19th Sep 2006 07:03
Independent News & Media PLC19 September 2006 INTERIM RESULTS FOR THE SIX MONTHS ENDED 30th JUNE 2006 BROAD BASED GROWTH DRIVES 10.8% INCREASE IN PROFIT BEFORE TAX AND EXCEPTIONALS Dublin/London 19th September 2006: The Board of Independent News & Media PLC ('INM' or the 'Group') (ticker: INWS.I; INWS.L) today announced the Group'sinterim results for the six months ended 30th June 2006. RESULTS 2006 2005 Change •m •m %Revenue 796.7 769.2 +3.6%Operating Profit Before Exceptionals 147.9 141.0 +4.9%Operating Margin 18.56% 18.33% +23bpsProfit Before Tax and Exceptionals 114.1 103.0 +10.8%Profit After Tax Before Exceptionals 91.7 84.4 +8.6%Profit After Tax After Exceptionals* 87.3 124.1 -29.7%Adjusted Earnings Per Share ** 7.43c 6.71c +10.7%Earnings Per Share* 6.89c 12.09c -43.0%Interim Dividend Per Share 4.15c 3.75c +10.7% * 2005 includes large once-off exceptional gain of €62.7 million onsale of iTouch ** Diluted EPS, before exceptional items SUMMARY HIGHLIGHTS • Record results with all regions contributing to growth inboth revenues and profits. • Double-digit adjusted EPS (like-for-like, excludingexceptionals) growth of 10.7% to 7.43c. • Better than expected Group circulation revenue growth of5.5% driven by cover price increases, reflecting the strength of INM's franchisein growth markets. • Strong underlying trading performances across the Group,especially South Africa, delivered a 4.9% improvement in Operating Profit BeforeExceptionals. • Operating margin increased to 18.56% reflecting growth inrevenues and effective cost management. • Broad based growth drives 10.8% increase in profit beforetax and exceptionals. • Interim dividend up 10.7% to 4.15c per share, reflectingthe strong half year operating performance and confidence in the Group's abilityto sustain superior earnings growth. • Excellent performance from the Group's recently listedIndian investment, Jagran Prakashan Limited ('JPL') (20.8% owned), with furtherexpansion in Indian outdoor now taking place. A number of Indian radio licencesalso recently secured. • Strong online performance, with portfolio enhanced by theacquisition of 100% of PropertyNews.com, the largest online property website onthe island of Ireland, and the acquisition of 20% of Cashcade Limited, a leadingUK online gaming company. - OUTLOOK - Commenting on these results, Sir Anthony O'Reilly, Chief Executive, made thefollowing outlook statement: "INM's geographically diversified portfolio of market-leading assets, acrossdiverse multi-media platforms, continues to underpin INM's clear and compellinginternational growth strategy. "With INM's ongoing focus on product innovation, its stated policy to be theindustry's low cost operator and its strong spread of assets worldwide, theBoard is confident of reporting yet another year of superior earnings growth for2006, in line with current market expectations. "This performance and these prospects continue to distinguish the Group from itsinternational peers." - OVERVIEW - Revenue increased by 3.6% to €796.7 million. This growth was primarily drivenby the Publishing division (+4.2%), with good underlying increases in bothcirculation (+5.5%) and advertising (+3.8%) revenues. Operating Profit Before Exceptionals increased by 4.9% to €147.9 million, withthe operating margin increasing from 18.33% in the prior corresponding period to18.56% this period. Stripping out exceptionals (including the one time benefit of the €62.7 millionexceptional gain from the sale of iTouch in 2005), underlying Profit Before Taxincreased by 10.8% to €114.1 million. Net Interest Costs reduced by 3.8% to €40.1 million, reflecting the benefit ofthe successful refinancing of the Group's core syndicated bank facilitycompleted in September 2005. Exceptional Items accounted for a net charge of €5.5 million in the 6 months toJune 2006, compared to a net exceptional gain of €37.7 million in 2005. The netcharge of €5.5 million in 2006 mainly related to employee restructuring costs inNorthern Ireland, whereas the net gain in 2005 was primarily due to thesuccessful disposal of the Group's investment in iTouch plc. Adjusted Earnings Per Share increased to 7.43 cent (+10.7%) due to the Group'sstrong operating