21st Mar 2007 07:02
Independent News & Media PLC21 March 2007 PRELIMINARY RESULTS FOR THE YEAR ENDED 31ST DECEMBER 2006 GLOBAL OPERATIONS DRIVE STRONG 10.4% INCREASE IN GROUP PROFIT BEFORE TAX AND EXCEPTIONALS Dublin/London 21st March 2007: The Board of Independent News & Media PLC ('INM'or the 'Group') (ticker: INWS.I; INWS.L) today announced the Group's preliminaryresults for the year ended 31st December 2006. RESULTS 2006 2005 Change •m •m %Revenue 1,635.7 1,611.5 +1.5%Operating Profit Before Exceptionals 329.5 311.6 +5.7%Operating Margin 20.1% 19.3% +80bpsProfit Before Tax and Exceptionals 265.7 240.6 +10.4%Profit Before Tax * 250.1 272.5 -8.2%Profit After Tax Before Exceptionals 210.7 195.1 +8.0%Profit After Tax * 198.4 229.2 -13.4%Adjusted Earnings Per Share ** 17.43c 15.62c +11.6%Earnings Per Share * 15.67c 20.30c -22.8%Dividend Per Share 12.45c 10.75c +15.8% * 2005 includes a large once-off exceptional gain of €62.7 million on the sale of iTouch plc ** Diluted EPS, before exceptionals SUMMARY HIGHLIGHTS • Profit before tax and exceptionals up 10.4% to €265.7 million, bolstered by a particularly strong South African operating result. • Adjusted Earnings Per Share** up 11.6%, at 17.43 cent. • Revenues of €1,635.7 million, up 1.5% on 2005 (+3.1% in constant currency). This reflects underlying revenue growth in excess of 5% for both advertising and circulation within the Publishing division. • Operating profit before exceptionals of €329.5 million, up 5.7% on 2005 (+8.0% in constant currency terms), reflecting good performances from all divisions. • Record 20.1% operating margin, delivering on INM's stated objective to be the industry low cost operator. • Indian associate, Jagran Prakashan Limited ('JPL'), continues to thrive and recorded profit after tax growth of 205.8% for the 9 months ended 31st December 2006. • INM's asset base enhanced by further investment during the year including: - 100% acquisition of propertynews.com, the largest property website on the island of Ireland and Wholesale Newspaper Services ('WNS'), the major newspaper and magazine wholesale distribution company in Northern Ireland. - Entry into the outdoor and radio markets in India. - Expansion of online interests throughout the Group, including investments in Cashcade, Verivox, Truphone, sellmefree and APN finda. - New full-colour production facility in Yandina, Queensland, Australia. • Proposed 2006 final dividend up 18.6% to 8.30 cent per share. - OVERVIEW - Operating Profit Before Exceptionals increased by 5.7% (+8.0% in constantcurrency) to a record €329.5 million on the back of good performances from allregions, which drove the Operating Margin (before exceptionals) to a record20.1%, achieving the Group's stated medium-term target. Significantly, all operating divisions (publishing & online, radio and outdoor)achieved year-on-year profit growth in constant currency terms. INM's SouthAfrican performance was particularly noteworthy, surpassing all expectations andreporting operating profit growth of 32.1% on 2005. The Group's share of results from associates and joint ventures also grewstrongly, up 19.6% to €16.5 million, reflecting increased contributions from JPLin India and the Group's South African outdoor joint venture. Group Revenue increased by 1.5% (+3.1% in constant currency) to €1,635.7 millionin 2006, and significantly, all the Group's main geographic markets achievedrevenue growth in constant currency. This overall 1.5% revenue increase wasachieved notwithstanding adverse currency movements, the loss of certainwholesale distribution contracts in Ireland, and the disposal of the SecurityPrint business in Australasia. Both circulation and advertising revenues forthe Publishing division were up in excess of 5% each on the prior year (inconstant currency terms). Reflecting the Group's stated ambition to be the industry low cost operator,costs were tightly managed across all regions in 2006, with costs only up 0.5%(+1.9% in constant currency terms), despite revenue-driven and newsprint-relatedincreases. Exceptional Items accounted for a net charge of €15.6 million in 2006, comparedto a net exceptional gain of €30.5 million in 2005. The net charge of €15.6million in 2006 mainly related to employee restructuring costs in Australasia,Northern Ireland and Ireland, partly offset by gains on sale of assets. The netgain in 2005 was primarily due to the successful disposal of the Group'sinvestment in iTouch plc. Net Interest Costs reduced by 3.7% to €80.3 million, despite increased interestrates in the Eurozone, Australia and New Zealand. Stripping out exceptionals (including the 2005 €62.7 million iTouch plc disposalgain), Profit Before Tax increased by 10.4% to €265.7 million. Adjusted Earnings Per Share increased to 17.43 cent (+11.6%) due to the Group'sstrong operating performance and reduced interest costs. The Group continued to develop and expand its geographically-diversifiedportfolio of leading media assets via several bolt-on and strategic investmentsduring the year. February saw the successful initial public offering of JPL, ofwhich INM