INM lowers profit expectations for second time
Media company says Brexit and corporate governance requirements also contributed
Robert Pitt, former INM chief executive, and Leslie Buckley, INM chairman. Photograph: Alan Betson / The Irish Times
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 on Thursday, 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.”
Thursday’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 Thursday’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 ahead to 2018, Davy said it expected industry trends to “remain linear”.