Financial Highlights Change m m % Turnover* % Operating Profit** %

Transcription

1 Interim Report 2004

2 Corporate Profile [ Independent ] is a leading media and communications group, operating primarily in Australia, Ireland, New Zealand, South Africa and the United Kingdom. Spanning four continents and eight individual countries, Independent has market leading newspaper positions in Australia (regional), New Zealand, Ireland and South Africa. In the UK, it owns the largest newspaper group in Northern Ireland and the flagship Independent titles. The Group publishes over 165 newspaper and magazine titles with a weekly circulation of 13.5 million copies and operates 53 on-line sites, achieving 108 million page impressions per month in aggregate. The Group is also the largest radio and outdoor advertising operator in Australasia, and has leading outdoor advertising operations in South Africa, Hong Kong, Malaysia and Indonesia. The Group has grown consistently over the last ten years by building a geographically diverse portfolio of market leading brands, and today manages gross assets of over 3.4 billion, turnover of 1.6 billion and employs over 10,800 people worldwide.

3 Interim Statement [ Independent ] is pleased to announce record interim results for the six months ended 30th June Strong growth in the Southern Hemisphere operations and muchimproved European markets has enabled the Group to deliver significant advances in both revenues and profits compared to the same period in Financial Highlights Change m m % Turnover* % 1 Operating Profit** % Operating Profit After Operating Exceptionals* % Profit After Tax % Earnings Per Share 4.67c 3.47c +34.6% Adjusted Earnings Per Share*** 6.59c 6.09c +8.2% Dividend Per Share 3.00c 2.75c +9.1% * From continuing operations ** From continuing operations before exceptional items *** Fully diluted EPS, before exceptional items and amortisation Turnover from continuing operations increased by a strong 14.0% to 736.9m, and both advertising and circulation produced volume and rate growth. Readership of our varied titles continues to expand and our ongoing investment in new products and formats has contributed to this growth. Each of the five primary operating markets contributed to the year-on-year 25.1% growth in Operating Profit (before exceptionals) from continuing operations. This significant growth reflects the improved advertising and circulation revenue performance and the unrelenting focus on cost efficiencies, which has enabled operating margins to expand to 17.2%. Profit after tax, at 68.1m, was up 42.8% on Earnings per share increased to 4.67c (+34.6%) on the back of this very strong operating result. The Restructuring Plan announced last December is substantially complete and its successful implementation to date ensures that the Group is on target to achieve its forecasted annualised savings of 18.9m by end The Board is recommending an interim dividend of 3.00c per share, an increase of 9.1% on 2003, reflecting the Board s continued confidence in the strength of the Group s operations and its prospects. This dividend will be paid on 15th November 2004 to ordinary shareholders registered at the close of business on 24th September A scrip dividend alternative will also be available.

4 2 Operations Review Australasia APN News & Media Ltd [ APN ] in which Independent has a shareholding of over 40% reported record results, with operating profit before exceptionals up 19.5% to A$125.4m for the six months ended 30th June. Turnover at A$586.6m was up 8.3% helped by strong local advertising demand and the positive impact on its markets of the continuing economic expansion of China and the Far East. The Publishing division which encompasses The New Zealand Herald and APN s 23 regional daily newspapers and more than 90 non-daily titles had an extremely buoyant first half with revenues and EBIT up year-on-year by 9.1% and 19.2% respectively. The main advertising pillars of employment, real estate and motoring produced strong revenue increases in both New Zealand and Australia, with financial/employment advertising, in particular, performing well growing by 36% in Australia and 30% in New Zealand over the prior year. The growth in the Publishing division was also underpinned by the strong performance of The New Zealand Herald, the country s largest newspaper based in the economic heartland of Auckland, where weekly readership now exceeds 1 million. APN recently announced the introduction of the Herald on Sunday, which will be launched as a compact (following our proven success with this format in the UK and Ireland) on October 3rd and will extend The New Zealand Herald s unique franchise across seven days. Circulation revenues performed well across both markets and APN now publishes the four fastest growing daily newspapers in Australia: The Sunshine Coast Daily (+4.2%), the Fraser Coast Chronicle (+4.1%), the Gympie Times (+3.3%) and the Gladstone Observer (+2.8%). The Radio division s clear focus on yield, inventory and rate management produced a strong outcome. Revenue increased by an impressive 15% and EBIT increased by 23% in local currencies. The restructure of APN s five main Outdoor advertising businesses into a unified structure APN Outdoor made significant progress in the first half. Revenues grew by a healthy 18.2% and the Outdoor division remains on track for the forecasted 2005 improvement. As forecasted, the Commercial Print division delivered a turnaround result for the first half of 2004, increasing EBIT by 50.0% to A$3.9m, despite a reduction in revenue of 6.1% to A$50.2m. Ireland First half turnover for the Irish operation increased by 7.5% to a record 189.6m, an increase driven by the continuing improvement in core advertising and circulation revenues in the main publishing division. Overall Irish operating profits grew by 8.5% from 37.7m in the first half of 2003 to a record 40.9m in 2004, reflecting the improved revenue environment and the continued tight focus on costs. As a result, operating margins improved, increasing from 21.4% to 21.6%.

