Cable investment blamed for 64% drop in profits

Independent News & Media has reported a 64 per cent drop in pre-tax profits for last year, reflecting a write-down of its investment in loss-making cable operator Chorus.

The media group posted pre-tax profits of €22.2 million, down from €61. 8 million a year earlier. However, this included an exceptional impairment charge of €82.5 million against its entire investment in Chorus.

On an underlying basis, the group said profits were up by 8 per cent to €129 million on turnover of €1.31 billion, down 2 per cent mainly due to the devaluation of the South African rand during the year.

Adjusted earnings per share grew by 1.2 per cent to 12.65 cents per share, slightly ahead of market expectations. Independent is proposing to pay a final dividend of 5.25 cents per share, an increase of 5 per cent, to bring the full-year dividend to 8.15 cents.

Independent executive chairman Sir Anthony O'Reilly, said the Chorus write-down "reflects the difficult economic conditions faced by the cable television industry in Ireland and globally". However, the company added that it was actively trying to sell Chorus at a price to mitigate the impairment charge.

Independent said that, overall, all its operating regions produced an improved performance last year and it was upbeat about the outlook for the year ahead.

Chief operating officer Mr Gavin O'Reilly said the group expected to show "a meaningful improvement" in 2003 and short-term targets of double-digit earnings per share and dividend growth were "achievable".

Current trading is in line with or above market expectations, while performance is ahead of the first quarter of 2002, he said.

While he does not expect a "major or material rebound in advertising in 2003", Mr O'Reilly said he expected advertising revenue to be up in the mid single digits. Circulation revenue should rise by a similar amount, reflecting price increases implemented in 2002 and in 2003. It has been helped in the first quarter by the focus on the war in Iraq.

Last year, circulation revenue rose by 5.4 per cent in constant currency terms, while advertising revenue in its publishing division, which accounts for 83 per cent of total revenues, was up by 0.7 per cent.

The Australian division delivered operating profits of €118.6 million or 51 per cent of the €233 million total.

The company said its Irish operations performed well in a tough advertising market, posting a 2 per cent rise in operating profit to €74.9 million as good cost control produced record operating margins of 20.5 per cent. Ireland represented 32 per cent of total profits.

In the UK, tight cost control outweighed a 6 per cent fall in revenue as profits rose by 19 per cent to €20.5 million.

However, the group's flagship titles, the Independent and the Independent on Sunday, remained in the red, losing £6.5-£7.0 million sterling (€9.6-€10.3 million) last year, although this represented an improvement on the previous year, the company said.

Independent remains committed to the titles, saying it had "no intention" of selling them, although they are not expected to turn the corner this year.

Its South African division reported a 12 per cent increase in profits to €25.2 million, while losses in the new media division narrowed to €3.4 million from €6.8 million a year earlier.