owns 20.8%, on the Mumbai Stock Exchange. In May, INM acquiredpropertynews.com, the largest online property website on the island of Ireland.In October, INM completed the acquisition of WNS, Northern Ireland's majornewspaper and magazine wholesale distribution company. During the year, theGroup further expanded its online offering with investments in Cashcade (20%) -a UK-operated online bingo and gaming company; Verivox (49%) - a European onlineutility price comparison business; Truphone (17%) - a mobile VoIP operator inthe UK and US; together with a number of online joint ventures in Australasia. - DIVIDEND - Reflecting the good underlying operating performance, a robust balance sheet andthe strong prospects for the Group's future, the Board is recommending a finaldividend of 8.30 cent per share, up 18.6% on 2005. This brings the totaldividend for the year to 12.45 cent per share, an increase of 15.8% on 2005. This final dividend will be paid on 15th June 2007 to ordinary shareholdersregistered at the close of business on 20th April 2007 and a scrip dividend willalso be available. - OPERATIONS REVIEW - AUSTRALASIA APN News & Media Ltd ('APN'), in which INM has a 41.6% shareholding, is listedon the Australian and New Zealand Stock Exchanges with a current marketcapitalisation of €1.6 billion. Operating Profit grew 1.1% to €181.1 million (up 6.8% in constant currency)producing a record 24.4% operating margin, up 140bps on the prior year. Revenue contracted by 4.7% to €741.6 million in 2006, primarily due to adversecurrency movements, the sale of the Security Print division and weakness incertain advertising markets. On a like-for-like basis, revenue actuallyincreased by 2% with the advertising market of Queensland again recording goodgrowth, partially offset by the markets of Auckland, Sydney and Melbourne whichwere flat to negative. The Regional Publishing division performed well, growing EBIT by 8% in localcurrency, helped by the strong advertising support from the local economieswithin Queensland and notably strong property advertising in the New Zealanddivision. The New Zealand National Publishing division experienced a weak performance fromits commercial printing division and a generally soft advertising market formost of 2006. However (excluding commercial printing), strong cost management inthe market-leading The New Zealand Herald, coupled with good market gains forthe Herald on Sunday (launched in October 2004) produced an overall 3% growth inEBIT in constant currency for the division. The Online division continued its rapid expansion with a number of exciting newprojects, including joint ventures with finda (New Zealand search directory) andthe Packer-owned ACP (sellmefree classified listings). In addition, APNestablished its job portal, search4jobs, as the clear number two in the onlinejobs market in Auckland. The New Zealand Herald website continues to be the mostpopular news website in New Zealand, attracting more than 500,000 uniquevisitors and generating more than 6.2 million page impressions each week, andgrew its online display advertising by 57%. The Radio division delivered a solid result in the face of ever-competitivemarket conditions, producing full year EBIT growth of 3.3% in local currency.In Australia, revenue actually contracted by 3.3%, but EBIT grew by 6.2%,reflecting excellent cost management and ongoing programming enhancements, whichproduced good ratings and agency market share growth. In New Zealand, revenuesadvanced by 3.8% and The Radio Network maintained its market leadershipposition. The Outdoor division (including associates) grew EBIT by an impressive 41%,following the cessation of a number of uneconomic contracts, the successfulretention of key contracts and gains in new business. In Australia, the Outdoormarket grew by 6.5% in 2006 and APN maintained its market leadership in all themain categories. In New Zealand, APN Outdoor also enjoyed a positive yeardespite a slowing national economy. In Asia, strong local economies contributedto the improved results for each of APN's businesses in Hong Kong, Malaysia andIndonesia. IRELAND Operating profit grew by 4.2% to €94.4 million in 2006, pushing operatingmargins up by 77bps to 23.3%. Revenue grew by 0.7% to €404.7 million in 2006, with strong gains in advertisingand circulation, partly offset by the loss of some high revenue, but low margin,wholesale distribution contracts. Advertising revenue increased by 9.3%, reflecting strong run-of-paper colourrevenues, driven by government and financial advertising, along with notablebuoyancy in the recruitment, property, retail and motor categories. Inaddition, magazine revenues grew strongly on the back of good readershipnumbers. In the most competitive newspaper market seen in years, circulation revenueincreased by 2.6%, driven by good sales volumes and cover price increases forthe market-leading Irish Independent, Sunday Independent and Sunday World.Ireland's number one quality daily newspaper, the Irish Independent, recorded ayear-on-year increase in circulation volumes to 163,732 copies per day in theJuly to