14th Sep 2005 07:02
Independent News & Media PLC14 September 2005 INTERIM RESULTS FOR THE SIX MONTHS ENDED 30TH JUNE 2005 Dublin/London 14th September 2005: The Board of Independent News & Media PLC ('Independent') (ticker: INWS.I; INWS.L) today presented the Group's interimresults for the six months ended 30th June 2005. These results were preparedunder International Financial Reporting Standards ('IFRS') for the first time. RESULTS 2005 2004 Change •m •m %Revenue 800.8 733.0 +9.2%Operating Profit Before Exceptionals 141.0 125.4 +12.4%Profit Before Tax 140.7 77.9 +80.6%Profit After Tax 124.1 68.3 +81.7%Earnings Per Share 12.09c 4.53c +166.9%Adjusted Earnings Per Share * 6.71c 5.85c +14.7%Dividend Per Share 3.75c 3.00c +25.0% * Fully diluted EPS, before exceptional items SUMMARY HIGHLIGHTS • All regions showing improved revenues and operating profit - advertising up 12.4%. • Active cost management contributes to H1 operating margin increase to 17.6%. • Profit before tax up 80.6% to €140.7 million, with Profit after tax up 81.7%. • EPS up 166.9% to 12.09c, with Adjusted EPS up 14.7% to 6.71c (or 7.35c under Irish GAAP). • Successful disposal of iTouch stake yields impressive return with proceeds of €100 million. • Interim dividend up a strong 25% to 3.75c per share. • Acquisition (26%) of JPPL in India - publisher of Dainik Jagran - which has the world's largest daily readership. • New 15-year contract print agreement with News International in Northern Ireland. • Bank facilities recently refinanced with maturity extended to 2010 via a new unsecured €440 million facility on improved terms and pricing. Commenting on these results, Sir Anthony O'Reilly, Chief Executive, made thefollowing outlook statement: "We are pleased to announce another set of record results for the first half. "Because of the geographically diversified nature of the Group's asset base instrongly growing economies, its market leading brands and a commitment to bethe low-cost operator, the Board remains confident of your Group's ability todeliver double-digit full year earnings growth for 2005 and to sustain superiorearnings growth into the future." - OVERVIEW - Independent News & Media PLC today announced record interim results for the sixmonths ended 30th June 2005. Revenue increased by 9.2% to €800.8 million. This growth was primarily drivenby the Publishing division (advertising +12.4% and circulation +5.5%) with theRadio and Outdoor divisions also reporting good underlying growth. Operating Profit Before Exceptionals increased by 12.4% to €141.0 million, withmargins increasing from 17.1% to 17.6%. The first half benefited greatly fromthe cost restructuring plan implemented last year, which largely mitigated thenewsprint price and other inflationary cost pushes in the business. With theGroup's stated commitment to be the 'low-cost operator', further efficiencieshave been identified which will enhance operating margins, whilst providing theresource to enhance further the competitive position of the Group's titles. Net Exceptional Items accounted for a positive €37.7 million in the 6 months toJune 2005, compared to an exceptional charge of €11.3 million in 2004. This netgain was primarily due to the successful and advantageous disposal of theGroup's investment in iTouch plc for €100.0 million, which generated a net gainon disposal of €62.7 million. This gain was partly offset by the redundancy andother costs associated with the closure of the Group's Sunday World print/production facility in Dublin and product launch costs in Belfast and SouthAfrica. Due to the timing of the implementation of IAS 32 and 39 (under the transitionto IFRS), Finance Costs include dividends on the New Zealand CumulativeExchangeable Preference Shares in 2005, whereas they are included as part ofMinority Interests in 2004. Excluding these dividends, Net Interest Costsdecreased by 6.0% to €36.2 million on a like-for-like basis. Profit Before Tax increased by 80.6% to €140.7 million and Profit After Tax wasup 81.7%. Basic Earnings Per Share increased to 12.09 cent (+166.9%) on theback of the strong operating performance and the successful disposal of theGroup's take in iTouch plc. Earlier this week, the Group refinanced its core bank facility and replaced itwith a new 5-year, €440.0 million unsecured facility. This new facility extendsthe maturity of the Group's bank debt to 2010 on improved terms and pricing. At the end of June 2005, Independent concluded the acquisition of 26% of Indiannewspaper publisher, Jagran Prakashan Private Limited ('JPPL'). This investmentin the