2017 interim results - independent news & media … interim results robert pitt ... coupled with...

2017 INTERIM RESULTS

Robert Pitt – Group CEO

Ryan Preston – Group CFO

INM | INTERIM RESULTS 2017

NOTE REGARDING FORWARD-LOOKING STATEMENTS Some statements in this announcement are forward-looking. They represent our expectations for our business and involve risks and uncertainties. We have based these forward-looking statements on our current expectations and projections about future events. We believe that our expectations and assumptions with respect to these forward-looking statements are reasonable. However, because they involve known and unknown risks, uncertainties and other factors, which are in some cases beyond our control, our actual results or performance, may differ materially from those expressed or implied by such forward-looking statements. These forward-looking statements speak only as of the date of this document and no obligation is undertaken, save as required by law or by the Listing Rules of the Irish Stock Exchange and/or the UK Listing Authority, to reflect new information, future events or otherwise.

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INTRODUCTION – ABOUT INM

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• Leading newspaper and media group across the island of Ireland.

• Ireland’s No.1 online news publisher with a continually growing Digital presence.

• Leading wholesale distributor of print newspapers.

• Managing gross assets of €225.3m and employing approx. 800 people.


FINANCIAL HIGHLIGHTS1 • Total revenue of €148.1m was down 8.4% on the prior year. This was primarily driven by a decline in distribution revenues of 9.0% and a

decline in total advertising revenues of 7.8%. Within total advertising, publishing advertising revenues declined by 10.9% partially offset by digital advertising revenue growth of 6.3%. Circulation revenue declined by 7.5%.

• Although the Group has seen strong growth in the Carsireland.ie operation, digital revenues have grown at a lower rate than previously envisaged.

• Profit before tax decreased by 19.5% to €14.9m primarily due to continued revenue challenges. However, this was somewhat mitigated

by the cost saving plans put in place. Earnings per share decreased during the period by 0.2c to 1.0c.

• Operating costs were negatively impacted by the level of recent awards in libel cases, particularly those relating to historic Sunday World

cases. This, coupled with costs associated with the Independent Review and meeting the requirements of the Office of the Director of Corporate Enforcement ("ODCE"), impacted operating costs by c.€2.5m in the 6 months to 30 June 2017.

• Pre-distribution operating costs, excluding the aforementioned libel and legal costs, decreased by €6.7m (-7.2%) due to cost saving plans

that have been put in place throughout the Group in order to mitigate the forecast revenue declines.

• Underlying operating profit, which excludes the aforementioned libel and legal costs, decreased by 2.8%. The continued revenue decline

was mitigated due to cost saving plans and the diversification from low margin newspaper deliveries to higher margin non-news items in the distribution business. The Group operating margin decreased by 1.1% to 9.8%.

• The Group ended the period with increased net assets of €80.1m (+€42.8m year on year). This was driven by an increased cash balance

of €95.7m, up €33.3m year on year, primarily from its EBITDA performance and the sale of property, plant and equipment, somewhat offset by outflows relating to provisions/working capital, capital expenditure, income tax and exceptional expenditure outflow. Additionally, the Group and the Trustees of two of its Republic of Ireland defined benefit pension schemes have reached an agreement to commence the wind-up of the schemes. The agreement will bring certainty for the future for both the scheme members and the

Group.

1 Before-exceptionals.

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OPERATIONAL HIGHLIGHTS - PUBLISHING

• The Irish Independent, Sunday Independent, Sunday World and The Herald achieve sales on average of 1.1m copies per week.

• The Irish Independent continues to lead the quality daily market with an ABC2 of 94,502, maintaining its No.1 position. It has 51% of the daily quality market in the Republic of Ireland and sells more copies per day on average than The Irish Times and Irish Examiner combined.

• The Sunday Independent, which recorded an ABC2 of 185,080, has c.63% of the Sunday quality market and remains by far the biggest selling quality Sunday newspaper, while also providing the largest regular audience on the island of Ireland across any advertising platform.

• The Sunday World is the nation’s largest tabloid with an ABC2 of 143,503 (c.45% of the Sunday popular market). It continues to lead the way in investigative journalism and the popular Magazine and is now also available to readers in Northern Ireland.

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2ABC Jan to June 2017


OPERATIONAL HIGHLIGHTS - PUBLISHING (continued)

• The Herald holds the position as the No.1 popular title for Dubliners with an ABC2 of 39,093. The newspaper benefits from rich local community connections and has delighted customers with an improved racing package.

• INM Regional newspapers are market leaders in every region where they publish (Kerry, Wexford, Sligo and Drogheda/Dundalk). Advertising revenue in H1 has remained strong despite the challenging environment with top quality local editorial content driving circulation numbers.