December 2006 period. Ireland's largest selling newspaper, the SundayIndependent, also grew its circulation volumes to 287,750 for the period July toDecember 2006, and the recently released JNRS industry readership researchconfirmed its position - once again - as the nation's best read newspaper, withover 1 million readers. The ongoing success of the Sunday World, Ireland's mostread and biggest selling tabloid newspaper, was again underlined by its salesincrease to 278,395 in the period July to December 2006, a 2.2% year-on-yearincrease. Both the Evening Herald and the group's joint venture, the Irish DailyStar, also reported good circulation performances, maintaining or slightlygrowing their ABC circulation volumes in the second half. The group's daily free newspaper, herald am, showed impressive gains inadvertising revenue and after 18 months remains the Dublin region's largest freenewspaper, with recent audited figures confirming a verified free distributionof over 84,000 copies daily, exceeding Metro by more than 7,000 copies. In its inaugural full year of operation, the group's online recruitment site,LoadzaJobs.ie, established itself as Ireland's number two employment site andcontinues to show impressive revenue growth. The full rollout ofpropertynews.com in the Republic of Ireland is firmly on track and its expansionacross the island of Ireland has been extremely well received by both estateagents and consumers. SOUTH AFRICA Operating profit grew by 32.1% to €55.2 million, driving the operating margin to21.0%, up an impressive 220bps on the prior year. Revenue grew by 18.3% to €262.8 million in 2006 (+11.4% in constant currency),with very strong gains in advertising and circulation revenues in all regions.The ongoing buoyancy of the South African economy coupled with an expansion inthe fast-growing new, middle-class consumer base, in particular, drove strongactivity in retail, motors and the property sectors in all regional markets(Cape, Gauteng and KwaZulu Natal). Individually, all markets producedimprovements in revenues, trading profits and operating margins. Newspaper advertising revenue increased by 12.2% on the prior year, with alltitles either maintaining or improving their already strong market shares inboth the display and classified advertising markets. Circulation copy sales of each of the group's main 15 titles improvedyear-on-year - pushing circulation revenue up by 8.9% on the prior year. Mostnotably, circulation growth of Isolezwe - the group's Zulu language newspaper -continued in 2006, achieving an average daily sale of over 92,000 copies in thesecond half (compared to 86,000 copies for the comparable period). In addition,the group's weekly title, Post, aimed at the Indian market, grew its sale by4.8% on the prior year. Cape Town's newest, populist tabloid newspaper, DailyVoice (launched in March 2005 to cater for the emerging mass-market) continuesto prosper and gain sales. Investment in online activities continues to good effect and the iol.co.zaportal is South Africa's dominant news, current affairs and classified site.It, together with the group's individual newspaper titles and other niche sites,now delivers well over two million unique visitors per month. The group's Magazine division (Conde Nast Independent Magazines) traded well,with Glamour, in only its second full-year of operation, continuing to beatexpectations in both copy sales and profits and it is now the second-largestselling women's magazine in South Africa. This division is now positioned forfurther expansion and opportunities are being actively pursued. The Group's 50%-owned Outdoor advertising business, Clear Channel Independent,had another good year in both South Africa and across its diverse Africanoperations, delivering net profit growth of 16.8%. UNITED KINGDOM Operating Profit was marginally down (€0.8 million) on the prior year primarilydue to the weak advertising market in Northern Ireland - which prevailed untilthe end of Quarter 3 2006 - and continuing investment in supporting the group'sproducts and brands at a time of significant change in the market place. Thismodest contraction produced an operating margin of 6.3%. Revenue grew by 8.4% to €226.6 million in 2006, reflecting continuing coverprice increases, additional contract print revenues in Belfast and additionalrevenue from the two acquisitions made during 2006, propertynews.com in May andWNS in October. Despite the generally poor advertising market - particularly in the first half -overall UK group advertising revenues were actually up 0.5% in constantcurrency. The Independent continued to buck a weak market trend for nationaltitles and actually reported a 2.2% growth in advertising revenue. The BelfastTelegraph, although down 3.2% year-on-year in advertising, encouraginglyreturned to growth in the second half of 2006 and continues to show good growthin the initial weeks of 2007. Both Independent titles continued to perform strongly, with The Independentachieving its highest market share for over ten years in the recent February2007 ABC figures. Circulation revenues were