Profit warning brings fresh horrors to INM’s boardroom

Independent News & Media's woes continue, with the company issuing a profit warning on Wednesday, just two days after the extraordinary revelation that its chief executive Robert Pitt might vote against certain motions being put to its AGM in Dublin next month.

Pitt's unprecedented move relates to a row with chairman Leslie Buckley over a potential acquisition of Newstalk, a national radio station controlled by Denis O'Brien, INM's largest shareholder. He is believed to have reserved his position specifically in relation to the resolution to re-elect Buckley as chairman.

The profit warning relates to a 7 per cent decline in total advertising, and a similar percentage drop in newspaper sales. This reflects the horrors that newspaper publishers continue to experience, amid the continued switch by consumers to digital platforms for news and information.

Legacy libel actions

Growth in digital advertising has also underperformed and the company has had to book significant charges associated with legacy libel actions, and costs associated with the fallout from disputes at board level. It has also abandoned its ambition to acquire other businesses.

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The only chink of light was presented by Newspread, its distribution business, which has diversified away from simply delivering newspapers and is growing.

Consensus market forecasts had suggested a pre-tax profit of about €38 million for the year. This is now expected to be slashed by 20 per cent to just over €30 million. This position would be much worse were it not for the fact that the company had shaved €10 million from its cost base.

‘Too difficult’

The share price fell by as much as 19.5 per cent in Dublin on foot of news of the profit warning, while stockbroker Merrion said it was now "too difficult" to place a "fair value on INM and therefore we no longer have a recommendation on INM".

Given the uncertain market backdrop, INM needs a united board right now with a clear business strategy to secure its future. Instead, the board is riven by conflict, there are three vacant chairs waiting to be filled by new independent directors, and the outcome of the ODCE’s investigation into Pitt’s disclosure are hanging over the company like a bad smell.