Profits drop almost 23% at Independent News & Media

Independent News & Media’s (INM) pre-tax profit fell almost 23 per cent in the first half of the year as advertising and print circulation revenue declined and the newspaper group booked costs for an ongoing legal dispute with the State’s corporate watchdog.

Profit before tax fell to €11.5 million for the first six months of 2018 from €14.9 million for the corresponding period last year, the company said in a statement on Friday.

Total revenues declined by 4 per cent to €95 million, driven by a 10 per cent drop in advertising sales across its print and online operations and a 6.2 per cent decline in circulation. Print sales had been dented as Storm Emma collided with the “Beast from the East” weather system earlier this year to hit print distribution, group chief financial officer Ryan Preston said on an analysts call.

However, the overall sales decline was partly offset by an 18.4 per cent increase in revenue from its newspaper and magazines distribution revenues, Newspread, which was helped by acquisitions.

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Legal costs

The company booked a €1.9 million charge for legal costs, mainly associated with meeting the requirements of the Office of the Director of Corporate Enforcement (ODCE) and a related judicial review into various allegations.

INM and the ODCE are currently awaiting the outcome of an application earlier this year by the State watchdog for High Court inspectors to be appointed to investigate matters at INM that were subject to a whistleblower complaint by its former chief executive, Robert Pitt.

INM said on Friday afternoon that it has been notified that the president of the High Court, Mr Justice Peter Kelly, will deliver his ruling on the matter next Tuesday.

The ODCE has claimed in court documents that a company controlled by INM's main shareholder Denis O'Brien paid a bill for an IT firm to access the publisher's computer network in 2014 without the board's knowledge. It alleges that INM's then chairman Leslie Buckley, a long-time associate of Mr O'Brien, facilitated the "interrogation" of the data, including journalists' confidential emails.

The watchdog also claims that Mr Buckley pressured company executives to pay a “crazy” price for Newstalk, a radio station owned by Mr O’Brien, in a deal that never went ahead. Mr Buckley, who stepped down from the board earlier this year, has said he will defend himself against all allegations.

Meanwhile, INM took another €1.3 million charge for restructuring, primarily relating to redundancy costs.

“Despite the challenges facing INM, the group generated a profit before tax of €11.5 million during the period, in line with expectations,” said chairman Murdoch McLennan. “Our balance sheet remains strong and we continue to explore new avenues to develop profitable revenue streams to support our core business.”

Cash on the balance sheet declined by 6.3 per cent during the period to €89.4 million.

The €99 million total sales for the first half of last year marked a restatement from the previously reported €141.3 million, as the company adopted a new accounting rule in January where the group now only recognises its fee for distributing other publishers’ newspapers and magazines as revenue, as opposed to the full selling price of the item. The move has had no impact on group profits.