Independent News and Media has reported a 26% slide in pre-tax profits before exceptional items and said it failed to raise new debt to pay off its €200m bond due to mature next month.
The group posted headline pre-tax profits of €211.7m for the year ending December 2008, down 26% on the €286.1m reported the previous year. But a €373m hit due to a writedown in the value of its assets - mainly its newspaper titles - led to total pre-tax losses of €161.4m. INM has operations in Ireland, the UK, South Africa, Asia, Australia and New Zealand.
Revenues fell by 11.8% to €1.477 billion, or by 2.6% on a constant currency basis, in what the company called a good performance in 'exceptionally challenging market conditions'.
INM said that as a result of the current difficult credit conditions, it has been unable to raise new debt to fund the maturity of its €200m 5.75% bond which is due to mature on May 18.
'The group currently does not have sufficient financial headroom available under its existing facilities in order to meet this maturity and service its debt obligations,' the company said.
It warns that if it does not get extra time to meet the bond repayment, there is a strong likelihood of a breach of its financial covenants in 2009.
The Indo group said that it has appointed Rothschild and Davy to advise it in relation to its refinancing requirements. To this end, it has entered into 'constructive discussions' with a committee of its bondholders, its banks and its two major shareholders - Tony O'Reilly and Denis O'Brien.
Asked by reporters about the prospects of a debt for equity swap, or a break-up of the group, chief executive Gavin O'Reilly would not be drawn, saying INM did not intend to run its negotiations through the media organs of ireland, or anywhere else.
He also rejected suggestions that the company's eye was off the ball over the last year because of the war of words with Denis O'Brien, saying the bond issue was 'a function of the credit markets as they exist'.
A statement on behalf of Denis O'Brien said the company still faced a number of significant challenges, but the new management team was working hard to address the immediate issues and progress had been made.
Mr O'Brien said the business had a number of valuable assets, which could return value to shareholders and bondholders. 'Management needs to remain focused on eliminating loss making businesses and all stakeholders need to work together to ensure that value is protected. If this happens the new management team will have a platform upon which to build a dynamic modern media business,' he said.
Advertising revenue dropped by 8.5%
In its results statement, the company said that publishing revenues for the year were down 5.2% while its advertising revenues - including online - declined by 8.5%. Its circulation revenues rose by 0.5%.
The group paid an interim dividend of 4.57 cent per share last November. As announced in January, the directors are not recommending a final dividend in respect of the whole year.
INM said that trading in the first quarter of 2009 has been tougher than expected. It has delayed the publication of its results twice amid ongoing talks with bondholders.
The group's Irish division reported revenues of €377.3m for 2008, down 6% on 2007 results. The group blamed the decline on a significant fall-off in advertising in the second half of the year. Advertising revenues fell by 15% year on year, reflecting the accelerating deterioration in the domestic economy.
However, circulation revenues rose by 2.8% as a result of select cover price increases and solid circulation volumes. The Irish Independent retained its market share of 47.9% during the year, while the Sunday Independent and Sunday World also saw strong performances.
INM said that revenues at its UK operations slumped by 19.8% to €215m as a result of falling advertising and circulation revenues. The UK division underwent a major cost efficiency programme in London and Belfast during the year which included the closure of its loss-making magazine division.
Revenues at INM's Australasia operations declined by 12.7% to €671.8m. The group has a 39.1% stakeholding in APN News & Media which reported tougher advertising conditions.
In its South African operations, INM saw revenues fall by 9.5% to €212.5m, while operating profits rose by 22% to €72.2m on the back of the positive impact of the acquisition of INM Outdoor. The group noted that South Africa's economy has not been hit as badly by the world recession compared to European and Asian markets.
INN's 20.8% owned associate in India, Jagran Prakashan, saw its revenues rise to €130.5m due to the continuing strong growth of Dainik Jagran, the country's largest selling newspaper.
After tumbling 15% in early trade, INM shares later recovered to end up one cent at 26 cent in Dublin.
Directors' pay dropped by almost 40%
The Independent News & Media annual report shows that former chief executive Dr Tony O'Reilly, who stepped down last month, was paid a total of just under €1.5m last year, down from €2.2m in 2007. His salary in 2008 was just over €1m.
Current chief executive Gavin O'Reilly was paid just under €980,000 last year, down from €1.5m a year earlier.
Total pay for directors at the company fell by almost 40% to €6.2m. The report also says directors agreed to take a 10% pay cut from January 1
The report also shows that the deficit in the company's defined benefit pension scheme almost doubled from a year earlier to €123m at the end of last year.