performance and reduced interest costs. In February 2006, the Group's Indian investment, JPL, completed a successfulinitial public offering of shares on the Mumbai Stock Exchange. Also inFebruary 2006, the Group acquired a 20% investment in Cashcade Limited, aleading UK online gaming company, which owns the getminted.com gaming portal,providing services ranging from casino to bingo. In May 2006, the Groupcompleted the acquisition of 100% of PropertyNews.com, the largest onlineproperty website on the island of Ireland. Already the clear market-leader inNorthern Ireland, PropertyNews.com is rapidly expanding into the Republic ofIreland, with a very compelling low cost, high volume advertising modelcomplementing our printed products. Subsequent to half year-end, the Groupagreed to acquire Wholesale Newspaper Services Limited (WNS), Northern Ireland'smajor newspaper and magazine distribution company. This acquisition is subjectto regulatory approval. The Board is recommending an interim dividend of 4.15 cent per share, anincrease of 10.7% on 2005, reflecting the strong half year operating performanceand confidence in the Group's ability to sustain superior earnings growth. Thisdividend will be paid on 20th November 2006 to ordinary shareholders registeredat the close of business on 29th September 2006. A scrip dividend alternativewill also be available. - OPERATIONS REVIEW - AUSTRALASIA APN News & Media Ltd ('APN'), in which INM has a 41.8% shareholding, is listedon the Australian Stock Exchange with a current market capitalisation of €1.4billion. After three years of strong growth, APN again increased operating profit to€83.2 million, an increase of 2%. APN continues to invest in New ProductInitiatives in its core publishing division and this period also saw significantinvestment in its Online division, with the launch of a number of newinitiatives. The Regional Publishing division performed well, growing operating profit by 6%following on from strong growth in the prior year. Continued population growthassociated with the resources/commodity boom in Queensland supported growth inreal estate advertising, particularly in Toowoomba, Mackay and Rockhampton,growing 13% in the first half, following double-digit increases in each of theprior three years. Similarly, in New Zealand the regional property marketremains buoyant, with real estate advertising up 17%. Circulation revenue grewin both countries, up 4% in Australia and up 3% in New Zealand, withco-ordinated marketing campaigns delivering circulation gains for key titles.The new printing centre at Yandina on Queensland's Sunshine Coast is due tocommence operations in October 2006. This plant will enhance APN's colourprinting capacity and drive further revenue growth. The New Zealand National Publishing (NZNP) division includes The New ZealandHerald, the Herald on Sunday, The Aucklander and New Zealand Magazines. Thedivision has a co-ordinated strategy to increase its market share in Auckland,New Zealand's largest market. The combined portfolio of titles has achievedstrong penetration into Auckland, with eight out of every 10 Aucklanders aged15+ reading a copy of an APN daily or weekly newspaper or magazine title eachweek. The New Zealand publishing business has built its subscriber database to170,000 homes. The New Zealand Herald retained its leading position as NewZealand's most read daily newspaper, with 547,000 readers on a typical day andreaching six out of 10 Aucklanders every week. Circulation revenue was up 7%for the first half of 2006. The Herald on Sunday, which was launched in October2004, is now the most read Sunday newspaper in Auckland and in the Northernregion and is on track to achieve forecast profitability in 2007. NZNP grewadvertising volume share in five advertising pillars (retail, agency,automotive, employment and general classified), while share in real estateremained stable. The Radio division consolidated earnings after successive periods of strongperformance, with operating profit up 2% for the first half. In Australia, theAustralian Radio Network (ARN) built on the success of its performance in thecommercially important 25-54 demographic, growing its share of agencyadvertising