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Article Excerpt
Original Source: FD (FAIR DISCLOSURE) WIRE
GAVIN O'REILLY, GROUP COO, INDEPENDENT NEWS & MEDIA PLC: Okay, ladies and gentlemen I'm going to start fairly immediately because we have people dialing in from overseas. So just to say good morning and thank you for joining us. Today we're delighted to be able to present Independent News and Media's 2008 first half results.
My name, as most of you know, is Gavin O'Reilly. I'm the Chief Operating Officer of the Group. I'm joined by my colleagues, Donal Buggy, Chief Financial Officer, Ivan Fallon who is CEO of our UK operations and Vincent Crowley who is CEO of our Irish operations.
As is customary, I will start with a short overview of the Group and then take you through a quick operational review. And then specifically look at the revenue trends in our business, particularly advertising within our Publishing division, which I know will be of great interest to a lot of people in this room.
And I should also say that the numbers that you see, many of the numbers will be shown in constant currency or local currency to give you the underlying trading trend. I think the numbers which you're going to see will certainly demonstrate the strength and diversity of our brands in what I think we can all agree are uncertain (inaudible) markets.
Also at the end of my first bit of the presentation, I am going to spend some time reviewing our cost performance in the first half, which, as you'll see, I think is a particularly good story reinforcing our mantra of being a low cost operator.
But there is no doubting that all industries these days are operating in some very, very unusual markets. Both the credit crunch and the contraction in consumer sentiment is something that every business is having to contend with these days. At INM we have faced 2008 with sturdy determination knowing that our business model, whilst not immune to the vagaries of the economic cycle, is one that will continue to provide resilience against these economic downturns.
A strategy of global diversification, of having exposure to a growing array of multimedia platforms, maximizing our market-leading brands, constant attention to cost management are the ingredients that position our Group to benefit from any improvement in general market conditions. And as the first half results clearly demonstrate this has allowed us to aggressively face the economic downturn head on, whilst continuing to be expansive in our brand development, in our online development, in our reach for new markets and geographies, and thus deliver, we believe, the best in class earnings for our shareholders.
Now the first half of 2008 was a period, we believe, of some achievement. In a media market which is certainly lacking good news these days, we are naturally happy to be able to present a strong set of numbers to you this morning.
As you can see from this chart, Group revenue was up 3% reflecting an impressive and sturdy operating performance in each of our markets. More significantly, and in contrast to quite a lot of media companies these days, our total Group advertising was up 2.8%, as was our circulation which was up 2%. These strong performances in albeit changing market conditions coupled with lower exceptional charges has driven operating profit up 8.9%, a performance that is well ahead of our peer group. And netting it all down has delivered 31.1% increase in profits.
Most of you already know the size, scale and diversity of our Group, but it's worth reflecting on this one slide as I think it neatly summarizes what INM is all about. Today we're present in 22 countries and that is a figure that is growing. And in terms of geographic split, approximately 46% of our business originated from Australasia, 41% from Europe and 13% from Africa.
But not only are we geographically diversified by design and thus not reliant on any one single market for our Group's prospects, but we are importantly diversified across the three key platforms. Today 81% of our business is in the business of Publishing and related activities, 9% in Radio and 8% (sic - see presentation) in Outdoor, the sector that we are particularly keen on with a stand-out performance so far this year. The combination of these markets and the leading multimedia platforms means that each week the INM brands connect with over 100m consumers, making us one of the largest and most diverse communication networks.
If we now look at our first half operating performance in more detail, and again I want to focus you on the constant currency percentages as the truest measure of our operational management. And specifically if we look at the trading performance by class of business, you'll see that Publishing and Outdoor delivered good, solid revenue growth, whereas Australasian Radio contracted slightly due to some challenging markets there which happily have since shown some improvement, especially raising market share.
Overall, as I said earlier, revenues were up 3% and profits were up 2.1%. As I mentioned a couple of minutes ago, Outdoor was indeed the star performer, which was led by a very strong Australasian performance and of course the acquisition of Clear Channel Independent in Africa first half. Despite all the unfounded doom and gloom about newspapers these days, it is significant to note that our underlying Publishing revenues actually grew, despite the weak economic backdrop, reflecting the strength and diversity of our product portfolio and stronger pricing which more than offset the decline in volumes.
To get behind these numbers, on the next slide I'm going to take you through the breakout revenue growth by primary geographic division and by platform so that you can see the underlying revenue trends in our business in the first half. If you go down to the bottom right of the slide, to the total column there, the area shaded in grey, the total managed revenues grew by 3.3% led by Outdoor advertising.
If we just focus on our wholly-owned subsidiaries, circulation grew by 2%, total subsidiaries (inaudible) there. Circulation grew by 2%. Advertising within our Publishing division contracted slightly by 0.9%. Print and Distribution grew by 5.1%. Outdoor grew by 14.9%. And that figure reflects Clear Channel for the full six months in both [2007 and] 2008 underlying growth trend. Radio, as I mentioned a couple of minutes ago, fell by 3.9%.
If we then look at that on a country by country basis, and Donal's going to detail, give you some more commentary on the market performances, if we just look at the revenue performance up there, Australasia delivered 2.7% revenues growth. Ireland, despite what all the gloom sayers have been saying about the Irish economy, delivered a modest 0.5% revenue increase. South Africa was up 5.1%. United Kingdom a modest 1.3% contraction in revenue.
The slide also shows the contribution from our joint ventures and associates which showed like-for-like revenue growth 29.8%, most of which is attributable to APN, our Indian associate, referred to, which continues to show very strong growth in advertising in both its newspapers and its new outdoor division.
But today obviously everybody's rightly focused on the short term prospects for our advertising markets in 2008. And this slide confirms the Group delivered about 2.8% increase in advertising in the first half. If we...
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