Operating profits at The Irish Times group fell to £9.95 million (€12.63 million) for 1999 from £12.76 million, despite a strong increase in revenue from advertising. Profits were depressed by a sharp rise in costs, which increased to £64.25 million from £54.32 million. After investment income - down to £1 million from £1.37 million - the group reported pre-tax profits of £10.96 million for 1999, down from £14.13 million the previous year.
At the end of 1999, the group had reserves of £50.78 million. These funds, together with ongoing cash flow from operations, will be invested over the next two to three years to provide a printing plant at Citywest, west Dublin, at a projected cost of £45 million, and upgrading production technology which will cost about £8 million.
A breakdown of costs shows while "people costs" were 9.5 per cent higher at £31.29 million and newsprint costs were 11 per cent ahead at £5.89 million, "other costs" jumped by 33 per cent or almost £7 million to £27.07 million. Managing director Mr Nick Chapman said this figure included "project and change costs" which he declined to break down but described as "an investment in the future". It included some costs associated with the new printing plant under construction at Citywest and new union agreements to facilitate changes in working arrangements, he said. Another factor accounting for the rise in "other costs" was a £1 million increase in the group libel provision to £1.4 million. "Like all newspapers, we are having to account for much higher costs on libel given the current state of libel legislation, which needs to change," he said. The annual report shows a 21 per cent rise to £2.25 million in executive director remuneration including pension contributions, reflecting pay increases and an increase in the number of executive directors.
On people costs - largely wages and salaries and including the impact of an increase in the numbers employed to 807 from 743 - he said he would be concerned if "the business suffered from undue wage inflation because that would reduce competitiveness". Mr Chapman said costs across the board need to be carefully monitored in a market where competition is increasing. Group revenue was 10.6 per cent ahead at £74.2 million, boosted by a 15 per cent rise in advertising revenue to £48.4 million with strong performances in a buoyant market across all advertising categories.
A breakdown of performance within the group shows The Irish Times newspaper produced an operating profit of £10.44 million, down from £12.89 million, while at The Irish Field operating profit fell to £97,000 from £175,000. Operating profits from subsidiaries Itronics and ICPC jumped to £703,000 from £446,000. But losses in the developing new media area, which includes Ireland.com, rose to £1.28 million from £749,000. Mr Chapman emphasised the dependence of the group on continued growth in advertising revenue. Stating that the development of new media would continue to require funds, he stressed that because of its unique ownership structure the group was in a position to take a long-term view on its new media investment.
He rejected any suggestion that the Citywest investment should be partially funded through borrowings rather than from reserves. "Why pay interest when we have the funds available?" he asked. But he accepted that the group needed to introduce better measures of return on investment which would incorporate factors such as cost of capital.
On staff concern about the quality of the group pension scheme, he said he was committed to improving the plan and was negotiating with the unions to have an improved plan in place by January 2001. In addition, he said, staff would benefit from the future success of the business through planned profit-sharing schemes. Mr Chapman, who became managing director last October, said the future looked "reasonably secure". "We are investing to ensure that the core business remains competitive - investing in marketing, new technology and the new printing press. That is aimed at maintaining our position in the marketplace and ensuring revenue growth. "And we are investing in developing our new media capabilities. New media revenue and profitability is at this stage a great unknown. Usage is the best measure at the moment and our usage figures are growing very strongly".
But he warned that in an increasingly competitive market, with new entrants and new media expected to target the traditional players, The Irish Times was going to have to change more quickly. "Jobs will change. We have to work more effectively and efficiently as the environment changes. We have to manage this with staff and the unions so that the organisation can successfully change. On the way there will be some difficult decisions which we will have to sort out together". He declined to be drawn on the implications for jobs at the group.