publisher of Dainik Jagran, which has the world's largest dailyreadership (21.1 million readers), is a very exciting opportunity for the Groupand represents a compelling initial presence in one of the world's fastestgrowing newspaper markets. The Board is recommending an interim dividend of 3.75 cent per share, anincrease of 25% on 2004, reflecting the strong half year operating performance,the significant return realised on the disposal of the stake in iTouch plc andcontinued confidence in the Group's ability to sustain superior earnings growth.This dividend will be paid on 14th November 2005 to ordinary shareholdersregistered at the close of business on 23rd September 2005. A scrip dividendalternative will also be available. - OPERATIONS REVIEW - AUSTRALASIA APN News & Media Limited ('APN') - in which INM holds a 39.7% shareholding - islisted on the Australian Stock Exchange (since 1992) and has a current marketcapitalisation of over A$2.4 billion (€1.5 billion). The Australasian operations reported record results for the six months to 30thJune 2005, with revenue increasing by 8.6% to €384.8 million and operatingprofit growing by 8.4% to €81.6 million. This result is after a significantinvestment in a range of new product initiatives ('NPIs') and APN reported anEBIT increase of 15% before NPIs. Key to the result was the strong first halfperformance from the Newspaper and Radio divisions. The New Zealand National Publishing division, which includes The New ZealandHerald, the 10-month-old Herald on Sunday, The Aucklander and New ZealandMagazines, increased overall revenue by 9% and EBIT by 14% on a like-for-likebasis. Readership penetration of APN products in the Auckland market increasedfrom 56% in 2002 to 68% at June. The New Zealand Herald, with a total weeklyreadership of 1 million people, is read by 70% of Aucklanders aged 15+. TheWeekend Herald is New Zealand's best read newspaper with a readership of635,000. The Herald on Sunday, launched in October 2004, has already becomeAuckland's best read Sunday newspaper and has achieved an audited circulation inits first six months of 101,355. During the half year to June 2005, the Heraldon Sunday has grown Auckland Sunday newspaper readership by 30%. The Regional Newspaper division operates 23 regional daily newspapers and morethan 100 non-daily titles across Queensland and New Zealand. This divisioncontinued to trade well in the first half. Excluding NPIs, revenue increased by8% and EBIT by 16%. The advertising pillars of employment and real estate/property recorded strong revenue increases in both markets. The A$35 millionnew full-colour printing/production facility announced last year on Queensland'sSunshine Coast at Yandina, is on target to be fully operational in the secondhalf of 2006. The Radio division continues to show good growth. In the six months to June2005, total revenues increased by 13.7% and EBIT increased by a verysatisfactory 28.3%. In Australia, the Australian Radio Network continued tobenefit from strong ratings in its target 25-54 demographic. The Radio Networkin New Zealand enjoyed good success with the launch of the new formats, Coastand Flava, into the Auckland market last year. Coast is already number 3 andFlava number 4. The restructuring of APN Outdoor continued to deliver improved results in thefirst half. Revenue, excluding NPIs, grew by 8% to A$106.2 million and EBIT grewby 8% to A$6.7 million. The Outdoor division remains on-track for furtherimprovement in 2006 following recent contract wins in Sydney and Melbourne. IRELAND Operating profit grew by 16.4% to €44.7 million reflecting a combination ofstrong advertising growth, good circulation figures for all titles and thebenefit of the successful restructuring of the cost base of the main Irishoperation in mid-2004. First half revenue for the Irish operations increased by 9.2% to €207.1 million.Advertising revenue grew by 14.6%, with real estate/property buoyant,recruitment recovering strongly, and general retail and motors well up on theprior year. The successful rollout of the Irish Independent compact edition during the firsthalf of 2004, together with cover price increases on the Sunday World, alongwith most of the group's regional titles, boosted circulation revenues by 2.7%year-on-year. Recently released readership figures confirm the strength of the group's Irishtitles, with the Sunday Independent attracting 1.056 million readers, far inexcess of all its competitors combined, and the Irish Independent remainsIreland's largest selling daily. All of the group's other titles remain