• The Star is one of Ireland’s most popular daily tabloid newspapers with an ABC2 of 50,649 and c.23% of the daily popular market.

• In Northern Ireland, the Belfast Telegraph, Northern Ireland’s leading daily newspaper, continues to maintain its strong share of the newspaper category. Sunday Life, won the highest possible accolade as winner of UK Regional Newspaper of the Year, and strongly reaffirmed its position as Northern Ireland’s leading indigenous Sunday newspaper.

• While Newspread’s (distribution) revenue has declined due the continued contraction of the circulation market, its diversification into adjacent categories remains successful with operating profit increasing 4.8% on the prior year. It was appointed the exclusive wholesale distributor of books to Tesco Ireland in late 2016. The recently launched Home Delivery service, for both INM and third party publishers, and the consumables packaging offering have also been a success. Newspread was the successful bidder in the recent Local Government Management Agency tender for the collection, sorting and delivery of Library items.

2ABC Jan to June 2017

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OPERATIONAL HIGHLIGHTS – DIGITAL

• Traffic on the Group's flagship news platform, independent.ie grew by 19% year on year, fuelled by continuous user experience improvements and the launch of new offerings such as farmireland.ie. Every week 3.6m users consume news from independent.ie. The iOS and Android native news apps now serve an average of 100m combined screenviews per month to over 300,000 people.

• We continue to build out classified and transactional revenue lines to further monetise the audiences attracted to INM’s publishing brands.

• Carsireland.ie continues to increase its traffic, engagement rate and its offering as one of the leading online classified platforms in the Republic of Ireland for motor vehicles. In 2017 CarsIreland.ie invested in data analytics capabilities and continue to develop automated business processes for dealers and car buyers.

• Responding to the growing demands from brands for higher quality digital content, INM has partnered with ShinAwil to establish a joint venture called Offscript.

3ABC Jul to Dec 2016

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STRATEGY OVERVIEW

Three Key Aims

Maximise Print Publishing Profitability

Grow Existing Digital Offer Acquisitions in Digital and New Channels to De-risk from long-term

Print Trends

• Customer insight to improve reader experience and make product more “sticky”.

• Cost control – produce more effectively (volume/scale, rate, operating model).

• Leverage vertical integration to maximise availability.

• Continue to grow Newspread’s non-print revenues and increase profitability of distribution network.

• Continue to out-perform the market in meeting the needs of brands through our unique creative solutions and audience-targeting capabilities within trusted brand-safe environments.

• Build upon existing strengths in important classified verticals (motors, property, farming and jobs) to introduce additional marketplace solutions to the SME sector.

• In addition to growing e-paper sales, develop paid-for digital content services for niche audiences.

• Use existing cash together with future FCF to invest in propositions which leverage existing INM reach, yet are insulated from industry impacts on particularly print circulation.

• Spread risk by identifying opportunities where positive EBIT already visible and volume of traffic will lead to higher returns. Strong management teams also crucial.

Company vision to be the most trusted and popular provider of content, advertising and relevant goods & services in the Irish market

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Before Before

Exceptional Exceptional Exceptional Exceptional

Euro millions Items Items Total Items Items Total

Revenue 148.1 - 148.1 161.6 - 161.6

Operating (costs)/income (133.6) 2.6 (131.0) (144.0) (1.3) (145.3)

Operating profit/(loss) 14.5 2.6 17.1 17.6 (1.3) 16.3

Share of results of associates and joint ventures 0.3 - 0.3 0.6 - 0.6

14.8 2.6 17.4 18.2 (1.3) 16.9

Finance income 0.1 - 0.1 0.3 2.9 3.2

Finance expense - - - - (0.6) (0.6)

Profit before taxation 14.9 2.6 17.5 18.5 1.0 19.5

Taxation (charge)/credit (0.9) (0.4) (1.3) (1.4) 0.2 (1.2)

Profit for the period 14.0 2.2 16.2 17.1 1.2 18.3

Period Ended 30 June 2017 Period Ended 30 June 2016

HY 2017 INCOME STATEMENT

• Total revenue down 8.4% year on year.

• Digital revenue growth slows due to change in customer trends.

• Operating costs before exceptional items include once off libel and legal expenses of c.€2.5m.

• Group operating profit, excluding libel and legal costs, decreased by 2.8%.

• Pre-distribution operating costs, excluding libel and legal costs, decreased by €6.7m (-7.2%).

• Exceptional items before tax of €2.6m include a €3.1m retirement benefit accounting adjustment, partially offset by restructuring and acquisition expenses.

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PROFIT BEFORE TAX – H1 2016 TO H1 2017

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EXCEPTIONALS

Exceptional gain of €2.2m comprised of: • A retirement benefits accounting adjustment of €3.1m with an associated deferred tax charge of

€0.4m;

• A charge of €0.4m related to miscellaneous restructuring costs, primarily redundancy costs in the Island of Ireland; and

• A charge of €0.1m for acquisition related expenses.