revenue by 15% over the same period last year. In New Zealand, TheRadio Network (TRN) continued to lead the industry, growing market share acrossthe country. TRN operates the top three stations in the major Auckland marketand the number one station in both Wellington and Christchurch. The Outdoor division (including associates) produced a 49% increase in operatingprofit, reflecting the ongoing benefit of the restructuring undertaken in 2004.APN Outdoor secured a number of major contract wins, including Railcorp in NewSouth Wales, Sydney Transit, Sydney Airport and Perth Rail. The successfultenders have enhanced the quality of the division's asset base in each of thekey industry formats. The outdoor industry grew by 12% in the first half of2006 and APN brands continue to be market share leaders in all of the majoroutdoor advertising formats in Australia and New Zealand. In Asia, APN's HongKong, Indonesian and Malaysian businesses all increased market share with newcontract wins. APN, under the Buspak brand, is now the largest bus advertisingoperator in Hong Kong. At the beginning of the year, APN separated its Online operations into adedicated division. Already, the nzherald.co.nz website is the most visited newswebsite in New Zealand and the third most popular site in the country. Theonline jobs site search4jobs.co.nz was launched in May and has quickly becomethe number two jobs site in the market, in both traffic and job volumes. InAustralia, worksearch.com.au has continued to expand and is already the largestregional employment website. IRELAND The Irish group achieved 4.5% growth in operating profit to €46.7 million in thefirst six months of 2006, reflecting good circulation and strong advertisingrevenues, combined with ongoing and effective cost control. Revenues increasedby 2.3% year-on-year despite the transfer of contract print income to Belfastfollowing the closure of the Terenure print plant in mid 2005. Advertisinggrowth was in line with the market and circulation was ahead of last year,driven by good volumes and cover price increases. Advertising revenue was driven by notably strong ROP, features and recruitmentrevenue, together with innovative new revenue streams such as "ibid", an onlineauction complementing ROP advertising in the Evening Herald - and Polski Herald,a pullout Polish language supplement published on Fridays. Magazine revenue wasalso well up year-on-year. LoadzaJobs.ie, the group's online recruitment site, launched in September 2005,recorded impressive revenue growth and is now the number two employment site inIreland. PropertyNews.com, already the number one property site in NorthernIreland, is being aggressively rolled out in the Republic of Ireland, with thenumber of Irish properties on the site growing rapidly and revenues increasing. The Irish Independent confirmed its pre-eminent position as the nation's numberone quality daily newspaper, with a resilient circulation sales figure of162,582 copies per day for the January to June 2006 period, despite anincreasingly competitive morning market. The Sunday World increased its January to June circulation volumes to 274,143copies, a strong performance in a competitive marketplace. The continuing success of the Sunday Independent as the nation's top sellingnewspaper is reflected in the recently released industry readership research,which confirmed that the title now has a remarkable 1.13 million readers, overone third of the adult population of the country, and 77,000 up on thecomparable period last year. The strength of the Sunday Independent Life and the Irish Independent Weekendmagazines was highlighted by their separate inclusion for the first time on theJNRS readership survey. Life is now officially the best read magazine inIreland with 757,000 readers, closely followed by Weekend in second place with728,000 readers and the Star's "Star Time" in third with 471,000 readers. The group's daily free newspaper, herald am - launched in October 2005 -continued to out-perform its Metro rival, with more than 60,000 copiesdistributed daily at key points around Dublin and showed encouraging growth inadvertising revenue in the period. Overall, operating margin improved by 50bps to 