up 8.7% on 2005, driven by coverprice increases and strong circulation figures for The Independent on Sunday inparticular, which had the best performance of any national newspaper in 2006.The latest National Readership Survey figures for 2006 again showed impressivegrowth in readership, with The Independent up 8.2% to 763,000 readers, thehighest uplift in the market and The Independent on Sunday up 4.3% year-on-year. Belfast's contract print division, now the largest on the island of Ireland anda major centre of production for many of the Group's Republic of Ireland titles,performed strongly and has further expanded with the addition of a new majorfull-colour Goss FPS production facility in Newry, which will be fullyoperational in Autumn 2007, and which will cater for both internal and externalprint contracts. Online revenues continue to grow strongly, led by a very good performance fromthe independent.co.uk website, which was up 65%. The focus has continued on reducing the UK cost base further through operationalefficiencies, improved systems and outsourcing across all areas of the business. 2006 saw a major cost restructuring of the Belfast operations, resulting insignificant headcount and cost reductions across all publishing functions andthe outsourcing of back-office processing functions. The recently announcedrestructuring and investment in new editorial systems in London, Belfast andDublin will enable further cost efficiencies going forward for the Group. INDIA JPL, publisher of India's largest selling newspaper, Dainik Jagran, wassuccessfully listed on the Mumbai Stock Exchange in February 2006. This followsINM's initial investment in June 2005 at a cost of €28.9 million, which today isvalued at approximately €80 million. The inherent strength of the Dainik Jagran franchise, allied to theextraordinary growth of the Indian economy, produced a year-on-year increase of172.1% in Profit Before Tax to €15.0 million (100%) for the nine months ended31st December 2006 (JPL's financial year-end is 31st March). In that period, JPL reported an excellent 27.3% increase in total revenues,predominantly from increased advertising revenue (up 26.0%) and increasedcirculation revenue (up 6.7%). In addition to the core Dainik Jagran brand, JPL expanded its publishingoperations through 2006, with the launch of both City Plus and i-next. i-next,which was launched in Lucknow and Kanpur in mid-December, is the first bilingualnewspaper in India and targets urban professionals and consumers in the 18-35age bracket. i-next will be launched in 5 more cities in northern India during2007. City Plus is an English language infotainment newspaper - launched inSeptember - and is now published in 4 different locations around Delhi andnorthern India. Outdoor advertising also performed very well, accounting for 2.5% of totalrevenues for the nine months, even though the Outdoor division was onlyestablished in mid-2006. JPL's outdoor advertising division now has in excessof 700 sites across the leading markets of northern India. INM also made a strategic investment in the fast-growing radio sector in India,taking a 20% stake (the maximum currently allowable for foreign investors) inRadio Mantra. The balance is owned by the Gupta family, who are the other majorshareholders in JPL. Last month, Radio Mantra was launched in the Hissar marketand plans are well advanced to launch a further 7 stations over the next threemonths. - 2007 DEVELOPMENTS - CONSORTIUM OFFER TO ACQUIRE APN In February 2007, INM, in conjunction with Providence Equity Partners ('Providence') and The Carlyle Group ('Carlyle') (together the 'Consortium') madean all-cash offer of A$6.10 per share to purchase, by way of a Scheme ofArrangement, the entire issued share capital of APN (the 'Transaction'). Theboard of APN has since recommended this offer to its shareholders and a meetingwill be held where APN shareholders will vote on the proposed Scheme. TheTransaction is also subject to the approval of INM shareholders at anExtraordinary General Meeting. Full particulars of the Transaction will be setout in documents to be mailed to INM shareholders in advance of that meeting. Assuming the Transaction is completed, INM would hold a 35% economic interest inthe Consortium - which it will account for as an associate - with Providence at37.5% and Carlyle at 27.5%. To reflect the continued primary role of INM withinthe operations of APN, INM would hold the largest voting interest (c. 39.3%) andwould also have preferential rights. The Board of INM believes that the Transaction presents a number ofopportunities and benefits for the INM Group. It monetises a valuable investmentin APN at a time when the value of Australian media assets is strong, whichshould result in INM receiving net proceeds in excess of €350 million. Thesefunds are intended to be used to maximise shareholder returns via theacceleration of the Group's expansion in its global markets and a furtherstrengthening of the Group's balance sheet. On completion of the Transaction,APN would be de-listed from the Australian and New Zealand Stock