clearleaders in their respective markets both in terms of copy sales and readership. The restructuring of the cost base of the main Irish publishing operations in2004 yielded a significant step change reduction in the group's costs throughthe outsourcing and rationalisation of telesales and clerical functions. Thatprocess continued in 2005, with further process improvements and cost savingsfor the broader Irish group. In June 2005, the decision was taken to ceaseprinting operations at the Sunday World print facility in Terenure, Dublin. TheSunday World print facility closed in July, with a reduction of 115 permanentand 44 casual positions. The impact of the strong advertising revenue growth and reductions in the costbase have increased operating margins by 130bps to 21.6% in 2005. SOUTH AFRICA The South African operations produced an excellent result in a strong tradingenvironment (especially in the retail sector), with business and consumerconfidence maintaining the all time highs set in 2004. Ongoing historicallylow interest rates, moderating inflation levels and the emergence of a rapidlygrowing "new middle class" provide a platform for sustaining the favourableeconomic conditions. Overall, the group produced solid year-on-year growth, with operating marginsshowing an improvement from 13.0% to 14.3% in 2005. Revenue growth of 17.7%,combined with the benefit of cost containment initiatives undertaken in thelatter part of 2004, delivered a 29.3% increase in operating profits to €15.0million. Newspaper advertising in South Africa showed strong growth in the first half of2005 with the group's titles benefiting from this and maintaining their strongmarket share in both the display and classified advertising markets.Circulation copy sales and revenue of all 15 titles remained positive, despitemore competitive market conditions. Circulation of Isolezwe - the group's Zululanguage newspaper launched in 2003 - has increased by nearly 30% in the last 12months to over 75,000 copies per day (last year nearly 59,000 copies). A newtabloid - Daily Voice - aimed at the popular end of the market was successfullylaunched in Cape Town in March 2005. This publication offers further rolloutopportunities to other metropolitan areas in which the group operates. The wholly-owned Magazine division (Conde Nast Independent Magazines) had a goodfirst half, with particular benefits from Glamour, which was launched in March2004, and is now the second largest selling women's magazine in South Africa.The Magazine division continues to expand its offering and reach, and added anew publication in 2004, GQ Cars, which will be published three times a year. In Outdoor Advertising, the impact of owning 50% of Clear Channel Independentagainst an effective 46.3% in the prior year, combined with strong organicgrowth from new product innovations and ongoing improvement in the performanceof operations in the rest of Africa provided further strong growth in itsprofitability. UNITED KINGDOM The United Kingdom reported revenue of €104.3 million for the first six monthsof 2005, which represents an increase of 4.2% over the same period last year.Strong advertising growth from the Nationals division was partly offset by afurther decline in recruitment advertising within the Magazines division. Incommon with other regional titles, The Belfast Telegraph, after a good firstquarter, has been affected by the second quarter downturn, as well as a slowingof economic activity in Northern Ireland. Overall, UK 'like-for-like'advertising grew by 5.5% in the period. This revenue growth, coupled with a further focus on tight cost control, helpedproduce an overall increase of 8% in local currency operating profit for thefirst half across the UK group. The UK advertising market in general has had a mixed first half of the year,with the first quarter showing modest year-on-year growth followed by adifficult second quarter. Despite this volatile market, The Independent hasbucked this trend and has shown strong growth in advertising revenues (+18.5%),capitalising on the substantial uplift in core circulation copy sales in 2004 asa result of the success of the compact newspaper, which was pioneered by TheIndependent. The circulation success of The Independent, following the conversion to compactlast year, continued through the first half of 2005, with year-on-year ABCgrowth for each month of the period. Following on from this success, the Saturday edition of The Belfast Telegraphwas launched as a compact in February, and a new morning compact edition of theMonday to Friday Belfast Telegraph