23.2%, reflecting the continuedfocus on costs and profitable revenue growth. SOUTH AFRICA The South African group delivered another excellent performance, benefiting fromthe ongoing strength in the economy. The strong trading environment continuedto be driven by buoyant consumer spending (underpinned by the burgeoning middleclass) and all confidence indicators, particularly retail activity, remainedpositive. Revenue growth of 16.4%, driven by a strong advertising market and supported byan ongoing vigilance around containing fixed overheads, delivered a 22.0%increase in operating profits to €18.3 million. Operating margin improved to15.0% from 14.3% in 2005. All of the group's titles performed strongly in a very favourable advertisingmarket and recorded improvements in market share in both the display andclassified categories. Circulation copy sales of each of the 16 titles alsoperformed well in the January to June 2006 period, despite competitive marketconditions. Circulation revenue growth was driven by the further strongincrease in copy sales of Isolezwe - the group's Zulu language newspaperlaunched in 2003 - which have increased to over 94,000 copies per day, upapproximately 25% on the prior comparative period. In addition, the group'sweekly title, Post, aimed at the Indian market, grew its sale by 5.2% on theprior year. The red-top Daily Voice - which was launched in March 2005 and isfocused on the popular end of the mass-market - has gained a very strongfoothold in the Cape Town market, providing a solid platform to extend itsgeographic reach beyond Cape Town. The wholly-owned Magazine division (Conde Nast Independent Magazines), in a verycompetitive trading environment, produced a strong first half trading profitimprovement, underpinned by Glamour, in its second year, now selling in excessof 100,000 copies per month. The 50% owned Outdoor Advertising division, Clear Channel Independent, reporteda 23% increase in operating profit, benefiting from the strong local tradingenvironment and a much improved contribution from its 13 African operations. UNITED KINGDOM The United Kingdom reported revenue of €107.8 million for the first six monthsof 2006, which represents an increase of 3.4% over the same period last year.This was attributable to strong circulation revenue growth driven by cover priceincreases and additional contract print revenues in Belfast. In a competitive circulation market, both Independent titles performed strongly.The Independent on Sunday recorded the best circulation performance of anyBritish newspaper in 2006, with a 9% gain in the latest 6-month period(March-August). Latest figures show The Independent's readership at a 9-yearhigh, up 24.1% in the 12 months to June 2006, mostly in the areas mostattractive to advertisers: young, female, ABC1 readers, while the Sunday'sreadership was up 9%. The continuing weak UK classified advertising market - particularly inGovernment and NHS spending - affected both Belfast and the Magazines division.However, overall UK group advertising was only 5.8% down in the period. After avery strong advertising performance last year, The Independent continued to buckthe negative market trend and has shown 1% growth in advertising revenue for thefirst half, compared to significant declines reported by most of its UK nationalnewspaper peers. The overall revenue growth, coupled with a further focus on tight cost control,helped produce a 5.2% increase in operating profit across the UK group. Online revenues for the UK group have continued to grow at a significant rate.This growth will be further accelerated following the recent acquisition ofPropertyNews.com, the largest website in Northern Ireland. With the continued difficult UK advertising market, the focus has been onreducing costs further through operational efficiencies, improved systems andoutsourcing across all areas of the business. This year has seen a majorrestructuring of the Belfast operations, resulting in significant headcount andcost reductions across all publishing functions. Belfast's contract print division, the largest on the island of Ireland,performed strongly and is currently being expanded with the addition of a newfull-colour Goss printing