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30-Jun 31-Dec

Euro millions 2017 2016 D

Intangible Assets 47.0 48.2 (1.2)

Tangible Assets 41.2 41.6 (0.4)

Cash and Cash Equivalents 95.7 84.8 10.9

Retirement Benefit Obligations (90.1) (97.3) 7.2

Other Net Liabilities (13.7) (15.0) 1.3

80.1 62.3 17.8

BALANCE SHEET

• Intangible Assets decrease is driven primarily by amortisation and an unfavourable foreign exchange movement offset in part by software additions.

• Tangible Assets decrease driven primarily by depreciation and an unfavourable foreign exchange movement, somewhat offset by additions.

• Cash increase generated primarily from its EBITDA performance, somewhat offset by a provisions/working capital outflow, capital expenditure, income tax and exceptional expenditure outflow.

• Movement in Retirement Benefit Obligations mainly driven by the finalisation of the de-recognition of two of its ROI defined benefit schemes and changes in actuarial assumptions used in valuing the pension obligations.

• Other Net Liabilities decrease is primarily driven by a decrease in trade payables due to the timing of payments.

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30-Jun 30-Jun

Euro millions 2017 2016

Operating profit for the period before exceptional items 14.5 17.6

Depreciation & Amortisation 3.1 3.2

EBITDA of Continuing Operations 17.6 20.8

Share based payment charge 0.4 0.3

Movement in provisions/working capital (3.3) (7.2)

Retirement benefit obligations deficit repair payments (0.8) (3.9)

Defined benefit retirement benefit obligations charge

recognised in the Group Income Statement 0.6 1.4

Exceptional expenditure (0.8) (0.7)

Income tax paid (1.0) -

Cash generated by operating activities 12.7 10.7

Cashflows from investing activities

Dividends received from associates and joint ventures 0.4 0.5

Purchases of property, plant and equipment (0.7) (2.0)

Purchases of intangible assets (0.6) (1.4)

Proceeds from disposal of available-for-sale financial

assets - 0.3

Acquisition of subsidiary, net of cash acquired - (3.0)

Advances to associates and joint ventures (0.2) (0.1)

11.6 5.0

Cashflows from financing activities

Interest Paid - -

Increase in cash and cash equivalents in the period 11.6 5.0

Foreign exchange losses (0.7) (2.3)

Net increase in cash and cash equivalents in the period 10.9 2.7

CASHFLOW

• Profit before exceptional items down €3.1m to €14.5m.

• Movement in provisions/working capital reduced by €3.9m to €3.3m due to improved working capital management.

• Deficit repair payments of €0.8m reduced year on year due to negotiations with Trustees but will increase in H2 2017.

• Exceptional expenditure primarily relates to restructuring costs in the Island of Ireland and acquisition related fees.

• Income tax paid represents a preliminary tax payment for 2017.

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SUMMARY 1 • Total revenue of €148.1m was down 8.4% on the prior year. Distribution (-9.0%), total advertising (-7.8%) with publishing (-10.9%) and digital

(+6.3%). Circulation (-7.5%).

• Although the Group has seen strong growth in the Carsireland.ie operation, digital revenues have grown at a lower rate than previously envisaged.

• Profit before tax decreased by 19.5% to €14.9m primarily due to continued revenue challenges. However, this was somewhat mitigated by the cost saving plans put in place. Earnings per share decreased during the period by 0.2c to 1.0c.

• Operating costs were negatively impacted by the level of recent awards in libel cases, particularly those relating to historic Sunday World cases. This, coupled with costs associated with the Independent Review and meeting the requirements of the ODCE, impacted operating costs by c.€2.5m in the 6 months to 30 June 2017.

• Pre-distribution operating costs, excluding the aforementioned libel and legal costs, decreased by €6.7m (-7.2%) due to cost saving plans that have been put in place throughout the Group in order to mitigate the forecast revenue declines.

• Underlying operating profit decreased by 2.8%. • Net assets stand at €80.1m, versus €62.3m at 31 December 2016 primarily due to an increase in the cash balance and a decrease in the retirement

benefit obligations. • Market leading titles - Irish Independent and Sunday Independent account for 51%2 of the quality daily market, and c.63%2 of the quality Sunday

market respectively. • The media industry continues to face challenging times with declining publishing advertising and circulation revenues, and the current slowdown in

digital display advertising.

• The Directors are not proposing a dividend for 2017.

• Subsequent Events.

1 Before-exceptionals 2 ABC Jan to Jul 2017

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Thank You

2017 interim results - independent news & media … interim results robert pitt ... coupled with...

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