was launched in March. Both initiatives werewell received and as a result The Belfast Telegraph was the best performingevening regional newspaper in the UK (ABC period January-June 2005). During the period, Belfast Telegraph Newspapers secured a new 15-year contractprint agreement with News International for its Northern Ireland copies. Thislong-term contract underpins the contract print business of the group's NorthernIreland operations and has facilitated the upgrade of the print plant inBelfast. - INTERNATIONAL FINANCIAL REPORTING STANDARDS - These results have been prepared under IFRS and all comparative financialinformation for 2004 has been restated. A summary of the impact of IFRS on the2005 Interim Results is detailed in Note 9 of this announcement and a detailedIFRS Restatement Document was released simultaneously with this announcement,and is available on the Group's website at www.inmplc.com. Whilst the first time adoption of IFRS results in some adjustments to theGroup's results, it is important to appreciate that the adoption of IFRS doesnot impact the Group's operations, cash flows or its capacity to pay dividends. The earnings impact of IFRS on the Group Income Statement is not significant -only €1.0 million on Net Profit for the half year. This includes a €2.9 millioncharge for a holiday pay accrual, which reverses in the second half and willhave no impact on the full year result. The impact on the Group Balance Sheet is more significant - reducing Net Assetsby €311.8 million. The two main adjustments relate to deferred taxation (€279.8million) and the inclusion of the deficit on the Group's defined benefit pensionschemes (€75.2 million). A deferred taxation adjustment is required under IFRS where the book value ofcertain assets (mainly acquired mastheads) exceeds their tax bases. Inconjunction with a number of other media companies, the Group believes that thisis an illogical adjustment. It does not take into account the Board's futureintention, which is to retain these assets, and the Group considers that therecognition of these liabilities under IFRS is not in line with the type ofliability, if any, that might crystallise if a disposal of these assets were tooccur. Also, the Group does not currently have a constructive or legalobligation for any tax liability associated with these assets and therefore therequired deferred tax liability in this case is inconsistent with the requiredaccounting treatment for other provisions. - OUTLOOK - Because of the geographically diversified nature of the Group's asset base instrongly growing economies, its market leading brands and a commitment to be thelow-cost operator, the Board remains confident of your Group's ability todeliver double-digit full year earnings growth for 2005 and to sustain superiorearnings growth into the future. ENDS 14th September 2005 For reference: Gavin K. O'Reilly, Chief Operating Officer +353.1.466.3200Donal J. Buggy, Chief Financial Officer +353.1.466.3200 Pat Walsh +353.1.498.0300/ +353.87.226.9345Murray Consultants (Dublin) Mark Edwards +44.20.7466.5000Buchanan Communications (London) Mark Kenny +353.1.631.5500K Capital Source (Dublin) ABOUT INDEPENDENT NEWS & MEDIA PLC - CORPORATE PROFILE - Independent News & Media PLC ('Independent') is a leading internationalnewspaper and communications group, with interests in Australia, India, Ireland,New Zealand, South Africa and the United Kingdom. Spanning four continents andnine individual countries, Independent has market-leading newspaper positions inAustralia (regional), India, Ireland, New Zealand and South Africa. In theUnited Kingdom, it publishes the flagship national title, The Independent, aswell as being the largest newspaper group in Northern Ireland. Across these regions, the Group publishes over 175 newspaper and magazine titles- including the world's largest read newspaper, Dainik Jagran, in India -delivering a combined weekly circulation of over 29 million copies. The Group'stitles are also well represented online with over 70 editorial and classifiedsites. Independent is the largest radio and outdoor advertising operator in Australasiaand has leading outdoor advertising positions in South Africa, Hong Kong,Malaysia and Indonesia. The Group has grown consistently over the last 15 yearsby building a geographically unique and diverse portfolio of market-leadingbrands, and today manages gross assets of €4.0 billion, revenue of over €1.8billion and employs approximately 11,000 people worldwide. INDEPENDENT NEWS & MEDIA PLC INTERIM ANNOUNCEMENT INCOME STATEMENT (unaudited) Six