press facility in Newry. This additional capacity willbe operational in early 2007 and will cater for both internal and external printcontracts. Further developments in Belfast include the purchase, subject to regulatoryapproval, of WNS, Northern Ireland's major newspaper and magazine distributioncompany. INDIA JPL, INM's 20.8% owned associate, was floated on the Mumbai Stock Exchange inFebruary 2006. In its financial year ended 31st March 2006, JPL reported a 28% increase intotal revenue. Advertising revenue increased by 32%, with increases in bothlocal and colour advertising, while circulation volumes increased by 8.8%compared to the prior year. The increase in revenue resulted in a very strongimprovement in both margins and net profits - with margins increasing from 7.0%in the prior year to 15.8%, while net profits increased by over 2,500%. This strong 12 month performance to March 2006 continued into the first quarterof its 2006/2007 financial year, with the three months ended 30th June 2006showing a 420% increase in net profits, when compared to the same period in2005. This extremely strong performance was again driven by increased revenues,up 19.8% on 2005 levels. This increase was due to strong advertising andcirculation revenues, with advertising showing growth of 21.5% (mainly due toincreased colour advertising). Capitalising on the strong economic growth in India, JPL has recently expandedinto outdoor advertising with a number of prominent sites secured in majorcities such as Mumbai, Lucknow, Bangalore and Delhi. In a separate venture, INM,in conjunction with the Gupta family in India, has recently secured eight radiolicences and expects to have these licences operational in 2007. ENDS 19th September 2006 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 - Independent News & Media PLC ('INM') is a leading international newspaper andcommunications group, with its main interests in Australia, India, Ireland, NewZealand, South Africa and the United Kingdom. Spanning four continents and 21individual countries, INM has market-leading newspaper positions in Australia(regional), India, Ireland, New Zealand and South Africa. In the UnitedKingdom, it publishes the flagship national title, The Independent, as well asbeing the largest newspaper group in Northern Ireland. Across these regions, the Group publishes over 175 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 70 editorial and classified sites. INM is the largest radio operator - 132 stations and an audience exceeding fivemillion people - and outdoor advertising operator in Australasia and also hasleading outdoor advertising positions in Hong Kong, Malaysia, India, Indonesiaand 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 €4.0 billion, revenue of €1.8 billion and employsapproximately 10,300 people worldwide. Further information is available on theGroup's website www.inmplc.com. INDEPENDENT NEWS & MEDIA PLC INTERIM ANNOUNCEMENT GROUP INCOME STATEMENT (unaudited) Six months Six months ended 30 ended 30 June 2006 June 2005 Notes •m •m Revenue 796.7 769.2 Operating profit before exceptional items 147.9 141.0 Exceptional items 4 (5.5) 37.7 Operating profit after exceptional items 142.4 178.7 Share of results of associates and joint ventures 6.3 3.7 Net finance costs: - Interest receivable and similar income 4.4 9.4 - Interest payable and similar charges (44.5) (51.1) Profit before taxation 108.6 140.7 Taxation (21.3) (16.6) Profit for the period 87.3 124.1 Attributable to:Minority interests 35.2 33.9Equity holders of the parent 52.1 90.2 87.3 124.1 Earnings per ordinary share (cent) - Basic 5 6.89c 12.09c - Diluted 5 6.85c 11.83c GROUP STATEMENT OF RECOGNISED INCOME AND EXPENSE (unaudited) 6 months ended 30 June 2006 2005 •m •m (as restated)Items of income/(expense) recognised directly in equity Currency translation adjustments (153.2) 80.6Retirement benefit obligations: - Actuarial gains/(losses) 27.6 (24.4) - Movement on deferred tax asset (2.8) 2.6Gains relating to cash flow hedges 21.1 1.6Net (expense)/income recognised directly in equity (107.3) 60.4Profit for the period 87.3 124.1Total recognised income and expense for the period (20.0) 184.5 Attributable to:Minority interests (31.0) 73.5Equity holders of the parent 11.0 111.0 (20.0) 184.5 GROUP STATEMENT OF CHANGES IN EQUITY (unaudited) 2006 2005 •m •m (as restated)Balance at 1 January 796.4 621.0Effect of change in accounting policy (note 1) (45.0) (18.7)As restated 751.4 602.3Issue of share capital 17.8 19.0Share based payment 1.8 1.1Dividends (including minority interests) (82.1) (77.8) Items of income/(expense) recognised directly in equity Currency translation adjustments (153.2) 80.6 Retirement benefit obligations: - Actuarial gains/(losses) 27.6 (24.4) - Movement on deferred tax asset (2.8) 2.6 Gains relating to cash flow hedges 21.1 1.6Buyback of shares held by minority (37.5) (12.8)Profit for the period 87.3 124.1At end of period 631.4 716.3 GROUP BALANCE SHEET (unaudited) 30 June 2006 31 Dec 2005 30 June 2005 30 June 2006 (IFRS Balance Sheets) (Note 2) (as restated) (as restated)Assets •m •m •m •mNon-Current AssetsIntangible assets 1,682.8 1,842.1 1,829.2 2,758.0Property, plant and equipment 332.8 363.1 364.3 332.8Investments in associates and joint 70.0 60.0 56.6 105.9venturesDeferred tax assets 93.8 96.7 86.5 93.8Available-for-sale financial assets 11.4 15.7 12.1 11.4Derivative financial instruments - 9.4 7.5 -Trade and other receivables 49.6 54.4 61.6 49.6 2,240.4 2,441.4 2,417.8 3,351.5 Current AssetsInventories 17.6 21.9 19.5 17.6Trade and other receivables 264.5 264.2 271.6 264.5Current income tax assets 14.4 17.1 10.7 14.4Derivative financial instruments 16.0 - 0.9 16.0Cash and cash equivalents 148.0 132.8 181.9 148.0 460.5 436.0 484.6 460.5 Total Assets 2,700.9 2,877.4 2,902.4 3,812.0 LiabilitiesCurrent LiabilitiesTrade and other payables 240.1 266.1 240.7 240.1Current income tax liabilities 12.0 16.1 12.0 12.0Borrowings 68.3 64.7 63.7 68.3Derivative financial instruments 0.7 6.6 2.2 0.7Provisions for other liabilities and 23.7 27.0 42.7 23.7charges 344.8 380.5 361.3 344.8 Non-Current LiabilitiesBorrowings 1,104.2 1,045.2 1,090.4 1,104.2Compound financial instruments 206.8 234.8 278.6 206.8Retirement benefit obligations 130.9 167.3 151.5 130.9Deferred taxation liabilities 264.4 292.3 289.8 21.5Derivative financial instruments 11.8 - 3.7 11.8Other payables 3.8 2.2 7.8 3.8Provisions for other liabilities and 2.8 3.7 3.0 2.8charges 1,724.7 1,745.5 1,824.8 1,481.8 Total Liabilities 2,069.5 2,126.0 2,186.1 1,826.6 Net Assets 631.4 751.4 716.3 1,985.4 EquityCapital and Reserves Attributable to Company's Equity HoldersShare capital 227.9 225.9 224.5 227.9Other reserves 292.3 325.5 329.0 1,313.9Retained earnings (375.6) (378.4) (418.8) (192.5) 144.6 173.0 134.7 1,349.3 Minority interests 486.8 578.4 581.6 636.1 Total Equity 631.4 751.4 716.3 1,985.4 GROUP CASH FLOW STATEMENT (unaudited) 6 months ended 30 June Notes 2006 2005 •m •m Net cash generated from operationsCash generated from operations 7 144.7 146.7Income tax paid (net of refund) (26.6) (10.7) Net cash generated from operating activities 118.1 136.0 Cash flows from investing activitiesPurchases of property, plant and equipment (22.4) (32.4)Construction in progress pending resale (12.7) -Proceeds from sale of property, plant and equipment 9.3 1.5Purchases of intangible assets (4.9) (3.4)Sales/(purchases) of available-for-sale financial assets 3.6 (0.2)Proceeds from sale of associate - 92.8Receipts/(advances) to/from joint ventures and associates 1.2 (0.7)Purchases of associates and joint ventures (5.7) (28.5)Purchase of subsidiary (10.1) -Interest received 5.1 8.0Dividends received 0.5 0.7 Net cash (used in)/generated from investing activities (36.1) 37.8 Cash flows from financing activitiesInterest paid (49.0) (56.3)Proceeds from borrowings 167.7 197.3Repayment of borrowings (46.0) (204.6)Proceeds from short-term construction financing 12.7 -Dividends paid to company's shareholders (46.2) (40.1)Payments of finance lease liabilities (21.3) (0.7)Purchases of equity minority interests (50.2) (6.4)Dividends paid to minority interests (29.0) (27.3)Proceeds from issuance of ordinary shares 6.9 3.1Debt issue costs - (2.5)Issue of equity minority interests 5.1 1.7 Net cash used in financing activities (49.3) (135.8) Net increase in cash and bank overdrafts 32.7 38.0Cash and bank overdrafts at beginning of the year 