Exchanges. - OUTLOOK - Commenting on these results, Sir Anthony O'Reilly, chief executive, made thefollowing outlook statement: "The Group's singular focus on producing the highest-quality brands, productsand channels relevant to its consumers in 10 major international markets,provides its advertisers with the best means of connecting with their targetaudience. It continues to differentiate INM from both its peers and other mediaplatforms. "The Group's ongoing investment in its brands and its utter determination to bethe low cost producer has enabled it to report yet another excellent performancein 2006, with improved margins, while producing a range of products that arebest in class in all the markets in which they operate. Significantly, alloperating divisions (publishing & online, radio and outdoor) achievedyear-on-year growth in their markets. "The positive trend in 2006 has continued into 2007. Given a continuation ofcurrent trading conditions, the Board remains committed to its stated objectiveof double-digit earnings growth." Note Regarding Forward-Looking Statements Some statements in this announcement are forward-looking. They represent ourexpectations for our business, and involve risks and uncertainties. We havebased these forward-looking statements on our current expectations andprojections about future events. We believe that our expectations andassumptions with respect to these forward-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 performancemay differ materially from those expressed or implied by such forward-lookingstatements. These forward-looking statements speak only as of the date of thisdocument and no obligation is undertaken, save as required by law or by theListing Rules of the Irish Stock Exchange and/or the UK Listing Authority toreflect new information, future events or otherwise. ENDS 21st March 2007 For further information, please contact: Gavin O'Reilly Chief Operating Officer +353 1 466 3200Donal Buggy Chief Financial Officer +353 1 466 3200 Media Pat Walsh Rory Godson Paul KearyMurray Consultants (Dublin) Powerscourt Media (London) Financial Dynamics (New York)Tel: +353 1 498 0300 Tel: +44 207 236 5619 Tel: +1 212 850 5600 Investors and Analysts Mark Kenny/ Jonathan NeilanK Capital Source (Dublin)Tel: +353 1 631 5500Email: [email protected] ABOUT INDEPENDENT NEWS & MEDIA PLC - CORPORATE PROFILE - INM is a leading international newspaper and communications group, with its maininterests in Australia, India, Ireland, New Zealand, South Africa and the UnitedKingdom. Spanning four continents, 10 major markets and 21 individualcountries, INM has market-leading newspaper positions in Australia (regional),India, Ireland, New Zealand and South Africa. In the United Kingdom, itpublishes the flagship national title, The Independent, as well as being thelargest newspaper group in Northern Ireland. Across these regions, the Group publishes over 180 newspaper and magazinetitles, delivering a combined weekly circulation of over 31 million copies witha weekly audience of over 100 million consumers and includes the world's largestread newspaper, Dainik Jagran, in India. The Group has established a strong andgrowing online presence, with over 100 editorial and classified sites. INM is the largest radio operator - over 130 stations and an audience exceedingfive million people - and outdoor advertising operator in Australasia and alsohas leading outdoor advertising positions in Hong Kong, Malaysia, India,Indonesia and across Africa. The Group has grown consistently over the last 15 years by building ageographically unique and diverse portfolio of market-leading brands, and todaymanages gross assets of €3.9 billion, revenue of €1.8 billion and employsapproximately 9,800 people worldwide. Further information is available on theGroup's website www.inmplc.com. INDEPENDENT NEWS & MEDIA PLC PRELIMINARY ANNOUNCEMENT Group Income Statement Year ended Year ended 31 December 31 December 2006 2005 Notes •m •m Revenue 1,635.7 1,611.5 Operating profit before exceptional items 329.5 311.6 Exceptional items 4 (15.6) 30.5 Operating profit after exceptional items 313.9 342.1 Share of results of associates and joint ventures 16.5 13.8 Net finance costs: 5 - Interest receivable and similar income 12.0 17.3 - Interest payable and similar charges (92.3) (100.7) Profit before taxation 250.1 272.5 Taxation (51.7) (43.3) Profit for the year 198.4 229.2 Attributable to:Minority interests 79.5 77.4Equity holders of the parent 118.9 151.8 198.4 229.2 Earnings per ordinary share (cent) - Basic 6 15.67c 20.30c - Diluted 6 15.60c 20.14c Group Statement of Recognised Income and Expense Year ended Year ended 31 December 31 December 2006 2005 •m •m (as restated)Items of income/(expense) recognised directly in equityCurrency translation adjustments (93.4) 86.8Retirement benefit obligations:- Actuarial gains/(losses) 25.0 (31.1)- Movement on deferred tax asset (1.6) 4.8Gains relating to cash flow hedges 4.2 0.7 Net (expense)/income recognised directly in equity (65.8) 61.2 Profit for the period 198.4 229.2 Total recognised income and expense for the period 