5 3 Advertising revenues grew strongly in the first six months of 2004 by over 12.0% (marginally ahead of the overall market), with particular strength in the advertising pillars of property, colour, government and run-of-paper/retail. More recently, the important category of recruitment advertising has also shown some improvement. Circulation revenues grew by 3.4%, reflecting core yield improvements in all titles, the continued focus on driving core volumes, and the very successful launch of a compact edition of the Irish Independent. The recently-issued ABC numbers showed the very positive impact of the compact, together with the underlying strength of the core newstrade sales of the other group titles. The positive impact of the Irish Independent compact launch was also reflected in the recently-issued JNRS readership numbers, where, in the last twelve months, total readership increased significantly by 16.3% to 607,000 readers. This increase was substantially greater than that achieved by any other daily title and reinforced the leading position of the Irish Independent. The Sunday Independent maintained its core circulation year-on-year, and yet the universal appeal of this title allowed its readership to further increase to 1,093,000 readers, further reinforcing its leading position. The underlying cost base of the Irish group was substantially restructured and reduced with the achievement of 208 redundancies (over one quarter of staffing numbers) towards the end of the first half of 2004 in the main Abbey Street publishing operation. Outsourcing back office/clerical and call centre activities to third-party locations in Cork and Armagh, together with the elimination of redundant roles, has resulted in a permanent reduction in the cost base. Importantly, these cost efficiencies are facilitating scalability, process improvements and enhanced performances in many functional areas across the Irish division. The impact of these cost reductions and process improvements will be seen in the second half of 2004 and into South Africa The South African operation performed strongly in a stable, upbeat economic and trading environment, with business and consumer confidence reaching new highs. Growth in consumer spending has been driven by the stable Rand and historically low interest rate levels. Overall, the group produced very good growth year-on-year, with operating margins showing a substantial improvement from 10.8% to 12.5% in Double-digit advertising and circulation growth gave a combined 12.8% lift to total revenues to SAR 814.9m. This strong revenue performance, combined with ongoing cost saving initiatives, delivered a 30.9% increase in operating profits to a record SAR 101.7m. Newspaper advertising in South Africa exhibited very firm growth in the first half of 2004 in the key advertising pillars, building on the positive trend which started in the second half of Strong property advertising was augmented by good brand and retail advertising, and overall, the group s newspaper division enjoyed a 13.5% advertising increase year-on-year, with the group s titles

6 4 retaining their dominant share. Circulation also performed very well with revenues up an impressive 12.5% on the prior year. This revenue growth was a mixture of rate and volume, and significantly, in the latest ABC-circulation audit, each of the group s 15 titles showed year-on-year growth, in a market where most competitors showed ongoing declines. Circulation of Isolezwe the group s Zulu language newspaper continues to grow, and has increased to nearly 59,000 copies per day (last year 45,000 copies). The Magazine division also had a busy and rewarding first half, benefiting from the very successful launch of Glamour, which has sold above 120,000 copies per month over its first three issues (making it the market-leader in its segment). Strong advertising and circulations for the other titles GQ and House & Garden pushed magazine profits ahead of forecast and the prior year. In Outdoor advertising, the group s 50% j.v. interest in Clear Channel Independent South Africa s leading outdoor company with a market share in excess of 50% showed further strong growth in its contribution to the South African earnings, through new product innovations and ongoing rationalisation of its operations. The implementation of the 2003 restructuring program has delivered significant efficiencies across the production, distribution and finance areas. The impact of these cost reductions and process improvements will be seen in the second half of 2004 and into United Kingdom The UK operation recorded revenue of Stg 68.7m in the first six months of 2004, which represents an increase of 8% on its continuing operations; the London regional newspapers division was successfully sold to Archant at the end of 2003, and therefore is excluded from the comparisons in order to get a true like-for-like growth profile. The half year result reflects a sturdy performance from the Belfast operation and substantially growing circulation revenues for the National operation. The combination of growing revenues and good cost control produced a record operating profit of Stg 5.0m, which represents a 42% increase on continuing operations over The UK advertising market has seen some recovery in the first half, with the Belfast Telegraph continuing to make sustained progress, with notably strong performances in the recruitment and display categories. The specialist London-based magazine division which continued to achieve further cost efficiencies also saw some modest improvement in London secretarial and financial recruitment advertising, the first period of growth for several years. Overall, UK like-for-like advertising grew by just under 1%, with the Nationals falling behind due to the complex conversion into compact and the timing of attendant rate negotiations with agencies. Subsequent to the period under review, the group has successfully concluded its rate contracts with the agencies and at a mutually satisfactory level, which reflects the substantial uplift in the core circulation copy sales of The Independent.