months Six months ended 30 ended 30 June 2005 June 2004 Notes •m •m Revenue 800.8 733.0 Operating profit before exceptional items 141.0 125.4 Exceptional items 4 37.7 (11.3) Operating profit after exceptional items 178.7 114.1 Share of results of associates and joint ventures 3.7 2.3 Finance costs: - Net interest costs 5 (36.2) (38.5) - Cumulative exchangeable preference shares dividend 5 (5.5) - Profit before taxation 140.7 77.9 Taxation (16.6) (9.6) Profit for the period 124.1 68.3 Attributable to:Minority interests: -Cumulative exchangeable preference shares dividend 5 - 5.2 -Other minority interests 33.9 29.7Equity holders of the parent 90.2 33.4 124.1 68.3 Earnings per ordinary share (cent) - Basic 6 12.09c 4.53c - Fully diluted 6 11.83c 4.51c GROUP BALANCE SHEET (unaudited) 30 June 2005 31 Dec 2004 30 June 2004 30 June 2005 (Alternative - Note 2)Assets •m •m •m •mNon-Current AssetsIntangible assets 1,829.2 1,701.6 1,719.7 2,904.1Property, plant and equipment 364.3 341.7 331.3 364.3Investments in associates and joint 56.6 46.4 50.9 92.5venturesDeferred tax assets 81.8 89.3 81.7 81.8Investments - 15.0 14.8 -Derivative financial instruments 7.5 - - 7.5Available-for-sale financial assets 12.1 - - 12.1Trade and other receivables 61.6 64.5 56.0 61.6 2,413.1 2,258.5 2,254.4 3,523.9 Current AssetsInventories 19.5 16.9 16.1 19.5Trade and other receivables 271.6 252.5 261.5 271.6Current income tax assets 10.7 9.6 1.6 10.7Derivative financial instruments 0.9 - - 0.9Cash and cash equivalents 181.9 123.8 99.1 181.9 484.6 402.8 378.3 484.6 Total Assets 2,897.7 2,661.3 2,632.7 4,008.5 LiabilitiesCurrent LiabilitiesTrade and other payables 240.7 230.7 201.3 240.7Derivative financial instruments 2.2 - - 2.2Current income tax liabilities 12.0 12.0 12.5 12.0Borrowings 63.7 58.1 150.8 63.7Dividends - - 38.0 - 318.6 300.8 402.6 318.6 Non-Current LiabilitiesBorrowings 1,090.4 1,046.9 942.5 1,090.4Compound financial instruments 278.6 141.9 141.8 278.6Derivative financial instruments 3.7 - - 3.7Other creditors 7.8 8.8 7.4 7.8Retirement benefit obligations 106.3 106.5 104.3 106.3Deferred taxation liabilities 289.8 279.9 281.9 10.0Provisions for other liabilities and 45.7 34.2 47.7 45.7charges 1,822.3 1,618.2 1,525.6 1,542.5 Total Liabilities 2,140.9 1,919.0 1,928.2 1,861.1 Net Assets 756.8 742.3 704.5 2,147.4 EquityCapital and Reserves Attributable to Company's Equity HoldersShare capital 224.5 223.3 221.3 224.5Other reserves 329.0 275.4 299.9 1,355.2Retained earnings (378.3) (414.6) (451.5) (178.4) 175.2 84.1 69.7 1,401.3 Minority interests 581.6 658.2 634.8 746.1 Total Equity 756.8 742.3 704.5 2,147.4 GROUP CASH FLOW STATEMENT (unaudited) 6 months ended 30 June Notes 2005 2004 •m •mCash flows from operating activitiesCash generated from operations 8 146.7 110.6Income tax paid (net of refund) (10.7) (17.9) Net cash generated from operating activities 136.0 92.7 Cash flows from investing activitiesPurchases of property, plant and equipment (32.4) (23.8)Proceeds from sale of property, plant and equipment 1.5 4.2Purchases of intangible assets (3.4) (3.1)Purchases of available-for-sale financial assets (0.2) (0.2)Proceeds from sale of associate 92.8 -(Advances)/receipts to/from joint ventures and associates (0.7) 0.7Purchases of associates and joint ventures (28.5) (6.1)Interest received 8.0 3.6Dividends received 0.7 0.5 Net cash generated from/(used in) investing activities 37.8 (24.2) Cash flows from financing activitiesProceeds from issuance of ordinary shares 3.1 -Debt issue costs (2.5) -Interest paid (56.3) (54.0)Proceeds from borrowings 197.3 -Repayment of borrowings (204.6) (56.6)Dividends paid to company's shareholders (40.1) -Payments of finance lease liabilities (0.7) (17.7)Purchases of equity minority interests (6.4) -Issue of equity minority interests 1.7 1.1Dividends paid to minority interests (27.3) (25.3) Net cash used in financing activities (135.8) (152.5) Net increase/(decrease) in cash and bank overdrafts 38.0 (84.0)Cash and bank overdrafts at beginning of the year 123.8 188.9Exchange gains/(losses) on cash and bank overdrafts 8.4 (7.0) Cash and bank overdrafts at end of period 170.2 97.9 Statement of Changes in Shareholders' Equity for the Six Months Ended 30 June 2005 (unaudited) Share Other Retained Minority Total Capital Reserves Earnings Interests Equity •m •m •m •m •m At 31 December 2004 223.3 275.4 (414.6) 658.2 742.3Adoption of IAS 32/39 on 1 January 2005 - (5.3) (0.9) (115.1) (121.3)At 1 January 2005 223.3 270.1 (415.5) 543.1 621.0Profit for the period - - 90.2 33.9 124.1Dividends - - (44.7) (33.1) (77.8)Issue of