132.6 290.4 Attributable to:Minority interests 46.1 121.3Equity holders of the parent 86.5 169.1 132.6 290.4 Changes in Equity 2006 2005 •m •m (as restated) At 1 January 751.4 621.0Effect of change in accounting policy (note 1) - (18.7) At 1 January as restated 751.4 602.3Issue of share capital 45.6 63.4Share based payment 2.8 1.6Dividends (including minority interests) (149.5) (139.5)Buyback of shares held by minority (64.7) (66.8) Total recognised income and expense for the period 132.6 290.4 At 31 December 718.2 751.4 Group Balance Sheet 31 Dec 2006 31 Dec 2005 31 Dec 2006 31 Dec 2005 (IFRS Balance Sheet) (Note 2) •m •m •m •mAssets (as restated) (as restated)Non-Current AssetsIntangible assets 1,800.5 1,842.1 2,863.6 2,950.5Property, plant and equipment 371.4 363.1 371.4 363.1Investments in associates and joint 83.0 60.0 118.9 95.9 ventures Deferred tax assets 90.8 96.7 90.8 96.7Available-for-sale financial assets 26.2 15.7 26.2 15.7Derivative financial instruments - 9.4 - 9.4Trade and other receivables 42.8 54.4 42.8 54.4 2,414.7 2,441.4 3,513.7 3,585.7 Current AssetsInventories 15.9 21.9 15.9 21.9Trade and other receivables 266.3 264.2 266.3 264.2Current income tax assets 15.5 17.1 15.5 17.1Derivative financial instruments 1.8 - 1.8 -Cash and cash equivalents 104.5 132.8 104.5 132.8 404.0 436.0 404.0 436.0 Total Assets 2,818.7 2,877.4 3,917.7 4,021.7 LiabilitiesCurrent LiabilitiesTrade and other payables 287.6 266.1 287.6 266.1Current income tax liabilities 6.1 16.1 6.1 16.1Compound financial instruments 120.0 - 120.0 -Borrowings 59.3 64.7 59.3 64.7Derivative financial instruments 2.0 6.6 2.0 6.6Provisions for other liabilities and 31.2 27.0 31.2 27.0charges 506.2 380.5 506.2 380.5 Non-Current LiabilitiesBorrowings 1,086.4 1,045.2 1,086.4 1,045.2Compound financial instruments 88.7 234.8 88.7 234.8Retirement benefit obligations 126.9 167.3 126.9 167.3Deferred taxation liabilities 282.6 292.3 24.5 25.7Other creditors 7.7 2.2 7.7 2.2Provisions for other liabilities and 2.0 3.7 2.0 3.7charges 1,594.3 1,745.5 1,336.2 1,478.9 Total Liabilities 2,100.5 2,126.0 1,842.4 1,859.4 Net Assets 718.2 751.4 2,075.3 2,162.3 EquityCapital and Reserves Attributable to Company's Equity HoldersShare capital 229.3 225.9 229.3 225.9Other reserves 329.9 325.5 1,346.3 1,378.4Retained earnings (360.2) (378.4) (167.8) (185.5) 199.0 173.0 1,407.8 1,418.8 Minority interests 519.2 578.4 667.5 743.5 Total Equity 718.2 751.4 2,075.3 2,162.3 Group Cash Flow Statement Year ended 31 December Notes 2006 2005 •m •m Net cash generated from operations (before restructuring payments) 354.0 350.3Restructuring payments (34.1) (20.2)Net cash generated from operations 319.9 330.1Income tax paid (51.7) (36.8) Net cash generated by operating activities 8 268.2 293.3 Cash flows from investing activitiesPurchases of property, plant and equipment (62.9) (58.7)Proceeds from sale of property, plant and equipment 21.6 21.4Purchases of intangible assets (14.1) (18.1)Purchases of subsidiary undertakings (18.4) -Cash acquired with subsidiary undertakings 2.7 -Proceeds from sale of subsidiary undertaking 19.2 -Purchases of associates and joint ventures (16.0) (28.9)Proceeds from sale of associate - 96.9Advances to joint ventures and associates - (4.1)Loans repaid by joint ventures and associates 8.0 10.8Purchases of available-for-sale financial assets (14.3) (4.7)Proceeds from sale of available-for-sale financial assets 4.2 -Interest received 8.6 14.8Dividends received 6.3 4.9 Net cash (used in)/received from investing activities (55.1) 34.3 Cash flows from financing activitiesProceeds from issuance of ordinary shares 14.0 8.8Debt issue costs (0.8) (4.1)Interest paid (80.2) (88.7)Proceeds from borrowings 206.4 611.9Repayment of borrowings (107.1) (644.6)Dividends paid to Company's shareholders (76.3) (65.2)Payment of finance lease liabilities (41.2) (15.1)Issue of equity minority interests 7.4 3.7Dividends paid to minority interests (64.9) (54.8)Purchases of equity minority interests (83.7) (83.6) Net cash used in financing activities (226.4) (331.7) Net decrease in cash and bank overdrafts (13.3) (4.1)Cash and bank overdrafts at beginning of the year 127.6 123.8Exchange (losses)/gains on cash and bank overdrafts (13.6) 7.9 Cash and bank overdrafts at end of year 100.7 127.6 NOTES TO THE PRELIMINARY ANNOUNCEMENT 1. Basis of Preparation of Financial Information under IFRS In accordance with EU Regulations, the Group is required to present its annualconsolidated financial statements for the year ended 31 December 2006 inaccordance with EU endorsed International Financial Reporting Standards ("IFRS")and IFRIC interpretations and with those parts of the Companies Acts, 1963 to2006 applicable to companies reporting under IFRS. The preliminary results for the year to 31 December 2006 have been prepared inaccordance with the Listing Rules of the Irish Stock Exchange. The Group'sfinancial information has been prepared in accordance with the accountingpolicies which were set out in the Group's 2005 consolidated financialstatements except for the change in accounting policy in relation to