7 5 The full roll-out of converting the broadsheet Independent to a compact-only edition was completed in March this year and culminated in The Independent being named as the National Newspaper of the Year. The unequalled circulation success in the past 11 consecutive months has culminated with the highest ABC circulation figures since 1997 being achieved in August (total ABC sales of 262,588 up 21% year-on-year, with core UK Newstrade sales up 34%). This underlying growth (and the parallel for advertising sales) has been further bolstered by enviable readership data, which shows a 31% increase in total readership for The Independent, including a 47% increase in female readership (October 2003 March 2004 year-on-year NRS data). Outlook Commenting on these record results, Sir Anthony O Reilly, Chief Executive, made the following Outlook Statement: Trading in 2004 has been very positive, with all five markets showing good revenue and profit growth. That positive trading position has continued into the second half, and as such, your Board remains confident of further improvements in underlying profitability for 2004, at least in line with market consensus forecasts. A combination of these current buoyant conditions, coupled with the benefits of the ongoing restructuring, leaves the Group extremely well placed to deliver a meaningful advance for th September 2004

8 6 Group Profit and Loss Account (unaudited) Six months ended Six months ended 30th June th June 2003 m m Turnover - Continuing operations Discontinued operations Operating profit - Continuing operations Exceptional items (11.3) (9.6) Operating profit from continuing operations Discontinued operations Exceptional items Profit on ordinary activities Net interest charge (39.3) (41.6) Exceptional finance charge - (8.0) Profit on ordinary activities before taxation Taxation on profit on ordinary activities (10.7) (4.7) Profit on ordinary activities after taxation Minority interests (including non-equity minority interests) (33.7) (25.5) Profit on ordinary activities after taxation and minority interests Dividends proposed (22.2) (20.2) Retained profit for the six months for the Group and its share of joint ventures and associates Earnings per share 4.67c 3.47c Fully diluted earnings per share 4.64c 3.46c Fully diluted earnings per share before exceptional items and amortisation 6.59c 6.09c Statement of Retained Profits (unaudited) Retained profit at beginning of year as previously stated Retained profit for the six months Treasury shares movement Exchange rate adjustments Retained profit at end of June

9 7 Group Balance Sheet (unaudited) 30th June 30th June 30th June 30th June (Inc. Mastheads) (Inc. Mastheads) m m m m Fixed Assets Intangible assets 1, , , ,336.4 Tangible assets Financial assets Investment in joint ventures - Share of gross assets Share of gross liabilities (12.5) (9.5) (12.5) (9.5) Investment in associates Other investments , , , ,824.8 Current Assets Stocks Debtors Other current assets Cash at bank and in hand Creditors - amounts falling due within one year (443.3) (506.8) (443.3) (506.8) Net Current Assets/(Liabilities) 15.3 (35.7) 15.3 (35.7) Total Assets Less Current Liabilities 2, , , ,789.1

10 8 Group Balance Sheet (unaudited) continued 30th June 30th June 30th June 30th June (Inc. Mastheads) (Inc. Mastheads) m m m m Creditors - amounts falling due after more than one year 1, , , ,172.1 Provisions for Liabilities and Charges , , , ,215.1 Capital and Reserves Called up share capital Capital reserves (22.0) (80.6) Profit and loss account Equity Shareholders Funds Minority Interests Equity minority interests Non-equity minority interests , , , ,789.1

11 9 Group Cash Flow Statement (unaudited) Six months ended Six months ended 30th June th June 2003 m m m m Net Cash Inflow from Operating Activities (before restructuring payments) Restructuring Payments (23.5) (3.6) Net Cash Inflow from Operating Activities Dividends Received from Joint Ventures Returns on Investments and Servicing of Finance Interest received - Group Interest paid - Group (54.0) (56.1) Debt issue costs - (8.8) Dividends and other payments to equity minority shareholders (17.5) (8.8) Dividends and other payments to non-equity minority shareholders (7.8) (9.9) Net Cash Outflow from Returns on Investments and Servicing of Finance (75.7) (80.2) Net Cash Outflow from Taxation (17.9) (16.8) Capital Expenditure and Financial Investment Purchase of tangible fixed assets, licences and titles (28.9) (8.0) Sale of tangible fixed assets and investments Purchase of investments/advances to investees (0.2) (4.8) Advances to joint ventures - (0.1) Increase in investment in associates (6.1) (4.6) Advances repaid by associates Other capital expenditure - (7.8) Net Cash Outflow from Capital Expenditure and Financial Investment (30.3) (8.3)

