Sustaining Superior Growth

Transcription

1 2005 Half Year Results Presentation The Global Newspaper and Communications Group Sustaining Superior Growth INDEPENDENT NEWS & MEDIA PLC September 2005

2 Independent News & Media PLC The Global Newspaper and Communications Group UNITED KINGDOM National Newspapers Regional Newspapers Contract Print Online Services Publishing > 175 titles Online Services > 70 websites Radio 128 stations IRELAND National Newspapers Regional Newspapers Directories Wholesaling/ Distribution Online Services INDIA Metropolitan Newspapers Online Services AUSTRALIA Regional Newspapers Outdoor Outdoor-Asia Radio Online Services Outdoor > 76,000 panels SOUTH AFRICA Primary Operating Regions Main Publishing Centres Associate Outdoor (Asia/ Africa) National Newspapers Metropolitan/ Local Newspapers Contract Print Magazines Outdoor Outdoor - Africa Online Services NEW ZEALAND Metropolitan/ Regional Newspapers Magazines Contract Print Outdoor Radio Online Services 1.

3 Sustaining Superior Growth 2005 First Half Results Lead 2003 Positioning for Sustainable Growth Focus 2004 Delivering Sustainable Growth Balance Innovate 2005 Sustaining Superior Growth 2.

4 2005 First Half Financial Highlights Sustaining Superior Growth H H % First Half Results m m Change Revenue % Operating Profit * % Profit Before Tax ** % Net Profit ** % Operating Margin (%) 17.6% 17.1% + 50 bps * Pre-exceptionals ** Post-exceptionals 3.

5 2005 Group Highlights Balance - Focus Superior H1 results; continued strengthening in operating margins All financials are reported in accordance with IFRS for the first time All regions ahead in Revenues and EBIT - Advertising revenues ahead % - Circulation revenues ahead + 5.5% 26% Investment in JPPL (India) publisher of the Hindi-language newspaper Dainik Jagran Successful disposal of itouch stake for 100 million New 15-year contract print agreement with News International in upgraded Belfast print operations New and improved bank financing concluded Further cost efficiencies achieved, more than off-setting external cost pushes 4.

6 The 4 Pillars Focused, balanced and innovative industry leader - Market share - Price LEAD - Margin enhancement - New markets FOCUS - Publishing & online services, radio and outdoor - INM focused on: Market leading positions Strong franchises Growth & emerging markets - Geographic reach - Revenue mix - Exposure to growth AND emerging economies - Protects downside risk BALANCE - Superior products sustain superior growth - Anticipate and define market preferences - A journey, not a destination INNOVATE 5.

7 Divisional Performance By Geography Geographic Split Revenues Operating Profit Millions H1 '05 H1 '04 % H1 '05 H1 '04 % Ireland % % United Kingdom % % South Africa % % Australasia % % Common Costs (6.1) (5.7) -7.0% Group Total % % Margins by Market H1 '05 H1 '04 Ireland 21.6% 20.3% United Kingdom 5.6% 5.8% South Africa 14.3% 13.0% Australasia 21.2% 21.2% Group Total 17.6% 17.1% Australasia 48% S. Africa 13% Ireland 26% UK 13% Gross Revenues Split by Market All markets ahead in revenues and operating profits Significant margin improvements in Ireland and South Africa Australasia 36% S. Africa 18% Ireland 40% UK 6% EBIT * (incl. Associates & JVs) Split by Market * adjusted for minorities 6.

8 Divisional Performance By Geography IRELAND Strong revenue growth -- advertising & circulation Market share increases Planned restructuring savings achieved Restructuring contributes to margin increase of 130 bps to 21.6% SOUTH AFRICA Strong revenue growth -- advertising & circulation Market share increases All titles continue to show ABC growth. Successful launch of Daily Voice popular tabloid in Cape Town Restructuring savings augment margins: bps to 14.3% Continuing growth in outdoor division in both SA and Africa UNITED KINGDOM National newspapers advertising +18.5%, bucks UK market trend 21 consecutive months of YoY ABC increases, assisted by compact and major product enhancements Overall NI advertising market is more challenging, but resilient performance Belfast Telegraph compact results in ABC growth -- bucking market trend AUSTRALASIA Strong revenue growth -- advertising & circulation New Product Initiatives (NPI) to drive future growth, with core EBIT growth of 15% pre-npis Herald on Sunday s ABC of 101,355 copies in first 10 months -- largest Sunday readership in Auckland Recent contract wins for outdoor division Strong radio ratings 7.