employeebenefits noted below. The consolidated financial statements have been preparedunder the historical cost convention, except for certain fixed assets where thefair value was regarded as deemed cost on transition to IFRS and the measurementat fair value of certain financial investments. In 2006, the Group has adopted the amendment to International AccountingStandard No. 19 "Employee Benefits" (IAS 19 - Revised). A prior year adjustmentarose on the implementation of IAS 19 - Revised. Previously, in relation to itsretirement benefit obligations, the Group applied the "corridor approach" toactuarial gains and losses arising after the date of transition to IFRS on itsdefined benefit post-employment schemes. The "corridor approach" refers to athreshold being the higher of 10% of the fair value of the plan assets or 10% ofthe present value of the defined benefit obligations at the end of the previousreporting period. Actuarial gains and losses at the end of the previousreporting period in excess of this threshold are recognised as income or expenseover the average remaining service lives of employees participating in the plan.Other than these, the actuarial gain or loss arising was not recognised. Inapplying IAS 19 - Revised, the Group is choosing the option to recognise allactuarial gains and losses in the period that they occur. Such gains and losseswill now be recognised in the Statement of Recognised Income and Expense. TheGroup believes that the election to recognise all the actuarial gains and lossesimmediately more fully reflects the net asset position of the Group. As a resultof applying IAS 19 - Revised, the Group has restated its results for the yearended 31 December 2005 with the following consequences: • An amount of €26.3 million is reflected as a charge in the Statement ofRecognised Income and Expense which represents the actuarial gains and losses(net of deferred taxation) arising in the year ended 31 December 2005. In theBalance Sheet this €26.3 million results in an increase in retirement benefitobligations of €31.1 million and an increase in deferred tax assets of €4.8million. • An amount of €18.7 million is reflected as a charge to opening retainedearnings as at 1 January 2005 which reflects the previously unrecognisedactuarial gains and losses (net of deferred taxation) as at 1 January 2005. Inthe Balance Sheet this €18.7 million results in an increase in retirementbenefit obligations of €20.8 million and an increase in deferred tax assets of€2.1 million. Profit and cashflows for the year ended 31 December 2005 remain aspreviously reported. Consistent with prior years, the full financial statements for 2006 and theaudit report thereon will be finalised and circulated to shareholders at least20 working days before the AGM. NOTES TO THE PRELIMINARY ANNOUNCEMENT (Continued) 2. Value of Mastheads - Supplementary Information The "IFRS Balance Sheet" reports the carrying value of newspaper mastheads attheir acquired cost; where these assets have been acquired through a businesscombination, cost will be the fair value allocated in acquisition accounting.The value of internally generated newspaper mastheads or post-acquisitionrevaluations are not permitted to be recognised in the IFRS Balance Sheet and,as a result, no value for certain of the Group's internally generated newspapermastheads (e.g. the three main Irish titles, the Irish Independent, the EveningHerald and the Sunday Independent) is reflected in the IFRS Balance Sheet. In the opinion of the Directors, the presentation of the value of both acquiredand internally generated mastheads is useful information for Shareholders, as itmore accurately reflects the value of the Group's newspaper mastheads. As aresult, the Group has presented an "Alternative Balance Sheet" which includesall of the Group's newspaper mastheads at their revalued amounts, includingthose mastheads that have been created internally with a correspondingadjustment to equity. At 31 December 2006, the Group's newspaper mastheads had a valuation of €2,372.6million (31 December 2005: €2,479.3 million) compared to a carrying value underIFRS of €1,309.5 million (31 December 2005: €1,370.9 million). All newspapermastheads are regularly valued/revalued by expert independent valuers, GrantSamuel & Associates Pty Limited. The most recent independent valuation wasundertaken as at 31 December 2004. No provision has been made for Deferred Tax in respect of the Group's intangibleassets (both internal and acquired) in the Alternative Balance Sheet as theGroup believes this deferred tax liability will not arise because it is theBoard's intention to retain these assets. In accordance with the requirementsof IFRS, deferred tax of €258.1 million (31 December 2005: €266.6 million) hasbeen provided in respect of the Group's intangible assets in the IFRS BalanceSheet. NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued) 3. Segmental Report By Geographical Segment Revenue Operating Profit 2006 2005 2006 2005 •m •m •m •m Ireland 404.7 401.7 94.4 90.6United Kingdom 226.6 209.1 14.3 15.1South Africa 262.8 222.2 55.2 