12 10 Group Cash Flow Statement (unaudited) continued Six months ended Six months ended 30th June th June 2003 m m m m Acquisitions and Disposals Purchase of equity minority interests - (1.3) Net Cash Outflow from Acquisitions and Disposals - (1.3) Equity Dividends Paid - (23.9) Cash Outflow before Management of Liquid Resources and Financing (10.8) (2.7) Management of Liquid Resources - - Net Cash Flow from Management of Liquid Resources - - Financing Issue of shares Share issue costs - (4.7) Issue of equity minority interests Treasury shares movement Repayment of short term loans - (279.6) Repayment of long term loans (56.6) (260.2) Receipt of long term loans Receipt of short term loans Issue of non-equity minority interests Redemption of non-equity minority interests - (107.9) Capital element of finance lease rental payments (17.7) (17.7) Net Cash (Outflow)/Inflow from Financing (73.2) 95.8 (Decrease)/Increase in Cash (84.0) 93.1

13 11 Segmental Report (unaudited) The Group operates mainly in Ireland, the United Kingdom, South Africa and Australasia. The following is an analysis of the Group s results by geographical market for the six months ended 30th June. By Geographical Segments Turnover Operating Profit m m m m Turnover (By origin): Group and share of joint ventures and associates Less: Share of joint ventures turnover (9.6) (8.0) Share of associates turnover (30.1) (25.8) Group turnover Ireland United Kingdom - continuing operations discontinued operations South Africa Australasia Exceptional items (10.8) (6.0) Group share of joint ventures Group share of associates 1.1 (4.3) 2.1 (3.0) Common costs (5.7) (5.4) Exceptional items Net interest charge (39.3) (41.6) Exceptional finance charge - (8.0) Group profit on ordinary activities before taxation and minority interests Turnover by origin has been shown above and does not differ materially from turnover by destination. The exceptional items of 10.8m in 2004 primarily relate to the non-recurring costs associated with the roll-out of the compact versions of The Independent in the UK, and, to a lesser extent, the Irish Independent in Ireland, together with the restructuring of APN Outdoor and the launch of Glamour magazine in South Africa.

14 12 Segmental Report (unaudited) continued By Class of Business The Group has three main classes of business: - Printing, publishing and distribution of newspapers and magazines and commercial printing - Radio - Outdoor advertising The following is an analysis of the Group s results by class of business for the six months ended 30th June. Turnover Operating Profit m m m m Turnover: Group and share of joint ventures and associates Less: Share of joint ventures turnover (9.6) (8.0) Share of associates turnover (30.1) (25.8) Group turnover Printing, publishing, distribution and commercial printing - continuing operations discontinued operations Radio Outdoor advertising Exceptional items (10.8) (6.0) Group share of joint ventures Group share of associates 1.1 (4.3) 2.1 (3.0) Common costs (5.7) (5.4) Exceptional items Net interest charge (39.3) (41.6) Exceptional finance charge - (8.0) Group profit on ordinary activities before taxation and minority interests

15 13 Notes to the Interim Statement (unaudited) 1. Basis of Preparation This interim statement has been prepared on a consistent basis with the accounting policies set out in the audited financial statements for the year ended 31st December Earnings Per Share m m Profit attributable to Exceptional items net of taxation and minority interests Amortisation of mastheads/goodwill/development expenditure Fully diluted profits before exceptional items and amortisation Weighted average number of shares in issue during the period 737,785, ,118,312 Effect of: Conversion of options 4,131, ,380 Fully diluted number of shares 741,916, ,524,692 Earnings per share 4.67c 3.47c Fully diluted earnings per share 4.64c 3.46c Fully diluted earnings per share before exceptional items and amortisation 6.59c 6.09c Basic earnings per share is calculated by dividing the earnings attributable to ordinary shareholders by the weighted average number of ordinary shares in issue during the period. For diluted earnings per share, the weighted average number of ordinary shares in issue is adjusted to assume conversion of all potential dilutive options over ordinary shares and dilutive cumulative exchangeable preference shares. The cumulative exchangeable preference shares were not dilutive in either 2004 or Fully diluted earnings per share before exceptional items and amortisation is presented in order to give a better indication of the underlying performance of the Group.

16 14 Notes to the Interim Statement (unaudited) continued 3. Reconciliation of Operating Profit to Net Cash Inflow from Operating Activities m m Operating profit from operations Share of profit of joint ventures (1.0) (1.3) Share of profit/(loss) of associates (1.1) 4.3 Depreciation and amortisation charges Decrease in stocks Increase in short term and medium term debtors (4.6) (0.7) Decrease in creditors (3.5) (3.0) Net movement in provisions (excluding restructuring payments) 0.9 (0.1) Effects of foreign exchange rate changes (1.4) 4.8 Net cash inflow from operating activities (before restructuring payments) Restructuring payments (23.5) (3.6) Net cash inflow from operating activities

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