Independent News and Media today reported a 26% fall in pretax profits before exceptional items of €211.7 million for 2008. The Dublin-headqaurtered multinational media company also said its has been unable to secure new borrowing facilities to fund the maturity of a €200 million bond due to mature on May 18th. IN&M's loss for the year was €161.4 million.
The company said it remains in talks with its bondholders and is seeking a “financial standstill period”. It has appointed Rothschild and Davy as advisers as it seeks a solution to its refinancing requirements.
It said there is now a “strong likelihood” of a breach of financial covenants within its borrowing facilities during 2009, if an amendment or waiver is not granted by the holders of a bond which the company is seeking to refinance.
In the year ending December 31, 2008, revenues fell 11.8% to €1.477 billion, or by 2.6% on a constant currency basis. Total group costs fell by €138 million, or by 10.4% on a constant currency basis with an operating margin of 19.7%.
IN&M said publishing revenues last year fell 5.2% while publishing revenues, including online, dropped by 8.5%. Overall online revenues rose 16.3 per cent, the company said.
In Ireland revenues fell 6% to €377.3 million due to a"significant fall-off in advertising in the second half".
Irish advertising revenues fell 15% in 2008.
For the first quarter of 2009, IN&M said trading has been "tougher than expected".
Assuming that advertising and credit markets do not deteriorate further the company expects profits this year in the range of €200 million to €230 million.
IN&M reported a total exceptional charge of €373.1 million in 2008, of which €290.9 million was a non-cash impairment charge arising on the group's assets (primarily intangible assets) as a consequence of the current economic downturn. The directors say they believe that when the economic climate recovers, these intangible asset valuations will improve.
Results detail
Goodbody analyst Gerry Hennigan commented:"Independent News & Media (IN&M) issued results for the twelve months to December this morning, which highlight the difficult operating environment. Reflecting the well publicised advertising slump, revenue for the year (€1,476.6m) is down 11.8% on 2007, resulting in operating profit (pre-exceptionals) of €290.3m (down 16.9% YoY) and adjusted EPS of 12.6c. The latter is broadly in line with guidance issued in January and compares to an outcome of 18.8c last year.
As expected, no final dividend was declared in a bid to conserve cash, with net debt at the end of the year of €1,315.7m (ahead of €1,333.4m forecast). As stated in our preview note, while the operating environment has taken its toll, it has been exacerbated in the IN&M case by the debt overhang and in particular the 5.75% €200m bond that is due for repayment next month. Failure to address the situation earlier, has resulted in protracted negotiations and while the Board is confident that an agreement will be reached, the statement highlights the fact that if an agreement or waiver is not granted than there is “a strong likelihood that IN&M will breach its covenants”.
Guidance on operating profit (pre-exceptionals) for the current year is now given at between €200m and €230m down from a previous range of €240m to €270m, as management acknowledges the ongoing difficulties facing the Group. Efforts to reduce debt continue in the shape of non-core disposals. Guidance would suggest further downward revisions to our forecasts (FY09 pre-exceptional operating profit of €250.4m adjusted EPS of 9.7c) while the ongoing bond overhang, which would appear to be going down to the ‘wire’ only adds to uncertainty and is likely to weigh on the share price this morning."