41.8Australasia 741.6 778.5 181.1 179.1Common costs - - (15.5) (15.0) 1,635.7 1,611.5 329.5 311.6 Exceptional items:Ireland (8.1) (5.1)United Kingdom (13.1) 40.6South Africa - (0.6)Australasia (0.4) -Common/Unallocated 6.0 (4.4) (15.6) 30.5 Operating profit after exceptional items 313.9 342.1 By Class of Business Revenue Operating Profit* 2006 2005 2006 2005 •m •m •m •mPrinting, publishing, online, distribution and commercial printing 1,355.1 1,320.9 281.9 270.9Radio 144.6 152.8 49.7 50.3Outdoor advertising 136.0 137.8 13.4 5.4Common costs - - (15.5) (15.0) 1,635.7 1,611.5 329.5 311.6 * before exceptional items NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued) 4. Exceptional Items Exceptional items are those items of income and expense that the Group considersare material and/or of such a nature that their separate disclosure is relevantto a better understanding of the Group's financial performance. 2006 2005 •m •mIncluded in profit before taxation are the following: Gain on sale of iTouch plc, net - 62.7 Gain on sale of assets (i) 18.2 11.4 Restructuring charges and impairment of property, plant, equipment and other assets (ii) (33.0) (27.2) Product launch costs, development and other promotional expenditure (iii) (6.0) (16.4) Gain on foreign exchange contracts, net of other exceptional items (iv) 5.2 - (15.6) 30.5 Share of associates & joint ventures exceptional items - 1.4 Total exceptional items (15.6) 31.9 (i) Gain on disposal of investments and properties during 2006, primarilyarising in Australasia. (ii) 2006 charge arises from the restructuring of operations in Ireland,Northern Ireland and within Australasia, and includes impairment chargesrelating to the write down of property, plant, equipment and other assets totheir recoverable amount across the Group. (iii) Relates mainly to online development costs in Australasia and Irelandand also to other promotional expenditure incurred in Ireland and the UnitedKingdom during 2006. (iv) Gain on foreign exchange forward contracts related to the return of cashfrom South Africa, net of other exceptional costs. NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued) 5. Net Finance Costs 2006 2005 •m •m Interest receivable and similar income (12.0) (17.3) Interest payable and similar charges 92.3 100.7 Net finance costs 80.3 83.4 6. Earnings Per Share 2006 2005 •m •m Profit attributable to Independent News & Media PLC 118.9 151.8Exceptional items (note 4) 15.6 (31.9)Tax credit on exceptional items (3.3) (2.2)Minority interest share of exceptional items 1.6 -Profit before exceptional items 132.8 117.7 Weighted average number of shares in issue during the year 758,880,670 747,883,265Effect of:Conversion of options 3,140,113 5,742,439Diluted number of shares 762,020,783 753,625,704 Basic earnings per share 15.67c 20.30c Basic earnings per share before exceptionals 17.50c 15.74c Diluted earnings per share 15.60c 20.14c Diluted earnings per share before exceptionals 17.43c 15.62c Basic earnings per share is calculated by dividing the earnings attributable toordinary shareholders by the weighted average number of ordinary shares in issueduring the period. For diluted earnings per share, the weighted average number of ordinary sharesin issue is adjusted to assume conversion of all potential dilutive options overordinary shares and dilutive cumulative exchangeable preference shares. Thecumulative exchangeable preference shares were not dilutive in either 2006 or2005. Basic and diluted earnings per share before exceptionals are presented in orderto give a better understanding of the Group's financial performance. NOTES TO THE PRELIMINARY ANNOUNCEMENT (continued) 7. Dividends - Approved and Paid 2006 2005 •m •mFinal dividend for the year ended 31 December 2005 of €0.07 (2004: €0.06)per share 53.1 44.7 Interim dividend for the year ended 31 December 2006 of €0.0415 (2005: •0.0375) per share 31.5 28.2 84.6 72.9 The Directors are proposing a final dividend in respect of the year ended 31December 2006 of €0.083 per share (€63.5 million). This proposed dividend issubject to approval by the shareholders at the AGM. 8. Reconciliation of Operating Profit to Net Cash Generated by Operating Activities 2006 2005 •m •m Operating profit before exceptional items 329.5 311.6Depreciation/amortisation 38.3 43.0Non-cash share option charge 2.8 1.6Cash exceptional items (0.8) (16.4)Unrealised foreign exchange movements (9.7) (4.9) Cash generated from operations before changes in working capital andprovisions 360.1 334.9Decrease/(increase) in inventories 2.3 (3.8)(Increase)/decrease in short term and medium term debtors (8.7) 3.9Increase in short term and long term creditors 6.8 14.5Increase in provisions (excluding restructuring payments) 1.9 1.0Retirement benefit obligations (8.4) (0.2) Net cash generated from operations (before restructuring payments) 354.0 350.3Restructuring payments (34.1) (20.2) Net cash generated from operations 319.9 330.1Income tax paid (51.7) (36.8) Net cash generated by operating activities 268.2 293.3 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Independent News & Media