127.6 123.8Exchange (losses)/gains on cash and bank overdrafts (20.2) 8.4 Cash and bank overdrafts at end of period 140.1 170.2 NOTES TO THE INTERIM STATEMENT (unaudited) 1. Basis of Preparation The interim results for the period to 30 June 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 that the Group expects to adopt for the 2006 year-end, which areconsistent with the principal accounting policies which were set out in theGroup's 2005 consolidated financial statements except for the change inaccounting policy in relation to employee benefits noted below. The principalaccounting policies adopted by the Group for the 2005 year-end, as set out inthe Group's 2005 consolidated financial statements, were consistent with IFRSsissued by the IASB as adopted by the European Commission for use in the EuropeanUnion. 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 on its defined benefit post-employmentschemes. The "corridor approach" refers to a threshold being the higher of 10%of the fair value of the plan assets or 10% of the present value of the definedbenefit obligations at the end of the previous reporting period. Actuarial gainsand losses at the end of the previous reporting period in excess of thisthreshold are recognised as income or expense over the average remaining servicelives of employees participating in the plan. Other than these, the actuarialgain or loss arising was not recognised. In applying IAS 19 - Revised, the Groupis choosing the option to recognise all actuarial gains and losses in the periodthat they occur. Such gains and losses will now be recognised in the Statementof Recognised Income and Expense. The Group believes that the election torecognise all the actuarial gains and losses immediately more fully reflects thenet asset position of the Group. As a result of applying IAS 19 - Revised, theGroup has restated its results for the six months ended 30 June 2005 with thefollowing consequences: • An amount of €21.8m 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 six months ended 30 June 2005. In thebalance sheet this €21.8m results in an increase in retirement benefitobligations of €24.4m and an increase in deferred tax assets of €2.6m. • An amount of €18.7m is reflected as a charge to opening retainedearnings in the Statement of Changes in Equity as at 1 January 2005 (1 January2006: €45.0m) which reflects the previously unrecognised actuarial gains andlosses (net of deferred taxation) as at 1 January 2005. In the balance sheetthis €18.7m results in an increase in retirement benefit obligations of €20.8mand an increase in deferred tax assets of €2.1m. The charge to retained earningsat 1 January 2006 of €45.0m arises from an increase in retirement benefitobligations of €51.9m and an increase in deferred tax assets of €6.9m. • Profit and cashflows for the six months ended 30 June 2005 remain aspreviously reported. The comparative figure for revenue for the six months ended 30 June 2005 hasbeen restated to reflect the presentation of advertising revenues on a net basisas explained in the financial statements for the year ended 31 December 2005. NOTES TO THE INTERIM STATEMENT (unaudited) (Continued) 2. Value of Mastheads - Supplementary Information The "IFRS Balance Sheets" report 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 Sheets 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 Sheets. 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 30 June 2006, the Group's newspaper mastheads had a valuation of €2,278.2mcompared to a carrying value under IFRS of €1,203.0m. All newspaper mastheadsare regularly valued/revalued by expert independent valuers, Grant Samuel &Associates Pty Limited. The most recent independent valuation was undertaken asat 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 €242.9m has been provided in respect of the Group'sintangible assets in the IFRS Balance Sheet at 30 June 2006. 