share capital 1.2 7.4 - 10.4 19.0Share based payment - 0.6 - - 0.6Buyback of shares held by minority - - - (12.8) (12.8)Cash flow hedges - 1.6 - - 1.6Currency translation adjustments - 49.3 (8.3) 40.1 81.1 At 30 June 2005 224.5 329.0 (378.3) 581.6 756.8 Statement of Changes in Shareholders' Equity for the Six Months Ended 30 June 2004 (unaudited) Share Other Retained Minority Total Capital Reserves Earnings Interests Equity •m •m •m •m •m At 1 January 2004 221.3 256.2 (435.1) 629.5 671.9Profit for the period - - 33.4 34.9 68.3Dividends - - (38.0) (29.9) (67.9)Issue of share capital - - - 9.6 9.6Share based payment - 0.3 - - 0.3Currency translation adjustments - 43.4 (11.8) (9.3) 22.3 At 30 June 2004 221.3 299.9 (451.5) 634.8 704.5 NOTES TO THE INTERIM STATEMENT (unaudited) 1. Basis of Preparation of Financial Information under IFRS The European Union (EU) requires all EU listed companies to prepare consolidatedfinancial statements in accordance with IFRS for accounting periods commencingon or after 1 January 2005. Accordingly, INM has prepared these interim resultsfor the period to 30 June 2005 on this basis. The Group's transition date from Irish GAAP to IFRS is 1 January 2004 and thecomparative financial information for the year ended 31 December 2004 and forthe six months ended 30 June 2004 have been restated on a consistent basis withthose accounting policies expected to be applied by the Group in preparing itsfirst full financial statements in accordance with IFRS at 31 December 2005,except where otherwise required or permitted by IFRS 1 "First time adoption ofInternational Accounting Standards". This financial information is based on the expected standards andinterpretations, facts and circumstances, and accounting policies that will beapplied when the Group prepares its first set of financial statements inaccordance with IFRS issued by the IASB and adopted for use by the EU as of 31December 2005. However, IFRS standards and interpretation of those standards bythe International Financial Reporting Interpretations Committee are subject toongoing review and possible amendment or interpretative guidance and thereforeall financial information prepared under IFRS is subject to change. The transition to IFRS is accounted for in accordance with IFRS 1. This standardsets out how to adopt IFRS for the first time and mandates that most IFRS are tobe fully applied retrospectively. There are certain limited exemptions from thisrequirement. The Group has availed of the exemption contained in IFRS 1 to only apply IAS 32"Financial Instruments: Disclosure and Presentation" and IAS 39 "FinancialInstruments: Recognition and Measurement" from 1 January 2005. The comparativefinancial information in relation to financial instruments for 2004 is presentedin accordance with Irish GAAP. This Interim Statement has been prepared on the historical cost basis, exceptfor certain fixed assets where the fair value was regarded as deemed cost ontransition to IFRS and the measurement at fair value of certain financialinstruments on adoption of IAS 32 and IAS 39 on 1 January 2005. A separate document has been issued simultaneously with this Interim Statementon 14 September 2005 detailing the impact of IFRS on the Group's financialstatements for the year ended 31 December 2004 and the six months ended 30 June2004. That document also contains a full list of the Group's provisional IFRSAccounting Policies and exemptions availed of under IFRS. The IFRS RestatementDocument is available on the Group's website at www.inmplc.com or from theCompany Secretary at, 2023 Bianconi Avenue, Citywest Business Campus, Naas Road,Dublin 24. NOTES TO THE INTERIM STATEMENT (unaudited) (Continued) 2. Alternative Balance Sheet Presentation The value of internally generated mastheads are not included on the BalanceSheet under IFRS. An alternative balance sheet has been presented as at 30 June2005 which includes the Group's mastheads at their revalued amounts. Allmastheads are regularly valued/ revalued by expert independent valuers GrantSamuel & Associates Pty Limited. The Group believes this alternativepresentation more correctly reflects the true value of the assets employed bythe business. Also, in this alternative balance sheet, the Group has reversedthe deferred tax adjustment on the Group's intangible assets arising ontransition to IFRS as the Group believes this deferred tax liability will notarise. 