9 New Investment India Market leader in emerging region 26% investment in JPPL for 28.5 million, principally to fund ongoing national expansion JPPL publishes Dainik Jagran -- with average daily current sales > 2.2 million and daily readership of 21.1 million (INS 2005) -- making it the world s largest daily readership * Dainik Jagran publishes 26 editions from 23 main business units across the Hindi belt a market of over 650 million consumers Modest contribution to Group profits in FY2005 Value underpinned by recent media IPOs/ activity * source: World Association of Newspapers, August

10 Divisional Performance Publishing Publishing Revenues Revenues Constant FX Millions H1 '05 H1 '04 % % Advertising % 11.6% Circulation % 4.6% Contract Print/ Wholesaling % 1.9% Total - Publishing Division % 7.9% Publishing Operating Profit Operating Profit Constant FX Total - Publishing Division % 11.3% Operating Margin: Publishing (%) 18.9% 18.5% Strong growth in both advertising and circulation in each market driven by:- firm pricing; good underlying volume gains; ongoing product innovation ( compact ); new product launches Overall advertising growth of 11.6% augmented by good volume gains in online services notably classifieds H2 05 onwards will show positive impact of island of Ireland print realignment into Belfast Print operations Revenue Growth by Market * Advertising Circulation Ireland 14.6% 2.7% United Kingdom 5.5% 3.8% South Africa 17.0% 4.5% Australasia 10.4% 7.2% Total - Publishing Division 11.6% 4.6% Rate 5.6% 1.6% Volume 6.0% 3.0% * Constant FX 9.

11 Divisional Performance Radio Radio Revenues Revenues Constant FX Millions H1 '05 H1 '04 % % Total - Radio % 13.7% Radio Operating Profit Operating Profit Constant FX Total - Radio % 28.3% Operating Margin: Radio (%) 27.9% 24.7% In Australia Strong ratings drive growth in agency advertising market share -- Agency share up 56% since June 2002 ARN leads demographic in the combined Sydney/ Melbourne markets Focus on maintaining the momentum established with the Mix and Classic Hits brands Total Australian radio revenue market worth A$766m Cumulative listenership share Sydney/ Melbourne In New Zealand Rollout of eight networks continues > 50% 10+ Auckland audience share Market share increase producing good revenue gains No. 1 stations in Auckland, Christchurch and Wellington 10.

12 Divisional Performance Outdoor Outdoor Revenues Revenues Constant FX Millions H1 '05 H1 '04 % % Total - Outdoor % 11.9% Outdoor Contribution Contribution Constant FX 100%-owned units % -49.8% Share of JVs & Associates % 117.3% Total - Outdoor % 24.4% Group restructure initiatives continue under the APN Outdoor banner Acquisition of Look Outdoor in New Zealand APN Outdoor secures Sydney Airports contract Tribe network (48 sheet) re-brand/ re-launch -- already profitable Yield management focus Outdoor audience measurement system developed in conjunction with outdoor industry Further contract renewals pending Autumn 2005 which will yield enhanced profitability SOUTH AFRICA & AFRICA 11.

13 2005 First Half Financial Overview 12.

14 2005 First Half Results Sustaining Superior Growth 2005 Interim Results -- Income Statement Change m m % Group Revenue % EBITDA % Operating Profit % Net Exceptional Items 37.7 (11.3) 433.6% Share of Results of Associates and Joint Ventures % Net Interest Costs (36.2) (38.5) 6.0% Cumulative Exchangeable Preference Shares Dividend (5.5) - n/a Profit Before Tax % Taxation (16.6) (9.6) -72.9% Profit After Tax % Minority Interests (33.9) (29.7) -14.1% Cumulative Exchangeable Preference Shares Dividend - (5.2) n/a Net Profit % 13.

