INM looks beyond UK for acquisitions as analysts say it must spend

Independent News & Media (INM) says it has expanded its hunt for acquisition targets beyond the UK following Brexit, as analysts warned on Friday the company needs to quickly deploy its capital if it is to keep investors happy.

INM released positive half-yearly results on Friday morning showing revenues rose by 2.7 per cent to €161.6 million in the six months to the end of June. The results also showed that its cash balances ballooned to €62.4 million, up from €35 million at this stage last year.

INM said it has no plans to pay a dividend this year from its growing cash pile, however. The company is focusing on buyouts instead. It is thought to have a war chest of about €120 million, and it is “actively” seeking buyout targets in the Irish publishing industry and also digital media businesses abroad

"We have done detailed work on acquisition targets in the UK, but there has been some uncertainty created by Brexit," said Robert Pitt, INM's chief executive officer.

“We are not running scared because of Brexit, but we need to be more careful. We are now willing to look further afield. Our biggest shareholders and our board are comfortable working abroad,” he said.

INM's two biggest shareholders are Denis O'Brien, the founder of the Caribbean telco Digicel, and Swiss-based financier Dermot Desmond. The INM board is chaired by Leslie Buckley, who also sits on the board of Digicel.

Mr Pitt indicated that INM is still interested in mopping up print assets in Ireland: "But it is difficult to see how we could deploy a lot of cash in Ireland. We will not be very aggressive in Ireland and we will not overpay."

No dividend

In the UK and possibly further afield, it is seeking to buy “digital media businesses” with scale that it can bolt on to its existing operations.

“If we buy you, we will put you front and centre,” said Mr Pitt. “You have to have scale within your market, but we need to be realistic about what we can buy. We have to acquire within our means. We aren’t looking for niche digital businesses, but they must be well-defined.”

Rob Stokes, an analyst with Davy stockbrokers, warned on Friday morning, that INM's share price is unlikely to rise until it deploys its capital. As INM has ruled out a dividend, this means it must make acquisitions.

“INM’s existing cash pile continues to be the source of investor focus,” said Mr Stokes. He highlighted that more than a third of INM’s market cap is tied up in its cash balances, and that this could be 45 per cent by year end.

In its results, the media group said the ongoing decline in print advertising revenues and circulation was offset by a 23. 4 per cent jump in digital advertising revenue and increased earnings from its distribution business, Newspread.

INM, which includes the Irish Independent, the Sunday Independent,the Sunday World and the Herald among its titles, said pre-tax profits rose by 22.5 per cent to €18.5 million.

In the Republic, under the Irish Independent and Sunday Independent titles, INM accounted for 50 per cent of the daily newspaper market and 65 per cent of the Sunday market, the company said.

Online traffic across the independent.ie desktop and mobile platforms grew by 24 per cent year on year, it said, fuelled by strong combined mobile web and app growth of 40 per cent.

Audience numbers as defined by unique visitors a month to independent.ie grew to an average of 9.4 million, an increase of 8.9 per cent on the corresponding period last year, peaking at 10.2 million in March 2016.

“While the outlook for H2 [half two] continues to be challenging, particularly in print advertising, the group will continue to deal with those challenges pro-actively,” said Mr Pitt.

Davy stockbrokers said: “On outlook, INM anticipates a full-year performance in line with current expectations and states that the directors are not proposing a dividend for 2016.

“While the operational performance of the group should not be ignored, it is hard to look beyond the staggering cash balance of the group.”