3. Segmental Report By Geographical Segment Revenue Operating Profit 2005 2004 2005 2004 •m •m •m •m Ireland 207.1 189.6 44.7 38.4United Kingdom 104.3 100.1 5.8 5.8South Africa 104.6 88.9 15.0 11.6Australasia 384.8 354.4 81.6 75.3Common costs - - (6.1) (5.7) 800.8 733.0 141.0 125.4 Exceptional items 37.7 (11.3) Operating profit after exceptional items 178.7 114.1 By Class of Business Revenue Operating Profit 2005 2004 2005 2004 •m •m •m •mPrinting, publishing, distribution and commercial printing 658.6 606.5 124.6 111.9Radio 76.0 67.1 21.2 16.6Outdoor advertising 66.2 59.4 1.3 2.6Common costs - - (6.1) (5.7) 800.8 733.0 141.0 125.4 Exceptional items 37.7 (11.3) Operating profit after exceptional items 178.7 114.1 NOTES TO THE INTERIM STATEMENT (unaudited) (Continued) 4. Exceptional Items 2005 2004 •m •m Gain on sale of iTouch plc, net (i) 62.7 - Restructuring charges and asset writedowns (ii) (22.7) (1.6) Product launch costs and development expenditure (iii) (2.3) (9.7) 37.7 (11.3) (i) Gain arising on the sale of the Group's shareholding in iTouch plc in June 2005. (ii) Restructuring charges and asset writedowns primarily relating to the closure of the printing operations of the Sunday World print facility in Ireland. (iii) Relates to new product launches in Northern Ireland and South Africa in 2005. 5. Finance Costs 2005 2004 •m •m Interest receivable and similar income (9.4) (5.2) Interest payable and similar charges 45.6 43.7 Net interest costs 36.2 38.5 Cumulative exchangeable preference shares dividend 5.5 5.2 Total finance costs (on a like-for-like basis) * 41.7 43.7 Total finance costs (based on IFRS transitional provisions) 41.7 38.5 * The comparative numbers for the six months ended 30 June 2004 have beenrestated on an IFRS basis, with the exception of IAS 32 and IAS 39, which wereimplemented from 1 January 2005. As a result, the Cumulative ExchangeablePreference Shares dividend is shown within finance costs in the six months to 30June 2005, but is shown within minority interests on the face of the IncomeStatement in the 2004 comparative numbers. On a comparable basis, the totalfinance costs for the six months ended 30 June 2005 were €41.7m, compared to€43.7m for the six months ended 30 June 2004. NOTES TO THE INTERIM STATEMENT (unaudited) (Continued) 6. Earnings Per Share 2005 2004 •m •m Profit attributable to Independent News & Media PLC 90.2 33.4Adjustment for conversion of cumulative exchangeable preference shares* 5.5 -Fully diluted profits 95.7 33.4Exceptional items net of taxation and minority interests (39.7) 10.0Fully diluted profits before exceptional items 56.0 43.4 Weighted average number of shares in issue during the period 745,634,666 737,785,086Effect of:Conversion of options 6,888,477 4,131,425 752,523,143 741,916,511 Conversion of cumulative exchangeable preference shares* 56,250,000 -Fully diluted number of shares 808,773,143 741,916,511 Earnings per share 12.09c 4.53c Fully diluted earnings per share* 11.83c 4.51c Fully diluted earnings per share before exceptional items* 6.71c 5.85c 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. Fully diluted earnings per share before exceptional items is presented in orderto give a better indication of the underlying performance of the Group. * The cumulative exchangeable preference shares were not dilutive in 2004for both Fully Diluted Earnings Per Share and Fully Diluted Earnings Per ShareBefore Exceptional Items. In 2005, the cumulative exchangeable preference shareswere dilutive for the purposes of calculating Fully Diluted Earnings Per Sharebut were not dilutive for the purposes of calculating Fully Diluted Earnings PerShare Before Exceptional Items. Therefore, in calculating the Fully DilutedEarnings Per Share Before Exceptional Items for 2005, the "Adjustment forconversion of cumulative exchangeable preference shares" (see above) is excludedfrom Fully diluted profits before exceptional items and the "Conversion ofcumulative exchangeable preference shares" (see above) is excluded from theFully Diluted Number of Shares. NOTES TO THE INTERIM STATEMENT (unaudited) (Continued) 7. Dividends 2005 2004 •m •m Dividends on equity shares Declared final (2004) ordinary dividend of €0.06 per share on 745,767,939 shares (2003: €0.0515 per share on 737,785,086 shares) 44.7 38.0 An interim ordinary dividend of €0.0375 per share has been declared subsequentto 30 June 2005 (2004: €0.03 per share). 