15 Enhanced Shareholder Returns Sustaining Earnings & Dividend Growth Shareholder Stats H1 '05 H1 '04 cent cent % Basic EPS % Adjusted EPS * (under IFRS) % Adjusted EPS ** (under Irish GAAP) 7.35 DPS % Average fully diluted shares (millions) % * Fully diluted EPS before exceptional items ** Fully diluted EPS before exceptionals and amortisation Adjusted EPS excludes the impact of exceptionals and shows the strong underlying performance of the operations in the 1 st Half. Dividend per share increase reflects the strong core operational performance and the significant profit realised from the advantageous disposal of our investment in itouch plc. cent Adjusted EPS** Trend H1 H2 Since 1974, Full Year EPS has grown by a compound 18% Under Irish GAAP 14.

16 Increased Cash Flow Strong operating cash flow 2005 Interim Results -- Cash Flow Statement Change m m m Operating Cash Flow Interest & Minority Interests (74.9) (77.8) 2.9 Taxation (10.7) (17.9) 7.2 Equity Dividends (40.1) - (40.1) Sub-Total: Capital Expenditure (34.3) (22.7) (11.6) Net Disposals/ (Investments) 63.4 (5.6) 69.0 FX Movement (29.3) 2.1 (31.4) Other (11.8) 3.8 (15.6) Reduction/ (Increase) in Net Debt (in 6 months) 9.0 (7.5) 16.5 Operating cash flow of million in H1 05 (+32.6% on last year) Effective working capital management Operating cash flow conversion of 92% (pre restructuring payments) Capital expenditure of 34.3 million -- including new upgraded full-colour press/ production line in Belfast Adverse FX currency translation movement mainly on APN debt ( 29.3 million) itouch disposal proceeds of 92.8 million in H1, with a further 7.2 million to be received in H2 Acquisition of 26% of JPPL in India for 28.5 million 15.

17 Capital Structure Increased financial flexibility Capital Structure H1 '05 FY '04 H1 '04 m m m Net Debt * Recourse (648) (677) (671) Non Recourse (324) (304) (323) (972) (981) (994) Capital Structure H1 '05 FY '04 H1 '04 Total Net Debt*/ EBITDA EBITDA/ Interest * Net Debt* as a %-age of Net Assets** 45.3% 45.4% 59.7% * Excluding APN Convertible Notes & NZ CEPS ** Including revalued element of mastheads & excluding deferred tax on intangibles New Banking Facility: o New oversubscribed bank facility just finalised, with improved terms and pricing o Unsecured 440 million 5-year facility with core banks, to replace old 2003 facility o Maturity extended - past the two bonds - to 2010 lude 6.0 the impact of the APN Debt Ratio Trends 5.5 Net Debt to EBITDA 5.0 Interest Cover

18 IFRS Impact on Income Statement (H1 2005) Half Year 2005 Adjust. Total Per Share m m Impact (cent) Net Profit under Irish GAAP 91.2 IFRS Adjustments - Summary Employee Benefits - Pensions (0.9) Employee Benefits - Holiday Pay (2.9) Goodwill Amortisation 3.8 Share Options (0.8) Other Adjustments (0.2) Total IFRS Adjustments - HY 2005 (1.0) (1.0) Impact on Basic EPS - HY 2005 (0.14) Net Profit under IFRS 90.2 No impact on the Group s Operations, Cash Flows or capacity to pay dividends Amortisation (excl. from Adjust. above) (3.8) Total IFRS Adjust. - HY 2005 (excluding Amortisation) (4.8) Impact on Adjusted EPS * - HY 2005 (0.64) * Fully diluted earnings per share, excluding exceptional items Note: IFRS standards and interpretations are still subject to on-going review and possible amendment or interpretative guidance and therefore the information above is subject to change. 17.

