INM low­ers profit ex­pec­ta­tions for sec­ond time

Me­dia com­pany says Brexit and cor­po­rate gov­er­nance re­quire­ments con­trib­uted

The Irish Times - Business - - BUSINESS / NEWS - COLIN GLEE­SON

In­de­pen­dent News and Me­dia (INM) has an­nounced a “ma­te­rial re­duc­tion” in ex­pected full-year profit be­fore tax due to the chal­lenges of Brexit and meet­ing cor­po­rate gov­er­nance re­quire­ments.

An in­ves­ti­ga­tion by the Of­fice of the Di­rec­tor of Cor­po­rate En­force­ment (ODCE) in re­la­tion to a pro­posed bid by the De­nis O’Brien-con­trolled com­pany for ra­dio sta­tion New­stalk is cur­rently un­der way fol­low­ing a pro­tected dis­clo­sure by its for­mer chief ex­ec­u­tive Robert Pitt.

The me­dia gi­ant also car­ried out an “in­de­pen­dent review” into the mat­ter, which it said had con­trib­uted to the re­duc­tion in ex­pected prof­its.

How­ever, the com­pany, in a note to the stock ex­change yes­ter­day, said the re­duc­tion was “pri­mar­ily driven” by a com­bi­na­tion of “on­go­ing chal­leng­ing mar­ket con­di­tions and higher once-off le­gal costs than pre­vi­ously en­vis­aged”.

“In line with re­cent global trends in the me­dia in­dus­try, INM con­tin­ues to face on­go­ing rev­enue chal­lenges with con­tin­ued un­cer­tainty in the mar­ket in­clud­ing Brexit,” it said.

“Le­gal costs re­lated to the in­de­pen­dent review and meet­ing the on­go­ing re­quire­ments of the Of­fice of the Di­rec­tor of Cor­po­rate En­force­ment have been sig­nif­i­cantly higher than pre­vi­ously es­ti­mated. The com­pany is ac­tively en­gaged in tack­ling the chal­lenges it cur­rently faces and will con­tinue to seek to max­imise its rev­enue streams.”

Warn­ing

Yes­ter­day’s an­nounce­ment was the sec­ond warn­ing in less than six months. In July, the com­pany cited lower than ex­pected growth in dig­i­tal rev­enues and in­creased costs aris­ing from “legacy li­bel awards” as the pri­mary driv­ers of a re­duc­tion in ex­pected prof­its.

Sources at the time said they an­tic­i­pated pre-tax earn­ings to fall about 20 per cent below mar­ket ex­pec­ta­tions.

In a note fol­low­ing yes­ter­day’s warn­ing, an­a­lyst Davy said the state­ment by INM meant its un­der­ly­ing earn­ings be­fore in­ter­est and tax fore­cast would drop 8 per cent to about €27.5 mil­lion from €30 mil­lion.

“Ad­di­tional one-off items are likely to bring this down to circa €25 mil­lion,” it said. “INM points to on-go­ing in­dus­try chal­lenges plus higher-than-ex­pected le­gal costs as the main rea­sons for the change. The group has a net cash balance of €95.7 mil­lion, which equates to 64 per cent of the mar­ket cap.”

In terms of the rea­sons for the re­duc­tion, Davy said: “INM’s ad­ver­tis­ing rev­enues are likely un­der the most pres­sure. The higher-than-ex­pected le­gal costs are more re­lated to the on­go­ing re­quire­ments of the Of­fice of the Di­rec­tor of Cor­po­rate En­force­ment as the in­de­pen­dent review is now com­pleted.” Looking to 2018, Davy said it ex­pected in­dus­try trends to “re­main lin­ear”.

PHO­TO­GRAPH: ALAN BETSON

Robert Pitt, for­mer INM chief ex­ec­u­tive, and Les­lie Buck­ley, INM chair­man.

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