Ireland's largest publishing group Independent News and Media has said it is complying with a request from the Office of the Director of Corporate Enforcement to produce records in relation to the possible acquisition by INM of radio station Newstalk last year. In a statement alongside its preliminary results for 2016, INM said a requirement from the ODCE to produce books and records is a procedural matter that does not involve any conclusion that there has been a breach of the law by the company or its officers. Today's results show the company reported a 12% rise in pre-tax profit to just under €42m on revenue of €323m. Revenue was up 0.7% year-on-year.
Philip O'Sullivan, from Investec, said that while Independent News & Media's print advertising and circulation revenue fell last year, its digital advertising rose by over 20%. Mr O'Sullivan said that legacy media companies have had to do "a lot of running to stand still" in recent years as they have had to cancel out some of the downward structural decline in their circulation and advertising figures with new sources of income. The analyst said that INM has done good work in growing digital revenues while they have also picked up a large number of distribution contracts, including - interestingly - one for the distribution of fresh fruit.
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Mr O'Sullivan said that INM has also managed to take a lot of costs out of the business and it has seen some good rationalisation measures with the merger of a number of newsrooms. The company also rationalised its printing capacity while the company's higher digital revenues gives it a much higher profit margin than its legacy operations, he added.
While shareholders have in the past questioned the company's acquisition strategy, Mr O'Sullivan said that it was very important to remember that INM knows the print space extremely well as its heritage is in that sector. He also said that management can achieve very good cost synergies from adding more print titles to its portfolio. The company is not just focusing on the print side of things, he points out, adding that INM bought out the 50% stake in CarsIreland.ie it did not already own last year.
Independent's News and Media's balance sheet has also improved during the year, and Mr O'Sullivan said that the company is "literally printing money" as its net cash increased to €84.8m at the end of last year, up over €25m from 2015. He said this very strong cash generation was also helped by the fact that the company is not paying dividends. Mr O'Sullivan noted that the company's pension dividend was a bit higher than he would have expected as it widened to €97m at the end of last year. The company is in discussions with trustees and Mr O'Sullivan said that as soon as there is a resolution to the pension issue the company will then focus on what they will do with the cash it has amassed.
INM said in today's results statement that it is "committed to an outcome that will lead to a more sustainable pension arrangement, more equitable outcomes between members and will give all members greater security and control over their pension savings". Mr O'Sullivan said the options that management have if they use the cash for investments - including acquisitions - by adding additional assets to the group should boost profitability and make the group more sustainable in the longer term. If you are an INM pensioner that is probably what you want to see, he added.
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MORNING BRIEFS - Retailer Marks and Spencer is the latest high profile brand to pull advertising from Google. M&S has joined the likes of retailer Sainsbury's, the British government and French advertising agency Havas in either restricting or cancelling advertising over the placement of ads on YouTube. Last week the London Times revealed that ads from a number of leading brands had appeared on YouTube alongside videos of hate preachers and extremists such as the former Ku Klux Klan leader David Duke. Michael Roth, chief executive of global ad agency Interpublic said if Google didn't fix the problem it would "suffer economically". Senior Google Europe executive Matt Brittain apologised for the placement of ads alongside such inappropriate content. He said said the company was reviewing its operations.