19 IFRS Impact on Income Statement (FY 2005) Extrapolated Adjusted EPS FY 2005 Adjust. Per Share m Impact (cent) Total IFRS Adjustments - HY 2005 (excl. Amortisation) (4.8) Exclude Holiday Pay Adjustment (not in Full Year) 2.9 Impact of IFRS Adjustments - HY 2005 (excl. Holiday Pay) (1.9) Extrapolated impact of IFRS Adjustments for FY 2005 (3.8) Extrapolated impact on Adjusted EPS * - FY 2005 (compared to Irish GAAP) (0.50) * Fully diluted earnings per share, excluding exceptional items The extrapolated impact of IFRS on the 2005 Full Year Adjusted EPS (of 0.50 cent) is less than the impact in FY 2004 (0.82 cent) due to a number of once-off costs in 2004, partly offset by higher charges for pensions, share options and leases in 2005 Note: IFRS standards and interpretations are still subject to on-going review and possible amendment or interpretative guidance and therefore the information above is subject to change. 18.

20 IFRS Impact on Balance Sheet -- June 2005 Balance Sheet -- as at 30 June 2005 Adjust. Total m m Total Equity under Irish GAAP 1,068.6 IFRS Adjustments - Summary Employee Benefits - Pensions (75.2) Employee Benefits - Holiday Pay (2.9) Deferred Taxation (279.8) Dividends 28.1 Business Combinations/Intangibles 24.0 Other Adjustments (6.0) Total IFRS Adjustments - at 30 June 2005 (311.8) Total Equity under IFRS Deferred Taxation adjustment - book value of assets (mainly mastheads) exceeds their tax base Illogical adjustment - no account taken of future intentions (i.e. no intention to sell the masthead, therefore no tax liability will arise) Liability booked bears no relationship to liability that might arise if masthead was sold. Any disposal would likely be shares (rather than masthead), which would have a significantly higher tax base than the masthead and thus, a much lower tax liability on disposal Inconsistent with other provisions as no constructive/ legal obligation exists for such a tax liability Note: IFRS standards and interpretations are still subject to on-going review and possible amendment or interpretative guidance and therefore the information above is subject to change. 19.

21 Sustaining Superior Growth Superior EPS growth - Enhanced shareholder returns OBJECTIVES SET OBJECTIVES MET 1. Superior EPS growth 14.7% H Target medium-term operating margin 20% 17.6% H1 05 on track - sustain best in class margins 3. Target Net Debt/ EBITDA below 3.0x Net Debt/ EBITDA Financial benefits of re-structuring On track for incremental 7m for FY2005 and 19m in total for Proactive cost management Continuous ongoing 20.

22 Outlook INM Outperforming Strong franchises in growth markets Sustaining Superior Growth Track record of performance & quality earnings All 5 markets exhibiting underlying growth Exposure to some of the world s fastest growing economies Advertising remains positive (despite tougher comps) and INM continues to outperform the broader market Outlook by INM market: Australasia Ireland South Africa United Kingdom Regional Strength Commodity Prices Portfolio diversification Outdoor: new contract wins Radio: strong ratings/ new licences NZ election uncertainty Broad-based economic growth Restructuring savings Island of Ireland opportunities SSIA inflows ( 06/ 07) Proactive product development Broad-based economic growth Commodity Prices Momentum building Restructuring savings Political stability Cover price war over Advertising recovery? Unique growth prospects for Nationals Proactive product development NI: Island of Ireland opportunities 21.

23 Outlook Statement INM Outperforming Strong franchises in growth markets Sustaining Superior Growth 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 in strongly growing economies, its market leading brands and a commitment to be the low cost operator, the Board remains confident of your Group s ability to deliver double-digit full year earnings growth for 2005 and to sustain superior earnings growth into the future 14 th September 2005 Lead Focus Balance Innovate Certain statements (verbal and written) in the operating assumptions for 2005 may be deemed forward looking statements. The forward-looking statements (verbal and written) contained in this presentation, including the operating assumptions, are subject to a number of risks and uncertainties that could adversely affect the Group s ability to obtain the results predicted in the operating assumptions including, without limitation, the following factors: (a) increased consolidation among the major retailers or other events which may adversely affect business operations of major customers and depress the level of local, national or classified advertising; (b) economic downturn in some or all of the Group s principal markets leading to decreased circulation or local or national advertising; (c) a decline in general newspaper readership patterns as a result of the competitive alternative media or other factors; (d) an increase in newsprint or syndication costs over the levels anticipated; (e) labour disputes which may cause revenue declines or increased labour costs; (f) acquisitions of new businesses or disposals of existing businesses; (g) rapid technological changes and frequent new product introductions prevalent in electronic publishing; (h) weakening exchange rates; (i) general economic, political and business conditions; and (j) an increase in interest rates etc