3. Segmental Report By Geographical Segment Revenue Operating Profit 2006 2005 2006 2005 •m •m •m •m Ireland 201.1 196.5 46.7 44.7United Kingdom 107.8 104.3 6.1 5.8South Africa 121.8 104.6 18.3 15.0Australasia 366.0 363.8 83.2 81.6Common costs - - (6.4) (6.1) 796.7 769.2 147.9 141.0 Exceptional items (5.5) 37.7 Operating profit after exceptional items 142.4 178.7 NOTES TO THE INTERIM STATEMENT (unaudited) (Continued) 3. Segmental Report (continued) By Class of Business Revenue Operating Profit 2006 2005 2006 2005 •m •m •m •mPrinting, publishing, online, distribution and commercial printing 659.5 632.8 130.0 124.6Radio 70.5 71.6 21.7 21.2Outdoor advertising 66.7 64.8 2.6 1.3Common costs - - (6.4) (6.1) 796.7 769.2 147.9 141.0 Exceptional items (5.5) 37.7 Operating profit after exceptional items 142.4 178.7 The taxation charge for the year comprises €2.4m in respect of Irishtaxation and €18.9m in respect of overseas taxation. 4. Exceptional Items 2006 2005 •m •m Gain on sale of iTouch plc, net - 62.7 Gain on sale of assets (i) 4.0 - Restructuring charges and asset writedowns (ii) (7.5) (22.7) Product launch costs, development and other Promotional expenditure (iii) (2.0) (2.3) (5.5) 37.7 (i) Gain on sale of non-current assets. (ii) Restructuring charges relating to the Group's Northern Irelandoperations in 2006 (2005: Primarily related to the closure of the printingoperations of the Sunday World print facility). (iii) Relates to product launch costs, development and other promotionalexpenditure incurred across the Group. NOTES TO THE INTERIM STATEMENT (unaudited) (Continued) 5. Earnings Per Share 2006 2005 •m •m Profit attributable to Independent News & Media PLC 52.1 90.2Adjustment for conversion of cumulative exchangeable preference shares* - 5.5 52.1 95.7Exceptional items net of taxation and minority interests 4.4 (39.7)Diluted profits before exceptional items 56.5 56.0 Weighted average number of shares in issue during the period 756,305,659 745,634,666Effect of:Conversion of options 4,742,920 6,888,477 761,048,579 752,523,143Conversion of cumulative exchangeable preference shares* - 56,250,000Diluted number of shares 761,048,579 808,773,143 Earnings per share 6.89c 12.09c Basic earnings per share before exceptional items 7.47c 6.77c Diluted earnings per share* 6.85c 11.83c Diluted earnings per share before exceptional items* 7.43c 6.71c 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. Basic and diluted earnings per share before exceptional items are also presentedin order to give a better understanding of the Group's financial performance. * The cumulative exchangeable preference shares were not dilutive in 2006for both Diluted Earnings Per Share and Diluted Earnings Per Share BeforeExceptional Items. In 2005, the cumulative exchangeable preference shares weredilutive for the purposes of calculating Diluted Earnings Per Share but were notdilutive for the purposes of calculating Diluted Earnings Per Share BeforeExceptional Items. Therefore, in calculating the Diluted Earnings Per ShareBefore Exceptional Items for 2005, the "Adjustment for conversion of cumulativeexchangeable preference shares" (see above) is excluded from Diluted profitsbefore exceptional items and the "Conversion of cumulative exchangeablepreference shares" (see above) is excluded from the Diluted Number of Shares. NOTES TO THE INTERIM STATEMENT (unaudited) (Continued) 6. Dividends 2006 2005 •m •m Dividends on equity shares Final (2005) ordinary dividend of €0.07 per share on 758,300,511 shares (2004: €0.06 per share on 745,767,939 shares) 53.1 44.7 An Interim ordinary dividend of €0.0415 (Interim 2005: €0.0375) per share -total dividend payable of €31.6m (2005: €28.2m) - has been declared subsequentto 30 June 2006. 7. Reconciliation of Operating Profit to Net Cash Generated fromOperations 2006 2005 •m •m Operating profit before exceptional items 147.9 141.0Depreciation/amortisation 18.5 22.3Non-cash share based payment 1.8 1.1Cash exceptional items (2.0) (2.5)Unrealised foreign exchange movements (7.1) (7.5) Cash generated from operations before changes in working capital and provisions 159.1 154.4 Decrease/(increase) in stocks 3.1 (1.1)Increase in short term and medium term debtors (3.4) (1.6)Decrease in short term and long term creditors (2.4) (0.9)(Decrease)/increase in provisions (excluding restructuring payments) (1.7) 0.1Restructuring payments (10.0) (4.2) Net cash generated from operations 144.7 146.7 This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
Independent News & Media