8. Reconciliation of Operating Profit to Net Cash Provided by OperatingActivities 2005 2004 •m •m Operating profit before exceptional items 141.0 125.4Depreciation/amortisation 22.3 21.1Non-cash share based payment 1.1 0.7Unrealised foreign exchange movements (7.5) (1.4)Cash exceptional items (2.5) (11.3) Profit from operations before changes in working capital and provisions 154.4 134.5 (Increase)/decrease in stocks (1.1) 2.4Increase in short term and medium term debtors (1.6) (4.6)(Decrease)/increase in short term and long term creditors (0.9) 0.9Increase in provisions (excluding restructuring payments) 0.1 0.9Restructuring payments (4.2) (23.5) Net cash provided by operating activities 146.7 110.6 NOTES TO THE INTERIM STATEMENT (unaudited) (Continued) 9. Reconciliation of 2005 Interim Results from Irish GAAP to IFRS This summary provides a high level overview of the impact of IFRS on the Group's2005 interim statements. IFRS adjustments identified in this report have no impact on the Group'sOperations, Cash Flows or capacity to pay Dividends. Impact on Income Statement for six months ended 30 June 2005 Adjust- Per Notes ment Total Share •m •m centProfit after tax and minority interests under Irish GAAP 91.2 12.23c IFRS Adjustments - Summary Employee benefits - pensions 1 (0.9) Employee benefits - holiday pay 2 (2.9) Goodwill amortisation 3 3.8 Share options 4 (0.8) Other adjustments (0.2) Total IFRS Adjustments - Half Year 2005 (1.0) (1.0) Basic EPS Impact - Half Year 2005 (0.14c) Profit after tax and minority interests under IFRS 90.2 12.09c Adjusted EPS* under Irish GAAP 7.35c Goodwill amortisation excluded from adjustments above (3.8) Total IFRS adjustments - half year 2005 (excluding amortisation) (4.8) Adjusted EPS* impact - half year 2005 (0.64c) Adjusted EPS* under IFRS - half year 2005 6.71c * Fully diluted earnings per share excluding exceptional items NOTES TO THE INTERIM STATEMENT (unaudited) (Continued) 9. Reconciliation of 2005 Interim Results from Irish GAAP to IFRS (Continued) Extrapolated Impact of IFRS on Adjusted EPS* for Full Year 2005 Impact Per Adjustment Share Notes •m centTotal IFRS adjustments - half year 2005 (excluding amortisation) (4.8) Exclude holiday pay adjustment (see above) 2 2.9 Impact of IFRS adjustments (excluding holiday pay) - half year 2005 (1.9) Extrapolated impact of IFRS adjustments for full year 2005 (3.8) Extrapolated impact on adjusted EPS* for full year 2005 (compared to Irish GAAP) (0.50c) * Fully diluted earnings per share excluding exceptional items Notes: 1. Reflects increase in defined benefit pension scheme charges. 2. Accrual for holiday pay at half year. This charge will reverse completely in the second half of the year and will have no impact on the full year 2005 result. 3. Reflects cessation of amortisation of goodwill. 4. Reflects the charge for share options to be booked in the income statement. Impact on Balance Sheet as at 30 June 2005 Adjustment Total Notes •m •m Total equity under Irish GAAP 1,068.6 IFRS Adjustments - Summary Employee benefits - pensions 1 (75.2) Employee benefits - holiday pay 2 (2.9) Deferred taxation 3 (279.8) Dividends 4 28.1 Business combinations/intangibles 5 24.0 Other adjustments (6.0)Total IFRS adjustments at 30 June 2005 (311.8) Total equity under IFRS 756.8 NOTES TO THE INTERIM STATEMENT (unaudited) (Continued) 9. Reconciliation of 2005 Interim Results from Irish GAAP to IFRS (Continued) Notes: 1. Recording of actuarial pension fund deficits (net of related deferred tax assets) arising on the Group's defined benefit pension schemes. 2. Accrual for holiday pay at half year. This charge will reverse completely in the second half of the year and will have no impact on the full year 2005 result. 3. Recognition of deferred taxation liabilities on the Group's assets (mainly acquired mastheads) where the book value of these assets exceeds their tax bases. While this adjustment is required under IFRS, the Group believes it is an illogical adjustment as it does not take into account the Board's future intention, which is to retain these assets, and the Group considers that the recognition of these liabilities under IFRS is not in line with the type of liability, if any, that might crystallise if a disposal of these assets were to occur. Also, the Group does not currently have a constructive or legal obligation for any such tax liability associated with these assets and therefore the required deferred tax liability in this case is inconsistent with the required treatment for other provisions. 4. Dividends proposed are no longer recognised as a liability until they have been approved. 5. Reflects cessation of amortisation of goodwill from 1 January 2004, write back of negative goodwill to retained earnings and the reversal of a previous revaluation deficit. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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