24 Investment Thesis Sustaining Superior Growth Leading brand franchises in growth markets To be the Low cost operator : to enhance operating leverage Strong asset backing (mastheads/ value of APN/ India) Geographically-balanced operations Clear and compelling business focus Innovative to sustain superior growth 23.

25 For further information on Independent News & Media PLC, please visit 24.

26 Leading International Media Group Who we are Appendices Leading International Media Group Primary operations on 4 continents and in 9 countries Core business areas Publishing & Online Services, Radio & Outdoor Advertising Total market capitalisation: 1.9 billion Total managed gross assets: 4.0 billion Business Attributes: Focused, Balanced & Innovative Industry Leader 25.

27 2005 First Half Balance Sheet Appendices 2005 Interim Results -- Balance Sheet 30 June June 2004 Change m m m Non Current Assets Intangible Assets * 2,904 2, Other Other Net Assets/Liabilities ** (126) (150) 24 Compound Financial Instruments *** (279) (142) (137) Net Debt (972) (994) 22 Recourse (648) (671) 23 Non Recourse (324) (323) (1) Total Net Assets 2,147 1, Share Capital & Reserves 1, Minority Interests Total Shareholders' Funds 2,147 1, * Including the revalued element of Mastheads - independently revalued at 31 December 2004 ** Excludes deferred tax on intangibles *** Includes reclassification of 126.9m from Minority Interests under IFRS in

28 Experienced, Proven & Energetic Management Team Aligned Interests Appendices Sir Anthony O Reilly CEO Gavin O Reilly COO Sir Anthony is a former Chairman, President and Chief Executive Officer of HJ Heinz Company. He was also a member of the board of the New York Stock Exchange. He is also Chairman of Waterford Wedgwood plc and Chairman of Eircom Group plc. He is a 27% shareholder and has been a Director of Independent News & Media PLC since Gavin was appointed Chief Operating Officer of Independent News & Media PLC in 2001 and was previously Chief Executive of Independent News & Media (Ireland). He is also a Director of News & Media NZ Limited and APN News & Media Limited. He joined the Group in 1992 and the Board in He is President of the World Association of Newspapers [ WAN ] the worldwide industry body. Donal Buggy CFO Donal is a chartered accountant and was appointed to the Board of Independent News & Media PLC in 2002 as Chief Financial Officer. He was Group Financial Controller since he joined the Group in 1996 from PricewaterhouseCoopers. He is also a Director of News & Media NZ Limited and APN News & Media Limited. Vincent Crowley INM Ireland Vincent was appointed Chief Executive of Independent News & Media (Ireland) in Previously he was Finance Director, and later Chief Executive, of APN News & Media Limited. A chartered accountant, he joined the Group in 1990 and became a Director in Ivan Fallon INM UK Ivan was appointed Chief Executive of Independent News & Media (UK) Limited in Previously he was Chief Executive of Independent News & Media (South Africa) (Pty) Limited. He joined the Group in 1994 and the Board in Tony Howard INM South Africa Tony was appointed Chief Executive of Independent News & Media (South Africa) (Pty) Limited in 2002, having previously been its Chief Operating Officer and Chief Financial Officer. Tony s involvement in the South African operations pre-dates Independent s investment (1994), having joined the Company in Brendan was appointed Chief Executive of APN News & Media Limited in Previously he was Chief Executive of Independent News & Media (UK) Limited. He joined the Group in 1985 and became a Director in Brendan Hopkins APN News & Media Ltd 27.

29 Independent News & Media PLC Independent House 2023 Bianconi Avenue Citywest Business Campus Naas Road, Dublin 24 Ireland T: F: E: mail@inplc.com 2005 First Half Results September, 2005