The sharp downturn in advertising income in the second half of 2001 has hit Independent News & Media hard, but the group has sounded a cautiously optimistic note for the current year.
Turnover and operating profits last year were €1.34 billion and €220 million, roughly the same as in 2000. But pre-tax profits tumbled from €155.3 million to €61.8 million mainly due to a €90 million exceptional charge and higher interest charges.
The €90 million exceptional charge relates to start-up costs and provisions against Independent's new media and cable operations, including a €15 million charge against Chorus, the Irish cable television company in which Independent has a 50 per cent stake. These exceptional charges were partly offset by a €32.5 million exceptional gain on the sale of Wilson & Horton in New Zealand to APN, Independent's Australian associate company.
Ireland accounts for 28 per cent of Independent turnover and last year sales in the Irish operations increased more than 10 per cent to €371 million while operating profits were up by the same factor to €73.2 million, allowing operating margins to be maintained at 19.7 per cent.
Circulation of two of the group's national titles, the Irish Independent and the 50 per cent-owned Star, reached new peaks although advertising revenue in the second half fell sharply after the September 11th bombings. Independent's comparatively resilient performance was aided by the first full-year of production at the Citywest print plant in west Dublin.
Chief operating officer Mr Gavin O'Reilly had some critical words about productivity at the Middle Abbey Street newspaper operations and also national pay agreements. "The PPF promised much but delivered nothing," he said, adding: "The PPF and its predecessor mandated enhanced levels of productivity at all levels. That has not existed in the last six months at Middle Abbey Street." He would not comment on whether Independent would remain part of centralised bargaining if another national agreement were concluded.
In Australasia, where Independent's wholly-owned New Zealand operations have been taken over by the group's Australian associate, turnover fell from €607 million to €560 million while operating profits fell from €126.7 million to €116.6 million. This combined figure, however, masks a strong performance from Wilson & Horton in New Zealand where operating profits grew 11 per cent to €61.6 million.
In South Africa, sales fell from €189 million to €161 million while operating profits were down from €24.3 million to €22.5 million. However, in local currency terms turnover was up more than 3 per cent while operating profits rose almost 12 per cent.
The British publishing operations were mixed but strong growth at the Belfast Telegraph meant that turnover rose from €210 million to €249 million while operating profits were up from €12.4 million to €17.1 million.
Mr O'Reilly launched a strong defence of Independent's accounting policies and rejected suggestions that its treatment of its debt was anything other than transparent. "We believe our accounts are extremely simple and straightforward," he said, adding that recent negative comment was "driven by a partisan press in this country driven by their own agenda".
"Our accounts are not found wanting in any regard. If you understand accounting then these accounts are crystal clear," he stated.
Mr O'Reilly said the group was "cautiously optimistic" that this year's results would show an improvement even though advertising revenue had yet to regain the levels of the first half of last year. Operating costs are under control and are down on last year, he said, while interest rates would show a fall as a result of debt and interest rate reductions.
