividend, launching a bond to help refinance existing debt and considering potentially divesting “non-core” assets. Its share price rose 35.5 per cent to €0.2575.

The group, whose chief executive is Sir Anthony O’Reilly, also announced it would hold on to the stake in the Australian media business APN News & Media as none of the suitors could come up with an appropriate offer.

“While INM – like all other companies – is currently operating in very challenging economic and advertising conditions, the group is pleased to confirm that its global and diverse operations are continuing to demonstrate considerable resilience,” it said.

The media industry has been especially exposed in the downturn. Earnings have been hit by a slump in advertising revenues, which have contracted significantly since September. INM pointed out yesterday that more than athird of its revenues were not dependent on the advertising markets.

Stocks in the sector have been under pressure in the past year – Johnston Press was the worst performing company on the London Stock Exchange’s main market over the past 12 months, according to Bloomberg – and last week INM’s shares fell more than 40 per cent.

This fall drove the group to release the unscheduled trading update, which called the price decline “significant and unwarranted”.

It added: “The current market capitalisation does not fairly reflect the true value of the underlying assets.”

The outlook for 2009 remains tough, however, as INM does not anticipate any improvement in global advertising conditions. Advertising revenues are expected to fall by at least another 4 per cent, while circulation revenues are expected to be flat or slightly up. It forecast that the operating profit could range from €240m to €270m for 2009.

The company is interested in streamlining its operations. In October, suitors emerged for its 39.1 per cent stake in APN, but the negotiations have been terminated since no appropriate deals were put on the table. “While there was significant interest in the APN stake (and its individual divisions), the deteriorating state of credit markets made it difficult for interested parties to put together a fully-financed bid for APN at an appropriate value that would have been acceptable to both INM and to the other APN shareholders,” INM said.

It remains in compliance with its banking covenants and said yesterday that it is working to de-risk its balance sheet and to reduce debt. After deciding to retain the stake in APN, it has looked to “alternative strategies” to help pay down a bond that matures in May.

This includes shelving the dividend, which should raise about €60m. INM also hopes to slash €30m of capital expenditure.

The group has also identified potential “non-core” assets to sell.